Q&A: How big can I scale my online used book business?

QUESTION: I have been selling books online for about a month now. I've sold about 300 books and am curious if there is a "limit" to how many books can be sold. Is there a point when my business can't get bigger? Sure, there is a limit to what one person can do, but can I build this into a large-scale business? In other words, if I had 20,000 books listed would I sell them at the same ratios that I am selling my current stock?

ANSWER: Great question. The short answer is, you can't scale a used book business to the same degree as you could with, for example, a business selling new products.

First, let's assume you'll keep your business a one-man show. Only so many hours are in a day for you to find books and list them for sale. You're limited to one geographical area, you can't go to every used book sale in the country to find more salable books.

And as your sales increase, you'll be spending more time organizing books, packing books for shipment, and dealing with customers. All these tasks will reduce the amount of time you can devote to finding new books.

Another thing that limits the scale of a used book business is the time-consuming inventory maintenance tasks that will multiply over time. I call it "getting rid of the deadwood." For example, let's assume that you're a good book picker, and 75 percent of the books you list for sale are sold profitably within 18 months. But because you have limited storage space, you decide to get rid of the low-priced books to make room on your shelves. Whether you sell these loser books off as a bulk lot, or donate them to charity, at some point you'll have to assemble them and dispose of them. And it's enormously time-consuming.

Most of my cashflow comes from books I listed for sale during the previous month or two. The good books get snapped up quickly, then you are left with slower-moving stock. So when your business grows to the point where your inventory consists of 20,000 books, you're likely to have a much higher percentage of slow-moving books. So the overall percentage of your inventory that sells on a daily basis will go down over time. How big you can scale of your business depends on your acquiring good quality stock consistently. And that depends somewhat on luck, and your persistence in finding good sources of books.

All of these issues we've discussed here are the things that limit the scale of a used book business, which is very labor- and time-intensive. But on the flip side, there are advantages to selling used books. The profit margins are high. I can't think of any other business where you can easily find your merchandise for a dollar or two per item and sell them at a 500 percent markup or more.

Short of hiring employees, I can think of one way to scale this type of business. That would be to recruit friends to find books for you, perhaps paying them a small commission for every book. Because I think that's the biggest thing that limits the scale of a used book business: the ability to find good used stock in quantity. The challenge here would be teaching them what types of books you want to avoid.

Q&A: I'm doing well selling books on eBay in bulk. How much can I make selling individual books?

Question: I currently sell paperbacks in groups on Ebay and make about $50,000 profit a year. Could I realistically expect to be more profitable selling hardbacks individually?

Answer: If you are making 50K annually selling in bulk on eBay, you are definitely among the more successful sellers around, I'd say. If you are doing that kind of volume, you're obviously benefiting from repeat customers because you're providing good value. So I would caution you against anything that would cause you to lose focus on the successful things you're doing now.

I've never sold any bulk lots. About 50K a year is the most I've ever made from selling individual books, and I considered myself pretty lucky to do that -- lucky in the sense that I've found some good local sources for books. That is mainly because I live in a metro area (Washington D.C.) that has a lot of libraries that have frequent library sales, where it's pretty easy to buy several hundred good hardbacks a month for no more than $1 or $2 apiece. I've been doing it long enough to be able to skim the cream at book sales pretty efficiently.

When I say I've been clearing about 50K a year, that's just me working as a one-person business, probably 50 hours a week. I could probably squeeze more cash out of the business annually, if I always sold at the lowest price. But I tend to accumulate stock, with the aim of getting higher prices down the road for some of the more unique books. (This won't work for the average book in plentiful supply, because price tends to go down as more copies become available online.)

One thing you might consider is testing the waters of selling individual hardbacks. If you have the time and inclination, I suppose it would be possible to develop a sideline to your bulk bookselling, selling the unique book you find here and there to individual customers. That's only if you have any spare time left from your current business, of course.

In my book "The Home-Based Bookstore" I advocate selling individual titles on Amazon because it seems more efficient to me than selling individual titles on eBay. But since you're an active eBayer, if you had an eBay store it might work to cross-promote some higher-end individual titles from your bulk listings. If you wanted, you could list the same books on Amazon Marketplace if they're selling at a higher price there.

Q&A: How can I find profitable books for resale online?

Question: How can I find profitable books for resale online? I started "playing around" with technical books both I owned and used. It was hit or miss when I started "speculating" on books I would buy. I became very discouraged when earlier this year I inherited and entire estate of books. Went to list them on Amazon, and just about all of them were penny books. I'd like to do this so it's actually fun and profitable.

Answer: One way to avoid losing money on books is to get a cellular price lookup service (you need a Web-enabled cellphone to do this). That way you can research the online market price of books before buying them, and be relatively sure you can sell at a profit.

