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208 Using what you have in your business!

We are back with another great episode. Apologizes for the absence. I’ve been hard at work creating some great mastermind programs to help improve your business. I’ve got the Zero-to-Hero Mastermind directed at those that are starting from scratch or are earning just a few thousand a month. I also have the $10k Collective Mastermind for those that have an Amazon turnover of $10,000 a month or more. If you’re interested in being a part of a group of some great minds, check out these great mastermind programs.

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Start selling on amazon? – why NOT to start with private label! (Episode #206)

How to start selling on amazon?

Want to start selling on Amazon?  Where to start?

The standard answer for a few years has been – by plunging straight into private label.

As that’s how I started myself – and eventually succeeded, until recently I taught that myself.

I’m no longer convinced

But after 18 months of mentoring people trying to start selling on amazon, and a year of masterminds mostly focussed on those, I’ve seen the struggles up close. I’ve seen inside too many businesses and too many minds. It’s a hard way to start.

All business has challenges starting. That’s a given. You need a tough mindset. I just happen to think that in late 2017, the old model just isn’t cutting for those who are trying to start selling on Amazon now.

Are you still focussed on Private Label?

Yes I am. I believe private label on Amazon is still a big opportunity.  I have many friends making loads more money than me to back that up. It’s not theory.

So I believe that Private label – and even better, developing unique products -works on Amazon.

However, when it comes to how to start selling on Amazon, that’s a different kettle of fish.

I think the irony is that by prematurely plunging into private label, many sellers actually miss out on properly executed private label. How can that be true?

It’s simple really. They  blow their budget on the first budget. They  bust their confidence in the business model, and indeed in themselves. And then they quit too early – and miss out on $10s or even hundreds of thousands of dollars of revenue per month

I’m not talking about what the overall goal is – rather,  it’s about how we GET there!

Start selling on amazon upwards graph on 3 gold bars

Whatever Works is good

Also I’m increasingly happy with whatever WORKS rather than being puritanical about business models.

As I’ve talked over the past two years to many Amazon experts, it’s clear from the sharper people (especially the master himself, Will Tjernlund )  that there are several models that can work. And you don’t have to start with private label.

Focus is good and learning a particular set of skills-  but so is PROGRESSION:

from simple to advanced; from low-risk to higher risk; from quick wins to projects that take months to come to fruition.

There is  a natural progression in terms of risk in the various business models available to ecommerce sellers in general, and ways to start selling on Amazon in particular.

chimp scratching head- Start selling on amazon

Real learning versus the the Art of Aping…

It’s like my old job of piano teaching.

Sure, I can teach little Johnny to seem like an accomplished pianist by teaching him or her three specific pieces and about 10 scales. You get a certificate, you look good, the parents are happy. 


Trouble is, he doesn’t know his way round a piano, he can’t read the music, he can’t play by ear, he doesn’t understand what he’s playing or why…in short, he’s not becoming any kind of real musician. Or any kind of real pianist. 

He’s aping the real thing. But he’s basically little more than a trained monkey.
Put him in any situation that demands real understanding of music, or real control of a piano, and he is finished.

My experience with Amazon sellers who try to learn  how to start selling on Amazon with Private label is remarkably similar.

Indeed, it mirrors my own journey as an Amazon seller myself. And it also mirrors my journey as a piano student/musician to a frighteningly similar degree too.

Vested interests trump real learning

That’s not surprising. There are a lot of vested interests in trying to “pre-package” business building skills and mindset. Same as there were in pretending you can become a pianist, with 20 minutes’ practice a day and three pieces at a time, with some bullshit “grades” scale.

(By the way, I have 7 years’ higher education in classical music, I’m engaged to a pianist – so this is not the ranting of an amateur. On the contrary. It’s the ranting of an ex-professional).

Both things, I’m afraid, while much better than doing nothing in terms of progressing, are basically based on a totally false premise. The false premise being that you can learn the piano by aping much better pianists’ external results – or by aping the actions of advanced Amazon sellers.

Instead, what I’ve seen overwhelmingly is that all of us entrepreneurs need to develop the right mindset and skills. And those come from experience.

Start selling on amazon

Experience is the best teacher (no surprise there)

The truth is that there is no substitute for learning overall business strategies and tactics. Nor is a substitute for learning by experience.

