Peter Valley is a large-volume Amazon seller who sells in all categories although books and media make up a significant percentage of his inventory. I learn so much from other sellers and recently read his new book Amazon Autopilot: How to Start an Online Business with Fulfillment by Amazon and Let Them do the Work for his perspective on how he sells successfully on Amazon.
In his first year, 2007, Peter sold over $138,000 worth of goods on Amazon. His business model is strongly influenced by Tim Ferris’ The 4-Hour Workweek (a big influence on me, also) and he talks about the ways he puts his business on autopilot so he can travel and have a life outside of work.
I was intrigued by his examination of ranking and asked him to share an excerpt from his book with all of us. Ranking is confusing for new sellers as everyone gives different answers. Because Amazon doesn’t share how rankings are figured or the volume it sells in individual categories, we can only guess. Most sellers create their own “rules” or philosophies based on experimentation and experience. Ultimately you will, too.
Cracking the Code on Amazon Sales Rank
Among the biggest mistakes I see Amazon sellers make is misunderstanding sales rank: Either ignoring it altogether, or overemphasizing its role in buying decisions. I wrote this article to get down to the question of sales rank: What it is, what it’s not, and how to interpret it accurately for maximum profits.
The Definition of Amazon Sales Rank
For every category (excluding, for some reason, many consumer electronics items), there is a number in the product description called “sales rank” that aims to capture an item’s popularity.
I can define Amazon sales rank in one sentence:
“The period of time since an item last sold.”
What does that mean? It means that starting from one hour after an item sells, its rank will start to rise until it sells again. The longer the gap between sales, the higher its sales rank grows. When the product sells again, it will drop significantly and then begin to rise again an hour later.
Amazon does not disclose their algorithm that determines sales rank. This article shows how I interpret that number using other information on Amazon.
The sales rank “safety zones” for each category.
I’ll give most of my focus here to interpreting sales rank for books and media, but I made a chart (this link goes to an easier-to-read PDF) to help Amazon sellers of all products answer this question: Should I buy, or should I pass? Or more accurately: Is there a demand for this product?
To make this chart, I calculated the top 1%, 5%, and 15% in sales rank for each category. Once you decide your comfort zone (Are you risk tolerant? Risk averse?), you can use this chart to know at a glance if a potential purchase likely to sell sooner, or much later.
For example, the top 1% is safe territory in any category. You can read from the chart that a sales rank better than 15,000 in Patio / Lawn / Garden is in the top 1% (at least at that moment), and buy with comfort knowing it will almost certainly sell.
What’s important is to have a buying formula that works and stick to it. When I’m out sourcing, I don’t like pausing to make small decisions hundreds of times throughout a day. I like to know the numbers I need to see on my scouting app if I’m going to buy, and then go on autopilot.
That’s where your formula comes in: Are you going to be a risk tolerant buyer, and purchase items outside the top 10% (or outside the top 30%)? Or play it safe every time, aim for quick turnover, and keep it in the top 1%? That’s where this chart comes in. Know your target percentage bracket, know the sales rank you need to see in each category, and go to work.
How I made the sales rank chart
The formula for arriving at the numbers in this chart was simple:
- On Amazon, I used the drop down menu to select a category.
- I left the field blank, and hit “Go.”
- The number of results is the number of items for sale in the category.
- From there, I determined the top 1%, 5%, and 15%.
You can print these out and keep them in your wallet (or just memorize them) so you have a quick reference for interpreting sales rank when you’re “in the field.”
Wait: It gets complicated.
How can this chart mislead you? Here’s how: The top 10% in Books means something entirely different than the top 10% in Grocery. We’re going to look at some familiar categories to illustrate.
Amazon has listings for:
950,000 movies (VHS and DVD);
4.5 million CDs, cassettes, and vinyl.
Calculating the top 10% of products selling in these categories brings us to these rankings:
95,000 in movies;
450,000 in music.
This is where it gets complicated. I know I sell a lot more movies ranked worse than 200,000 (way outside the top 10%) than CDs ranked 200,000 (inside the top 5%). I read this as Amazon simply selling a lot more movies than CDs, which makes a lot of sense. This is an example of how relying on a sales rank “safety zone” can be deceiving. Some sellers might fight me on this point, but in most instances I wouldn’t touch a CD ranked 450,000, but never hesitate to pick up a DVD ranked 95,000.
A book ranked 100 on Amazon could be selling 500 copies a day. However a case of vegan raw food bars ranked 100 could be selling 75 units a day. Different categories, different sales volumes, same rank.
The same holds true for percentage brackets. The top 0.01% selling DVDs on Amazon might average 200 units a day. In Lawn & Garden, that same 0.01% bracket might average 20 units. People buy more DVDs than garden hoses. Pretty simple.
How relying on sales rank alone can be deceiving.
There is debate about how much sales rank should factor into a buying decision. On one end, those who say that the only thing that matters is your profit margin, meaning if a book costs 25¢ and it’s going for $25 on Amazon, they’re buying it — even if the sales rank indicates it hasn’t sold a copy in five years. On the other end are those who need solid proof a book is in heavy demand before they’re spending one cent, no matter if a book is selling on Amazon for $500.
