Today we have Brian Johnson of Sponsored Product Academy (& PPC Scope) to talk to us about PPC and the REAL reason for the end of Amazon incentivized reviews.
This is a guy that has been in ecommerce industry for years. He started out selling banking equipment on eBay for seven years before a friend pulled him into Amazon. He began launching his own private label products. This was about three years ago when Amazing Selling Machine launched.
It’s more than just growing your business on Amazon. You have to actively contact and cold call retailers in order to sell your products. It’s the next step in the process. You’ve sold on Amazon, you’ve diversified through other channels, and you’ve built up your brand. If you want to become a wholesaler, you have to take the time to build your brand. It’s not an overnight task. It takes a lot of time to build a brand.
It might not be a good idea to start large chains like Tesco or Wal-Mart. The better idea would be to find a smaller one in your area. Make contact with the owner or decision maker, and set up a presentation where you can make a pitch on your products. A fallback would be to create a PDF that goes over all the information. You can them email the document to them and follow up a few days later with a phone call.
You may not have the money to get a booth or a stand, but you can go as a guest. You can find local retails and get their contact information. Then you can send them an email and PDF where you talk about your company and make a pitch. One vital aspect, in order to become a wholesaler, is making these connections.
You can’t go to these retailers and sell some generic widget. It needs to be unique. It also helps to have several products in your catalog before you become a wholesaler. Bear in mind that even though it may take a year or two for your wholesale business to get going, the payoff happens when retailer orders tens of thousands of products at once.
The great thing about wholesale is the potential. It really is possible to to do great things with it. Whether you want to do it to make some extra income or make it into a large operation. Manuel has done this. He currently does about $300,000 on Amazon, and close to $1.5 million in wholesale. When you factor in his consulting and sourcing income, he is making around $2.5 million a year. The potential is there if you’re willing to put in the time and effort.
Get in touch with Manuel at importdojo.com and get a free eBook and newsletter.
There are many things that you have to take into consideration. You have to think of your lead time and everything that goes into it. Also consider receiving time at Amazon. It might take awhile for them to check it in. When planning a strategy for your FBA inventory, you should plan for the worst case scenario. There could be issues with it getting backed up at port or issues with your supplier.
A great thing about using software for forecasting, is that they can keep track of that, whether it’s Jeremy’s Forecastly or another piece of software. It tracks inbound inventory, current inventory, what you have in manufacturing, and true sales velocity.
You also need to consider spikes in sales. You may have consistent sales every day, but a couple times a month your sales spike. This is why you need to build in a safety stock. That gives you a cushion so that if you get a surge in sales, you have enough stock to cover it until your next shipment gets there.
Forecastly has many business that use its service. The software can then use this anonymous data to make predictions about Amazon as a whole. It takes ASIN level data over the past 30, 60, and 90 days to makes prediction about future sales numbers.
Their main focus is demand forecasting. It considers your recent sales including stock out periods. If you were out of stock, it can determine what you would have sold had the product been available. It also tracks the variability of demand which is something you can’t do in a spreadsheet.
The main thing you have to be conscious of when managing your FBA inventory is, what do you need to replenish, when do you need to replenish it, and how many units do you need to replenish. Forecastly tracks all that while monitoring your inventory and will recommend your orders.
Many sellers want to use a 60 day trend to determine their sales velocity which is a bad idea. If you selling in an upward trend, meaning your sales are growing, then your sales were much lower 60 days ago. This will make your average too low. Forecastly uses a 30 day trend to get the most up to date projections.
We, here at Amazing FBA, love a rule of thumb. Unfortunately, when it comes to FBA inventory, many sellers follow a rule of thumb that won’t help them, and could hurt them. It’s the idea that you need to have X amount of days worth of inventory. Whenever they place their order, they bring it back to this magic number.
For example, if you wanted to maintain 90 days of inventory and you order monthly with a 30 lead time. When it’s time to make an order, you have 60 days of inventory. Based on this, you would order 30 days of inventory.
You don’t need that much inventory. You wouldn’t need to order for another month because you have a 30 day lead time and you’re tying up cash in stock you don’t need. The rationale behind this method is security. The attempt to avoid stock outs by keeping a large amount of stock on hand.
Amazon will continue growing their own private label brands. So Amazon is now your competitor. International markets are growing. The European markets are booming. If you’re having success in the US, you’ll want to take those products to the UK and the rest of Europe. That isn’t as easy as it sounds. You have to come up with a separate replenishment strategy as well as deal with the tax regulations. There is an opportunity, though. Especially in Germany where 40% of the sellers are non-German, and very few are American. That means they are willing to buy from foreigners, but not many Americans are there yet.
As Amazon grows, the more warehouse space they will need. They are investing in new space, but they don’t want to overdo it. You will likely see seller-fulfilled-prime see some growth as a solution to this problem though will come with its own issues.