You need to learn to understand what you see in the data; to READ the data. You need to learn the landscape of a marketplace. Everyone has to learn how the mechanics of production, freight and amazon work. You need to get familiar with Amazon’s internal processes.

All this takes time and practice. It doesn’t need however to be a painful, high-risk, uncertain gain experience, like that of the big private label approach.

Practice makes you better. Planning for months, selling nothing, then sending half your life savings across the world suddenly…well, that is NOT such a great way to practise becoming a better online seller. Nor to start selling on Amazon specifically.

15 reasons  to start selling on amazon with something other than private label

BIG RISKS -AT THE TIME OF LOWEST COMPETENCE! 

  1. when you start out, you know little and have little experience. That’s fine. That’s also not the time to take big risks!

    MOQs and freight costs from China –

  2. these nearly always make for a rather unpalatable large upfront order. It’s all relative of course. If you have £10-20K to invest, you might get away with a budget of £2-3K per order plus some giveaway money. Not for any serious product in the USA, though. And for most people, that’s about half their money for Amazon, in my experience.

    Cashflow

  3. It usually takes months to get a decent private label product off the ground. The fastest I’ve personally done it was four months, with a business partner – so we had a combined 4 years of Amazon experience at the time and access to some very experienced people. It’s still challenging enough.
  4. That means no money coming in at all for months.
  5. AND a large lump sum out a few months in.

    TIME TILL YOU START SELLING

  6. It takes months to get a PL product off the ground.
  7. Meanwhile you’re not learning from the marketplace directly – you’re an outsider attempting to learn from the rather minimal data Amazon releases. Data which the rest of the planet is also trying to learn from. This is a huge downside.
  8. You’re not learning to ship in products or deal with Amazon systems. That’s a large learning curve. The sooner you can start the better
  9. You’re not getting access to Amazon business reports with more insider information like conversion percentages
  10. You’re not getting access to the Search Term Reports which I believe are the real value you’ll get from Amazon ads. That’s where you find out keyword-level conversion percentages which is VERY powerful info.
  11. you’re also not earning! See the cashflow issue above.

    The percentage of successes is so low!

  12. This is the real kicker, I’m afraid. I do know several people who started with private labelling and are still at it today and making great money. Maybe 10-15 people. Maybe 20 max.
  13. However, I must have known hundreds people (vaguely known of at any rate) who started around the same time as me, or have drifted into (and out of) the Amazing FBA Facebook group . Most have apparently drifted away without achieving anything. Or worse, they are fantasising about making money for 2 or 3 years – and wasting those years (that was me for years, by the way – which is why I try my best to stop anybody else wasting their life in the same way)
  14. True, most people who start anything don’t follow through. And that is perhaps even more true for online businesses.
  15. Still, it would be nice to see a little more consistency if it really  is going to be advertised as a potential replacement for the day job (by the way, I’m super cautious about what I say to any potential mentoring client or member of a my London masterminds about replacing day jobs. In most cases, I say give it a minimum of a year – and that’s short)

 

Start selling on amazon

Conclusions on Private label as a way to start selling on Amazon

Am I saying private label is dead then? Is it true that nobody should start a private label business on Amazon? Is private label only for the rich or the super-experienced online maverick?

No, no and no.

That is NOT what I’m saying. I want to be super clear. I think the opportunities to make a ton of cash and have the satisfaction of becoming a real entrepreneur (and mastering a tricky but addictive craft) are very real with private label. And even better with original tweaks to a product.

But both models take serious investment of money, time and energy into each product line. 

That is fine, even very important at the right point in your development as an Amazon seller, or as an entrepreneur.

Start selling on amazon - the himalayas

Don’t start with Mount Everest

But you don’t have to START learning to mountain climb by training in a gym for 3 months, studying maps and theory incredibly hard, then attempting the Himalayas as your first set of mountains.

Sure it’s been done – I read about exactly that in the news a while ago.

There’s a clue here. It’s news – because it’s the exception to the rule!

You don’t have to START selling on Amazon by scaling a private label mountain either.

Again, yes there are exceptions. Again, we read about them and the buzz goes around. Because it is NEWS. Because -I’m sad to say, after trying this way for so long with newcomers –  it’s unusual to succeed that way.

There are alternatives

So is this a reason to be depressed and quit?

Maybe – if you are the sort of person who quits easily. In which case, please don’t attempt to become an entrepreneur.

