Selling Books for a Penny... Now How Does That Work?
Go pick out a couple of books from the shelf that you have recently read or plan to read, scan them with your smartphone and favorite picking app, and observe the lowest 'Used' price on Amazon that other merchants are selling it for.
Yup. One cent. A lousy, measly, nearly-worthless penny! Now, why on earth would somebody sell a book on Amazon for only a cent? Aren't they losing money when you factor in the cost of picking the book and the Amazon fees? How could selling a book for a penny possibly make good business sense?
The short answer: Shipping charges... and lots of them.
I was once privileged enough to visit and get an inside look at the operation of one of these large Amazon sellers that deals in penny books. It was a huge warehouse full of shelves of books and DVDs with giant piles of mixed books and people with scanners scanning and sorting them and another room with people on computers listing them and another room for shipping. It was pretty impressive, but how is could an operation like this be sustained by penny books, I asked.
The math is actually quite simple. This operation buys books and media in bulk, and often can even get bulk books for free. I was told it costs an average of $100 for a palette of over 500 books and movies, sight unseen. So that averages to about twenty cents per book for the picking cost.
Now, a couple of these books are gold. It might be a rare occurrence, but all it takes is a few decent textbooks or artist monograms that can be sold for $20-30 each and the costs on the whole palette is recouped. When you're dealing in bulk like this, you only need, like, 5% of your books to be worth just a few dollars each and things can really start to get profitable. So even if two-thirds of the palette should be classified as 'penny books', enough profit is still generated from that other third to begin to cover the costs of storage and labor.
So, you're thinking, all those penny books are just the leftover chaff to be recycled. They're a liability, right? Nope, those penny books also generate profit not in the sale price, but in the leftover change from the difference between the shipping funds collected by Amazon and the actual shipping costs. And when you ship hundreds of books a day like this operation does, you can qualify for bulk shipping costs, which are much lower than even media mail.
We're talking actual shipping charges of about a buck per book. So even after Amazon fees and the costs of shipping materials like padded envelopes and labels, these penny books are bringing in a buck or two each. Do that several hundred times a day, add it to the bigger profits made from the sale of book and media that actually has value, throw in the occasional rare mega-valuable book, and you have yourself quite a thriving business.
This Amazon Forum thread about penny books from a few years back breaks down the math with some more detail, so give it a look if you still are scratching your head.
Obviously, selling books for a penny does not work for the Part Time Picker. A penny book operation requires cheap laborers, large warehouses, forklifts, and all kinds of crap I have no interest in dealing with. That doesn't sound like fun at all.
Sure, I'm happy to pocket the proceeds that come from the low costs of shipping a lightweight book, but I'm not about to base my livelihood on the principle. Don't get me wrong, I love penny books... love buying them, that is. (But then, of course, I'm paying the shipping charges too, so they are really $4 books, now aren't they.)
And since your so good at math there is no need for me to explain that books sold for a penny but using FBA results in nothing but a loss for the merchant. If you see someone selling a book for one cent with free FBA shipping, you should buy that book just to teach that idiot merchant a lesson.