Amazon Lightning Deals: Are they worth it? We crunched the numbers...

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If you’ve been an Amazon FBA seller for some time, you’ve probably heard about Lightning Deals. And if you’ve heard about Amazon Lightning Deals, then you’ve likely heard about the debate surrounding their effectiveness as well.

In this article, I tackle the subject of Amazon Lightning Deals, and cover the following sub-topics:

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What are Amazon Lightning Deals?

Straight from the horse’s mouth, this is a lightning deal:

A Lightning Deal is a promotion offered in a limited quantity for a short period of time.

Lightning Deals can be found throughout Amazon.com, and are available on the Today’s Deals page or Prime Day page. Lightning Deals are available, one per customer, until either the promotion period for the deal expires or all the available inventory is claimed.

Since Lightning Deals are time-sensitive, it’s important to complete your order as soon as possible. You can sign up to watch a Lightning Deal up to 24 hours before it begins.

When a Lightning Deal is available, here’s what you’ll see:

The item featured in the deal.

The promotional discount amount and final price (not including tax).

A status bar indicating the percentage of deals that have already been claimed.

A timer showing how long you have to add the item to your Cart and claim the promotional discount.

An “Add to Cart” button if there are available promotional discounts.

Note: On Prime Day, all deals are exclusive to Prime Members.

Note: When all the promotional discounts for a Lightning Deal are held by other customers, you’ll see a Join Waitlist button and the status bar will show that 100% of the promotional discounts are currently being held in other customers’ Carts or have already been used to purchase the deal.

Learn more about how to Join a Lightning Deals Waitlist.

How do you create an Amazon Lightning Deal?

To create a Lightning Deal on Amazon, you must do the following:

1 – Check for eligibility.

To be eligible for these deals, you must have a Professional Seller account, receive at least five Seller Feedback Ratings per month, and have a minimum 3.5-stars rating overall.

Your product must also meet certain criteria. It must:

Have an Amazon sales history and a rating of at least 3-stars.
Be Prime-eligible in all regions.
Follow Amazon’s pricing policies.
Be unrestricted, and/or inoffensive and appropriate.
Be in ‘New Condition’.
Have as many variations as possible.
Be compliant with customer product reviews policies.
Be compliant with deal frequency policies.

2 – Log onto Amazon seller central and go to the Deals menu.

Once you’ve determined that your Amazon seller account and product are eligible for an Amazon Lightning Deal, go to Amazon Seller Central and log in.

Once there, go to the ‘Promotions’ tab and click ‘Deals’.

3 – Select ‘Create a new deal’.

When the screen loads, you’ll see all of your previous promotions, as well as a button that reads ‘Create a new deal’.

Click on that button.

4 – Choose an eligible product and enter the information for its deal.

In the example below, I selected Jungle Stix as the product for the promotion, and Lightning Deal as the type.

5 – Schedule your Amazon Lightning Deal.

After you’ve entered in all of the relevant information for your Amazon Lightning Deal, you’ll need to pick a date range for the promotion. Amazon doesn’t allow you to pick the actual day and time that your Lightning Deal will appear.

6 – Configure your Lightning Deal.

Once you have the time period set, you’ll need to enter the deal’s pricing and number of units available for the deal.

The deal price is the maximum amount for which you plan on selling your product. Amazon requires that you give at least a 15% discount. Since we normally sell Jungle Stix for $29.95, we discounted them to $25.45.
Next, commit a number of units to the deal. In this instance, we committed to 26.
If your product has variations, you can offer some or all of the variations.

7 – Review and submit.

Once you’ve decided that all of your information is correct, submit your Lightning Deal for approval. Typically, the approval process is instantaneous.

9 – Receive your schedule.

Amazon usually notifies its sellers the week before your actual Lightning Deal. And though there is no way to influence the day and time your Lightning Deal appears, if you’re lucky, it will appear during a weekday morning when shoppers are busy buying.

But if you’re unlucky, your Lightning Deal could appear on Amazon at two o’clock in the morning. On a Sunday.

How many Amazon Lightning Deals are there every day?

