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#56 Marketing Mastery Mini Course: Principle 3: optimize!

Problem #3:  Low Conversions

Result: Wasted Ad dollars, lower sales, lower profits.

Solution: OPTIMIZE!

To find your conversion rate for each product on Amazon, there are two sources of info:

  1. Overall Conversion data:
    1. Go to “reports” on top menu
    2. Click on  “Business Reports”
    3. On left find “By ASIN”
    4. . Click “Detail Page Sales and Traffic”.
  2. For Amazon ads conversion data:
    1. click on “Reports”,
    2. from drop-down menu click “Advertising Reports”,
    3. at the top middle, click on “Search Term Report”.
    4. If needed, click Request Report button
    5. Under “Check Report Status & Download” if needed on the right click “Refresh” button
    6. on the right, click on “download” button next to latest report
    7. Open report as a spreadsheet
    8. Search for “Conversion percentage” .

Analysing Amazon ads data is a big topic in its own right. If it’s overwhelming you, just start with the global conversion data.

    1. PHOTOS
      1. Main product shot is CRUCIAL!
        1. try to differentiate from competition main shots
      2. use the first 7 shots (including the main) for most important things as last 2 are hidden unless shoppers click on them
      3. Have at least 2, maybe 3 shots with a model using the product, preferably in a logical sequence, or if it is is not totally obvious how to use a product.
      4. If you have more than one product, have the 7th shot show a composite picture of your other products, preferably with the ASIN code under each and a little text telling shoppers to put the code in the search bar
      5. Use the last two shots for little product details
      6. Many sellers also put text on their images, effective mini bullet points. It may be against ToS – but it seems to help. Your choice how far you want to push it!
    2. KEYWORDS
      1. For Amazon’s algorithm
        1. This matches customer searches to keywords in your listing
        2. Use Amazon Ads data if you have it: which keywords give best ACoS? Best sales in absolute volume? 
        3. If just starting out, use AMZTracker or other to examine the competition.
        4. Also keep an eye on competitive listings
      2. For Humans:
        1. Make sure the relevant keywords are woven into the copy
        2. Try to focus on those words that convert well if you have data
        3. If no data yet,
      3. Three places to optimize:
        1. Title (obey Amazon’s rules eg 80 character limit
        2. Bullet points – bear in mind features into benefits
        3. The Keywords tab in Seller central>Manage inventory>[Product]>Edit
    3. TITLE:
      1. Get most important keyword first
      2. Ideally get your product title in next
      3. Your brand is least important as most people have never heard of you!
      4. Check Amazon’s latest ToS – including length (may now be limited to 80 Characters)
      5. If you have data:
        1. you can match up best converting/least expensive/most sales keywords with your title. It may not be what you think.
        2. Your best converting keyword may not be the one that makes you most sales. Likewise it may not be cost effective ie profitable
        3. SO analyse your data carefully!
    4. BULLET POINTS
      1. Turn Features into Benefits, e.g. This light has Xenon 214.B lenses – so the light is more focussed, brighter and more visible at night.
      2. Keep sentences short. Keep words short. Assume 8-10 year old reading level!
      3. Be clear! Always answer the “So what?” question.
    5. DESCRIPTION
      1. Flesh out your bullet points
      2. Use simple HTML if possible: <b>bold</b> etc.
      3. Again features become benefits
      4. Don’t spend too much time on this because
        1. The Amazon algorithm doesn’t index it any more
        2. it appears below several offers from Amazon of your competitor’s products! It’s too late!

Product Example A

Sales Price  $15

Total Landed Cost $5

Amazon fees $5

Gross profit $5

Amazon ads costs

100 clicks @ $0.50 a click=$50 ad cost

Relationship between conversion rate and profit per unit

example A1 (sales price $15, gross profit $5)
At 20% conversion rate:

20 clicks out of 100 result in a sale.

Ad cost total=$50

20 sales @$5 gross profit=$100 gross profit

Profit after advertising (for 20 units)=$50

So profit after advertising per unit=$50/20=$2.50

Example A2 (sales price still $15, gross profit still $5)

At 10% conversion rate:

10 clicks out of 100 result in a sale.

Ad cost total SAME= STILL $50

10 sales @$5 gross profit=$50 gross profit

Profit after advertising (for 20 units)=ZERO!

So profit after advertising per unit= ZERO!

Relationship between price, conversion % and profit

In practice, conversion rate is strongly affected by price. The lower the price, the higher the conversion rate tends to be.  NB This is not always true if higher price gives a perception of a better quality product- test your prices!

compare with example A2 above.

Product example B1 

Sales Price  $14

Total Landed Cost $5

Amazon fees $5

Gross profit $4

Amazon ads costs per 100 clicks (average): $50

At 15% conversion rate: (Sales price $14 , gross profit $4)

15 sales @$4 gross profit=$65 gross profit

Overall Profit after ads costs=$65-50=$15

Profit per unit=$15 overall profit ÷15 units=$1
Although the price is $1 lower ($14 instead of $15), the profit is actually greater per unit ($1 a unit average over zero) and greater overall (15 units sold at $1 profit per time instead of 10 units sold at no profit)

Split testing

To find the price at which you optimise overall profit, you will need to do some form of split testing.


Simple/primitive method: You can just run the listing at one price for 7 days (or longer) then change the price and repeat. Then compare results. Without software, that’s the best you can do on Amazon.

