Antoni Watts got into the Amazon business after running his own sourcing company in China. Today he’s going to teach us about how to import Chinese products.
Antoni Watts got into the Amazon business after running his own sourcing company in China. He’s here to teach us how to find Chinese manufacturers for our Amazon products.
Once again we have Antoni Watts on the show. Today he is going into detail about his Amazon seller software, Cashcow Pro.
There are many things that you have to take into consideration. You have to think of your lead time and everything that goes into it. Also consider receiving time at Amazon. It might take awhile for them to check it in. When planning a strategy for your FBA inventory, you should plan for the worst case scenario. There could be issues with it getting backed up at port or issues with your supplier.
A great thing about using software for forecasting, is that they can keep track of that, whether it’s Jeremy’s Forecastly or another piece of software. It tracks inbound inventory, current inventory, what you have in manufacturing, and true sales velocity.
You also need to consider spikes in sales. You may have consistent sales every day, but a couple times a month your sales spike. This is why you need to build in a safety stock. That gives you a cushion so that if you get a surge in sales, you have enough stock to cover it until your next shipment gets there.
Forecastly has many business that use its service. The software can then use this anonymous data to make predictions about Amazon as a whole. It takes ASIN level data over the past 30, 60, and 90 days to makes prediction about future sales numbers.
Their main focus is demand forecasting. It considers your recent sales including stock out periods. If you were out of stock, it can determine what you would have sold had the product been available. It also tracks the variability of demand which is something you can’t do in a spreadsheet.
The main thing you have to be conscious of when managing your FBA inventory is, what do you need to replenish, when do you need to replenish it, and how many units do you need to replenish. Forecastly tracks all that while monitoring your inventory and will recommend your orders.
Many sellers want to use a 60 day trend to determine their sales velocity which is a bad idea. If you selling in an upward trend, meaning your sales are growing, then your sales were much lower 60 days ago. This will make your average too low. Forecastly uses a 30 day trend to get the most up to date projections.
We, here at Amazing FBA, love a rule of thumb. Unfortunately, when it comes to FBA inventory, many sellers follow a rule of thumb that won’t help them, and could hurt them. It’s the idea that you need to have X amount of days worth of inventory. Whenever they place their order, they bring it back to this magic number.
For example, if you wanted to maintain 90 days of inventory and you order monthly with a 30 lead time. When it’s time to make an order, you have 60 days of inventory. Based on this, you would order 30 days of inventory.
You don’t need that much inventory. You wouldn’t need to order for another month because you have a 30 day lead time and you’re tying up cash in stock you don’t need. The rationale behind this method is security. The attempt to avoid stock outs by keeping a large amount of stock on hand.
Amazon will continue growing their own private label brands. So Amazon is now your competitor. International markets are growing. The European markets are booming. If you’re having success in the US, you’ll want to take those products to the UK and the rest of Europe. That isn’t as easy as it sounds. You have to come up with a separate replenishment strategy as well as deal with the tax regulations. There is an opportunity, though. Especially in Germany where 40% of the sellers are non-German, and very few are American. That means they are willing to buy from foreigners, but not many Americans are there yet.
As Amazon grows, the more warehouse space they will need. They are investing in new space, but they don’t want to overdo it. You will likely see seller-fulfilled-prime see some growth as a solution to this problem though will come with its own issues.
The inbound process is likely to change. It used to be that you would just slap on a UPS label. Then you had to also do the Amazon label. Now you have to do box contents. It’s going to get more and more complicated as Amazon continues handling more inventory.
If you want to receive a free tool for launching new products, head on over to Forecastly.
This is one of the biggest issues with Amazon inventory management. It’s something everyone deals with. Sometimes a product doesn’t as well as you expected. Once again, there is no crystal ball solution.
It might seem obvious, but one thing you can do is to look at it from a marketing perspective. Take a look at what you can do to improve the conversion rate. Can you improve your images or other aspects of your listing? Pay-per-click ads. It’s an investment. It will take time to perfect it. Is there anything else you can do as a last ditch effort to recoup your investment in the stock?
If you have already considered the marketing aspect, you could try a completely different route. You can wholesale it or sell it on a different channel. You’d be surprised how many people will buy lots of inventory on eBay other sites that will help you with that. There are sites that help you with bulk sales. You can work with a service that does flash sales, like touchofmodern.com. They will flash sales household products that are high-quality. If you want to leave it on Amazon, you could lower your price. Even if you take a loss on the sales, at least you’re putting money back into your pocket.
