It’s just a matter of contacting the brand when you find an ugly looking Amazon listing. It takes 60 seconds to do a Google search to find their contact information and send off an offer. It doesn’t make sense when people say that they’ve been eyeballing a company for two months and can’t decide whether or not to pull the trigger. Just contact them and move on. If there is something that you need to do that is causing you anxiety, just pull the trigger and do it.
Vendor Express is for everyone, anyone can sign up. Vendor Central is invite only. They are basically the same. Instead of sending inventory to Amazon and waiting for it to sell, Amazon will place purchase orders with you. As soon as they place the order and you ship it to them, it’s already sold. For some companies, especially bigger companies, it works better with their cash flow. This way their inventory only leaves their warehouse after they’ve been paid rather than sending off $40,000 worth of inventory and waiting three months to get the money.
Plus, once you’re in Vendor Central, it says your product is shipped and sold by Amazon. You get invited to Amazon marketing services that allows you to put videos in your listing. It allows you to make your listing an A+ listing where you get images in your description.
Some companies have negotiated it down to 30 days, but for the most part Amazon pays you every 60 days. Some of these old-school U.S. vendors still have 60 and 90 day payment terms. So if you can get one of these vendors, you can grow on vendor central forever. You can buy $100,000 worth of product from the distributor, sell it to Amazon for $130,000, then you don’t have to pay the vendor until you get paid from Amazon.
This works well for bigger, established companies that can have unpaid accounts. But if you’re small, not getting paid for 60 days can kill you.
Unlike Seller Central, you can’t edit your images and description whenever you want to. If it’s, something like 90 days old, you have to email them and ask them for permission to edit the listing. It’s annoying that you have to contact them to do stuff, but the plus side is that when you contact them, they are willing to do a lot more. If you’re on Vendor Central, then you’re seen as more of an established company rather than some random seller on Seller Central. They trust you more and that you’re trying to do what’s best for the company rather than trying to find loopholes.
They’ll combine duplicate listings, it’s easier to take down people that are selling bogus stuff. There was one company that had a cheap product for people to retail arbitrage. It had about 30 listings for the same product from all these different sellers. Will went to Amazon, had them combine all of them into one listing. It’s now the #1 listing in its category. It had 3,000+ reviews from all the different listings. Then they went and gated that listing, kicked off all the other sellers, and the company he’s working for is making a lot of money from this product, whereas before, they weren’t making anything.
You can make parent-child a lot easier on Vendor Central, if you have a high ranking product already. Or under one SKU, you can bundle together multiple ASINs. If you’re selling a fishing rod, and the parent-child, comes with different fishing lines. Those are two different ASINs, and they’ll actually combine those in Vendor Central. Whereas on Seller Central, you would be sitting there trying to do giveaways. Or I can take it seriously, wipe out the competition, add all the bestsellers to the number one listing, and really take this thing to the next level.
The one or two unit orders are just going to happen. Especially, if you have a small catalog with only one or two SKUs. If you have 1000 SKUs, then one or two units of each product isn’t that big of a deal. The main issue is price control because you don’t know what Amazon is going to sell at. With a lot of these brands, they want to know they their products are selling at the right price because they don’t want to screw over their brick-and-mortar stores. Whereas Amazon will sell it at whatever price they want, even below cost.
Another big issue Will had with a client, was that there was a hot seller in that category, and then they have Amazon basics, and they had the third best one, and Amazon quit placing purchase orders. They had someone in Vendor Central, and they had their AmazonBasics, they didn’t need another. Now that one listing, they also had on Seller Central. If Amazon doesn’t order it, then it’s not in stock. If it’s not in stock, then it can’t be prime. Then they can’t run PPC. Since it didn’t sell, Amazon wouldn’t order it. It was a vicious circle. To fix it, they had to kick-start it on Seller Central, generate some sales to remind Amazon that it actually does sell.
The best thing is to sign up immediately. Amazon wants a lot of SKUs, they don’t really care about the price. So if you have a catalog of SKUs, like 100, then Amazon will get a lot more excited than if you had just one.
Minimum number of suppliers. Good luck having 50 SKUs, from 50 different suppliers. However, if you have one supplier that has 50 SKUs, then they add 50 more. Will’s brother added a supplier with 10,000 SKUs. He put then on Vendor Central and Amazon order one of each. He sold 10,000 units that day.
Adam has been an entrepreneur for over 20 years.
Adam got started right out of high school. He knew he didn’t want a boss and was captivated by the idea of entrepreneurship. He has had several businesses but not focuses solely on Amazon. He has had online and offline businesses including a flight simulator business, hair salon, and a finance company. He has a very diverse background, to say the least. Selling on Amazon FBA came more recently.
Adam got into selling on Amazon FBA part-time while he was running an animation business. He sold that business last year and moved away from service businesses in order to start a product business with Amazon. Part of the allure of products is that it gets away from the “selling your time” type job where you make more money the longer you work. With products, once you do the hard work and develop the product, you can sell it all over the world and get paid over and over.
His animation business was growing and financially successful but he had a lot of people and a lot of moving parts. With products, it so leveraged and you can get away from that.
As a business guy, Adam found Amazon very impressive. It’s a phenomenal company. In terms of their growth and numbers you know they are doing it right. He really loved that you didn’t have to build a website, that you didn’t have to find the customers because they were already there and that they handle fulfillment and shipping. FBA just changed the rules of product distribution. It was appealing to sell into the biggest markets in the world from wherever you were. To get more of Adam’s thoughts on the Amazon opportunity, CLICK HERE
It definitely isn’t according to Adam. He did an experiment this year. He started with 6 products that launched in February or March to test what it would be like for a newcomer. They are currently around a million dollar a year products at this point. So it isn’t too late. There is a lot of opportunity to those with the necessary education.