All other things being equal, that will tell you what effect price has on conversion %, overall sales and overall profits.

However, all other things may not be equal e.g. if the demand for your main keywords happens to drop off that week due to say a national holiday, good weather, etc.

To get a more reliable result, you need to use split-testing software. In the USA, I’ve just started using Amzsplit= Splitly

Sadly it is not yet available for the UK, although they keep promising jam tomorrow! I’m exploring a UK equivalent – if it works, I’ll let you know in the Facebook group – don’t forget to join if you haven’t already!

HOW TO SUBSCRIBE TO THIS PODCAST

A podcast is a free downloadable audio show that enables you to learn while you’re on the go.  To subscribe to my podcast for free, you’ll need an app to listen to the show from.

For iPhone/iPad/iPod listeners – Grab your phone or device and go to the iTunes store and search “Amazing FBA”.

This will help you to download the free Podcasts App (produced by Apple) and then subscribe to the show from within that app.  Every time I produce a new episode, you’ll get it downloaded right away.

For podcast enthusiasts – If you already listen to podcasts and have a podcatcher that you prefer, the feed you’ll need to add is: http:// amazingfba.com/feed/podcast.

For those who don’t have a mobile device – You can always listen to the show by clicking the audio file at the top of this page.

If you have any queries, just go to www.amazingfba.com/ask

 

1

#55 Amazon Private Label Strategies: Kevin King Interview Part 1 of 3

**WARNING: Contains a bit of swearing &  A Lot of Truth!**  

How did you come to be selling on Amazon?

Entrepreneur since age 4 when resold bubble gum to friends! Not had a job as an employee since age 17.  Direct marketing background not SEO. Sells calendars directly to consumers, also wholesale.

Been selling on Amazon since late 1990s – e.g. old CDs, DVDs etc.

Also in calendar business signed up for Amazon Advantage – media only e.g. CDs, DVDs

In Q4 gets purchase orders. Start of season 3-4 a week; end of season say 1000 a week.

That alone pulls in six figures – and everything else on top of Amazon orders is 100% profit.

So Kevin has seen the power of Amazon grow.

2 years ago he looked into the PL model but didn’t jump on it, which he regrets.

Started doing it May last year – doing some Retail Arbitrage – see how shipping and systems work. He realised RA is too much work and not scaleable. Race to the bottom.

Why do PL?

Calendars are seasonal. He had pay-per-view TV revenue stream but the internet had killed that off. Plus Kevin’s Background matched all the skills needed, including:

developing packaging, product development, online marketing -plus sourcing from China and Korea. So he went for it.

Kevin’s philosophy is to prove a product on Amazon then take them into retail on other channels.

Amazon is the bulk of his revenue. This is problematic long term because they could in theory shut your account down or suspend your best selling product at any point.

Recent example: Amazon wrote to Kevin saying they’re suspending his best selling product because of an image violation. They didn’t even tell Kevin what the violation was!

Kevin worked out it could be cartoons or extra elements in the images that he had put in. So he was able to deal with the issue. But it was a reminder that you’re vulnerable to some robots or some employee doing things by the book.

Where would you get started as a newbie with Product Selection?

How much money do you need to start in Amazon PL?

Product selection depends on how much money you have to start with.

Even Scott Voelker and other people say unrealistic things about how much you need to start. Kevin says you need a lot of money. There are stories of someone who started with $300 and made a lot of money. Some of the stories are untrue, some are true. But what’s missing: five days later that person took a loan from the uncle for $10,000 & 10 days later put $20,000 on the credit card. etc.

It paints a false picture. Some people get lucky, but it’s very rare. It takes a lot of work and a lot of money. If you just want a bit of extra holiday money you could do one of two products. But to make a living demands serious money, determination and hard work. Even Kevin didn’t realise how much money it takes even with his product.

Do you believe in staying in one Amazon category and building a brand? Or do you pick each product on its own merits/just follow the numbers?

In Kevin’s case, he started five brands because he came from a product background so he was a aware  one might not work. So he wanted to increase odds of success.

Launching second product won’t double sales unless it’s just an add-on or extremely complementary. So he’s not so worried about potential complementary sales.

However, if you can, do get them. An example is that Kevin started in the makeup category. The problem was  massive competition because it was easy to get into. Now for example he sells makeup tools instead of makeup itself, and many of those are complementary [cross sales potential].

How do you go about picking products? If you had $5000 to start out but potentially use credit card later?

If it’s capital intensive, what’s your approach to finance?

Kevin will make use of available credits. For example at bankrate.com you can get find credit cards listed. Like City and Chase which will give you know percent balance transfer and also wash purchases for about 15 months

If you have good credit and some good history, there’re other places like a deal struck on deck etc. If you have a pro seller account for a year and the metrics look good, Amazon will offer you a decent rate on loans as well.

How do you differentiate your products on the competition?

In some cases, Kevin sources products that are straight up private label from Ali Baba. But he makes a few changes. Every product has retail packaging.

A lot of people will take the brown box that is given by manufacturer, but customers care about the look of packaging.

Kevin doesn’t do an initial order under 1000 units – if he doesn’t have confidence in the product he won’t buy it. He believes he can sell out over time if it was a dud product. It may take a year and tie up cash but you can sell anything on Amazon in time. So the risk is not that great.