Proper Amazon inventory management is very difficult. You have to think long and hard and it really comes down to a plan. In the case of excess inventory, many sellers just go on a whim. One seller is dealing with excess inventory because they bought 3000 units of a product they’ve never sold before. Their main reason was that they got a good cost on them at 300 units.
The cost isn’t as important on that first order. You’re really trying to prove the product is viable. Then on your second order, you can get the cost right once you know the product will sell. It might be difficult for a first-time seller since your money is tied up but you’re not making much profit. However, you are lowering the risk if the product doesn’t take off.
One tactic that you might consider is ordering small amounts of several different products knowing you are likely to run out. Then you can see which one takes off. This isn’t a great strategy. If you find a good product that takes off, you will jump in the sales rank. Now you have a high ranking product with no inventory. Let’s say it sells out in a week but you have a 45 day lead time. Now you’re going to be out of stock for 45 days unless you can negotiate with your supplier and spend more money to have it expedited.
One issue you might run into is a minimum order quantity (MOQ), where suppliers will require a large order otherwise they won’t accept it. You can try to negotiate with them saying that you will be ordering from them for awhile, but it’s company policy that the initial is smaller.
Amazon inventory is a crucial but neglected area for all Amazon sellers. We have Jeremy Biron with us today. He’s the founder of Forecastly. He has been selling on Amazon for over 10 years so he has a really deep understanding of the marketplace and of Amazon inventory management and the issues that can involve.
He was one of the first FBA sellers in the office supply space running a multi-million dollar operation. Jeremy has a strong knowledge of Amazon and what it takes to maintain your Amazon inventory.
Coming out of college about 15 years ago, Jeremy was working in the corporate world doing marketing and sales. Quickly realized that the corporate life wasn’t for him. He got into selling Amazon inventory part-time while working the corporate job. He happened upon office supplies. Not the sexiest products but he found a place. He realized that he could make more money selling on Amazon than in his full-time job and he enjoyed it much more.
He started selling full-time 8 years ago. Then, about 2 years ago, the office supply space wasn’t going in the right direction. He heard from a lot of other FBA sellers about their Amazon inventory issues. Jeremy had the answer. He had custom software they used in-house. He decided to take this software, improve it so it could be mass-distributed, and began Forecastly.
It was a combination of stock-outs and excess Amazon inventory. At first, they were just using the reports you get from seller central. It shows how much you have in stock and how much you sold in the past, like 30 days. It would be 30 days later, after he had placed all those orders, and looked at his profit and loss and think that he should have sold more. As it turns out their estimations were off. He knew from the beginning that using the inventory reports from Amazon wouldn’t cut it.
A lot of the time, those aren’t accurate. Looking at your current Amazon inventory and your inbound numbers. You inventory is usually right, but your inbounds number aren’t. They didn’t know exactly what was going into Amazon. What status was it in. Even looking at your existing Amazon inventory, you can’t tell if it’s being labeled, is it moving around the country, or is it reserved because it’s already been sold. If I have 100 units, and 10% has already been sold, I really have 90.
The other piece of it is figuring out your sales velocity. That’s not as easy as many people think it is. Let’s say you sold 50 units last month. If you don’t know if you were in stock the entire time, your don’t know your true sales velocity. If you sold 50 in the last 30 days, but you were out of stock half that time, you should have sold 100. However, those reports are saying you sold 50, and if you want a 30 day supply, you should buy 50 more.
The last piece to this is taking that demand forecast and building a replenishment strategy off it. Knowing when you’re going to run out of stock.There isn’t an Excel spreadsheet that will tell you if you’re going to have a spike in sales. The only way to do that is by using a database and running some crazy statistical calculations.
This is something Jeremy sees a lot of mistakes with. Even if you’re an experienced private label seller and you’re bringing out a new product. It’s tough trying to figure out how much to order. Some things you want to think about when releasing a new product
You want to consider payment processing. Your money doesn’t show up immediately. Sometimes it takes a couple days to process your payment with the bank. The suppliers won’t do anything until that payment processes.
How long will it take for the factory to actually make the product. Is it going to be reliable? Will it take the length of time they quote you.
