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139 Greg Mercer on Amazon in 2017 – Part 5 of 5

What are your thoughts on Amazon in 2017? What’s coming? And what do we need to do to prepare for it?

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.

138 Greg Mercer on Amazon Product Launch – Part 4 of 5

One of the big things in 2017 we’ve got to deal with now, Greg Mercer, is obviously launching. In October of 2016, incentivised reviews were banned in the US, then shortly after, Germany, the UK, and the whole of Europe. How do you do an Amazon product launch now?

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.

You were talking about adjusting to new realities in 2017. At the end of last year, we tried to launch some products without an Amazon product launch service. With all the talk around incentivized reviews being banned and the risk of account suspension, I think we were a bit too risk averse. So It’s good to know that JumpSend is still an option.

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.

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#77 Selling an Amazon Business with Coran Woodmass of The FBA Broker – Part 1

How did you get started with this?

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.

How did you get involved with sales of Amazon companies?

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.

Should I sell my FBA business now or hold it?

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.

How do I know if Can I sell my Amazon 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.

How long do you need to be in business before selling?

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.

Is there a minimum number of products you should have?

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.

How is it valued?

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.

What can make my business worth more?

Type of businesses

Reseller

Private label

Proprietary

Age

The longer your business has been around, the better

EBITDA

The more profit you’re bringing in, the more attractive your business will be

Defensibility

Diversification

Diversified products

Diversified traffic sources

Different niches

Seasonal Items

Competition

The strong the competition, the more wary investors will be

Do you have any tips for determining profit and loss?

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.

137 Best Products to Sell Online with Greg Mercer – Part 3 of 5

Talking about the best products to sell online , Greg Mercer, Let’s back it up to how get ideas in the first place. Do you do that organically, or do you use some sort of tool?

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.

Let’s talk about competition. I would imagine by the end of the year, a lot of people will be using the same tools when deciding what to sell online. A lot of people will be using the Jungle Scout suite trying to find the obvious products. How do we deal with the competition? You mentioned going for the obscure products, do you have any other ways to find the best products to sell online on Amazon?

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. 

136 Amazon Product Research with Greg Mercer of Jungle Scout – Part 2 of 5

Doing Amazon product research,  how do you find out about patents and licensing,  and what are some warning signs?

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.

Diving deeper into the basics of competition, what do you think about the idea of brand dominance? I would imagine it would be near impossible to sell running shoes because I’m sure it’s dominated by big brands like Nike or Adidas. Do you take that into account?

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.

135 Greg Mercer on the Best Products to Sell On Amazon – Part 1 of 5

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.

Let’s start with the one thing that every struggles with: finding something to sell. What is your first step to finding the best products to sell on Amazon?

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.

You say you want high demand and low competition, can you define that in some way, and how do you find that out?

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.

One issue that many people have had, is regarding the monthly sales number. Some sellers have noted that the estimate Jungle Scout shows differs than the actual numbers when they lookup their own products.

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.

People seem to put too much faith in tools. You can give me the best painting supplies in the world and I still could paint a good picture.

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.

Let’s go back to the 2000 units a month number. I had a product that, on Cyber Monday, sold 103 units. Now, the same product is selling 4 or 5 units a day. How do you account for that, especially this time of year when sales volume tend to be low?

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.

As you know, sales tend to spike in December, plummet in January, then even out the rest of the year. Would you try to take account of that?

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.

How do you measure competition?

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.

Tell me about the relationship between the average review and the number of reviews. I had a product that had a 4.9 average but only 22 reviews. It was selling quite well against competition which had 700 reviews. Is that a one-off thing or is there a correlation between the average review?

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.

I’ve noticed that if a product goes from 4.9 to a 4.6 average, the conversion almost halves.

Yeah. Visually, if you have a 4.9 average,Amazon displays 5 stars. But a 4.7, they show 4 and a half stars.

132 Will Tjernlund on Selling to Amazon Directly – Part 1 of 3

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. 

First off, why is it a good idea to sell to Amazon directly?

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.

What’s behind the statement that it’s inevitable?

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.

What you’re saying is that you want to be one of these big brands that Amazon goes to for sourcing, because it’s easier to source from you than from the Chinese, is that correct?

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.

Are you trying to find those mid-points in the market between Amazon basics and the expensive brands? Is that the general strategy?

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.

How do you find these gaps in the market that works with this business model?

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.

Do you have any other criteria you use to judge a product?

Will likes to find products that you have to explain what it is. It’s that niched down. 

Would that not lead to negative reviews, if you have to explain it to the customers?

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.

First, we’re searching for keyword niches and then finding products to fit, is that right?

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.

That’s a really good strategy since there’s no competition, and I would imagine conversion rates are really high since the only people searching for it know exactly what they want.

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.