Kevin picked his first product in May 2015 it took two months to get products out but that was okay because he used for long photo shoots and made a really beautiful products and packaging.

Three Product Examples.

Example 1: Product for dogs, just wanted to do it, the research tool said no but Kevin wants to do it anyway. It’s doing well because it’s a great positioning and marketing.

He went to www.upwork.com for CAD design in Argentina which he had sketched on paper.

He went to one factory that messed it up; 2nd factory  however made new moulds.

Kevin rarely has a hijacker because they are original. The only time that ever happens to him is when you sell the products for $0.99 to people who have accounts on review groups. So they probably have 10 accounts and they basically use it today bit of retail arbitrage..

Example 2: Kevin spent $30,000 dollars on creating a mould and tooling. But where the best seller is selling a product for $10, Kevin is doing it for $100. BSR doesn’t matter to Kevin for that reason.

The competitor is making only $1 a sale, Kevin is making $20-$30. Because Kevin has differentiation against the high end to compete, BSR does not matter to him, also at the high end of product quality and price there is less competition.

Example 3: Kevin recently launched another product in the dog space. He did use tools like: ASIN Inspector, Jungle Scout, other tools including Merchant Words and UberSuggest. However, all these tools are just guesses. The only numbers you can totally trust are Amazon ads results.

Again, most of the competition were playing at the low end. They were the equivalent of McDonald’s, whereas he wanted to create a product that was equivalent of the best steak house in town/French chef. It’s a smaller market but enough to make it work.  They were using cheap packaging, where is Kevin created a  kind of cigar box type packaging.

Kevin’s product is twice as expensive as the main competition, and has half the number of products e.g. five treats instead of 20. On Friday it was put up with no promotion. He had 3 sales with no reviews. He started PPC (one sale) but it is already selling at a high price point without it.

Differentiation and going for the High End

Kevin makes sure to be different and go for the high end of the market [less crowded/more profit].

Kevin may sometimes go to Alibaba and source an existing product. However he will add pieces to it change things so it is different.That might be thought of as bundling, but Kevin things it’s bigger than that.  It is about changing things so it is different from the existing products.

He does not go into the model of getting it in fast and then get it shipped. He is in for the long haul, not “get rich quick”. People preach that model but Kevin doesn’t buy that.

Differentiation and building a brand is an end to end process. It is no good skimping on the product or if you have issues, even if the packaging is good, it will still go wrong!

Building on email list from your Amazon customers

If you use a manage by stats, they will take your Amazon customer’s postal address is match them up email addresses. This is not perfect, but 30 to 40% should match up. 

Testing your market and their views on products

Kevin recently send out an email to 100 people on his email list. He had 20 responses and he email he sent out 20 units from his competitors, In plain packaging.

He got great feedback on the pros and cons of different models. He also got the sales copy for his bullet and title. And he knew what was a good product.

Those who raved, he went back to and asked them for reviews. He had up a dead listing for the product said that it could have reviews on. So it actually had eight reviews on it before the product went live.

Reviews – numbers and discounts

It is a myth that you need 50 or hundred or 500 reviews. However, now you really need verified reviews. If you sell it out over 50% discount, it won’t be a “verified” review. Customers are also getting savvy.

Kevin now sorts by verified reviews when he is searching on Amazon, and other Amazon customers are probably starting to do the same.

An example of this is that Kevin got a product that got five stars reviews across the board from giveaways. But after it was used for real, the real reviews went down fast.

How to maximize positive reviews – Email followup tip

Kevin has the first email which does not even offer anything, it contains tips and suggestions and checks. For example if it is a potentially dangerous product, it tells the consumer to be careful when opening it.

The timing of this email is crucial. Assuming that most customers use Prime, they will receive the product two days after ordering. So Kevin times this email to arrive one day off to the order. In other words it is after the order but before they receive the actual product.

He puts the question in the PS: “Why did you choose us?” And offers a free gift if they onto this question. Always put something in the PS if you want someone to read it.

This gives an important psychological insight before they have a product in their hands. From this he can change the listing, bullet points etc. and he gets a lot of verified reviews. About 10% respond. It gives great insight into why they hit the buy button. The product itself can negatively or positively influence them.

You start to see patterns here.

Optimising listing

What are your main points? Photos? Title? Bullet points?

The title is really important. The reviews the second most important thing including a video on page 20 possible. Images are also very important. If somebody’s shopping for a well-known brand, the images not so important. But for private label, they are crucial.

Packaging is also very very important. If you have great packaging, it can help you make sales with the photo of the packaging itself.

An example of improving packaging:  Kevin started with a $1 box. The new box cost $2.20 but he was able to raise the price to $40- $50, his customers didn’t feel ripped off, they felt they were getting a good deal. This is what to aim for.

If you look at high-end products like Apple Samsung, the packaging is absolutely critical especially somewhere as competitive as Amazon. It gives the customer confidence even if it’s not fancy, it can be a couple bucks but the spelling must be good and it must look like something they can get in a retail store. In a retail store if you think about the people by based on packaging anyway.

You can use great packaging in your photos to catch the eye and differentiate your product.

Careful who you listen to

The figure of “ 50% of full price figure to get verified reviews” comes from Kevin’s own testing and people who know what they are saying. 

Kevin warns that some people don’t have a clue are giving advice, in Facebook groups and even some podcasters. Some give great value but a lot of the podcasters don’t have a lot of experience selling. It varies a lot. It’s best to trust the guests are doing the numbers.