It’s interesting because right now his European business is doing about 70% of his US business. What’s truly amazing is that his cost-per-customer (CPC) in Europe is about ⅓ of what it is in the US. Also, Europeans give more feedback than Americans. He has automated emails that go out and he gets about twice as many emails from UK residents than the US.
Adam is in .com and then Spain, Italy, Germany, France, and the UK.
The US is always appealing because it’s so big but because it’s so big means there is a lot more competition. Also, America is home many of the Amazon course gurus that have pumped out a lot of courses to those wanting to start an Amazon business. The challenge is that there are a lot of sellers that have been educated on the same strategy at the same time. So America is still a great opportunity if you have the right education and the right lens. You can’t beat the US market because it’s so big and broad.
However, if you live in the UK and feel more comfortable working there, Adam would recommend starting in the UK. It’s a fantastic market, much easier to access, much easier to rank, and a much more appreciative group of consumers. However, if you don’t live in the US or the UK Adam recommends starting in the US because it’s much easier to get started. The regulations for foreign sellers are a lot tougher in the UK and it’s a lot easier to get your account set up in the US.
Another issue is that not everyone is registered for VAT and many people won’t until Amazon requires it because it will add 20% to your prices and put those that register at a disadvantage.
One of the biggest promoters put out a course telling people to sell items for under $40 with high Best Seller Ranking. When they first launched they recommend being in the top 100 of any category. Once they began selling this idea they realized they needed to expand because they had 5000 people looking to be a top 100 in about 15 categories.
One of their flaws was the emphasis on BSR because it doesn’t really matter. That only measure who sells the most. But in business, it doesn’t matter how much you sell, rather how much margin you make. That’s the difference between turnover and leftover. Adam is looking for higher margin, less contested spaces. People don’t realize how massive Amazon is. Over 2 million sellers with hundreds of millions of products. There are a lot of unsophisticated sellers that have two images with ten reviews and are on page one. There are a lot of small sellers that looked for cheap products with high turnover where anyone can get into it. What Adam looks for is something that is difficult for people to compete and isn’t as obvious.
Adam cover a lot of this in his course at reliable.education. His first product was $160 retail. But it was costing him $40 a unit. So there was an $80 margin which gave him options someone selling a $12 product just doesn’t have. He could spend more on advertising. Even if he spent $20 per sale he was still making $60. He was completely out of the top sellers and in his subcategory there was around 45,000 and he was nowhere near the top. He still came in and started making $15,000 a month in sales and $8,000 profit.
The first thing people need to think about is that whenever you look at a market for anything, you need to think about it from a consumer’s point of view. Why will a consumer notice you? And why would a consumer buy from you and not someone else? It can’t be something they need to read about. Don’t expect them to read your copy and find some feature. Think of Amazon like Tinder. People put in a few details about what they are looking for, then go through the pictures and start dismissing them. You need to have good photographs, but you also need something good in the photograph. So try to get something that is visually different. Some key detail or feature that will grab the buyer’s attention.
For example, if you look up desktop calculators on Amazon, they are all black or grey except for one that is green. Now if you look at car covers, they are all black or grey or blue. But if someone came with a car cover that had a cool saying, or was bright pink, it’s going to stand out. The question is, how can you innovate, visually, at the core design level. It’s not about the best title or description, anyone can do that. The big thing is to think like a customer. Just follow Jeff Bezos advice, “Be in business for the customer.” In the end, the best products are going to win.
To get more advice or free training from Adam, just go to reliable.education
It’s no surprise to anyone that sales with Amazon in 2017 will get more complicated. There is more competition. It will probably weed out those that aren’t committed and aren’t willing to invest the time and money needed. It’s going to get more sophisticated. The person just throwing something up on Amazon probably isn’t going to make it. The ones that put in the effort, and work to make sure it’s a good product to sell will excel.
We’re going to need better listings now that there is enhanced brand content. More people will start using that making it more difficult for those who don’t.
Email follow-up sequences will become more important. They’ve always been important, but now that they are the only real way to get reviews, they are that much more important.
Inventory management will become more important. It’s not secret that Amazon’s distribution centers are bursting at the seams. That can’t really hold more products. So we will likely see stricter inventory control. Whether that’s higher storage fees, or they don’t allow to send in shipments on products that they already have a lot of inventory for.
It’s seems obvious hearing that, but I didn’t really think about it. A couple months ago we were trying to ship products to Amazon. We were warned against sending new products until after the holidays. And it’s fantastic that you were able to talk to Amazon lawyers. It’s reassuring to know that JumpSend is sound and don’t have to worry about getting flagged or banned for using it. I’m definitely going to use it with my next launch.
Greg has first-hand experience with this as he has launched six or seven products since October; three or four in the last few weeks. An Amazon product launch is very different after this updated Terms of Service was released.
Let’s take a 10,000 ft. look at this. In order to rank organically on Amazon, you need to have sales. There are a few ways to get sales. You can make your products really cheap, you can try to drive outside traffic, you can use deal sites like JumpSend. Without sales, you can launch your product but it will end up in the deep dark hole of Amazon and no one will find it. As Amazon sellers, we need to be thinking about how we can get sales on a product that is not organically ranking and doesn’t have any reviews so there’s no social proof.
Greg utilizes his JumpSend tool. It’s a deal site where about 30,000 people are visiting and looking for good deals. It’s no longer a place to get reviews, it’s a place to get sales. It still works, and it is completely within the Terms of Service of Amazon.