How do you begin to develop the relationships with these wholesalers and distributors? And what kind of capital do you need to get started?

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.

It really seems like these companies don’t understand e-commerce, or at least Amazon.

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.

What do you say to those companies that are hesitant?

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.

How do you deal with that? My understanding is that you can sell any product on Amazon.

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.

Would you do that yourself, or would you persuade the brand to do it?

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. 

Basically, you’re offering to be their Amazon front-end allowing them to focus on what they best.

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.

130 When to Abandon an Amazon Marketplace

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.

Tune Your Listing to the Amazon Marketplace

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.

Know When to Walk Away

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.

#109 Oriana Marcolongo of Currencies Direct Part 3

Mannan Shah, the senior account manager – 6 years’ experience as Trader/dealer

What 3-5 factors are most important to consider to help predict future relationships between currencies?

The main determination for currency movement is the key interest rate for that particular country. For the US, if the Federal Reserve says there will be a major hike in interest rate by December 2016, it will struggle against other currencies. The expectation of the interest rate is the main factor.

The second thing is economic outlook and future growth expectation in that particular country. The US regularly release a jobs report that will give you insight into where the economy is heading. Manufacturing, retail sales, and inflation can weight a lot on the currency movement.

The third thing is political balance and uncertainty in that particular country. The GBP has dropped 28% since Brexit. Even though the UK is still currently within the EU, the uncertainty of the situation has had an effect. In the next couple days, the US election will play a major role in the deciding the USD movement as well.

What particular 2-3 factors are you looking at to help you predict the Pound to USD relationship over the next two months (Nov/Dec 2016)?

The biggest factor will be the election. Donald Trump is causing major volatility in the stock market. Depending on how the elections turnout 8 November, we could see a lot of volatility. In Mannan’s opinion, if Donald Trump gets elected, we could see the sterling spike to upwards of £1.30 per dollar overnight because Trump himself, is unpredictable.

Another factor that could affect it would be that in December 2016, the Fed plans to raise interest rates. According the Mannan, the election will determine what the Fed will do in December.

The euro and the dollar relationship is quite important for UK sellers since they often sell in Euro to the rest of the Eurozone but buy their products in dollars from Chinese suppliers. What’s your prediction on the future of the Euro vs. the dollar?

The euro and the dollar have been trading in a tight range for about a year and a half. It has been trading between €1.08 and €1.14 range. Going forward, he doesn’t see that changing much. The main expectation is on the US side now; looking into 2017 and seeing what the Fed does. Recently, the euro dipped to €1.08 but has bounced back to €1.11. If the Fed decides to raise rates in 2017, we could see the euro drop to €1.05 and possible €1.03 for every dollar.

The euro will remain much more stable against the dollar than the sterling because of Brexit. Brexit will continue to drag the value down for another year or two if not more, as everyone waits to see what deals the UK makes with other countries once they are out of the EU in 2019 or whenever that happens.

When you have speculation in the news all the time, that reflects in the currency markets with volatility so the rates keep shifting. Is that correct?

Yeah. Generally, the way the currency market moves, it looks for what is coming next rather that what has already happened. What is usually on Bloomberg or other news sources is what has already happened. So the big article will be that the Fed says this, but the market has already moved based on expectation. If the outcome isn’t what the market expected and there is a big shock, then the market moves dramatically. Much like what we had when the Brexit vote came in. Just before the results were announced, it was believed that the people would vote to remain in the EU, but 4 hours later the market dropped 1100 points.

To sum that up, if something is expected, that has already been priced into the market. It’s the unexpected events that causes weird volatility. For example, if the markets expect the UK to leave the EU with almost no rights to access it, such as no passports for the city of London, and so forth, then that will already be priced into the currency exchange. But if May comes out of the meeting and actually, the EU will be generous to Britain, and they have done something special, you could see the pound suddenly get much stronger.

Exactly, as long as the expected happens, you won’t see much movement. For example, in the US election, Clinton is expected to win. If Trump comes out as the winner, that would be a shock to the market and you might see the S&P drop 5-7%.

What can we, as small businesses, do to help mitigate those risks in a practical sort of way over the next couple months? Taking into account the US elections, Federal interest rates, and the UK politics surrounding Brexit.

Take advantage of forward contracts to lock in currents exchange rates and avoid any uncertainty. If your feel that your margins are good enough, you can make sure that, regardless of what happens, you will have that same rate. Then you can work your pricing on the product.

Can you share your best practices?

The first thing you should do is get yourself set up with a free e-tailer collection account. This will help avoid expensive conversion costs.

When you are buying stock from your suppliers, don’t use banks for supplier payments, use Currencies Direct. This will save you money on currency exchange, which lowers your cost and improves your margin. Not only do banks tend to hit you with extra charges, they sometimes take three or four days to send currency whereas currency exchange specialists will generally send it within 24-48 hours.

