Why are some books so cheap on Amazon?

One question I get a lot, as a former Amazon bookseller, is why some books are so cheap on Amazon. Namely, how can books sell for a penny? And why do they sell that cheap? I can tell you nobody wants to make a living selling books for a penny, but it is possible to do so and turn a profit, if a seller is careful and the market conditions are right. Here’s how they do it.

The main reason some books are so cheap on Amazon

Professional sellers use repricing software, or bots, to keep people from undercutting their prices. There are several such services out there, and they help a bookseller keep prices competitive. Most of these bots work in both directions, keeping a seller from charging too much, but also keeping them from charging too little. I used one, and it was part of my survival equation as a seller.

When a book, CD, video game, or other item floods the market, prices drop. Old bestsellers are the most frequent example of this. If you don’t care about the edition or whether it’s a paperback or hardcover, you can pick up a copy of of most past-their-prime bestsellers for a couple of dollars, plus shipping. Sometimes less than that. Sometimes even as little as a penny.

A book I wrote even sold for a penny on Amazon for a while. Then retro computing became a thing, so the prices have recovered to a degree. But if there had been more than 10,000 copies printed in the first place, its price may have stayed absurdly low.

The opposite can happen too. Market scarcity can cause prices to rise, and the combination of extreme scarcity and bots can cause them to rise to absurd levels.

Should you buy the cheapest listing on Amazon?

So, should you buy the cheapest listing on Amazon? It depends.

Before you click the buy button, I recommend you look at two things. First, look at the description. A lot of sellers will use generic descriptions, especially on super cheap books, to save time. Words like “may have writing, folded pages, and other damage” indicates the seller just bought the book and listed it. At these tiny profit margins, I don’t blame them. But if you see a description that shows the seller actually did look at the book and that describes the copy specifically, buy it. That’s a hallmark of a careful seller.

The second thing to look at is feedback. It’s virtually impossible to keep 100% positive feedback on Amazon, but if a seller’s feedback falls below 90 percent, I get nervous. I’ve never had a problem with a seller who had 95% feedback or better.

The economics of selling cheap books on Amazon

If a seller deals in high enough volume, selling cheap books is profitable. I had people argue this point with me, but my accountant can vouch that I was making the numbers work. If the cheap books are all a seller sells, they won’t make much. But there isn’t a ton of difference in the time required to pack and ship five books or just one, as long as you’re organized and have a good process.

Penny books are less common on Amazon now because it’s much more difficult to make money selling books that cheap now than it was in 2005. But here’s how it worked. You’d buy the books in volume, so you were paying less than 10 cents for each book. The last couple of hours of a book sale or estate sale are prime time for this. They usually run a deal where you can fill a bag for a dollar or two, just to clear out the venue.

Selling the right cheap books

I didn’t just want any book. I wanted something popular enough that it would still sell quickly, and I wanted it to be light enough that I could ship it in a small, cheap bubble mailer. Or maybe not even a bubble mailer. Had I been willing to use those white vinyl mailers, I could have done this a bit longer. But I didn’t want to risk books getting damaged in shipment and getting bad feedback.

So let’s say the book cost 10 cents. The mailer it shipped in cost 25 cents. The paper for the invoice and for the mailing label cost me a penny each. Add another penny for the packing tape. Amazon gave me $2.99 for shipping. At that time, I could ship most paperback books for around $1.75. So the profit on that book that sold for a penny was between 75 cents and a dollar.

If the book sold for a dollar under the same conditions, the profit was more like $2. So I was very content flipping popular books for a dollar or two.

These types of books tended to decrease in value quickly, but that’s why I looked for titles that would sell fast. If I could unload it in a week, it didn’t matter to me that it would be selling for less in two months.

Cheap books on Amazon are a way of buying business

One thing I learned in my other career is that sometimes you have to buy your way into new business by pricing low. Of course the goal of any business is to make money, but making money doesn’t mean you have to get top dollar on every single deal. A few bargain basement deals can lead to bigger deals in the future you wouldn’t otherwise get.

My wife and I got a lot of repeat business when we were doing this because we struck a nice balance. We priced our books competitively, described our books accurately, and packed them reasonably well. I didn’t keep track of how many people bought a super cheap book and came back for more expensive ones, but we did have a small number of regular repeat customers, like a brick and mortar store would. We built up a lot of feedback pretty quickly too, with the increased volume.

Over time we did have to raise our minimum price. If we started selling books again, we wouldn’t do penny books this time, but I’d collect a supply of low-priced books that sell fast to give ourselves a jumpstart again.

Why you see fewer penny books now than you used to

Other booksellers hated those dreaded “penny sellers” in Amazon’s early days. But from the buyer’s perspective, their demise means the prices on common books is higher now than it used to be. What happened?

It was a combination of factors.

Amazon Prime

The first factor was Amazon Prime. Soon after Amazon started Prime, they started a service called Fulfillment By Amazon. You could ship your inventory to Amazon, and Amazon would ship it for you. Prime members got free shipping. So a clever seller would list a book for $3.99, undercut the penny sellers by exactly one cent, and Prime members would buy them. The Prime member got an OK deal, but knew they’d get the book quickly and it would be packed in a box. The seller paid Amazon fees for all of this, but made a lot more than the dollar I was making in 2005.

If you’re going to sell cheap books, it makes a lot more sense to have Amazon handle the fulfillment and charge a little more.

The Postal Service

The second factor is shipping costs. Postal rates increase every year. But Amazon has only raised the shipping allowance for books once since 2005. The cost of shipping a book today is generally $2.75-$2.80. The amount of your shipping allowance varies depending on the plan you’re on, but $2.99 is a fairly safe assumption.

If it costs $2.75 to ship a book, the mailer costs 25 cents, and the label and invoice cost a penny, you lose money selling the book for a penny even if you got it for free. At least in 2020.

E-readers and digital distribution

And finally, digital distribution has to play a factor. How much of a factor is unclear. Some percentage of people who buy digital books wouldn’t have bought a physical copy. But it’s definitely cut into the supply of used books some. A decade ago, I would go to garage sales and the person selling books would mention they just use their Kindle nowadays. And the number of books I could find at garage sales really did drop off between 2010 and 2015. Fewer being sold means fewer paperbacks ending up on the used market.