So Greg puts his products on JumpSend. Then he offers it at a price people want it, which can vary. He offers about five coupons a day, maybe ten if it’s competitive. From this, he is getting sales. He will do this for about a week. After that time, the product will be ranking very well. From those sales, a few will end up resulting in a review. He will also turn on pay-per-click advertising (PPC). It’s costly, but it does get you sales. That’s what you need to get started; you have to have these sales.
Where most people go wrong, is that they get scared of spending the money. Usually, Greg has to turn PPC so high that he is losing money on that sale. If he is offering 70% off, then he is likely losing money. People seem to get shy about losing money. However, that’s a part of doing business but you will recoup this money in the long-term. A big problem for people is that they’re afraid to bid the PPC that high, or they’re afraid to give that big of a discount because they’re afraid of losing money.
That’s the gist of it. To do an Amazon product launch, you have to force sales somehow. The easiest way is deal sites and PPC. Then you’ll start ranking organically, and start getting reviews. Another thing is that you definitely want to have an email follow up sequence turned on. You can use any tool for that, but keep in mind that JumpSend is also a follow-up email service as well as a deal site. It’s nice that it is a full launch package. No matter what you use, before you do your first giveaway, you need to have some sort of email follow-up that asks for a review.
The first email will thank them for the purchase. The second may let them know that they can contact you if you have any issues. The third could ask for a review. With an email sequence you’ll see that you can get 10-15 reviews out of 100 compared to the 3 out of 100 you may get without one.
Going back to the coupons. Amazon forbids any action that tries to manipulate the sales ranking, and in a way, giving out coupons does that. It’s not so much following the letter of the law but how Amazon sees that. If you give coupons to only JumpSend users but not to the general public, is that potentially violating the Terms of Service?
There is a clause in the ToS that was release in the first quarter of 2016 that said something to the effect that purposely manipulating sales rank is against the rules. It comes down to, what does this mean? It is a bit of a grey area. Greg’s personal opinion is that Amazon put that in because, at the time, sellers were doing these massive giveaways, especially in the supplement category. They were giving away about 100 units everyday for a couple days. That is probably what that clause was looking to prevent.
So, is giving away a couple coupons a day considered manipulating sales rank? All Greg really cares about is making sales and ranking organically in the search results. Since those Terms of Service were released, there hasn’t been anyone, that we’re aware of, that has gotten in trouble for manipulating sales rank. Some have gotten in trouble for some review type infractions. They have been big sellers doing about $500,000 a month. One seller, their VA got in touch with a top reviewer, didn’t ask for a review but it might have been implicated that they expected one, and their account was suspended for two months.
Some sellers have mentioned that some of their reviews were removed if the discount was too high. The sales were legitimate and organic in every way, but if the discount was over 50% off the regular price, then they were removed. You mention that you might give 70%-80% off, does that create any issues, as far as Terms of Service?
Amazon’s ToS are really vague, so Greg bases his knowledge off data and what people are actually experiencing. Whatever you do, do NOT imply that they are getting the discount in exchange for a review! That is a clear violation of Amazon’s ToS. If a person uses a coupon to buy a product, you’re just giving out coupons to make sales. Since October, Gerg has noticed that some of the reviews have been marked “unverified”, so he assumes that those are the ones bought with a coupon.
There is no way to know since you can’t track a review to an order. It seems that, for now, they are sticking. They might not stick a year from now. For the short-term, they are nice to have since, when you do an Amazon product launch, you won’t have many reviews. So even though they are unverified, it’s better to have them than little to no reviews.
They’ve done a lot of testing, and there is no one number, say 30% off, that will get a product verified. Some products, you can give a 50% off coupon and it will show verified. You can give 20% on another, and that will result in it being unverified. Even if you post it publically in the listing.
It’s reassuring that you’re not hearing about people getting their accounts suspended for giving away coupons and that, if you have a follow-up sequence, you can still get reviews. Since you have so many JumpSend users, you have a good amount of data. Also, that Amazon doesn’t seem as trigger happy with this as they seem to be with reviews.
Greg gives away about 5-10 units a day. That isn’t really manipulating sales rank. If it was 100 units a day or 500 units a day, it is probably more likely that Amazon will come knocking on your door. You just have to be mindful.
With the reviews, it’s worth repeating, you CANNOT give a coupon with the purpose of getting a review, or expect a review, or require a review. There is no more incentivised review.
Greg and some others that were running review sites had the chance to speak with Amazon lawyers. At first it was a bit scary but in the end it was a great experience. The lawyers were willing to work with them because they were looking to make the whole industry more legitimate and do away with the whole incentivized reviews.
There were a few things that aren’t in the ToS, but they did put it in writing. Big picture, you can’t incentivise anyone you’re giving a coupon to, in any way, to leave a review. An example of this, is that there were a lot of Facebook groups that had implied reviews with each other. They were saying that you don’t have to leave a review, but if you do you get more coupons. That’s not okay.
They’re not cool with you checking their review profile to see if they left a review. You may not require a review, but maybe you could check to see if they left one or not, and kick them out of the Facebook group.
Offering them more deals or giving them more coupons if they left a review is something Amazon is not okay with.
Basically, anything you do to check up on reviews, or anything link to reviews at all. That was when ReviewKick was relaunched as JumpSend. It’s totally legit and by the books. They have the lawyers blessing. You give out coupons to these people, but you have no idea who they are, you can’t follow up to see if they left a review. They don’t get more coupons for reviews. You’re just giving away coupons in the hopes of getting more sales.