[Michael does not claim to be an expert in doing big numbers, which is why these days he focuses more on more on getting in guests who are doing big numbers, and focusing on what they have to say]

HOW TO SUBSCRIBE TO THIS PODCAST

A podcast is a free downloadable audio show that enables you to learn while you’re on the go.  To subscribe to my podcast for free, you’ll need an app to listen to the show from.

For iPhone/iPad/iPod listeners – Grab your phone or device and go to the iTunes store and search “Amazing FBA”.

This will help you to download the free Podcasts App (produced by Apple) and then subscribe to the show from within that app.  Every time I produce a new episode, you’ll get it downloaded right away.

For podcast enthusiasts – If you already listen to podcasts and have a podcatcher that you prefer, the feed you’ll need to add is: http:// amazingfba.com/feed/podcast.

For those who don’t have a mobile device – You can always listen to the show by clicking the audio file at the top of this page.

If you have any queries, just go to www.amazingfba.com/ask

 

3

#51 Using Amazon Suppliers & Building Quality products with Manuel Becvar of Import Dojo – Part 1 of 2

   This episode, #51, is the first of two parts of the interview with Manuel Becvar of Import Dojo. Manuel has 11 years’ experience of sourcing in Hong Kong and China and also is an Amazon seller with several product lines live and selling well. 

EPISODE 51 SHOW NOTES

What took you to Hong Kong?

Went there for a 6 month internship  for an Austrian electronics firm in 2005. He was handling sourcing from suppliers. He fell in love with the city and a woman and never left!

He loved the drive and opportunities of Hong Kong. Very expensive but great place to live.

Do you also sell on Amazon?

Yes since August 2014. Also documented launching a whole brand. He currently has 7 products and 10 more coming in the next few months.

He’s focussed on getting after 3-5 categories in different categories. He launched then stopped a few more.  He has several businesses which were more of a priority till now.

What are they?

  1. Selling on amazon
  2. Sourcing company in hong kong for amazon sellers.
  3. A consulting and import course, step by step guide to import from china and sell on amazon but also sell to retail.

He started out with a consumer electronics brand, selling to retailers in Europe under own brand and their own brand, but also now on Amazon. Now Manuel is focussing on his own Amazon business as it is really picking up.

Tell me about stopping a product?

He used to sell smart phone accessories but then the prices got so low there was not much profit. Electronics can be very competitive.

What’s your process for selecting products? What are your selection criteria? Do you go by the numbers of individual products? Or build a brand in a niche?

Manuel is more old fashioned, doesn’t use Jungle Scout or ASIN inspection so much. He subscribes to relevant product websites. newsletters, goes to trade shows. Also looks at Kickstarter and Indigogo for product concepts.

Manuel doesn’t look into creating a huge brand in one category. Tries out one product in a niche e.g. coffee press. If that takes off, build into that niche. If not, don’t go into say grinders, filters etc. 

Coffee press now selling about 20 a day.

How do you  beat the competition?

you need to stand out to beat the competition.  Tries not to copy the competition. This is his approach. Will Tjernlund does copy the competition, but Manuel is more interested in creating unique products and building a brand.

How can we make a product unique in a simple way?

Example 1: Blue tooth speaker-

The sample looked bad, plastic finish, bad sound, packaging horrible. 

The finish rubber instead of plastic was 20 cents more but immediately looked better.  Then looked at components, sound was bad, different driver sounded much better and cost just 50 cents more.  Used photographer to get better photos. 

He turned a $10  product into a $30 product but only cost him $2 more.

Focus on finish, minor improvements etc.

Example 2 – Coffee Press

There are  lots of stainless steel finishes, but no copper finish.  So Manuel had that done and added in extra filters etc.

Look at the little things you can change.

Tell us about working with suppliers. What’s the best way to approach your supplier about this?

Introduce yourself including company presentation –

Create an excel file or word doc about the product- include bullet points, this is where it’s at, this is what i want instead. 

Also point out that if you improve the product, they will make more sales with other customers as well. so they are more willing to make changes with costs.

So you’re not trying to get an exclusive deal with them?

Amazon sellers are mostly a small part of a suppliers’ business. if Manuel does say $10,000 a year he’s a very small fish. that may be 0.5% of their turnover if you work with a big factory (this is true for his own coffee press. They also work with Tesco’s who order $1m a year)

How do you get an exclusive deal for amazon rights?

He has set up an agreement with the Purchase Order which says – “My plan is to order 10,000 units. Are you willing to give me exclusivity for a year. If I don’t reach 5000 units within 6 months, we can cancel this agreement. “

This give Manuel 6 months to figure out if he wants to place more orders and it means the supplier can make more profit too after 6 months. 

Manuel is okay with that because he would have a head start, maybe 100-200 reviews already. It’s okay to have competition. It’s not all about one item only.

Manuel is happy if he can do 6 months of excellent sales on one product. That repays the time and money invested already. 

Greg Mercer was saying if you get 6 months’ head start, you can defend your product against competition. So you agree with that?

Yes, that does work.

Where do you go to look for suppliers?

Manuel has collected over 1000 business cards for suppliers from previous job being a product manager, when he went to China every 2 weeks.