The inbound process is likely to change. It used to be that you would just slap on a UPS label. Then you had to also do the Amazon label. Now you have to do box contents. It’s going to get more and more complicated as Amazon continues handling more inventory.
If you want to receive a free tool for launching new products, head on over to Forecastly.
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.
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?
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.
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.
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.
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.
Brad’s very first day at Amazon, he was working next to a guy named Tor. When asked what he was working on, Tor responded that he was working on the GCID program. It stands for the Global Catalog Identification system. This means that people can have a brand, and put their own brand on Amazon and have these account numbers linked to their brand. Brad says that this was the start of the whole brand revolution that has happened over the past three years. People have discovered that private labeling is much better than competing by the box. Instead of people competing over the same item using the pricing algorithm, many have moved to private label and own the ASIN. Now they get all the sales.
This year, with all the fraud stuff going on, Amazon is figuring out brand protection and brand control, and those are big things coming from inside Amazon; trying to get more brand control and brand protection. Big brands, like Sony, was the originally intended beneficiary. These companies have a lot of products with fraudulent listings. Then they realized they could extend it for a lot of people.
Amazon has gotten more into brand gating, and brand content because of these sellers. This is likely going to be the beginning of a program that sellers love. Amazon will get that feedback and keep building more and more around your brand. This also builds consumer trust.
That’s a big issue. That’s a major differentiator between them and eBay. eBay feels more like the wild west whereas Amazon was more in control with actual brands. So consumer trust is one of, if not the, biggest thing on Bezos’ mind.
When things like that come out, all the big heads come together and institute new programs to solve whatever problem. Amazon is trying to solve the fraud issue with brand gate and brand control.
It’s not so much about where Amazon is heading, but rather the minds of the brand owners needs to be going in. You have a lot of these large brands that really understand brand management because they have been doing it for 50 or 100 years. Amazon has enabled these new sellers and they are powerful and effective at building their brand.
The idea, for the last couple years, is that these people have gotten a certain part of the brand going and now they have to determine where to go from here. Over the next couple years, you’ll see more sophistication in the brands. Who the brand is, who identifies with it, what’s the target audience.
It comes down to what do you mean by compete. If you think about what the Chinese are good at that those in the UK aren’t. They have manufacturing there with some very competitive costs. There are other manufacturers in the world that have better prices, but they’re harder to reach because you can’t look them up on Alibaba.
The bigger question is, if these manufacturers can cut out the middlemen and sell direct to consumer, where does that leave these middlemen that are trying to create a brand? That’s what the majority of these sellers are.
Many of these manufactures don’t have the acumen to be that middleman. They’re not very good at it. The middleman is very valuable. They are doing the work to build a brand and they’re doing the research on what’s going to be a big seller. There is a place for sellers. Remember, just because these manufacturers can make the products cheap, middlemen are still needed to figure out what products need to be marketed.
There is some worry about counterfeit. If a seller does all the research and comes up with a brand idea, and what if someone else takes the idea and sell their own. Brad spoke with some attorneys when he was in Hong Kong. They said that you can actually set rules and regulations of your products with the manufacturer. That way they can’t take your product and sell it to someone else. You can work within the Chinese system and shut down other manufacturers if they copy what you’re doing.
Just remember what they can do, what your can do, where the value lies, and how your brand can gain consumer trust. How often is a Chinese manufacturer gathering emails, and sending emails to their customers. That’s a very western idea and way of thinking.
You can email Brad at [email protected], or use the contact form on their website, productlabs.net. If you would like to use his video service, please go to amzproductvideo.com.
I wasn’t planning on recording any podcast for a few days but I just had an experience as an Amazon buyer that is very important for Amazon sellers to understand.
Psychology is very fascinating to me and it should be to you as well. There are different parts to the Amazon supply chain and psychology plays a major role in many of these. The aspects that I am most fluent in are negotiations and selling/marketing. What makes consumers buy and what makes consumers attracted to your projects?
Recently we talked about message to market match and that if someone is looking to buy a red dog bowl and you are specifically selling a red dog bowl then they are much more likely to buy your product. This is a very powerful concept. This can be the basis for an incredible business. The other thing we talked about was Know, Like, and Trust.
The other day, I was going to print some music from my Brother printer and I was getting an error telling me to change my toner. I didn’t want to deal with this but I knew I had to take care of it and not be lazy. Notice, I’m reacting to a problem. I’m not thinking this through like a business transaction. It’s a consumer purchase, I’m not a print shop, I’m just a musician that occasionally prints some stuff. I didn’t plan it, I didn’t know about it and I didn’t want to do it but it’s a necessity. I was motivated by urgency.
That’s often the case with consumers on Amazon with all types a products. From things as mundane as a printer cartridge or as urgent as forgetting to get a birthday gift for your spouse. If I had more time I would go down to the shop and buy the cartridge or item I needed. However, I just so busy, I need to buy it quickly on Amazon and get on with my day.