Another thing that was surprising, Amazon’s not dumb. They are very in the loop. All these Facebook groups with the implied reviews, there is probably an Amazon lawyer in the group. Amazon is very attuned with what sellers are doing.
It’s surprising that people think they can fly under the radar. Amazon is one of the biggest companies in the world, and third-party sellers account for ⅓ of their sales.
Just over 3 years ago, Coran and his wife left Australia and their corporate jobs and began traveling. They had online businesses at the time and soon began buying and selling websites to fund their traveling. He liked the process of building a company to sell it rather than building to for the income. He struggled to keep his attention on one thing.
For this interview Coran create a package of tools for Amazing FBA listeners at http://thefbabroker.com/amazing. So do check that out.
About a year ago he got into the brokerage side of things after people began asking him to review and vet websites that were for sale and help negotiate the sales. As of about a month ago he has been dealing exclusively with FBA businesses.
Most people do this backwards. They build up a business and it’s making money and then they decide they want to sell it. Maybe they want to focus on something else, maybe they want to cash out and pay off the investment. That’s a terrible time to sell. Odds are, you won’t be structured in a way that is attractive to sellers. The first thing you need to think about is who you are going to sell to and what they are looking for.
Let’s say you have a private label business that’s been operation for an year and half to two years. So you have a bit of history and you beginning to think about exiting. Reasons that Coran decided to sell his companies were that he might need the cash flow for something else or he was getting bored with the business.
Coran breaks Amazon businesses down into three types, retail arbitrage/wholesaling, private label, and unique or proprietary.
For retail arbitrage/wholesaling, unless you have exclusive rights to selling on Amazon, the chances of your income being taken away is very high. What an investor is looking for is a return on investment. They will pay a certain multiple for a business with the intention of getting that money back first. So with wholesaling, for almost all cases, your only asset is your inventory, so if you lose your means of selling it, you’re just stuck with a load of stock.
Private label is the most popular way to sell on Amazon. There is a barrier of entry so your products have a shelf life of 6-12 months. That means that if you have one product that you haven’t differentiated, you just stuck your label on a product and built the brand, it’s not super defensible. So it will sell at a lower multiple. You can definitely sell these companies, you just have to put a little work into it.
Unique or proprietary products are much more defensible. You may have taken negative comments on your products and tweaked them. So you might have a unique mold or something that makes your product unique, that will sell at a higher multiple. The more you can make a private label product better or unique, the better it will be when it comes time to sell.
For example, Greg Mercer at Jungle Scout ran a case study where he made his chop sticks a little longer. While not super defensible, it is unique, and if you build your brand around that it sets you up in a better position.
There is a debate among brokers as to what the minimum amount of time is. For Coran, a year is still young. You certainly want 12 months of history. There are a few reasons for this. One, you want to see if there is any seasonality involved. An investor wants to work out their return on the longest history possible. There is also something to be said for a product that takes time to gain traction. Seems a bit counter-intuitive but an investor will look at a product and think, “What’s to stop me from doing this myself?”, so a product that takes time to get established show the investor that this company is worth buying because it will take that much more time to get it going if he/she wanted to start from scratch.
Most importantly, when it come to age of a company, you want the company to be established. For online companies, that typically means 3 years. Compared to offline, like brick and mortar businesses, 10 years is a long time.
Even if you’re not thinking of selling your company soon, now is the time to start preparing for it. A year, year and a half out, you want to make sure your products are defensible and that you have products that will add value to your company when it comes time to sell.
Coran is working on two businesses, trying to get them ready to be listed. One business is completely private labeled, very little in the way of differentiation. It’s just brand. He has 20 products. That business is attractive because of the wide range of products. Out of the 20 products, most of the income comes from three products. It is all on Amazon and bringing in a million in sales a year.
The other company has only one product that is unique. It’s is their own formulation and their own brand. 70% of their income is coming from Amazon. They also sell on Amazon US and Amazon UK. 30% of their income is coming from their Shopify store. So they have several layers of defensibility.
The gold standard, according to Coran, is a third company he is working with. They have 10+ uniquely formulated products. Multiple sales channel. 70% through their e-commerce channel, 30% on Amazon.
The less reliant you are on one thing, the better. Multiple products, multiple sales channels, multiple traffic sources. So if you have a private label and don’t want to focus on unique products, focus on finding sales channels outside Amazon. That way, if one thing takes a hit you have hedged your bets.
You need to look at it from an investors perspective, they are looking for a return on investment (ROI). Their in for $1,000,000 and their making $200,000 a year on it, that’s the ROI. They way we value Amazon businesses is net profit. The best way to look at this is: what is your annual net profit. If your business has been around a year and making decent profit, that’s not as attractive to these kinds of buyers. The important thing to consider I: what is your profit right now? When working with clients, Coran finds that most people over-estimate their profits. Oftentimes it’s as much as half of what they thought it was once they put in their numbers. If you want to find out what your business is worth, use Coran’s tool for that.
The longer your business has been around, the better
The more profit you’re bringing in, the more attractive your business will be
Diversified traffic sources
The strong the competition, the more wary investors will be
Profit and Loss Template – Use this spreadsheet to help determine how much money your are actually making.
It starts with your total sales and revenue. From there it takes out the cost of sales. This is your Amazon fees, packaging, shipping, etc. All the costs associated with selling that item. Then it takes your operational costs out. The is refunds, ads, web hosting, salaries and other drawings, etc. All the costs that are associated with running your business. In the end you’re left with your net revenue.