Preparation of shipping. If you’re placing a large order, it’s going to take time to process that shipment. Then sea or air time. Then is has to come through customs. There can be a lot of delays here. Then is has to be sent to Amazon where it will sit on their dock until they can receive it. If you send it to your house first, or a third-party preparer, all that takes time.
People will underestimate their lead time, and throw off the whole process. That goes for existing products as well.
Just to underline how important this is, it will always take longer than you expect. If a factory quotes you 2 weeks, it will likely take longer. They will tell you what you want to hear. If you send it to a prep facility, it could sit there for 3 weeks. Don’t underestimate receiving time at Amazon if it’s around Christmas or other holidays.
In terms of reality, it’s going to come down to you putting some pressure on them. Communication is key. Contact them saying that you’re going with them. You like the communication so far. How likely do you think we’re going to hit that three week mark? Should I account for an extra week in there? They’re people too. It will put them at ease knowing that they got the order and don’t have to tell you what they think you want to hear. There really isn’t a magic formula because each supplier is different.
You can add in a late delivery penalty. Let them know that it’s your company’s policy that there is a 10% penalty for every week past the deadline. You see this difference between new and veteran sellers. If you ship an order to Amazon and it’s late, you’re going to be hit with a charge-back. This is also dependent on your payment agreement. If you pay everything up front, you can’t go and take that back. Whereas if you make a partial payment before delivery, it’s a bit different.
The main point is to get a straight answer out of them. They are likely to be more honest if they will get less money if they try to be overly-optimistic. Most terms I recommend is 70% up front, and 30% balance.
One point Jeremy wanted to make sure to hit on is about new product and why lead time matters. It’s not lead time for your first initial order. It’s thinking ahead to your next order. Let’s say your very first order arrives today and you have a 45 day lead time. Now you have to think about your next order. If you didn’t order enough units to get through 45 days, you will run out of product. Even if you place a PO today.
You don’t want to place another order for 30 days. If you have a 45 day lead time, you have to order enough for 75 days of inventory. You don’t want to over-order inventory, but you really don’t want to run out. There are a lot of sellers that always order 100 units, or 1000 units. They’re just making up a number. Jeremy recommends looking at JungleScout. If you’re shooting for a rank of 10,000 in the office products category, you can look on JungleScout and estimate how many units you’ll sell in a day.
Exactly. They have a free Excel spreadsheet that you can get at forecast.ly/amazingfba. It’s a simple sheet that tells you what your lead time is, and when you’ll want to place your next order. The last piece on top of that is safety stock. That is a complicated thing so we won’t go into too much detail. Essentially, it’s insurance against a stock-out. If you think you’ll sell 10 units a day for those 75 days, then you’ll buy 750 units as your initial order. Depending on your level of cash, you’ll bump that up. You may want 10% safety stock. So you’ll add 75 units, just in case sales are higher than expected.
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.
What are the major freight paperwork and how do we overcome those?
If you are using a courier or one of the freight professionals, they do all that for you. You don’t have to worry about the various paperwork, custom claims, etc. This is a skill these guys have been working on for years, they can do it better and more efficiently than you, so let them do it. UPS is around £11 per shipment for customs clearance. DHL is right around there as are most of the others. Since you’re importing the product, most of the paperwork is done by the exporter and you’ll end up with the VAT and the duty. Both of these are calculate off the commercial invoice.
One thing the Chinese like to do to be nice, is send the shipment as samples. If they are a sample, that’s fine. However, if you’re shipment is 500 units, that clearly isn’t a sample. At some point, the guys at HMRC are going to catch on and you may end up with penalties as well as your future shipments getting more scrutiny causing delays.
You have a proper business, so you want to make sure you do things by the book. It may cost you more in duties, but you want to build your business on solid ground.
Another they offer is to lower the cost of the invoice to stay under a certain value at which point things become more complicated. Is that something to avoid as well?
At the end of the day you’re evading taxes, which simply put, is wrong. Also, if you get caught you may end up getting put on a list which will further delay you in the future. If one of the customs officials gets to digging around and realizes your products are valued at more than what was declared, they will put you on a watchlist. Ongoing shipments will be inspected and paperwork will be scrutinized which will hold up your shipment.
Do you need to instruct your suppliers about commercial invoices or will that be checked by DHL or UPS?