Once upon a time, Amazon Lightning Deals were awarded very rarely. So rarely did they appear that we suspect (since we don’t have data from that period) that back in 2016 there were less than 10% of the Lightning Deals that appear now.

Recently, we put together some data to see just how many Lightning Deals there are on Amazon every day. This is what we learned:

Number of Lightning Deals Per Day (July 2019)

As you can see from the chart above, on average, Amazon hosts close to 1,500 to 2,000 Lightning Deals per day. The massive spikes around July 17th were the Lightning Deals for Prime Day.

So, in a given month (excluding July), Amazon can host as many as 45,000+ Lightning Deals. That’s quite a bit of competition!

How much do Amazon Lightning Deals affect your sales?

The question I wanted answered when I first started writing this was: how much do Lightning Deals help improve a seller’s sales?

We collected data on the average Lightning Deal’s effect on sales before, during, and after the Lightning Deal debuts on Amazon. These were the results:

On average, a product sees an approximate 65% boost in sales the day of the Lightning Deal.

The day after the sale, the boost is still there but it drops to close to 39%. On day three, it’s down to 22%, and 19% on day four. By day six the boost is below 10%, continuing its downward trend back to its original sales numbers over the next eight days.

Overall, a product will generally experience a 200% bump in average daily sales from a Lightning Deal. That means that if a product normally experiences 10 sales daily, the two-week period post-Lightning Deal should average out to an extra 30 units of sales per day.

Now that we know Amazon Lightning Deals DO improve sales, one question–a million dollar question–remains. Are they worth it?

Amazon Lightning Deals: crunching the numbers.

Let’s do some quick math to determine if Amazon Lightning Deals are, in fact, worthwhile.

We’re making the following assumptions, and using the following data, for this equation:

Jungle Stix is our product of choice for the deal.
On average, Jungle Stix sells 20 units per day.
A 200% bump in sales means that we will sell an extra 60 units of Jungle Stix.
Jungle Stix has a landed cost of $5.00 per unit.
Amazon receives 15% of the sales price, plus $4.50 to ship and handle the product.
We will only discount our product by 15% for the Lightning Deal (selling it for $25.45 each).
There is also a $150 charge to run the Lightning Deal.

Taking all of this into account, once a unit of Jungle Stix sells during a Lightning Deal, the product earns a gross profit of $12.13. Here’s how that breaks down:

$25.45 – ($5 + $4.50 + $3.82) = $12.13

In order to cover the $150 fee for the Lightning Deal, we need to sell 12 more units than what we normally sell over the course of 7 days. So, if our data is correct and we see a bump of 200%, that means the $150 will be covered by the sales made during the actual Lightning Deal.

The boosted sales in the days following the deal will be pure profit. Here’s what the crunched numbers look like:

(60 sales x $12.13 gross/unit) – $150 Lightning Deal fee = $577.80 gross profit

With an extra $500+ in potential profit up for grabs, I’d say that Lightning Deals are probably worth doing. But I strongly recommend doing your own math first, to make sure any deal you’re planning to run will be profitable as well.

What if you can’t profit from an Amazon Lightning Deal?

Of course, Jungle Stix are in a unique position. The product earns an average of 30 sales per day already, for 900 sales per month, so an additional 60 sales are just icing on the cake.

But what about products that don’t earn 30 sales per day? Or products that don’t earn $12.14 per unit in gross profit?

The best way to decide if an Amazon Lightning Deal is a profitable option for your Amazon FBA business is to perform a break-even analysis on your product.

Here’s how:

1 – Determine your product’s gross profit per unit.

If you aren’t sure how to figure out your product’s gross profit, simply use this equation:

Discounted sales price of your Amazon FBA product – Amazon fees per unit – landed cost per unit = gross profit

For example, if I sell a textbook for $25 on Amazon (discounted from its normal price) and my total Amazon fees are $9.05 and the landed cost of my product is $5.50, then my product earns $10.45 in gross unit per sale.

$25 – $9.05 – $5.50 = $10.45

2 – Determine your break-even unit numbers.

Next, determine the number of units you need to sell in order to pay for the Lightning Deal. Do this by dividing the Lightning Deal fee amount by the average gross profit per unit.

