Is it necessary for Amazon FBA sellers to run flash sales?

Amazon FBA sellers should all be familiar with LD (Lightning Deals). There is a lot of controversy about whether Lightning Deals are necessary. In today’s article, let’s take a look at whether Amazon’s Lightning Deals are worth doing.

The main contents include:

• What are Amazon Lightning Deals?

• How do sellers participate in Amazon's Lightning Deals?

• How many flash sales does Amazon have every day?

• What impact does flash sales have on sales?

• Is it worth doing flash sales?

• How to judge whether it is suitable for flash sales?

• Why should I participate in flash sales?

01

What are Lightning Deals?

Lightning Deals are limited-time, limited-quantity promotions offered by Amazon. Consumers can find them on the Today's Deals page or the Prime Day page. Each consumer can purchase the product once before the Lightning Deal ends. Sellers can apply to participate in the Lightning Deal 24 hours before the event begins. For sellers, it is important to fulfill orders as soon as possible after the Lightning Deal ends, because consumers are very sensitive to the delivery time of Lightning Deals.

Once the Lightning Deal is live, you’ll be able to see:

• Products participating in the flash sale

• Discount amount and final product price (excluding tax)

• A progress bar showing the progress percentage of the flash sale

• Countdown to remind consumers how long they have to add products to their shopping carts and receive promotional discounts

• When the promotion starts, the Add to Cart button will appear

• If all discounts have been claimed, consumers can see a Join Waitlist button and a progress bar showing which discounts other consumers have not used and which have already used.

Note: Prime Day During the event, all offers are exclusive to Prime members.

02

How do sellers participate in Amazon's Lightning Deals?

Sellers participate in flash sales activities, specifically follow the following 8 steps:

1. Check eligibility

First, you must have a professional seller account, get at least 5 seller feedbacks and ratings per month, and have an average rating of at least 3.5 stars, and choose Amazon FBA for logistics.

In addition, products that apply for flash sales must also meet the following standards:

• Have sales record on Amazon and have a rating of ≥ 3 stars;

• Available to Prime members in all regions;

• Non-restricted products, stable sales;

• It is a new product, not a second-hand product;

• There are many product variations;

• Follow Amazon pricing policies;

• Comply with the rules for obtaining reviews;
• Comply with reporting frequency rules.

2. After making sure you meet the requirements for applying for a flash sale, log in to Amazon Seller Central and click Advertising > Deals.

3. Select “Create a new deal”.

After jumping to the Deals page, you will see all the previous flash sales. There is a "Create a new deal" button in the upper right corner. Click it to create a new flash sale.

4. Select products that meet the flash sale conditions and enter the promotion information, as shown in the following example:

5. Select the flash sale date

After entering the information, you need to select the start and end time of the flash sale. Yes, you can't choose a specific day or time, you can only choose a week, as shown below:

6. Fill in the elements of the flash sale activity

After scheduling, you need to enter the product promotion price and the quantity of flash sale products. The promotion price is the biggest factor in the promotion, and Amazon requires sellers to offer at least 15% discount.

For example, if the regular price of a product is $29.95, the sale price for the flash sale can be set to $25.45. Next, set the quantity of the product for the flash sale. In the example, the $29.95 product is set to 26 pieces. If the product has variations, you can also offer some or all of them.

7. Review and submit

After ensuring that the information is filled in correctly, submit the LD application. Usually, the approval will be obtained quickly.

8. Accept the schedule of flash sales

Amazon will usually notify sellers one week before the actual flash sale event begins. Sellers cannot control the date and time of the flash sale event. The specific time depends on the seller's luck.

03

How many flash sales does Amazon have every day?

This article summarizes the data from July to August. Let’s take a look at how many flash sales Amazon has every day!

As shown in the above figure, the data surge on July 17 was due to the Prime Day promotion. In addition, there are about 1,500-2,000 flash sales on Amazon every day on average . I calculated that there are at least 45,000 flash sales every month! It can be seen how fierce the competition is...

04

What impact do flash sales have on sales?

Let’s take a look at the trend chart of the impact of the flash sale on sales:

On the day of the flash sale, average product sales increased by about 65%. Over the next 12 days, sales continued to grow but the growth trend gradually slowed down. After 12 days, sales basically stopped increasing.

In short, flash sales can boost sales. In theory, the average daily sales of a product on the day of a flash sale can be 200% higher than on normal days. For example, if the product normally has 10 sales per day, then the average daily sales in the two weeks after the flash sale is launched will be 30 sales.

05

Is it worth doing a flash sale?

We use data to calculate whether a flash sale is worth doing:

• Assume that the product participating in the flash sale is X, the price is $25.45, and the average daily sales volume is 20;

• The landed cost of product X is $5;

• Amazon charges a 15% commission on sales, plus $4.50 for shipping and other expenses;

• Products participating in the flash sale must be discounted by at least 15%.