A commercial invoice is just like any other invoice. It will detail the value of what your purchased, the goods you purchased, the delivery address, the importer on record’s address, and the commodity code. That is a global code that details what the product is classified as which you can find on the HMRC website. So when the shipment comes in they can charge import duties.
Is that something the Chinese supplier will automatically put on the invoice and get right?
Well… they’ll put it on the invoice. It may not always be right and there is no way of going back and saying this is wrong, so you’ll just have to double-check it and next time you order tell your supplier that they put the wrong commodity code on it. Which could save yourself some money since the import duties can vary depending on this code. It can range from 0-12% on top of VAT.
How is VAT calculated? Is it the value of the goods only? So if I have 500 units that cost $2 a piece, is VAT calculated on that $1000?
It is the commercial invoice value + freight + duty. VAT is calculated on the total of all three.
Is there anything else we need to get on the commercial invoice? Say I order a shipment, sent to your prep company, do I need to make sure all that is on the invoice and how do I communicate that to DHL or whoever?
It does need to be on there, but in Greg’s experience if doesn’t matter. It seems to be a daily battle with FedEx, or DHL trying to get the person on the commercial invoice or airway bill. It doesn’t matte who the consignee is, Greg seems to always get the bill sent to FBA Pep UK at his address. If you look at the paperwork that comes with it, it clearly states the correct customer but they seem to ignore that.
How do you handle that, when you get the invoice in stead of your customer?
It depends on the customer. Some will just pay it which is fine. Even though it’s FBA Prep UK on the bill, they can’t sort it out. The customer has to contact them and tell them that they will accept that invoice.
The biggest takeaway seems to be that it’s best to just use a freight forwarder or use your courier and make sure that your name and the company name is on the paperwork.
Those guys are the professionals. They are doing this day in and day out. Sure you can learn it, but that’s time better spend on your company and sourcing more profitable products.
Another thing you have to worry about is your EORI (Economic Operator Registration and Identification scheme) number. Which is a number supplied by the HMRC (Her Majesty’s Revenue and Customs). You can’t apply for one unless you have a shipment coming, and you can’t get your shipment into Europe until you have it. It takes about 3 or 4 days to get it, so as soon as your supplier gives you all the detail on when the shipment is coming from, where it’s going to land, the size of it, the vessel number, take that information and you can apply for your EORI number online.
Small samples should be ok, your couriers can take care of it. Once you start getting bigger shipments coming in, you’ll want to get your own number. It simply for statistical purposes of what come in and goes out of Europe.
On a side not, outsourcing is vital! It’s a waste of time trying to do everything yourself. Some of the simpler tasks, or task that need expertise can be outsourced freeing you up to focus on growing your business. Here is just one example:
This is a 15×15 grid of everything that needs to be done with products. This is why you shouldn’t order 15 different things from AliExpress and why you need help with prep.
For more ambitious sellers what are the biggest challenges when trying to scale up?
What about people who want to import a lot of one product?
Factoring time scales. If your coming by air now, you’re looking at 7-10 days from China to yours or your prep company’s hands. As you scale up you’ll have to start coming by sea which is about 35 days from China to the UK. Then the ship has to be unpacked which is another 5 days. It’s about 40 days from the time the supplier delivers it to the time you take delivery. Obviously, this is something you have to consider. If you’re doing you analysis to determine when you will need more product, you’ll have to add another 30-40 days onto that or risk running out by the time the ship arrives.
If you’re used to doing your own prep, as you scale up the deliveries will get bigger. You’ll start getting them in pallets rather than loose boxes. If you plan on continuing to do it at home, you have to consider how you’re going to offload the truck. It’s no longer going to be a van or small truck, it’ll be coming in artics so access becomes an issue. Also, you have to request a truck with a taillift if you don’t have a forklift. That will cost another £40.
What about those who want to go from a few SKUs to say 10 or 20 but not a huge quantity of each one?
This is common with things like pencils. Where you have one type of product, but 5 or 10 variations. i.e. different colors which Amazon treats as completely different products. Having the product description on the boxes is a huge help. That way if there is a problem with a particular SKU, it’s easier to identify which ones they are without having to open every box.
Whether you’re ordering 500 unit of one product, or 50 units of 10, the challenges are the same. Where the challenges would come and the cost would rise, is if your importing products from different suppliers. Now, there are services that will consolidate for you. You can have four or five different suppliers send everything to these consolidation warehouses. They will consolidate those and export them as one shipment saving you money.
