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I am going to be talking about something that, I think, doesn’t get talked about enough. That is the reality of what you’re dealing with in an Amazon business. I don’t want to be negative, this is a reality check and reality is not a negative thing if you deal with it in the right way. This can lead to a long-term, genuine, sustainable business. The key to that is dealing with reality and not a fantasy of what you would like to have.
Realism is Good for You Amazon Business
The first thing I want to mention is that it’s positive to be realistic. Some Amazon coaching can cast being realistic in a bad light. They are a little to happy, happy for my taste. Not that being positive, confident, and optimistic is a bad thing. Rather, it is important to face reality head on.
Caveats aside, Amazon is treating me well right now. I have several products doing well and I’ve sold almost 800 units in that past few weeks at a decent profit margin. I say that, because what I’m about to tell you may shock some people because they aren’t thinking clearly about what they’re doing. This has become clear to me after working in great detail with mentoring clients. I usually have about 6 – 8 clients and many of them are just starting out. Also, if that interests you, please take a look at my mentoring program. Many of these clients are well-experienced yet have some delusions about how Amazon works.. A couple have doctorates, some have been selling online for years, and some are in financial industries. Even they, don’t really get the nature of Amazon.
Business as Investments
Any investment and/or business is to get some kind of return. Whether you invest capital or your time, you are looking for a return on your investment. There is some sort of ratio between the return you expect and the risk you’re prepared to run. If you want low risk, low reward, you might look into government bonds. If you want a greater return, but are willingly to have more risk, the stock market is where you turn. Or you may decided to be a venture capitalist and invest in startups. These are very high risk investments, but if you do it right, it has very high rewards.
Now your Amazon business, a business that primarily depends on Amazon’s sales and marketing channel; how would you rate that in terms of risk/reward? Just because you’re building a business doesn’t mean you shouldn’t think of it as an invest-able asset. Likewise, for any investment you should treat it as a business and look at the underlying assets. If you are wanting to invest it Coca Cola, look at their business. Look at their competition. Consider legislation that is fighting against them, and any potential expansion possibilities.
Bringing it Back to Your Amazon Business
If a venture capitalist were to look at an Amazon business, one that has a proven market traction, they would see it as a very high risk, but a very high potential reward investment. Having a business with only one sales channel where Amazon is pretty fussy and can shut your account down over small things, is a very high risk thing. The rewards are very high, as I am seeing for myself, and they are real; just like the risks.
This has profound ramifications for how you deal with Amazon. For example: is running your own Amazon business a viable replacement for your full-time job? If you’re tired of your corporate job and want to strike out as an entrepreneur and spend more time with your family, is Amazon a good replacement for a paycheck? Often times it is advertised as such. My answer: NO.
Diversify Income
A paycheck, from a full-time job is relatively secure. It’s not completely secure, which is good to understand, since you can lose your job or whatnot. But I would never recommend trading a secure form of income for one as tumultuous and uncertain as Amazon. I don’t think you should ever replace your day job with just Amazon. I still do some music coaching and I make no apologies for have an off-line and off-Amazon income that is solely under my control. It is a good strategy for risk diversification. I also make money from mentoring as well as the podcast. Even though these are very closely linked to Amazon, they are not the same thing. I also have some property. If you want to give up your paycheck for Amazon, make sure you have other sources of income.
At the very least, you will need to have an income source to pay for inventory. Even if it only costs you $1 per widget, you still need to have enough inventory to cover sales, if you are doing private label. An alternative is retail arbitrage, which was exclusively covered in my mastermind group. Also, if you want access to exclusive content like that, join the London Mastermind.
This may sound like doom and gloom, but I don’t think it is. You have to understand that Amazon is an amazing place to grow your capital, but it can’t be a swift replacement of your income. I don’t think Amazon should be the sole replacement of your income.
Risk Management
Once you understand the risk of your Amazon business, rather than burying your head in the sand, you can mitigate risk. You can increase your reward while reducing your risk. With Amazon, what are the biggest risks?
Account Suspension
Therefore take care of things that can affect your account. You have to play within the rules. Years ago, some of use sellers pushed the rules quite hard and Amazon gave us a slap on the wrist. Now, they are suspending accounts. For example, if you are using incentivised reviews, take care not to look like you’re buying reviews. Another example is Amazon’s crazy policy around “defect” rate. What Amazon rates as defects are too many returns, refunds, or 1 star feedbacks. Once you’re suspended, it is a long and difficult process to regain access to your account.
I was facing an issue recently in regards to the feedback rating. Long story short, the buyer had left a product review under feedback rather than an actual review. This was an account that didn’t have much in the way of sales and only had 58 reviews. Since there were so few feedback reviews, that was a high rate of 1 star feedbacks and Amazon did not like that and I got a message saying account at risk.
What Can You Do?
For me, it was simple. The buyer had left a product review as a feedback which goes against Amazon’s policies, so we were able to get it squared away. What that told me was that I need to be more cautious about how I get feedback. Not as a way to increase reward, but as a way to reduce risk. Like an insurance policy, it’s not very sexy, but you will be happy you have it if you ever need it.
What I started doing is having a follow-up sequence in my email asking for feedback. A lot of which will be product review which I will ask them to do a traditional product review. This also encourages feedback from customers, more so than you would get otherwise. Which is a great way to improve your service, but also, you can then ask them to submit that as feedback on Amazon. This will allow you to build up a cushion of positive feedback and help you take care of issue away from Amazon. This way, if you ever have a 1 star feedback, not product review, you will have a large amount of positive feedback to outweigh the negative.
Recap
- Recognize that you are dealing with a high-risk, high-reward way of making money
- Diversify your income sources so you’re not ruined if something happens with Amazon
- Once you recognize your risk, mitigate and reduce them while keeping your rewards
There is a lot here, too much to go into great detail. If you are serious about getting started, I recommend getting into the mastermind and really exploring these opportunities.
Watch Why Your Amazon Business is at Risk
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