In regards to salaries and other drawing from your business, when it comes to selling the business you can add that back into your profits. The reason is that your investor might not want to draw anything from the business. So you want to present them with the profits including what you are drawing from it. Then they can decide what they want from it. If they are looking for an income, they can look at the net revenue and determine how much they can draw. If they are looking for growth, they might want to leave everything in and use that to grow the company.
If you don’t add back your salary, it makes it much more difficult for them to find it. You want to make it as easy as possible for your buyer.
To find possible best products to sell online, as Greg mentioned in the previous episode, you can look at Amazon’s best seller, or look for trends in your everyday life. If you have time and are cost conscience then that works. However, the Jungle Scout web app was created to solve that problem. There are a few tools in the Jungle Scout web app, which is different than the Chrome extension. It’s more like traditional software. It has a database tool which is a recreation of the Amazon catalog. It’s available for the European and North American marketplaces.
What they’ve done is rebuilt Amazon’s catalog so it’s more user-friendly for sellers. You are able to search by metrics that sellers care about. You can search for all products that sell more than 500 units, have less than 50 reviews, have a poor listing, and weigh less than 5 pounds. You can put all that in and get it down to 5000 listings. From there you can get ideas of the best products to sell online. What people are are some really obscure products that people would have never thought to look for.
There’s a few strategies you can implement. One is finding a product, and improving on it. This is the age old practice. Take an item people are already buying even though it’s crappy, and just improving upon it. That’s what’s great about this day an age. 20 years ago, big corporations had to spend a lot of money doing research to find this same information that any average Joe can get by reading product reviews.
Just find a product to sell online that is selling despite poor reviews. Then filter by 1-star reviews and find out what everyone hates about it. Then contact a factory in China and have them make this one simple change. Put it on Amazon, and now you getting 5-star reviews while your competitors are getting 3-4 star reviews.
You’ll also find that anything with a higher barrier of entry will have less competition. If it’s a larger item that need to come in containers, those will have less competition, but will come with headaches. More expensive items will have less competition. The U.S. is the most competitive out of all the markets, so Greg has been expanding into Europe. According to an Amazon representative, if you combine all the European stores, they do about as much volume as the U.S.
Greg is by no means a lawyer and you should speak with an attorney about any specifics when doing Amazon product research. The information shared here should not be considered legal advice. But Greg has a lot of experience dealing with these types of things.
When doing product research, the first thing is patents. These offer protection for inventors. No one can use their idea for the length of the patent. If you do, the patent owner can sue you.
The expensive way to find out if something is patented is to hire a lawyer to do a full patent search. It’s expensive, takes a lot of time, and is full of headaches. However, you can be sure that you won’t have to worry.
Greg will look for red flags. If it’s a unique item that he’s never seen before or has a unique feature, that would be a red flag. Another would be if they’re the only one selling that type of product. Whereas if there are 8 people selling the same thing, it’s probably not patented because the patent owner would have come after them. An easy way, is many patent owner will put that in the description, or on the owner’s website. A lot of times you can just Google the item plus patent.
If at that point, you still think there might be a chance it’s patented, then it’s best to just drop the project.
Greg avoids selling products where there is strong brand loyalty. People buying running shoes, wants Nike or one of these big brands. That’s an item to stay away from. Whereas, does anyone really care who makes their alarm clocks? Apparel is another category with brand loyalty, also electronics. People care who makes their TVs and computers.
Do people care if their mixer is made by Kitchenaid? Or would they be ok with a private label? To determine this, you need to figure out how well the Kitchenaid is selling vs the private label. If the kitchenaid is selling 3000 units a month and the private label is selling 100, that’s a red flag. If Kitchenaid is selling 1000 a month and the private label is selling 600, that tells me people are willing to buy a private label.
We have Greg Mercer on the show again. You can listen to our previous interview on product research, as well as one on supplier negotiations. Greg studied civil engineering at university and had a corporate job that he hated. He began selling on Amazon as a break from his day job. He managed to quit his day job and just do FBA full-time. He did that for about two years when he was frustrated by trying to find products to add. The best way to scale your Amazon business is by adding more products. Greg didn’t have a lot of capital to throw around so he wanted to find ones. Out of this need, Jungle Scout was born. Now he joins us to help us find the best products to sell on Amazon.
Today, Greg is still selling on Amazon. He has released a few products in the last few months. He’s been working on Jungle Scout, and that has expanded into a quite a tool for Amazon sellers. There is Jungle Scout, which a research tool. Jump Send is a deal site to get you additional sales, as well as a follow-up sequence. Splitly is an AB testing tool for Amazon sellers. Fetcher, which is profit analytics. It calculates what you’re really making after refunds, promos, etc. All the numbers Amazon likes to hide from you.
That’s a common issue. Everyone knows how good of an opportunity Amazon is, but it’s finding products to sell that is a struggle. The best products to sell on Amazon are ones that have existing demand, that means Amazon customers are already searching for it. You want products that have low competition and that have good margins. Those are the main things. Other things you may want to consider are whether they may infringe on any patents, and they don’t need to be licensed. Think of liability; if a person can hurt themselves with it, you may want to steer clear. Lighter, smaller items are generally less complicated. They are easy to ship and you don’t have to worry about oversize storage limits.
Jungle Scout was created to solve that issue, but you can look on the Amazon’s best sellers page. You can get ideas from Pinterest, look at what people pin a lot. You can hang out in big cities where trends start first. Once you do that, make a list of product ideas and go to Amazon. There is actually a free way to find out how well a product sells. You can click on a listing, then look at the best sellers rank under the product description. Then you can go to junglescout.com/estimator. It’s a totally free tool, you don’t even have to put in your email. You put in that sales rank and it will give you an estimated amount of units that product sells on a monthly basis and see what the demand is.