Manuel also works with a lot of trading companies. He will sometimes be willing to pay say 50 cents more and use a trading company, similar to agent. Some of them work as if you are working with factory, for example if factory doesn’t speak English, don’t know about country requirements eg CE (European Union), FCC (USA), FDA (Food & Drug Administration, USA) approval, doesn’t have experience exporting to a country, etc., etc.

So working with a trading company can make a lot of sense.

Alibaba and Global Sources Manuel does use if he can’t find anyone through his network – you can verify and vet the suppliers. You can still vet them by checking their certificates, asking who they work with,  Which markets they export to etc.

For example, If Manuel asks “where do you export to?” and they say, “Middle East” and you want to export to USA, don’t bother. He wants a supplier

It’s also good to know a few names in the industry eg small supermarket or worked with an Amazon seller before. Check business certificate.

What are the big does and don’ts for selecting a supplier? Assuming Alibaba, Global Sources or HKTDC and someone who is new to the process.

There is a lot of filtering you can do. e.g. a microwave on Alibaba, filter by Gold Supplier, trade assurance, 3rd party verification.

You can also filter by region – say 10 different provinces of China.

Let’s say Guangdong have 5000 suppliers and another has just 10. That shows you where the main factories are for this kind of product.

If a region specialises in making those products, they have the resources and the infrastructure.

Say in Jeijung province, with 10 supplier results, they probably don’t specialise in that.

There are many other filters you can use.

Send out enquiries to 10 suppliers. 3 or 4 get back to Manuel with and answer all his to Qs

Email out “vendor profile”,  asking for:

  • 2 customer references for customers
  • markets. Has he exported to this country before?
  • business certificates, and certificates for prods
  • no workers; when company established; annual turnover.
  • do they do R & D? Have their own engineers? how many product lines?

You get a gut feeling after a while.

This is included in import dojo ebook as a downloadable document.

Import Dojo is actually a 60-page book which is a bestseller on Amazon! It is free at the company’s site. 

 What’s next in your process?

Get a soft copy of any certificates needed – prove he has it!

IF that’s okay, then ask for a sample from at least 2-3 suppliers. Same process with all suppliers.  If all samples are equal, go with most responsive/proactive and helpful supplier, even if price is a little higher. Then place an order. 

So you’re okay with higher prices?

They need to make profit too, they work hard. The factory will be business partner, it should be a fair biz relationship. As long as profit is built into your price, it’s fine to pay a little bit more.

If you have individualised products and with good product price, you can afford
If you’re building a brand, if you squeeze in cheap products, it won’t help. 

I guess it depends on whether you have customised products vs. commoditised products sold en masse?

Yes, I’m building a brand, so selling cheap products to make a quick buck is not part of my strategy.

What is the best tip for negotiating on product price once you have verified that the quoted price is in the fair region? Should simple customisations really cost that much more?

There shouldn’t really be a big difference. Unless the supplier has to invest money into a new tool or a new mould. If it’s just a colour difference, it shouldn’t be much.

To find if it’s reasonable, ask at least 3 suppliers for a quote. IF one is way off on price, he’s either incompetent or trying to rip you off!

To contact Manuel, click here for the Import Dojo contact page.

NEXT EPISODE

In Episode #52, Manuel gives details on keeping your money safe, getting quality control for Electronic Products, simple ways to start with Freight, overall process and predictions for the future of Amazon. Stay tuned!

HOW TO SUBSCRIBE TO THIS PODCAST

A podcast is a free downloadable audio show that enables you to learn while you’re on the go.  To subscribe to my podcast for free, you’ll need an app to listen to the show from.

For iPhone/iPad/iPod listeners – Grab your phone or device and go to the iTunes store and search “Amazing FBA”.

This will help you to download the free Podcasts App (produced by Apple) and then subscribe to the show from within that app.  Every time I produce a new episode, you’ll get it downloaded right on your iDevice.

For Android listeners – Download the Stitcher Radio app (free) and search for “Amazing FBA Podcast.”  Or, if you have already downloaded a podcasting client, follow the directions in the next sentence.

For podcast enthusiasts – If you already listen to podcasts and have a podcatcher that you prefer, the feed you’ll need to add is: http:// amazingfba.com/feed/podcast.

For those who don’t have a mobile device – You can always listen to the show by clicking the audio file at the top of this page.

If you have any queries, just go to www.amazingfba.com/ask.

#50 Product Process, Suppliers, Freight and Amazon Future with Anthony Lee Part 2

NEW PRODUCT PROCESS

So a product jumps out at you from the universe.

Can you talk us through your process with a new product (from selection to re-ordering)?
(from product selection, via supplier selection, freight/supply chain, getting products to Amazon, product launch)

What are your criteria/ numbers?

Look for main KW “The thing that it is” on page 1 – using Jungle Scout, Anthony wants to see at least 60% of sellers doing $15,000 sales each. He wants a handful under 250 reviews. They’ve probably been there under a year, so there’s room for AL to take some market share.

He’ll glance at BSR – a number between 2000-4000 =mid competition. Anthony is confident he can easily get on page 1.

80% of all factories in the world are in China – it has lots of real estate, dedicated to factories. Everything AL sources is located in China.

Next step is to find a supplier using Alibaba, Global Sources,. Global sources is his go to place. HK is an easy place to reach and many of their suppliers go to their trade show. HKDTC (never had much success so far) and Made in China as backups.

