#99 Adam Hudson on Amazon Basics Pt. 3
So you mentioned you started with $20,000 when you started your first company and I often tell people that you need at least $5,000 to start, which is a manageable figure for many people, but is that a viable number for people to start out with?
It is. You just need to do a lot of research. Adam uses Zonguru, which he owns, which is similar to AMZ Tracker and Jungle Scout if they had Feedback Genius built in. You need to track something like 100 – 200 products.
Spend hours tracking products and going to Amazon and Alibaba.com Use Pinterest, that is a great resource. If you want to sell coffee cups, just do a search for cool coffee cups, and people have built boards with all these designs they like. They are literally giving you the products they want to buy.
Adam isn’t interested in tracking the number 1 product. He’s is looking at the number 4 or 5 listing and he sometimes goes to the second page. He doesn’t like tracking products with a lot of reviews. He prefers niche products where if you were to count all the reviews for every product on page one, he wants the average to be below 60 or 70.
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In the UK, you would probably adjust those numbers down. Simply put, it’s not worth it to go into the huge niches with a lot of competition and products are doing $20,000 or $30,000 a month. He is more interested in a smaller portfolio of products where each product is doing $5,000 or $10,000 a month. He’s happy having ten products doing $3,000 a month. A more stable business with lower, but consistent sales day in and day out.
Some sellers in the US have found their products have a life cycle of about three to six months. Have you found similar results? And how do you defend against competitors coming in, driving the prices down and advertising costs up?
Adam hasn’t found that in his experience. Most people want quick success and they aren’t willing to do the labour that he does. He will labour over a logo and package design and he will take a month to get another sample and other people just aren’t willing to put in that kind of work.
One unique thing he does when he gets a quote from a supplier is to offer them more money. If they tell him that it’ll be $4 if will ask if they can do it for $5 and explain that he wants the best possible product. The best quality control and the best possible outcome. No cutting corners. Taking that extra step to make the product the best it can possibly be.
The response he gets is remarkable because that extra dollar could double their margin and it’s only a dollar that he has to get back on the retail end, and he could get $10 because of the superior quality.
One thing you have to be wary of with these gurus is their ability to misrepresent their earnings. They could talk about how much of a margin they’re making but leave out the cost of acquiring new customers. Sometimes they may be losing money whenever the get a sale from an ad because the ad costs are so high.
Find out more about how Adam gets these results.
In the US many sellers aren’t making any money from sales that come from ads, and it seems like the only money they’re making is coming from their organic sales. So, tell us about what needs to be measured, and once you measure it, how do you deal with it?
The first step, with any business, is to write down what kind of life you want to have. You may want to make as much money as you can. But that means you will be working as much as you can.
Adam made his decision early on that he didn’t want hundreds of products because it’s too much stress. He also didn’t want hundreds of keywords that he was bidding on in PPC because he didn’t want to spend his day going through PPC reports and optimizing his keywords. For his products, he bids on 10 words, exact match. He doesn’t do any broad match advertising.
He is aware that he is missing sales but he doesn’t care because it will be eating into why he got into the business. Because of that, his ACoS is really low he hardly spends anything. Be sure to read Adam’s blog post about how advertising costs can eat into your margin.
You cut off everything that doesn’t make a profit, so how do you drive sales volume? How do you drive traffic to your listing?
Amazon does it. He has twice the conversion as everyone else because he only does exact match keywords, so if someone sees his listing they are looking for that exact product. Lke he mentioned before, he is charging twice as much as he next competitor. Therefore, it is better for Amazon to drive traffic to him because they can send have the amount of customers and get the same conversion and make the same amount of money per sale. It all comes back to having the best product.
(More of Adam’s insights are at reliable.education)