For demand, you want to look for products that are already selling on Amazon. A beginner mistake is that people “know” that a product will do well if it gets on Amazon. A small percentage of the time, that might be true, but more often than not people are wrong. It’s much safer and less risky to go with something that is already selling.
I want to see 2000 units a month, being sold on Amazon. Let’s use a coffee cup as an example. If you search “coffee cup” on Amazon. Then take the top 10 listings, or however many are relevant. Let’s say 8 are selling coffee cups. Then click on each of the listings, get the best sellers rank. This is helpful because it tell us how well this product is selling. This number, by itself, is very difficult to interpret. However, at Jungle Scout, they have come up with an algorithm that can estimate how many units are sold based on that number. It changes on a daily basis and they have a full-time data scientist that is always updating this. So, get that number for each listing, find the units sold on Jungle Scout and add them up. If it’s more than about 2000, then the demand is there.
The first thing is to look out how they drive these algorithms to estimate the sales. Depending on the category, they collect between 200,000 and 500,000 data points every month for that category. This is the relationship between the unit sales and the ranking number for that day. Then they run a regression analysis and they come up with a line of best fit to estimate the sales based on the rank.
The best sellers rank changes on an hourly basis. The way they estimate sales is that if a product continues to sell as well or as poorly as it has for the past few days, this is how many units will sell in a month. If, last week, your product was selling 10 units a day, but this week is selling 1 unit a day, Jungle Scout will estimate based on the 1 unit per day. So you’re sales might be 60 units that month, but Jungle Scout will only estimate 30. It’s the best they can do with the limited data Amazon gives out.
Some people will get on there and see their products are 10% more than Jungle Scout’s estimate and will conclude that you need to add 10%. That’s not true. If you look at the regression analysis, there are some points that run above the line, and some below. They’re taking the average of hundreds of thousands of products in a particular category. So, your 1 product may not fall on that line, but if you average the whole category, it will be on that line.
Exactly. People get caught up, too much, in the tools. Keep in mind this is still just an estimate. You’re using this tool to determine a ballpark range on a product’s sales. Jungle Scout may estimate that a product does 900 units a month. In reality, it might be 800 a month, or 1000 a month, but you know it’s in that range. It helps with forecast and it help determine if there is good demand in there.
This is difficult. One tool that helps is Google Trends. This tool allow you to see how a search term has trended over the years and seasons. This is a fairly good gauge of how items will sell on Amazon. As many people know, Greg has done public case study selling bamboo marshmallow sticks called Jungle Sticks. Based on Google Trends, you can see how the sales have changed based on the seasons. January to February are the slowest times. July and August were the highest times. And if you look at the sales, you can see that matches up. So can look on Google Trends to determine if this is a high season or a low.
The reason I like to use the 2000 or 3000 units, is because people like to answer “It depends”. It’s too arbitrary if you’re a beginner. At the end of the day you’re looking for the item with the biggest spread between demand and competition.
If I was a complete beginner looking to sell my first product on Amazon, I wouldn’t worry about that. That’s more higher level strategy. Focus on getting your first product up on Amazon and learn the rest later.
If you’re already have your products on Amazon, and you’re trying to figure out forecasting, that is a good idea. Two good resources are Google Trends, and Keepa. Keepa has a really nice, free database of how sales rank has trended. A lot of products have two years or so of data. You can look at the and see how the sales rank has trended over the months and seasons. You can try to start estimating how well your product is going to sell.
Some products you can tell by common sense. If you’re selling lawn products, then the summer months are going to be the best. Other products, like the marshmallow sticks, it’s not as clear when they’ll sell well and Google Trends can help with that. If Google Trends shows there is twice as much searching for marshmallow sticks in the summer months, then you know to order a little extra inventory.
Reviews are a great indicator of competition. That’s probably the biggest thing to look at. On top of that, the quality of your competitors listings. If they have a poor listing, like one picture, a really crappy title, than that is someone that would be much easier to outrank. As opposed to someone with a really good listing.
The first thing to look for is how many reviews they have. Older, more mature products that have been selling consistently well, are harder to outrank.One way to tell how mature a product is, is how many reviews it has. An older product that sells well, is going to have more reviews. A product with 1000 reviews is going to be much harder to outrank than one with 15. A rule of thumb is to look for something, where 3 or 4 of the top reviews have under 50 reviews. That signifies that it’s probably a young niche.
One thing to understand is how Amazon ranks the listing. They use keyword relevance. The sales velocity probably makes up about 50% of the algorithm. That would be the number of sales per day. Another factor is the conversion rate of your product. Now the sales velocity and the conversion rate depends on a number of factors. Those including the quality of your pictures, the price, the social proof, the average star rating. If you competing against other listings that have a lower rating, then you’re probably have better conversions and more social proof. People would much rather buy a product with a higher average rating than one with more reviews.
Yeah. Visually, if you have a 4.9 average,Amazon displays 5 stars. But a 4.7, they show 4 and a half stars.
Today, we have one of the giants in Amazon, Will Tjernlund. He’s a man that is always ahead of the curve and is always willing to help the rest of us catch up. This isn’t Will’s first time on the show, you can find his last interview in episode 45, and episode 46.
The big trend coming to 2017 will be selling to Amazon directly using Vendor Express, Vendor Seller, AMS, and all these other buzzwords we have to learn now.