The services cost around $8 or 10 a month, and are much faster than navigating through Amazon's screens. You just punch in the ISBN and you get the prices for new, used and collectible listings on Amazon. Depending on your wireless device, you may be able to connect a bar code scanner and avoid having to key in the ISBNs.

Here are some services:
ScoutPal. www.scoutpal.com
Bookhero. www.bookhero.com
AsellerTool. www.asellertool.com
BookScout. www.theoldbookstore.com
BookDabbler. www.bookdabbler.com

Clearing the deadwood from your online bookstore

Each time you list a new batch of books you’ve purchased, you can assume that about 25 percent should sell within three months. Within about 18 months, 65 percent to 75 percent of those books will probably have sold, depending on your pricing strategy and buyer demand for the titles you picked.

Now is the time to begin determining which of the remaining stock is deadwood and must be removed from inventory. A good starting point is a price of $10. If books are priced below that point, out they go after 18 months. Deadwood sitting in your inventory costs you money. The space the book is occupying could be used by newer inventory that will bring in profits. Be brutal. Clear space on your shelf for new inventory that will generate cash.

More patience is appropriate for higher-priced books, however. Obscure books priced more than $50 may take two or three years to find a buyer.

Once storage space becomes tight and you’ve confronted the nuisance of clearing deadwood, the need for selective buying will be more obvious. It takes time and effort to cull the losers, time you could be spending find-ing profitable books. Set guidelines you feel are appropriate for your situation. For example, you might decide to reject books you can’t sell for more than $6.

Q&A: Where can I find good used books to sell online?

Question: I went to three local thrift stores -- a Goodwill and two Salvation Army stores. Of thousands of books, I found only two that were reliably profitable -- one selling for around $15, one for $20. It didn't seem that scouring for books that way was very productive, it would have taken many hours of work to make $35.

Answer: First, I would say that trying to find good books for resale in a Goodwill/Salvation Army type of store is going to be difficult for a couple of reasons. Number one, most of the books donated to these shops are usually are very popular (and therefore commonly available) titles. For example, you'll see lots of romance books, and lots of "Chicken Soup for the Soul" books at these shops, a lot of popular fiction. Nothing is wrong with these books, but they are so plentiful in the used market that the prices for them are very low because there isn't enough demand after the book has been on the market a few years. So, for example, when an Amazon seller ends up with one of these books you see in abundant supply at thrift shops, and find that the book is selling for only 90 cents on Amazon, the seller prices theirs at 89 cents. Then the next person prices theirs at 88 cents, and so on. If there is not enough demand from the book buyers on Amazon to soak up these used copies being listed online, the price can go all the way down to 1 cent!

The other main reason it's so hard to find valuable books in a thrift shop is that lots of used booksellers regularly go there to find books for resale. So the stock gets picked over very quickly. If there is not much turnover at the shop, with new inventory coming in from people donating books, pretty soon all the books that were worth decent money will end up in the hands of booksellers, and most of the stuff left on the shelves is junk.

Also, some of these types of thrift stores are beginning to sell some of the valuable donated books online themselves. They check the online price as soon as they get the books, and the valuable ones they sell themselves and keep all the proceeds, instead of allowing booksellers or collectors to snap them up at bargain prices. I guess there's nothing wrong with that, except that it makes it really hard for book buyers and collectors to find decent books in these types of stores.

Library sales are probably the best source of profitable books for online sellers. And that is precisely because the books available at a library sale haven't been picked over before you see them. So you have a much better chance of finding some valuable books at a bargain price at a library sale.

Does Amazon sales rank matter for used books?

Question: Amazon sales rank seems to be a big concern of booksellers but doesn't have much bearing on my sales. How important is it?

Answer: You're right, Amazon sales rank is not the primary factor in whether a book is good inventory for a used bookseller -- in most cases. The most important consideration is, what is the going price on Amazon, and am I getting it at a bargain price? Even if the book sells only one copy a year (and the sales rank exceeds, say, 500,000) you still have a good chance of selling at a profit.

However, sales rank would be an important consideration if you were buying a certain title in quantity. For example, a couple of years ago, I came across a listing on eBay of a bulk sale of about 500 copies of a book about stock market investing. Five hundred copies of the same book, all in their original factory cartons. The books were about 20 years old and they had been misplaced in a warehouse, and whoever found them put all of them on sale on eBay. The auction winner had to buy the whole lot, and there was a reserve price of a couple thousand dollars. I thought it was a quality book, and the going price on Amazon for the book was about $25. But because the Amazon sales rank was so poor (worse than 200,000) I knew it would take way too long to break even.