What do you see coming up in the Prep side of Amazon as a problem?
Amazon will start requesting detailed contents of boxes. You can do it now, as an option, and in the US they have started requiring it. Usually if it happens in the US it will happen in the UK. So you will have to communicate that with your supplies to be more clear about what’s in each box especially of you ship directly. They will also requiring packing notes, so when they open the box, they know what’s in it to speed things up on their end.
Brexit will likely have an impact on shipping in Europe.
Amazon announce recently that they will have an air fleet of about 40 planes to ship products themselves. It’s unknown if freight will change much since it’s a fairly stable and established system. However, Amazon will likely try to takeover that.
How can people get hold of you?
How did you come to be selling on Amazon?
Ryan was a part of ASM and that what got him started. That’s what really piqued his attention. Ryan says that when he finds something he wants to do he really pushes ahead with it until he learns how to conquer it and ASM got him started on that.
He did very well on his first product despite it being a very commonly sold product on Amazon. He cites his creative thinking and hard working attitude to his success. He was able to take this generic item and really dominate the market with it. After his initial success, he was itching to expand with it.
From there he met with a good friend, Nakisha Muhammad and discussed some of the issues he was experiencing. She then became interested in Amazon selling and they went in together on a joint venture. She started seeing those same issues with seller central and limited reporting. She, being a world-class coder, approached Ryan saying she could build a solution. Together they worked on it and came up with their dream ‘seller central’. Thus, Hello Profit, was born.
What were the problems with seller central that made you feel the need to develop software to replace it?
In seller central, you see all these revenue numbers and it is extremely difficult to see what you’re actually profiting, even with Quickbooks or Xero. Once you have more than a couple skus, everything gets clumped together. If you launch a new item, it is difficult to see which one is profitable or which variation is actually profitable and which ones are draining you.
Can you describe the 3-5 commonest problems Amazon sellers have with profit and loss numbers on Amazon?
As mentioned before it is difficult to see where you are profiting. However, that really isn’t Amazon’s issue. It’s not the chore to make a cohesive solution. Their focus is customer service so there no benefit to them to make this. It’s up to us to understand how our business is doing.
2. The Payout Report
If you have ever downloaded this file, it is a mess. You could have 100,000 records of every little thing and way over on one side it the ascent it’s associated with. It is not humanly possible to go through all that manually, and figure out what’s happening.
3. Tracking Promotion Giveaways
It was difficult to tell how many promotions were given away on each day, and how that affects the bottom line. They give you that widget of like the top 5 promotional items, but if you have 10 or 50, that’s pretty much useless, plus it 24 hours behind or more.
How do you deal with Amazon ads costs?
A new feature that is going to be added to Hello Profit is a wizard that is going to help optimize ads. The purpose of HP is to help you see your real profit. Now. Amazon doesn’t make it easy to see this. So, HP pulls in reports through the API, and the main one is available the morning following today’s numbers. So you can’t see what today is doing, because the day isn’t finished, but you can see any day in the past, which is sufficient to tighten up your ad spending.
So, HP pulls that number in, on the merchant dashboard it deducts that range of ad spend from that range of sales. You can view the numbers from the very top, all the way down to every variation of every product and it pulls the information from every campaign and aggregates it for every product variation.
Do you deal with the keyword side of things, or strictly with the profit?
HP will have a campaign reports so you can see how your campaigns are doing. You choose any product you wish as well as any date range, unlike Amazon which only has a few predefined ranges. You can set thresholds for you ad spend, like amber level, you might be getting out of your comfort zone or red which is like you’re bleeding out. So you can see which keywords are being profitable and which ones you might want to cut.
The biggest takeaway from any of this is that there is fat to trim. You have to look at your daily numbers and find where you’re losing profit. You might not think you have a profit issue but you almost certainly do. It is not in Amazon’s interest to be transparent in how much you’re spending in ads. Whatever tool you use, it is vital to review your numbers.
What if you can tighten things up and save 10%? That’s like launching a whole new product. It is much more efficient to find that profit in your numbers rather than going through a product launch.
What are the problems with using a spreadsheet to handle your numbers?