Will says that it’s inevitable. Eventually, Amazon does want to source and sell themselves. If you can get ahead of the curve and get on their side early, it will only help you in the future. It’s one of those things that you know you’re going to do it three years from now, and you’re going to ramp up three years from now, why not go ahead and do it today. Will’s of the mindset that if you’re going to have to do it in three years, then do it now and be the expert in three years when everyone has to do it.
Because it’s their game plan. If you read The Everything Store, Jeff Bezos’ biography, he talks about it being the game plan to make it easier for third-party sellers to sell on their marketplace, take care of the annoying aspects like fulfillment, customer service, storage, and marketing.
Then, all they need is us third party sellers, essentially, glorified sourcing agents, to find the best SKUs and see what sells the best. Then they start from the top and decide if this product is easy enough to manufacture that they just want to come out with their own Amazon Basics version of it, or if they want to work with the biggest brands in that category and source their products directly.
So, if you’re not selling directly to Amazon, eventually they are just going to try to squeeze you out.
Third-party sales are becoming a bigger part of Amazon, something like 50% of sales were from third-party sellers this past Christmas season, but from the different advantages Vendor Seller gives you and the heads up if gives you, and also that it works better with Amazon’s business model, it’s for sure, the way of the future.
Right. Just think of a general catalogue, think of kitchen knives. Like a block with 10 knives in it for $29.99. Amazon can come out with that knife block for $29.99 and then there will be, like German manufacturers with brand names.
The customer has to decide if they want to get those cheap Amazon knives, do they want to get the expensive German knives, or something in between. That’s were you, as a third-party seller, has the advantage. You can offer that middle product that better than Amazon’s version, but not as expensive as the German brand. You make sure it’s good quality and all your packaging looks good, and Amazon buys directly from you because you’re filling a gap in the market.
It’s different for every category. For that category, that may be the best route taken. Also, think of it this way, when you jump on Vendor Express and get upgraded to Vendor Central in six months and you’re selling directly to Amazon, then everyone else who is selling those mid-level knives will get blown out of the water because yours are going to be shipped and sold by Amazon.
Two or three years down the line you’re going to have a lot more reviews than everyone because you’re shipped and sold by Amazon. They do different sales and they do different marketing things to push your products. Then, when these other mid-level sellers try to jump on Vendor Central, Amazon doesn’t want to work with them because you’ve got them covered.
Will’s been taking a roundabout way by looking for big brand names that have terrible accounts and I go and consult with those companies. He will offer to run their Amazon accounts. He will then optimize their listings, fix violations, and get everything back in stock. From their, he’s been using these big brand companies as his private label arm. He will suggest new products. If they’re selling a bunch of kitchen accessories, he will suggest another one, which is smart for them since they own their own factories. They then will fly to China to get samples, and then buy every product on the first page of Amazon as comparison.
Right now, Will is looking for niches of these companies that he is already consulting for, let them handle the research and development, and he looks for products that are within their wheelhouse, but not being manufactured yet.
Let’s say they sell 40 different types of ladles, he will suggest a slotted spoon. He’ll look up that product on Jungle Scout, and find their review-to-revenue ratio. Check the revenue to review ratio: Let’s say slotted spoons have 10,000 reviews and $100,000 revenue a month, so $100 revenue to review ratio is good. He takes that information to the company and shows them that there isn’t much competition, it has proven sales, and it’s in the category they are already selling in.
Will uses the review-to-revenue ratio as a way to quickly gauge the lifecycle of a product and it’s maturity. Determine if it’s easy to ship. If every listing on the first page is being sold by Amazon, then you’re probably too late. From there you look at every facet and see if will work, and if you can’t find anything wrong with it, it’s worth a shot.
Will likes to find products that you have to explain what it is. It’s that niched down.
It wouldn’t be unusual within the niche. For example, a little tool that is only used for cutting fly fishing rod lines. Yeah, it’s a weird product. It’s a small piece of metal with a blade. It’s costs $.50 to make and the guy is buying it for $10. Not much by the way of sales, but there’s no competition and it’s $8 profit.
It also has to have a very specific keyword that the customer searches for. A woman recently came up to Will talking about her product that was a wireless bluetooth headset that you can sleep in. When asked how a customer would search for that, she replied with “bluetooth sleeping headphones that are wireless.” The problem with that is it’s too specific, no one will search for that, and you can’t rank with “bluetooth headphones” or with “wireless headphones” as as that’s too general/generic. Since she didn’t have a keyword in mind, she could even do a revenue-to-review ratio because she did know where to start.
Exactly. Will recently started climbing and there is a tool called a grigri. Now, no ones knows what a grigri is, but if you’re in mountain climbing, everyone know what it is. Plus, how easy is it to rank for this very specific word, grigri? No one else is going for it. Anyone who searches for it, knows what it is and wants to buy, and if someone doesn’t know what it is, they wouldn’t need it anyway. Also, if no one know to search for it, then there isn’t any private labelers nipping at my ankles, looking it up on Jungle Scout.
Yep, and it works really well with US brands. Will contacts these climbing brands that have been in the niche for years, and they’re selling these harnesses for $140 when they sell them wholesale for $40 because they have this established brand. So, no one knows who Black Diamond Climbing is, but every mountain climber knows who they are. So when someone searches for them on Amazon, they are astounded that they can get the entire cataloge because no one else carries as much. From Will’s perspective, it’s amazing. There is high demand, he doesn’t have to do any research and development, and he can still make huge margins, and he only has to place an order once a month with a U.S. based distributor.
Many of these distributors have very small minimum-order quantities. One particular company said their average yearly order volume from one of their distributors is $2500.