With such a poor sales rank, I knew it would have taken a couple of years to sell most of the books, and I didn't think it was worth the risk. If I had come across one copy of the book at a library sale, I would have bought it without hesitation, but I didn't want to invest that much money in a single title -- because I knew from the Amazon sales rank that it was a slow seller.

Q&A: Should I sell used books on eBay or Amazon.com?

Question: Should I sell used books on eBay or Amazon?

Answer: I prefer selling on Amazon because it is just so much more efficient than eBay (in most cases). You can list your books for sale much faster, and I believe they sell faster on Amazon because the buying process is so much simpler and easier for the buyers.

Another big plus in selling books on Amazon is that you can capture some sales from book buyers who go to Amazon, originally with the intention of buying a new book. They get to Amazon's site expecting to pay $20 for a new book, and notice that a used bookseller has the same thing they're looking for in excellent condition for only $10. So you get lots of sales on Amazon from people who hadn't even considered buying a used book.

However, there are some instances when I think it's good to sell on eBay. If you have a collection or assortment of one authors' books, you could sell it as a package. For example, if you had one copy of each book written by Stephen King, you could sell it as an "instant Stephen King collection" and it would surely receive lots of attention, and sell for more than you could get for each of the titles individually.

And there are lots of booksellers that believe if you have a truly unusual, collectible book, you can get a higher price by auctioning it on eBay than you can selling it at a fixed price on Amazon.

So even though I prefer selling on Amazon to eBay, I have active accounts on both sites because I don't want to put all my eggs in one basket. For example, what would happen if your whole business depended on Amazon, and one day Amazon decided they didn't want to allow independent sellers on their site anymore? In that case your whole business could go down the tubes. So I would recommend that sellers maintain an active eBay account, just to avoid becoming totally dependent on a certain sales venue.

Amazon sales rank and its impact on used book sales

Some online booksellers like to consider a title’s Amazon sales rank in making their buying decision. The rank is a measure of how often a particular book sells compared to every other book in Amazon’s catalog of more than 3 million titles.

The sales rank can be as low as 1 or higher than 3 million. The lower the number, the greater the sales volume — a sales rank of 1 designates the top-selling book on Amazon. If you list a book for sale in the lowest 2,000 sales rank, the odds are it will sell within hours, assuming it’s priced competitively.

You can look up a title’s Amazon sales rank by looking in the “Product details” section of the title’s Web page on Amazon. The number can change frequently, since Amazon recalculates the sales rank of books in the top 10,000 once every hour. Books ranked from 10,000 to 100,000 are assigned a new rank once per day. There are also books with no sales rank on Amazon, which means that no copies have sold.

Since Amazon has an estimated 70-percent share of the Internet book market, its sales rankings are the best free information about book sales. Amazon made a series of changes in October 2004 to make its sales rank system more accurate and transparent. The rankings now take sales of new and used Marketplace items and e-books into account.

All this does not mean you should rule out books with high sales ranks, say more than 400,000. If you’re the only seller with a copy, you’ll get the sale. You might have to wait a year for a buyer to come along, but if you price high, it will be worth the wait.

Amazon does not publicly discuss its sales figures for individual titles, but a number of outsiders have at-tempted to calculate what a given sales rank means in terms of quantity sold. A book with an average sales rank of 1,000 sells about 90 copies a week, while a book with an average rank of 500,000 sells about one copy per week, according to statistics compiled by Morris Rosenthal, publisher of Foner Books. Rosenthal figures that an Amazon sales rank of 10,000 translates into two sales per day, and a sales rank of 1 million translates into a single sale every other month.

In other research, economists at MIT figured that a book ranked number 10 on Amazon sells about 5,000 copies on Amazon each week, and a book with a rank of 100,000 sells 1.6 copies per week on average. Amazon sells more than 100 million books per year, and about half of those unit sales come from sales of titles ranking above 40,000, according to the MIT research. Titles ranked from 100,000 to 200,000 account for just 7.3 percent of sales at Amazon, and titles ranked from 200,000 to 300,000 produce just 4.6 percent of sales.

Slower-selling books tend to have higher prices, according to the MIT researchers. They found that the average price of books with a sales rank higher than 100,000 is about $8 higher than the faster-selling titles.

Title Z is a fee-based sales charting service that allows users to instantly retrieve historic and current sales rankings from Amazon and create printable reports with 7-day, 30-day, 90-day, and lifetime averages. The idea is to see how topics or titles perform over time compared to competing titles.

More recently, Amazon itself has launched a subscription-based service for higher volume sellers. Amazon Historical Pricing provides access to over 3 years of sales data on books and other Marketplace items. The service will cost $499 per month for up to 20,000 request per month, or $999 for up to 60,000 requests per month.

Also, a computer-book publisher, Paradoxal Press, offers a nice tool to track Amazon Sales Rank, and it's free.