Criteria: Gold Supplier for 3 years – they have to pay for that. Make sure they take some kind of secure payment -they’re probably not trying to rip people off.

Send out your enquiry. Ask for samples first – if it’s crap, cost doesn’t matter! 3-4 samples generally.

You pare down – send emails. certain %age come back; ask for samples; certain %age respond.

Whittle down to highest quality then  pit them against each other for quotes.

“I really like your quality and I personally would like to work with you. But my partners would like to work with your rivals because of price.”

ALWAYS make custom modifications. Put logo on product not just package, have the product itself your brand colours. Better for brand and for hijackers etc.

Give them design specs, place a 30% deposit but have them send you a sample of your design.

Use that to check quality and for photos.

How do you deal with Quality control?

Have an inspection co. like Asianinspection or Richforth. Contract them for a man day (unless it’s electronic in which case you might need a week) 300 USD for one man day.

Have it set against a margin of error. So you know it’s good to go before you leave the factory.

You tell the factory they won’t get 70%

You can work with a sourcing agent. It’s just hard to find someone you can trust. Most of them are very much making a deal with the factory and you. Get paid on the front end and the back end. It turns out AL has 15 years’ experience as an importer and AL is now communicating with him. That will help with QC – they can check factory, batch inspection.

The real low tech way/cheap way to do it – find someone on Upwork to go to the factory and send a Skype video or pictures of the production line or products. Have them toggle switches etc.

What are the biggest issues you’ve met with suppliers? What are your best solutions?

AL has been “lucky” but that’s because he has a lot of hoops to jump through before he’l work with them. He’s heard the horror story e.g. sample quality not real quality or jack up prices last minute etc. Not experienced yet.

The best way is to very very thorough about selection process.

What other hoops do you make them jump through?

Communication. How responsive are they? If it takes 2 days to get an email back, am I a priority?

When we get to a certain point, what’s your Skype? how about your mobile/cell phone?

I have them send pictures of the production facility. Because

  1. see the factory. 2. How willing are they to do it?
    The factory is your biz partner – they’d better act like it! If you were gong into  biz with someone in your own country how you would you want them to act?

How do you handle freight? Supplier’s carrier?

How do you deal with inventory management?
It’s a big area of confusion! AL does not have a courier account with DHL etc. because he doesn’t do much air freight. He just uses supplier’s courier account for samples – he  even has a standard template for samples.

For everything else he uses sea freight as it is significantly less expensive. Generally he shipped LTL (Less than a Truckload /LCL (Less than a Container Load) although now mostly 20-40 foot containers.

Because the closest US coast to China is the West coast, and the most common port is Longbeach, he specifically looked for a Freight Forwarder in LA. So that is freighting by sea and delivered the shortest distance. Then he does LTL pickup by Amazon who picks up palletized and labelled units ready to go to Amazon.

SO you’re looking for a one-stop shop for warehousing and freight?

Yes, wanted to make process as easy as possible. They contract with a customs agent to handle the customs clearance. AL just gets an email with the bill. They make it really easy.

An alternative is to use Asia based Freight Forwarders – they get amazing deals on fast boats out of China. So you need to go through the same process.

Amazon decided that everything is going to Moreno CA so West Coast made sense. However, every time they have a strike, his products get stuck. The absolutely best way is to go out and get as many quotes from FF as possible. As lots of questions and get one that will take the time to educate you. One of them might say “Well our clients do it this way” and make a suggestion.

Tell us about inventory management – when a product is selling, what then?

What about “Killing off” products with low sales or low profit?

AL doesn’t yet use inventory management software – doing it manually is a pain. It’s tricky because you base reordering decisions on two weeks’ sales; then you get a spike in sales and you will run out of stock. The other danger is demand drops off instead and you buy too much inventory so you pay high warehousing fees. That’s when supply chain management evolves.

You need to look at warehousing deals so at some point you can bring in whole containers and bring  only a couple of pallets to Amazon.

Every product is seasonal. You need to be in the game before you learn that pattern for a particular product. A store manager might be your first hire – a necessary one if you’re going to have and grow a business based on importing.

When to let go of products?

A lot of people come in thinking they need to make lots of sales or it’s over. If the product is still making you a profit, you should maybe reconsider. Even if it’s only a small amount. If you get 5% return, it’s worthwhile.

What’s your approach to cashflow management?

Al is just starting that conversation – chances are you will run into this soon enough. The solution is not in the system itself. Cash injections become important.

AL’s short term solution has been credit. Will Tjernlund uses Amazon outside of PL to make cash faster – wholesaling ideas are fantastic. When you’re in this business, you’ll make a lot of connections. It could be someone in your local area who doesn’t have product on Amazon or it’s not selling well. You probably have more Amazon experience than they do. SO soft sell – let me help you with this – good way to make extra cash. AL has recently been working out profit share deals with people who want to

Leverage whatever skills you have. A lot of people want this skill but don’t have time to develop. A lot of retailers are on a 36 month contract and paying whether they make sales or not. You could come in with a solution  and make them extra money.

You can work out a wholesale deal. You can do consulting. Whatever comes your way.

Bigger picture

What’s working well right now in your business (that you can reveal)?

Finding great margin deals by establishing relationships with factories and suppliers. Then get on page 1 for main keywords.  AL has one  product only selling 2 a day which will kill it in Q4.