Will finds them by searching through Amazon. As he’s looking for climbing stuff, he notices that these major brands have three of the five bullet points filled out, their out of stock, or they have one of the five images. All sorts of these red flags exist and they tell you that these Amazon accounts are being managed poorly and they don’t understand the Amazon ecosystem.
It’s easy enough to contact these companies, become a distributor, and send them a message. Tell them who you are and that you were looking to buy one of their products on Amazon and saw that it was a mess. Let them know about the issues you found and that you can help them get their account in order. Ask them to make you the only distributor on Amazon, you won’t screw over the brick-and-mortar store by selling their product too low, you’ll pay up front, and keep their product in stock. All the things you can promise them that their distributors can’t promise them. These other sellers are only using them and not adding any value whereas you can actually add value to their company. You can be this A+ consultant, but you’re paying them instead of them paying you.
Another selling point is that it’s in their best interest to work exclusively with you. You can make sure to keep their listing looking good and their prices at the right level. They wouldn’t let big-box stores carry their products if they didn’t know who was selling it, at what price, or what the packaging looked like.
Imagine you’re a big mountain climbing company that specializes in making the best carabiner. You have been in business since 1975, you have 10 people working in manufacturing, 1 person in accounting, 1 person in HR, and 5 people in sales. Each salesperson has their region in the U.S. and they call up local shops asking if they want to place an order. Their whole job is to get as many accounts under their belt as possible. Then, all of these distributors start selling out the backdoor, and now they have 40 people selling on Amazon. This puts the company in a tough situation. They told these stores that they can only sell in the store. They can’t cut them off because they have been doing business for 40 years and they want as many accounts as possible. However, the Amazon market is hurting their brand.
These old-school companies will gladly sell to you because they still have the mentality of “sell to everyone,” but some will question the sale if you are selling it on Amazon because of this issue.
A lot of these companies don’t know the first thing about Amazon. They will contact seller support and demand they stop sellers from selling their products.
There are some gated brands like Nike or Louis Vuitton, and there is no way you can sell their stuff on Amazon. You can go onto Amazon and gate your brand. If you explain that customers are getting hurt by counterfeits, then they will likely approve it. Make sure to put in the customer first mentality and use the word counterfeit and you’ll have a better chance.
It depends on the company. When Will calls up these companies, he just feels them out on how they want to go about it. They might just want him to be a distributor, that’s fine. Or they might want him to be a distributor only if he can keep the price high, that’s a different conversation. Or they might want him to run their Amazon account, but it’s all going to be under their brand. Each time a company will ask for something different, and usually he will say yes because they are simple things. You just have to feel the company out.
If they’re making $20 million in sales on Amazon, then they’re making enough money to go and hire a whole team. Until they get to that point, it’s better to hire a someone like Will to handle it. It’s not worth it to take six months to hire and train a team when they don’t even know what to train them on.
Exactly. Amazon is like this big scary monster in retail. Instead of them trying to deal with it, Will is like the band-aid on the wound. They are sick of dealing with it, it’s not working with their business model. Just hand over that part of the business to an expert that will take care of everything. All they have to do is deposit a check.
Welcome to part 2 of what I’m not going to do in 2017, my stop-doing list or my giving-up list, if you will.
The next thing on my list after giving up products that aren’t profitable or don’t sell, is to think about the marketplaces that you might stop selling in as well. Certain marketplaces will be better suited for certain products. For example, if you wanted to sell barbecue equipment in the UK right now, while it’s in the middle of January and it’s freezing cold, you won’t do well. You might get a few hardened people (like me!) that walk around in shirts while it is 5° C, but not many. Certain products aren’t going to work out in certain marketplaces at certain times.
It may be that you sell a product in one marketplace and it does really well, then you try to sell it in another and it does poorly. You have to make sure to do the right things. You have to dial in your pay-per-click and your keyword research needs to be specific to each marketplace. Don’t be lazy and transfer over what you already have because it can work quite differently. Especially if you’re a UK seller trying to sell in the US marketplace or vice-versa. Don’t assume the keywords are the same, they often aren’t.
Let’s say, even once you’ve done that, and done your pay-per-click properly, and did a proper launch, your product isn’t taking off. I wouldn’t say to kill it, but maybe pause that listing and let your inventory sell off. This isn’t a product you’d want to re-order.
Classic example, I had a generic product in the US marketplace, we’ll call it a blue widget, sold great, but only at a certain price point which wasn’t profitable. If I raised the price, it would drop to page five and sales would disappear. Now a niched-down version of that product, call it a stainless steel blue widget , did much better. I sold 1200 units in six weeks at a 25-30% margin.
With those same products in the UK, it was a different story. The generic blue widget version did a few sales a day at a profit. However, the niched-down version, the one that sold 1200 units in a few weeks in the USA, was very disappointing. It, maybe, sold one or two units a day, even though it was still on page one, albeit at the bottom. For me, that’s not worth the time and effort to keep doing that. I was then able to reallocate my money and focus into something else.
This isn’t so much giving up an Amazon marketplace as such, but rather, giving up a certain product in a certain marketplace. I encourage you to look at your numbers. Make decisions based on the data rather than what you wish was the situation. Just because you invested a lot of time, money, and effort into something, doesn’t mean you have to stick to it. You have to be willing to walk away if the data shows that it’s not working. It’s called a sunk cost and it’s an incredibly important discipline for all business people.
Need more personalised input on issues like this? Live in the UK in or near the South-East? You might want to consider joining us for monthly meetings where we can thrash out all the issues like this one for YOUR business. Check it out here.