Take advantage of your account manager. They can help you set up forward contracts if needed, as well as contact you if there is a notable movement in exchange rates and you can set up notifications so that you are always up to date with what’s going on.

#100 Adam Hudson on Amazon Basics Pt. 4

To find out more of Adam’s own strategies and tactics, CLICK HERE

Reviews are a major part of any strategy and you mentioned earlier that you want enough reviews to seem viable. Is that correct and could you expand on that?

Yes. It hard to seem credible if you have five reviews and everyone else has 100, so you have to work for those reviews.

How much is enough? And what do you do now that incentivised reviews have been removed?

How many depends on the product. It depends on what page one looks like for you products’ search terms. There is still opportunity out there. There are a lot of products with low reviews that are still dominating. Adam would use ilovetoreview.com, which he also owns, to get 25 reviews for products in the UK and 50 in the US.

Find out more of Adam’s latest thinking HERE

It’s only in the US that incentivised reviews are gone and it’s only compulsory reviews. There are other services that never guarantee the review but would push out your products at a discounted rate or for free. It’s not clear how it works, but it seem that after you get around 25 or 30 sales in a day then you products get a jump start and the sales keep rolling in. So even if you’re not getting a guaranteed review, there is still value in pushing your products out at a discounted rate.

Adam can only speak to his community at ilovetoreview.com, but the reviewers have been doing this for three years where they use the coupon, get the product, and write the review. So, they will probably continue to do so even though it can no longer be required.

Companies will continue to do this even if the review rate drops in half. Adam’s company has a review rate of 87% meaning 87% of products that were pushed out came back as a review. With these new rules, that will likely drop. And if it drops in half that means you will just have to send out twice as many products. This is a one-time investment for something that can generate income for life.

Another tip from Adam is to follow up with you customers via email. Especially in the UK, they are very responsive to this. Zonguru (which Adam also own) has this automation built in.

Every time you make a sale it can send an email when it ships, six days later following up with any issues,and 14 days later asking for a review.

Not only will this help in getting reviews, but it allows you to get ahead of any issues with the product, say if the box was damaged or the product wasn’t right, allowing you to take care of the issue without before going through Amazon’s return system.

Adam tries to casual in his style in his emails. Just a quick “Hey, how are you doing? Just wanted to make sure everything is good with the product.” He doesn’t try to sound like a big company with huge copy in the email, just a quick message like you would send to an acquaintance. 

The bogeyman in all this, as Adam puts it, is that Amazon can change this against this type of thing. They have already sued a bunch a review companies last year. All they have to do is make a change in the algorithm that scrutinizes those reviews that have reviewed an above average amount of products, and out of those, how many used a coupon and just wipe out those reviews. They can just remove reviews of people who are just reviewers.

No one knows how things will work out, but sellers will just have to adjust. They will still have to do product launches, just like every company in the world when they launch a new product. You just have to follow up and encourage your customers to leave a review. You only need 25 – 50 –  if you need more than that you’ve gone into the wrong niche.

As you say-  Amazon has the ability to wipe out these reviews if it chooses. It just drives the point, that at the end of the day it comes down to organic reviews and organic sales.

Yes. Just make great products that people like. It’s that simple. And don’t be impatient. Adam likes the way this is because it knocks out all the people that think they can get rich quick on terrible products. It’s about putting in the work. Putting in the effort. That gives him the freedom to sit around all day, and look at his seller account and see that he made $3,000 in  a day.

You mentioned earlier that you teach this stuff. How do you do that? Is it live webinars, live courses, group training?

He has a company called Reliable Education. The aim is to give people a realistic expectation going in and tell them the truth.

On the website, you can enroll in a free training program that is four videos where he shows you his home and drives you around where he lives in Australia.

He educates you on what the Amazon opportunity is, how to find products and his criteria for that. He teaches you about “Velicity Retailing” which is how to compound your capital over time.

All this leads to a paid programme which is an online course where you get access to about 90 videos that show you Chinese factories and how a 3D printer is made and a lot of very cool stuff.

It includes a private Facebook community and will link you with a mastermind group that they cap at seven people. Everyone signs a NDA so they can freely talk about what their companies are doing and talk on Google Hangouts or in person, and they’re all trained with the same philosophy of not being opportunistic, not get rich quick. They are solid people that want to build solid businesses.

They also have 12 coaching webinars with each member of the course. They have an onboarding program for every new member. There are two guys whose job it is to call every new member and talk to them and get a feel for them. They also have a program where they loan money to a 3rd-world entrepreneur, interest-free, and gets paid back over time. People seem to find a lot of value since their refund rate is less than 5%.

How do listeners get hold of you or find out more about you?

Just at reliable.education. Adam doesn’t really use Twitter etc. so you can’t catch him there – sounds like he’s more likely to be on his boat!