What are the most successful sellers you know doing right now?

One person is leveraging Facebook advertising for both Amazon and Shopify sales.

Either learn an avenue really well, or pay someone else who knows it really well.

Another friend takes advantage of every single offer. Every beta programme they do, she takes it. She’s got someone at amazon who answers her email. She is killing it!

Find an area where you can get visibility for your products and get really good at it.

What do you see coming in terms of changes that we should be thinking about adapting to… In the next year?

Predictions are mostly wrong! But a focus of unique products is coming – we’re in the middle of a Kickstarter crowdfunding craze. SO AL assumes that Amazon will get a lot more of untested unproven concepts coming out. This might be the next generation of sales. The marketplace has proven they like this kind of thing. There will be a lot less competition for those products.

If you have an idea, this will be growing, -there are prototyping companies out there, go for it.

In the next five years, there will be other marketplaces – whatever teenage girls are doing now will become big! App based – right now, teenage girls are buying products on App based programmes like Wish etc, which are basically like eBay

Do you have any parting words of advice?

The most important thing is: understand you are serving a marketplace, a niche, not just selling a product. Treat it like a business – it’s an investment – go at it with a calm pulse, understand that it takes time. The growth curve is never easy, it’s never in a straight line but stick with it.

HOW TO SUBSCRIBE TO THIS PODCAST

A podcast is a free downloadable audio show that enables you to learn while you’re on the go.  To subscribe to my podcast for free, you’ll need an app to listen to the show from.

For iPhone/iPad/iPod listeners – Grab your phone or device and go to the iTunes store and search “Amazing FBA”.

This will help you to download the free Podcasts App (produced by Apple) and then subscribe to the show from within that app.  Every time I produce a new episode, you’ll get it downloaded right away.

For podcast enthusiasts – If you already listen to podcasts and have a podcatcher that you prefer, the feed you’ll need to add is: http:// amazingfba.com/feed/podcast.

For those who don’t have a mobile device – You can always listen to the show by clicking the audio file at the top of this page.

If you have any queries, just go to www.amazingfba.com/ask

 

#49 Amazon market research, credit & margins with Anthony Lee Part 1

How did you come to be selling on Amazon?

Working as a waiter! Not really. AL saw a video on PL on Amazon and that was it!

How come Private Label?

AL was taught only PL and that’s what he’s done. He only knows about wholesale from Will Tjernlund.

Do you sell only on amazon.com or also in the UK and/or Europe?

Currently in the USA. Everyone expands their business in their own way. AL has decided to focus on building off Amazon rather than expand Amazon internationally.


How do you find products?

The “Standard” answer: try to find things that you use. Walk around kitchen/dining room and when you see something that you use, you will able to ID with target demographic because you are in it! (About 2 products found this way). Makes figuring out Customer Avatar much less complex.

Then check the numbers to see if other people are making money with the product. If they check out, go deeper.

The “real answer”: Decide on a Category e.g. kitchen. Then look in the relevant dept at the shops, in your friend’s cupboard – become mindful and the universe will show you a product! [Then check the numbers]

Do you believe in staying in one Amazon category? Or do you pick each product on its own merits/just follow the numbers?

Start with product on own merits. Then plan to expand into the category with your brand.  Then start thinking of the implications – what are complementary products?

How do you deal with the increased competition in the Private Label Amazon market( esp. USA)?

A lot of people look at the competition – there is a lot of “sky is falling” thinking!

The days you could trip over something to make $100K a month are over but that was always going to be short lived. Now it’s just levelling out.

BUT The idea it’s too saturated is silly. More people starting on Amazon leads to new products on Amazon which create new markets – also if you intro a new product, you’re the only seller!

You don’t sell a product and have an Amazon business; you have a physical prods biz and Amazon is just a channel.

Do you use other sales or marketing channels?

Took a while to learn that FBA is the most affordable fulfillment centre. AL spend 6 months looking for alternatives but Amazon is the best!

The next was finding companies to connect Amazon FBA to other channels. AL has put products on Jet – long approval process – eBay templates are being built. Next month going on Sears, Rakatan. Shopify site is nearly up. 

Tell us more about a “Customer Avatar”?

If you sell anything, you always have an ideal customer/target demographic. Person most likely to see, love and buy your product. Focus on them and don’t go broad – you will miss easily sales if your message is too diluted. Focus language- when you’re writing bullets/description e.g. if you sell male enhancement, the language is men “he/him”etc. – refine that ever deeper the more you know your avatar.

Ask” by Ryan Levesque (on Smart Passive Income podcast) uses surveys for this.  Do you do this?

It’s hard to do this because Amazon’s customers are not your customers. But once you have an email list, it’s very powerful, yes. But until you have that, just pay attention to your data.

If you run FB ads, look at the demographics and over time build a picture.

Gender, age range etc. e.g. Baby market – AL started with idea of just mums but gradually got more specific.

Surveying your own audience/buyers really does give you amazing results.

Yes, it is very important who you’re hitting

[Andre Chaperon the email marketing “guru” is obsessed with Customer Avatar].

Dealing with increasing competition – from moderate to tough. How do you deal with this?

Before AL used to say: “Find a product and do it really well.”  Now it’s: “He who has the most SKUs wins”. [SKU=Shelf Keeping Unit, i.e. a product line]

When you start out,   “failing” may be that your listing is buried in page X.  Once you get to the point where you know what you’re doing, “failure”=selling only 5 a day of a product.