Back to the previous example, if I’m earning $10.45 per textbook after the discount and my Lightning Deal is $150, I need to sell at least 15 textbooks in order to cover that fee.

$150 / $10.45 = 14.35

3 – Determine if it’s possible to reach a break-even number with your average daily sales.

Looking at our data for the average percentage bump experienced with Lightning Deals, you need to use that to determine if it’s even possible to sell enough units to warrant the cost of the Lightning Deal fees.

You can figure this by dividing your break-even unit number (the one you discovered after following step two) by the average percentage bump (which, in this case, is 200%).

If the result is lower than the average unit sales per day for that product, then the Lightning Deal is worth it. You will profit.

If the result is equal to the average unit sales per day for that product, you will break even.

And if the result is higher than the average unit sales per day for that product, you will lose money.

For example, to break-even with my textbook product, I determined I need to sell 15 units. So the equation (and answer) would look like this:

15 / 200% = 7.5

On average, I sell 10 units per day. That’s higher than the 7.5 I need to break-even, therefore, the Lightning Deal is worth it. But if my product sold 7 or fewer units per day, I would end up losing money on the Lightning Deal fees.

Some other considerations.

Here are a few more things to think about when it comes to performing a break-even analysis for a Lightning Deal:

The number of units you sell is inversely proportionate to the amount of gross profit per unit your discounted product earns. If your gross profit per unit is higher, you will need fewer sales to cover the cost of the Lightning Deal. And if your gross profit per unit is lower, you will need more sales to pay that $150.
The percentage bump chart is an average. Your products may perform better or worse, depending on a number of factors. For example, if your Lightning Deal appears at a lousy time–like 2 am on Friday–you might not see the 60% first-day bump in sales that a lot of Lightning Deal sellers see.
Lightning Deal fees aren’t a fixed number. During the holidays and Prime Day, Amazon Lightning Deal fees can be as high as $500 per listing. Granted, your sales are also higher during those times, but $500 can still be a difficult amount to pay off.

What other reasons are there to use Amazon Lightning Deals?

Of course, an increase in sales is only one reason to schedule an Amazon Lightning Deal for your product. Other reasons that you might create a Lightning Deal include:

Liquidating inventory.

If you have a ton of inventory you need to unload, a Lightning Deal can help you do that. Even if you end up losing money in fees, removing your inventory this way is still better than liquidating it through Amazon’s liquidation program (which can pay as little as $0.05 per unit).

Of course, the problem with this option is that Amazon rarely approves slow-moving, liquidation-ready products for Lightning Deals. But there’s no harm in trying!

Loss leaders for brand awareness.

A loss leader is when a company discounts a product in order to attract customers and capture their information. Lightning Deals can also be used in this way.

However, the challenge with this method is that Amazon doesn’t allow its sellers access to customer information. Emails, addresses, buyer information; it’s all owned by Amazon.

It is possible to place something in your packaging though, to lead customers to alternate channel where you can get their contact info. I should mention, conversion rates are low with this, and ultimately it’s not as cost-effective as doing a similar promotion off-Amazon.

Improve product visibility.

When a Lightning Deal is successful, sellers not only experience an increase in sales. They also see an improvement in their best seller ranking (BSR). And when the best seller ranking improves, the product’s visibility improves as well. We saw that in the percentage bump chart above.

Two weeks after a Lightning Deal, average daily sales for the product remains high. If that product is well-made, that bump, along with the product’s strengthened visibility, could lead to a permanent increase in average daily sales.

Even if it’s just an extra 15 sales per month, netting you a profit of $10 each, that’s $150. Who doesn’t want an additional $150?!

Conclusion

It’s time I admit something to you. When I started writing this piece, I had a pretty negative stance regarding Lightning Deals.

In my experience, Lightning Deals almost never seemed to work. I’d sell an extra 10 units with a deal, but it wouldn’t be enough to cover the fees.

Now, however, I see that a Lightning Deal doesn’t just improve sales for the day the deal runs. It improves sales for up to two weeks after the Lightning Deal ends.

So, not only did this information change my mind about Lightning Deals, it’s also made me think I need to start running them as soon as possible!

What do you think about Amazon Lightning Deals? Let me know your thoughts in the comments below.