Amazon CRaP: How to Avoid Selling Unprofitable Items

CRaP is one of the best Amazon acronyms to date. It actually stands for “Can’t Realize a Profit” and refers to products that do not make a profit. This is a term Amazon uses when reviewing the profitability of vendor products.

For many years, Amazon’s focus was on gaining market share across numerous product categories, even if this meant sacrificing their bottom line. Now that Amazon is more established with large market shares in major retail industries, the focus has naturally shifted to profitability. Amazon is focusing on profit margins. If a product can’t provide a profitable margin, Amazon doesn't want it.

What Makes an Amazon CRaP Item?

Below I have listed the most common reasons an item may not realize a profit on Amazon.

Low Margins

If the vendor did not offer Amazon good margins or allowances from the beginning, the product may be unprofitable from day one. While vendors don’t want to give Amazon their best price, they do need to offer a good enough margin for both parties to be profitable.

Heavy Discounting

If there is lots of price matching on an item and resellers are engaging in price wars to win the Buy Box, Amazon may no longer be willing to compete and sacrifice margin.

Short Expiration Period

Once an expiration period comes close to an end, the products are disposed of. This happens when demand drops and inventory becomes aged and overstocked.

High Customer Returns

There are costs involved when handling returns. While Amazon often builds this into its allowances, if returns are high Amazon may end up having to fund more than agreed upon by the vendor.

Low Retail Price Points

Items that typically retail under the $10 mark will often be unprofitable due to the cost of shipping, even if the profit percentage is high.

Heavy/Bulky Products

Items that are heavy to ship, large, or an odd shape can be costly to ship. These can often cost more to ship than the product is worth.

Managing Unprofitable ASINs

Once you have identified why items are or could be unprofitable, you need a solution. Here are some suggestions to consider.

1. Offer competitive prices: Make sure you offer Amazon competitive pricing, factoring in the market price when reviewing your product costs. Find the right balance for both parties, but don’t forget that Amazon will come knocking each year for improvements so keep some margin in your back pocket.
2. Manage assortment: Review your range and decide which items make sense to sell to Amazon via Vendor Central and which items should be removed. Look into customizing products solely for Amazon or selling products in multi-packs or bundles.
3. Review a hybrid (vendor/seller) strategy: If you remove certain items from the vendor side, look into listing these via Seller Central or work with a third-party seller or distributor to sell these items on your behalf.
4. Use direct fulfillment: If items are expensive to ship, look into shipping the product directly to the end consumer and bypassing Amazon’s Fulfillment Center to cut down on shipping costs.
5. Monitor customer returns: If items have a high customer returns rate, investigate the reason for this. It might be a simple fix, such as when the product pages have inaccurate data or images.
6. Tighten up your distribution channels: If the products are being aggressively priced in the market, you may want to start implementing strategies to tighten up your distribution channels, such as introducing distribution agreements or a MAP policy.

Always review your products before listing them on Amazon and make sure they have a good chance of being profitable for both your business and Amazon. While there are some scenarios you cannot plan for, there are some more obvious cases where you know the items aren’t going to be profitable from day one. Select your products wisely and avoid wasting time on items that are just not suited for the vendor platform.