Answer: The question comes from a customer and is really taken out of context because the customer wanted to know how anyone could afford to sell books on Amazon for a penny.

 

The reality is that there are several very high volume booksellers that sell SOME of their inventory for a penny and have been stereotyped as penny booksellers.  I know one such dealer that has 2,500,000 books in his inventory, some of which do sell for a penny.  He employs six people that do nothing but list 2,000 books each per day.  If all he sold were penny books and if he only maintained his inventory level, he would be selling 84,000 books per week.  If all of those books were free, he would still only profit $840 from the books alone.  Of course, he uses fully automated packing and shipping tools, so his shipping costs are less than what most realize and he profits about $0.60 per book from his postage reimbursements.  Well, now we are talking about $50,400 profit per week, but still probably not enough to justify the employees he has, the warehouses, and the machinery, but it is sounding better.

I do not know his actual average margin and I wouldn't ask because it is none of my business, but if I estimate that he profits an average of $1.00 per book, plus the $50,400 he makes from shipping, he would be making $134,400 per week.  I suspect he is doing better than that and is making somewhere around $175,000 per week in gross profit.

Well, that is great for him because he is set up to handle a very large volume of shipments every day, but if you start selling books for a penny apiece, you are going to find yourself making around $0.15 per hour and you are going  to be packing books around the clock just to fulfill your orders.

A better scenario for the beginning bookseller is to establish a minimum threshhold profit for any given book.  Personally, I do not buy books anymore unless I feel they will profit me $5, and even then, I am very selective about the low margin books I do buy.  They need to have a good Amazon sales rank, 100,000 or lower, they need to be in excellent shape, they must not require much time to cleanup and remove stickers, and they have to weigh less than a pound when they are packaged for shipment because I want to know that the shipping reimbursement is going to cover shipping and packaging.

That said, you shouldn't blindly follow my model because it is based on my own break-even analysis and my business model.  You should do the analysis yourself for your business and decide a minimum profit threshhold for books you buy.  That is exactly why I have included these analysis tools and spreadsheets in the accompanying "Bookkeeping for Booksellers" CD.  You can also see examples of these calculations along with explanations in my book.

Thus, you can see that there is a lot of money to be made selling penny books if that is your business model and you have the capital to buy automated packing machinery, hire a bunch of employees, and you can afford the warehouse space to store millions of books.  On the other hand, there is very good money to be made selling books for more profit, requiring much less storage space, and not having all the associated headaches and pressures of going to a large scale business model.  I prefer to keep my own online bookselling business small and to have fun scouting for gems myself.