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Get the notion of secret hidden products out of the way in the Amazon product research niche. Find out in today’s episode.
Learn more about Dana and “The truth about business”.
Dana had a 7-figure amazon business he ran for 2 ½ years before selling it.
He was a freelance copywriter for about 8 years before that.
So 10 years’ Amazon experience in all.
Dana likes to look at building a portfolio –
The big programmes ask you to find secret hidden niches. This is wrong!
The “Hidden niche” fallacy
Dana worked with a bunch of sellers who launched a product, spent all their money, though it was a Hidden niche. Then they see 3 other people selling it.
Dana sees other people selling it – that means that other people are buying it – there’s a market for it.
Get the notion of secret hidden products out of the way!
There are a lot of people selling software based on the “hidden niche” idea.
Other ways to figure out what to sell
Dana looked at businesses on Craigslist.
He’d heard horror stories of sourcing from China and wanted an alternative.
Lady selling pet supplements company – all-natural formulas.
Obviously not doing well at selling
- Great at science
- Great at products
Dana bought it for $3500!
He wasn’t looking for pet supplements but it “found him”.
Product line
The key: make sure you have a product line in Amazon product research.
So you can sell more stuff to the same customers
Random products make no sense.
Instead, sell a line of products that all fit under an umbrella!
You have a tiny store in a large town (your storefront within Amazon).
Think about who would come in to buy things.
Think of a specific person who comes with the intent to buy something.
Sell something you care about and will do good. But also you can package and bundle and create a business
Creating a sellable asset
When you go to sell this thing, it will be way easier to find a good buy if you find an umbrella of products in Amazon product research.
Dana sold his business within a week – didn’t even use a broker, just someone in his network.
He sold to a friend doing $3-5M with 2 brands on Amazon – he thought their portfolio could grow to $10m – and then sell to an even bigger company!
Average customer value was high from selling more to each customer, so that also helped the sale.
Opposite example
Friend no. 1 seller of umbrellas on amazon – $1M a month
Sold a bunch of random products. They made good money.
However, they had a terrible time selling the company. The margins were good, but their products were all over the place!
Sourcing – quality vs. Profitable
Sourcing is not something that Dana is good at in Amazon product research.
That’s why we have real experts in different areas.
Dana was afraid of sourcing from China because of horror stories first-hand.
That is not what others have to do.
Dana decided to acquire the pet supplements company in part because he knew he could produce it.
It was essential-oil based – holistic herbal remedy for 36 different things.
Start small and grow
He didn’t roll all of them out at once – it would have been risky.
He started with 4 products
He got as much info as he could from the person who started the company.
Made calls to see if he was getting good deals.
Made in the USA – more dear to buy but sold premium price
- Each unit cost $7-12
- Sold for $25 a bottle
- So about $9-10 a bottle all in, sold it on Amazon
- Was not at mercy of vendor or supplier
- More flexible
- Also could put “Made in the USA” on bottles
Don’t overstock
Really look at cost of inventory and raw materials.
When Dana sold the company, he had
- Too many raw materials
- And also bottles of inventory – about 30,000 – 40,000 on hand!
- don’t buy into “economies of scale” esp when starting.
- You’ll tie up too much cash in the inventory
- It’s a RISK
- When in doubt if you can keep the cash, keep it
- If it works slower, that’s okay.
Could produce 1500 bottles a week. But didn’t NEED to!
Horror story 1 – Rubber Maid and Walmart
- The company called Rubber Maid who makes plastic stuff eg garbage cans
- They were doing really well, then they got an account with Walmart.
- Walmart went to RM and said we want to order a “crazy number”.
- RM thought they had won the lottery. We’re good!
To fulfil that order – they had to
- Build extra factories
- Get all cash and spend on raw materials
- Terms were net 60 or net 90 – so would only get paid after it was produced and sold.
- like Amazon sellers, we get paid when it sells
- Walmart never planned on buying the inventory!
- So when RM created that whole thing including building buildings.
- Walmart then backed out of the deal.
RM had two choices:
- Go bankrupt
- Or sell the company to Walmart – which is what they did
- Walmart bought them at a ridiculous low-ball price.
That was their aim all along!
Horror story 2 – Bezos, Walmart and Diapers.com (Quidsi)
Jeff Bezos negotiated a deal with the founders of this company to acquire the company for a big discount to the market price. The main mechanism for Amazon was selling Diapers themselves at a huge loss (calculated at around $100M at one stage).
Amazon beat down the founders; they also outmanoeuvred Walmart, who was highly interested in the company and had actually put in a higher offer for it. Once the company was acquired, Amazon’s special diaper deals and prices almost disappeared again.
Dana’s book “The Truth about business”
Dana’s other books used to be VERY expensive – often $100s or $1000s per copy.
This one is different – Dana wants everyone to have a copy.
The last person who read it messaged Dana that “it literally changed their DNA”.
Digital version for $ 1, a bundle of audio, physical, digital
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Watch my full interview with Dana Derricks
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