In my urgency and need to be done with this quickly, I almost missed the mental processes that took place. So, I get on Amazon, search for the printer cartridge I need and scroll through the listings. I got to about the fourth one down and immediately decided that’s the one I want, almost missing what was going on in my head.
The first listing was £9 and it looked like a compatible item, but I scrolled past it until the fourth or fifth which really caught my attention. It was such an intuitive process that I had to slow it down and ask myself, “why am I about to but this?” First off, I’m not in a price comparing mood. It was way cheaper than I was expecting. I was expecting £40 or £50 for an actual Brother cartridge and the listings were in the £9 to £15 range. My price resistance was way down because I was prepared to pay almost 5 times that amount and move on. Since it was so much cheaper, I wasn’t going to sit there and compare prices.
What set the listings apart, and what won it for me, was the one offered a two-pack. If I were to reverse engineer my buying thought process, the first thing that got me was that it was a two-pack and bundling brings out the value thinking. The price compared to the top listing. I could see that it was a value to get the two-pack over the one pack. The my frustration of running out. Since I didn’t want to be in this situation, I would want to buy the two-pack so I wouldn’t have to go through this. This is true for a lot of stuff. If you are selling anything renewable, bundling them brings value to the buyer because they don’t want to run out in a month or two.
The next thing thing that won me over was that it specifically said it was for a Brother printer. The listing said exactly what I wanting to see rather than almost what I wanted to see. That helped push me over the edge and buy it.
Even as an Amazon seller, I was almost taken unaware with the way selling works. If I didn’t spend my life working on Amazon and teaching others how to sell on Amazon, I would have completely missed how the psychology of this process works. It came down to three things.
The last thing I noticed that influenced my decision want the ratings. The top listing had 39 reviews and 4.5 stars. It was that little bit of imperfection. Whereas the one I bought had 16 reviews and a 5 star average. If I were being objective, I would calculate it. The one listing had many more reviews and likely had just as good overall satisfaction. Some buyers will do this, so it is a very important aspect to be aware of. However, in these urgent situations, consumers tend to be irrational and see 4.5 stars compared to 5.
Today I am bringing you another episode on marketing fundamentals: KLT. Know, Like, Trust. Once again, this isn’t a mindset for you, but that of your consumer which is really important to understand. Stepping back, the most important thing to understand is what marketing means. Marketing isn’t about creating a widget and figuring out how to sell a lot of it. It may look like that, but marketing is really understanding markets. Simply put, supply and demand.
If you start by understanding the markets, and find what people are looking for, then create a product that fulfills that need, that it truly smart marketing. To take a pre-existing product, and then try to sell it is much more primitive and difficult to do.
Last episode, we talked about message to market match. If you are the only person selling red dog bowls, even though a lot of people are selling dog bowls, you win. The caveat to that is credibility. I gave the example of trying to sell the world’s best dog food to cat owners and how you won’t find success with that.
Now, imagine you have that same dog food in a room full of dog owners, except that you are trying to give this amazing dog food away for free. That puts the questions in people’s minds. Why in the world would someone be willing to give away this great product for free? How can this dog food do everything it claims?
There is a simple marketing principle of KLT. Know. Like. Trust. These are the elements we need to have in place before people will buy from you. Amazon puts a spin on this that you should be aware of.
If people have never heard of you then it’s going to be harder to get people to buy from you. This is difficult to do when you only have a listing to do this with. If you are the only person selling a red dog bowl, it’s less important. However, you won’t likely remain the only one. If there is any sort of competition, you will need to work on your brand marketing off Amazon. You will need to have a website. You need a social media presence and you will want to get YouTube videos up.
The next step is getting people to like your product. It is possible to accomplish this entirely on Amazon. You must have great looking pictures and amazing packaging. No longer can you get away with putting dreadful products on Amazon and sell it. You really must make sure that you have a good quality product.
The last element is trust. If you’re going to sell dog food, and make some big claim that it’s going to make your dog live five years longer, then you need to back that up. Be careful on how to try to backup these claims. Amazon supplement sellers were leveraging the trust people had in Dr. Oz after he claimed vitamin c serum was the next big miracle drug. Soon these sellers started getting cease and desist letters from his lawyers. If you’re going to reference an expert, be sure you have their permission to do so. A long-term strategy might involve referencing celebrities and big names in your industry and paying them for permission to use them.
Let’s bring it back to the simplest stick: how to I make my listing more likely to convert? KLT. The know part is a long-term strategy. If you are around for a long time, keep showing up in Amazon results, dominate a niche, then you gradually become known to people and they start searching for your brand name. That is when you know that you’re starting to build a brand. When you’re sticking in people’s minds to the point they search you out specifically.