But if you have 300 product lines doing 5 sales, that’s a living!

Having a fleshed out catalogue is  great for your brand. if you approach wholesalers you’re better placed. there are many benefits. It’s a very capital intensive approach but all of Amazon products business is capital intensive so you just have to be very intelligent with your product choices of inventory and expansion.

How do you make intelligent choices i.e. use of capital?

Most people come in thinking “If I can make $8000 sales/mo at 45% margin i could quit my job.”

AL says: “Keep your job and reinvest your money for 5 years.”

With a traditional business, you would give it 5-10 years before you give up on it. So why not with Amazon?

It’s a tough sacrifice but if you reinvest everything repeatedly, you’ll really build out your cat and have more options. That and intelligently using credit. Business credit cards are building AL’s credit and opening new SKUs.

Where would you advise using credit and where avoid?

If you can afford to make 3X the minimum payment per month, then using a credit card to expand your brand is okay. So in the end, that won’t hurt your credit. What you do have is new inventory to make new money off. This is a strategy if you have  couple of products doing pretty well.

If you’re starting out, it’s more of a risk. AL did max out 3 credit cards to start because he had no capital. It’s a personal choice. But it’s not a good idea to take out credit for a highly competitive product.

What sort of margin would you aim for in general?

Aim for 50-55%. It never works out that way because of competition and price wars. AL has an average across all SKUs of 36%. But the wiggle room is there now.

HOW TO SUBSCRIBE TO THIS PODCAST

A podcast is a free downloadable audio show that enables you to learn while you’re on the go.  To subscribe to my podcast for free, you’ll need an app to listen to the show from.

For iPhone/iPad/iPod listeners – Grab your phone or device and go to the iTunes store and search “Amazing FBA”.

This will help you to download the free Podcasts App (produced by Apple) and then subscribe to the show from within that app.  Every time I produce a new episode, you’ll get it downloaded right away.

For podcast enthusiasts – If you already listen to podcasts and have a podcatcher that you prefer, the feed you’ll need to add is: http:// amazingfba.com/feed/podcast.

For those who don’t have a mobile device – You can always listen to the show by clicking the audio file at the top of this page.

If you have any queries, just go to www.amazingfba.com/ask

#47 Amazon Keyword Research, Amazon USA vs UK and Quality Control – Q & A Tuesday no 4

#47 Q and A Tuesday no. 4 SHOW NOTES

Q. 1 David G.

Merchant words vs KWI for accurate kW search volumes?

Danny :

Both use algorithms rather than qualified data from Amazon’s servers. Use as guidance rather than absolute numbers. The best data will be from your reports.

Michael: remember that all research numbers before you have product live are an approximate guide. If the numbers look good, go ahead and place an order, but just place a small one. You could go to AliExpress and make a really small order of say 20-50 units. Or go to a supplier on alibaba.com who will accept a small MOQ. Then launch the product with a few reviews and see if you can get sales at a reasonable price.

Either way, then you will get real data which you can then use to decide whether to place a full sized order.

Q2.  Kurt

Hi all, I am currently selling on co.uk and I am wanting to start selling on the .com market… do I need to create a brand new buyers account (with different email address) and then use that to create me .com sellers account?

Thanks

Hi Kurt, yes you do need a separate account. The advantage is that your business on amazon.com is separated from amazon.co.uk. So if there is a global issue (like account suspension) in one marketplace, you are safe in the other one.

You can link the reviews for a product between the two marketplaces as long as it is the same ASIN. This can be very helpful if you have for example a product that did well in the USA and you want to take advantage of the reviews in the UK. This is only going to work if it’s the exact same product.

Ruth B

Advice needed asap –

I have had long delays with my first order, the initial colour changes and gift box design took longer than expected and then it failed the inspection in China. 

My supplier said they would rework the problem items and with the canton fair happening, instead of the promised 3-4 days this took more like 3 weeks. 

I have had it reinspected and it still hasn’t passed – the previous major problem has been fixed but various other problems were found – all cosmetic – scuff marks, glue marks, slight gaps where the 2 materials meet (only a couple of these), damage to gift boxes. 

In total there were more defects found in the second inspection than the first (including major and minor defects). 

Where do I go from here in terms of negotiations/demands with my supplier?

I don’t really want to say goodbye to the product and lose my deposit plus all the time and effort that has gone into differentiating/designing etc, but i also don’t want to risk receiving an order of a defective product. 

The inspection pictures of the products without defects do look really good and the finish looks good quality but there do seem to be a number of defects which would result in returns. 

Having failed the first inspection my supplier agreed by email to replace (including shipping costs) any damaged items that might arrive in the UK, but how do I know they will actually stick to their promise as this is my first order with this supplier?

Nigel:

Ruth, sorry to hear that it’s a bit deflating and it happened to me with my 1st order last year. Our solution was

to have all our 1,000 items checked & pay for the ones that are ok & leave the others (after 3 inspections!)

This resulted in 203 out of 1,000 being passed &

given we paid 30% upfront we actually got a small refund.

Remember most inspections fail initially and you can accept or reject the order despite the result . Well done you though for having an inspection – many still don’t bizarrely & it’s saved you a big problem down the line.

In the end we had to change supplier for future orders.

Michael: Nigel’s advice is good.

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