What do I think? Operating in either extreme is just a function of laziness. Particularly in books and media, there is a (somewhat subjective) formula you can apply to determine if a book has a small but steady niche demand, or it is merely obsolete. It’s not all left to the whims of “the market.” By asking a series of questions one can ask to assess if that copy of “Algorithmic Architecture” ranked 3.2 million is just steadily selling one copy a year, or is so irrelevant it will literally never sell another copy for the rest of time.
I developed eight factors I use to separate the obscure and valuable from the merely obsolete. Going into that formula may be outside the scope of this post, but the message here is: Sales rank isn’t everything. Look at ALL of the available evidence to make a determination as to the potential for an item to (eventually) sell.
How I was a victim of sales rank myths for years.
I started out selling books on Amazon very part time in 2007. For literally the first four years I considered any rank worse than 500,000 to be the black abyss of sales into which books would vanish and never be seen from again. Fact was, I didn’t know how to interpret that number, and how often a book ranked 500,000 was actually selling.
This myth was reinforced by most of what I’d read, which advised not to touch anything ranked beyond 1 million at the absolute worst, if not 500,000.
The reality check came when I started a small side business publishing. This allowed me to see exactly what a sale of a single copy did to sales rank, and track exactly what one, two, and three days without a sale did. What I learned was mind blowing.
A single sale will cause any book to jump to a sales rank of approximately 100,000. Maybe 70,000, maybe 120,000. Two sales in a day will bring it up to around 30,000. The actual rank can be on either end of these estimates, depending on how many other books have sold that day on Amazon.
None of what I publish sells well enough for me to be able to offer personal testimony beyond what two copies sold in a day translates to. But the available info says that a book ranked steadily at 5,000 is selling about 11 copies per day. A book with a steady rank of 100,000 is averaging a little more than one copy per day.
After a sale, the rank starts its downward decline. If no other copies sell, the next day the rank will be approximately 250,000. After two days, the rank will hit somewhere around 400,000 (again, ballpark figures here).
Most Amazon sellers still believe in the “sales rank abyss” I spoke of, and put it somewhere around 1 million. As in: “Anything ranked worse than 1 million will never sell and is a waste of your time.”
If 500,000 means that a book sold three days ago, what does 1 million mean? Keep in mind almost none of the Amazon literature I read will advise you to buy books ranked worse than 1 million. Let’s take a closer look. How long ago did a book ranked 1 million sell?
Have a seat.
A book ranked 1 million sold about ten days ago. That’s it.
Picture holding two books. According to your scouting app, the book in your right hand has a rank of 100,000. The book in your left, a rank of 800,000. Both will cost you 50¢, and sell on Amazon for $10. Most sellers would run to the counter with the 100,000-ranked book. Most would pass on the 800,000-ranked book. But the only thing that separates them is about five days.
The folly here is that there is no such thing as “a book ranked 100,000” or “a book ranked 800,000.” There are only books with those ranks at that moment. That 100,000 book could be 800,000 in a week. And that 800,000 book could be 100,000 in five minutes. Sales rank only tells you one thing: How long it’s been since an item last sold.
This is a brief look at demystifying sales rank. Both ignoring and being a slave to sales rank will hurt you as an Amazon seller. Print the charts, study them, then read the feedback (as expressed in your sales) to know what works for each category.
To oversell my point, four weeks ago I sent in a shipment of 110 books (salvaged from a university library dumpster) with an average sales rank of 4 million (only four were ranked better than 2 million). From this shipment, I’ve sold four books in four weeks – books that most sellers will tell you “will never sell.”
I will add to Peter’s article that you never know exactly when the next sale will be. Is a book on its way up to 5 million or will it sell a copy tomorrow? That is really hard to tell sometimes which is why it is important to have rules and stick with them. It would be so exhausting if we had to deeply analyze each buying decision or relied on any one inventory item to make our money.
That being said, my “rules” have evolved over time. I, too, have sold highly ranked books (mostly textbooks), but I’m currently working to have a bigger inventory of fast-selling books and smaller of long-tail. There is no wrong or right with this – just what YOU are comfortable with, your level of risk and your available dollars that can sit in inventory for a while.
From my own experience, my book is – as of this writing – ranked 123,777. I normally sell about 20-25 copies a month on Amazon.com. I’ve seen the rank crawl up to 400,000+ and drop down to under 80,000.
I would remind everyone reading this that Amazon is constantly adding new product to its catalog. If you are going to use Peter’s chart or your variation of this chart, you’ll want to update your numbers on a regular basis. While books are by far the biggest category, other categories are gaining momentum as more and more people turn to Amazon for all their shopping needs.
As you can probably tell from this article, Peter has a strong point of view. I did not agree with everything he writes in his book – I steer clear of activities that Amazon might frown on – but I learned new sources for inventory, ranking and how to make a trip pay for itself with FBA. You can check it out for yourself. He offers 30 pages from the book for free here: Amazon Autopilot: How to Start an Online Business with Fulfillment by Amazon and Let Them do the Work. As a final note, I am not an affiliate of Peter’s and receive no compensation from him for writing this story or for any book sales from it.