That’s where Ryan and Nikisha started in the beginning. It is possible to get around 80% of Hello Profit’s functionality with a spreadsheet, IF, you are a master at spreadsheets and are willing to hire a team to handle the spreadsheets, but some of it is too advanced to handle with Excel. And you will end up spending your profits on the team.
There is so much data coming from Amazon, and the reports are so bloated, that it will take a team of spreadsheet experts to go through it all. It is much better to have a tool that can automatically handle the data. If you try to do it manually, you’re probably going to miss something and be off the mark at the end of the day anyway.
You might have $10,000 in inventory and it’s irresponsible to go about it blindly. That’s why it’s important to have a tool that handles this nightmare that way you can get back to being a business owner. Launching products, and expanding your business. And it’s important to outsource tasks that take away from that. So unless you’re an expert programmer and expert in accounting, you’ll need to outsource this. You can’t do everything.
What are the biggest mistakes sellers make with Inventory stats?
Ryan brings up a related issue that HP isn’t the solution for yet, though they hope to be, is the issue of inventory. This is one area you need to be proficient in or find a tool to help you with, because running out of inventory is so damaging to promotions, sales velocity, and making the algorithm happy.
If you’re out of inventory for a week or two weeks, how much does that cost? Can you calculate the cost of running out of inventory for two weeks? Also, on the opposite end, having too much inventory and being charged by Amazon for long-term inventory fees.
You have to consider seasonality, lead times of your suppliers, how long it will take by sea or by air and the costs associated, fudge factors if Amazon decides not to put your time out nine days for whatever reason.
You also have to consider the cost of getting ranked again if you run out of inventory, or even considering how things have changed in the time you’ve been out.
Let’s say you run the same promotional strategy that you did 6 months ago, the fields changed, the algorithm has changed. There’s no guarantee that you’re going to get back to where you were. So it could be a long-term loss because you didn’t act accordingly.
You also need to consider when and how much Amazon pays you out, so you can consider how much inventory you can afford. Hello Profit does this to an extent. It will predict how much you have made so far, and using that determine what your likely payout will be. So if you’re halfway though the payout cycle, just double what your prediction is.
What do you personally do in term of projecting cash flow?
The simplest thing Ryan has found is to go for products that have a high ROI. He likes to do 150% or more. This way he will have made enough to pay it off, cover associated costs, and have enough left over to buy another 1.5x inventory. This puts in some room so that he doesn’t have to be as perfect in his math and leaves enough profit to cover unexpected costs like increase ad spend if there is an increase in competition and has to reduce his retail.
One piece of advice to anyone is to make sure your ROI is solid. If all things stay the same and your demand goes up, as we all want, you’ll be able to buy more inventory than you have ever sold, and not have to pay in again. So each product, not only covers itself, but has groth built in. So if you order 1000 unit, next time you can order 1200.
Can you touch on the differences between profit and ROI?
If you Google the FBA revenue calculator, you plug in your competitor’s products, and it calculates the FBA fees you should have as well, and there is a field to plug in you landed costs. Once you hit calculate, it will hopefully show you a green number on the bottom, which is the anticipated payout to you for one sale. You can take that number then and divide it by your costs to get you ROI.
Let’s say your anticipated payout is $10 and your total cost is $5.
(105)100%= 200% ROI
This would be a great product. Because there is a lot of room for growth, you can decrease you retail if you need to, you can do a lot of giveaways, you can do promotions and ads, and you will still be profitable and you can still grow as demand grows.
How do you find products that have a high ROI?
Ryan recommends Jungle Scout, though Hello Profit comes with many of the same features. Ryan will go into HP and use Product Genie and search for all kinds of things and over time it aggregates all kinds of data, even things he wasn’t searching for because it happened to show up in the results as well.
It all goes into a database associated with his account, and he can search against things he didn’t know he had. He usually looks for a certain BSR. He doesn’t mess with sub-100 anymore, but if you can find one that 200-300 or the 1000 range, those are great products. If he can find one that is not too big or heavy, that he has an idea how much shipping will cost. He will take a look on Alibaba and get a rough cost estimate, then use the calculator to find his ROI. He can find out if this product is worth his time in a couple minutes.
Look at your competitor that you think has a similar business model and look in their storefront and find other product ideas for yourself. Leverage other people’s research. There are a lot of great products out there that might not have major numbers but a good ROI. Even it they only do 10-13 sales a day, launch 10 of them and you’ll make a good profit with that kind of ROI.
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