Most people shouldn’t scale the Himalayas and most people probably shouldn’t be entrepreneurs either. And that is absolutely fine. 

Most people don’t have the mindset, stamina or sheer hunger of an entrepreneur, and there is nothing wrong with that. I’m not a rugby player – despite being forced to play it (very badly) at school. Yes, I admire good players – but I don’t feel a failure because it doesn’t suit me (my sports teachers at school had a go of course…)

Most people who are a right for a profession build skill, fitness and experience one hill, one mountain at a time. If they get on well,  they move to the next natural level.

start selling on Amazon - business post-its

Amazon is still business as usual

Business is no different – and Amazon is no different to business. Just because Amazon has built the world’s most amazing traffic and conversion machine shouldn’t blind us to the fact that normal business rules still apply.

The economics and business principles are the usual:

Supply and demand. Risk-reward ratios. Opportunity cost.

The mindset and skills needed are the usual ones too:
The skills of assessing the supply and demand balance in a market; assessing risk vs reward; weighing up opportunity cost (if you go for one opportunity, you tie up the money and time that could go into another);

The mindset of a blend of vision and opportunism; pragmatism with some theory and imagination; discipline with flair and improvisation……and so on…

Go for it – but lower risk and increase learning!

I personally think anyone wants to have a serious crack at building a business and becoming an entrepreneur has never had such opportunity at their feet. And if you want to go for it, I think you should go for it.

There is no reason for anyone to exclude themselves from becoming an entrepreneur.

But wait – isn’t that against everything I’ve been saying in this post?

No again.

I want you to have the maximum chance of success, not to exclude you from the club.

What I am saying is that starting an Amazon business with private label does not maximise your chances of succeeding.

Instead, what you should do is read my next post and consider a much lower-risk way to learn your craft as an Amazon seller!

(Now there’s a cliff-hanger…!)

Thanks for reading.

(By the way – well done for reading to the end. Now there’s a hint that you have some stamina. You’ve passed the first test, oh Jedi. If you’re British, Click here – I think you may have what it takes to join the real business builders.)

(Sorry, I couldn’t resist putting a little teaser at the end too! I’ve got to have fun too, you know…)

Happy hunting.

 

172 How to Sell Your Amazon Business with Coran Woodmass Part 1 of 2

The guest today is Coran Woodmass from The FBA Broker. Coran specialises in buying and selling FBA businesses. He has been involved in buying and selling online-based businesses for 4 years. Continue reading

166 Fetcher and the Future of Amazon with Shane Stinemetz Part 3 of 3

The Future of Amazon 2017

The future of Amazon is going to be challenging for Amazon sellers. Products are becoming more competitive and this making the Amazon space more congested than before. Therefore, people need to find a way that they can assert creativity in their sales by creating something original or by adding something original to the already existing products. Continue reading

164 Amazon Sales with Shane Stinemetz Part 1 of 3

It is important for any business to measure its profit and loss as this helps in determining the direction of the business. It helps in understanding if the business is headed in the right direction or if there are changes that need to be implemented. Continue reading

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145 Amazon Inventory Management with Jeremy Biron of Forecastly Part 2 of 3

How to Deal With Excess Amazon Inventory

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.

Improve Marketing

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?

Pull the Inventory

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.

Avoiding Excess Inventory

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.

Casting a Large Net to Find the Right Product

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.

Minimum Order Quantity

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.

144 Amazon Inventory with Jeremy Biron of Forecastly Part 1 of 3

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.

Tell us more about yourself and how you got started.

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.

What prompted you to create this custom software for Amazon inventory?

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.

Tell us about how you used the Amazon inventory reports and what the limitations were.

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.

Coming back to why this matters. One thing you mentioned was demand forecasting. Basically, you have to think about this before you place your very first order, if you’re new to Amazon. Or when releasing a new SKU. How do you work this out?

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

How long, from the time I tell my supplier that I want to place an order, to the day it actually arrives at the Amazon warehouse. There is a lot that has to happen in the time-frame.

Lead time

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.

Manufacturing time

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.

Shipping time

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.

Is there someone magic trick that you use to determine actual time frames when a manufacturer quotes you?

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.

So simple formula is LEAD TIME + 30 day. That way you have 30 days of data in which to base your estimate?

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.