( Note: Landed Cost includes the price of the goods themselves and the costs incurred during transportation. )

The calculation formula is as follows: 25.45 – (5 + 4.50 +25.45 × 15%) = 12.13

In summary, if product X participates in the flash sale, the gross profit of the product is $12.13.

The registration fee for the flash sale is $150. According to the calculation results, in order to make back the cost, 12 more units of product X must be sold in two weeks. In theory, sales will increase by 200% after the flash sale, which means that an average of 60 units of product X can be sold every day.

If the theory is correct, the sales from the flash sale will be enough to offset the cost and even make a profit. The calculation formula is: (60 × 12.13) – 150 = 577.8

From this point of view, flash sales are worth a try.

Note : The above is just a calculation demonstration. Sellers are advised to calculate according to their actual situation.

06

How to determine whether a flash sale is suitable?

Product X in the example above is a special case because its sales volume is not low. The best way to determine whether a flash sale is right for you is to calculate your product's break-even. Here are the calculation steps:

1) Calculate the gross profit of a single product

The formula for calculating the gross profit of a single product is as follows:

Gross profit = discounted price of FBA product - Amazon fee per unit - landing cost per unit

For example, if there is a product Y with a discounted price of $25, the total Amazon fee is $9.05, and the landing cost is $5.5, then the gross profit per unit of product Y is $10.45.

(Note: 25 - 9.05 - 5.50 = 10.45)

2) Calculate the sales volume required to break even

Next, calculate how many units of product Y you need to sell to break even on the sale entry fee.

The calculation formula is as follows:

Sales volume required to break even = Participation fee for flash sale ÷ Gross profit per product

Let’s take product Y as an example. The above calculation shows that product Y can earn a gross profit of $10.45 per unit, and the participation fee for the flash sale is $150. Therefore, at least 15 units of product Y must be sold to recover the cost.

(Note: 150÷10.45 ≈ 14.35)

3) Calculate whether the current day’s sales are worth doing a flash sale

Previous data analysis showed that product sales could increase by 200% within two weeks. Use this data to analyze whether your current daily sales are worth running a flash sale.

Calculation method : Sales volume required to break even / average sales growth

For example, we calculated from step 2 that we need to sell 15 units of product Y to make back the cost. Theoretically, the sales increase of the product is 200%, so we put it into the formula: 15 ÷ 200% = 7.5

If the seller's average daily sales of product Y is greater than 8, then it is profitable to do a flash sale . On the contrary, if the sales of product Y is less than 7, it will be a loss.

Other considerations

When analyzing the profits of flash sales, you also need to pay attention to:

• The number of units sold is inversely proportional to the gross profit per discounted unit . This means that if your gross profit per unit is higher, you need to sell fewer units.
  
  
• The percentage trend chart is just an average . The specific product performance depends on many factors. For example, if the flash sale occurs at an uneconomical time (such as 2 am on Friday), the sales of the flash sale on that day may not exceed 60%.
  
  
• The registration fee for a flash sale is not fixed . During holidays or prime time, the registration fee for Amazon's flash sale is as high as $500 per item. Of course, product sales during this period will be higher, but the high cost means that it is more difficult for sellers to make back the cost.
  
  

07

Why should I participate in flash sales?

Participating in flash sales can boost product sales, but that’s not the only benefit. Other advantages include:

• Helps to clear inventory

If you’re looking to clear out a lot of inventory, participating in a Lightning Deal can help you do that. Even if you end up losing money, it’s still more cost-effective to clear out inventory this way than to sell it through Amazon (which only sells for about $0.05 per item).

There is still a problem, which is that Amazon rarely approves products with slow sales growth, but it never hurts to try.

• Increase brand awareness

Sellers can sell goods at low prices by offering discounts, etc. to attract customers and obtain customer information to increase brand awareness. Participating in flash sales is a channel to sell goods at a reduced price, but sellers will not be able to obtain customer information such as email addresses and addresses.

To obtain customer contact information, sellers can include small cards in the packaging, etc., to direct customers to other channels such as landing pages. However, the conversion rate of this practice is very low, not as high as other promotional activities on Amazon.

• Increase product exposure

When a flash sale is successful, sellers will not only increase sales, but also improve their BSR ranking. Once the BSR ranking is improved, product exposure will also increase.

Two weeks after the flash sale, the average daily sales of the product are still high. If the product is of good quality and has good exposure, then the average daily sales of the product will likely continue to grow.

For more information about flash sales, please refer to Amazon Seller Platform.

Website: https://mai.amazon.cn/gp/help/external/G202183600?language=zh_CN