To get people to like you, you have to have a remarkable product. Since you, likely, aren’t well-known, your images and packaging have to look simply stunning.
Trust is much harder to build, but you are leveraging Amazon’s trust. Which isn’t the same as your consumers trusting you or your brand. If it’s on Amazon, and it has good reviews, you are leveraging the trust generated by other consumers in their reviews, and the general trust people have in the Amazon platform.
This principle of marketing is harder to implement on Amazon, but it is vital to understand it you are wanting to build a business and if you are planning to sell that business. The more of a brand value it has, the more differentiation it has from any rivals, the greater multiples you can get when you go to sell. That could be the difference between selling your business for 2x your profits versus 3x. This is when you get the payoff for all the hard work you put in now.
I want to emphasize that this is not an instant win situation. You will get quick wins with higher conversion, the real payout shows itself long-term with a strong independent business. There are plenty of tricks you can use to circumvent the system, but Amazon is quick to fix that and then you are left with nothing. What I am teaching you today is a tried and true marketing principle that has stood the test of time.
If you are serious about moving your business forward, there are still spaces left for the December meeting of the Amazing FBA mastermind in London. In January I will be expanding to include a high-level mastermind for those that are serious about creating a strong business.
Today I have a simple but powerful marketing principle: Triple M. This isn’t so much about your mindset, but rather about understanding the mindset of the consumer. By that I mean a shopper that has the potential to buy from you. I feel like people don’t truly understand this and therefore there is an opportunity for you on Amazon.
This is key in driving sales and conversions. Let’s unpack this in non-internet terms. This is a fundamental process that applies in any market in any medium whether it’s face-to-face or online or wherever.
If I was in a room full of cat-owners and they hated dogs, I could offer them the best dog food in the world. I could say, “it would make your dog leap for joy and it will make him/her the happiest and healthiest dog and add five years to their lives. It is normally £50 and I will sell it for £3.” How many responses would I get? Zero! Now, if I had a room full of dog owners, the response would be much different. Message to market match is crucial.
Amazon does its best to ensure there is good message to market match because it leads to happier consumers. Happier consumers will like and trust Amazon more and keep coming back.
Keep in mind that we are leveraging people’s trust in Amazon. When someone does a search on Amazon they are saying, “I am looking to buy xxxx.” Amazon then looks at all the listings it has available. Then compares keywords that are in the title and the bullet points. Then determines whether those keywords have helped that product sell, and delivers the best matches to the consumer.
If you are selling dog food, and the shopper puts in the word “cat food”, you have to hope that Amazon does not display your listing. If it does, then it is just a waste of everyone’s time because the cat owner isn’t looking for your product.
You need to be very clear about the market you’re going after. Instead of trying to find keywords that will help you sell a product, you should be thinking of the customer’s search terms, and finding a product that will fulfill that search.
Let’s use “red dog bowl” as an example. Here is a great way to find a niche market where demand is high but the obvious keywords, dog bowl, are hyper-competitive. It would take a lot of work and giveaways to gain any traction. Now, let’s say you search for red dog bowl and the search results show a black dog bowl, and a silver dog bowl, etc.
That means that Amazon couldn’t find an exact match for the terms had to display similar products that aren’t exactly what you’re looking for. That tells me that there is an opportunity. If I am a shopper that is looking, specifically, for a red dog bowl, and my search results come up with one red dog bowl and the rest are different colours, then I will likely click on that one. This will help your click-through rate and this is called dominating a niche market, which is internet marketing 101.
The other thing to think about is when people have gotten on your listing, they are pretty likely to buy. As long as you don’t actively put them off, they are likely to convert. So you will be getting better click-through rates as well as conversion rates. Therefore, if you’re buying Amazon ads then you will be getting a better return on your investment.
Let’s say you’re paying $1 per click for “red dog bowl” and 30% of people that click end up buying, then the cost per sale. Averaged out, will be $3. Whereas, if you were to pay $2 for the keyword “dog bowl” and people click on it, then see several other listings that are very similar and end up clicking on another product. That conversion rate will be much lower. Let’s say the conversion rate is closer to 10%, you are going to end up paying $20 per sale.
You can find a niche market. Also, if you can find a niche market where you can supply the exact thing that people are searching for and no one else is supplying it, you can secure niche dominance and will have very good click-through and conversion rates. This will lead to fantastic sales since there is less competition.
The next stage in message to market match is believably. If you are selling that miracle dog food to a room full of dog owners. This time you’re giving it away for free. That raises the question of whether or not they can trust you. That question, I will answer, in the next episode.
#85 The sea…and Natural Rhythms
It’s funny how interacting personally with basic natural forces reminds you of some Business basics for Amazon. Here are a couple of thoughts that have struck me while swimming in the sea off the South-East coast of England:
There is a natural rhythm to everything in business. Just like the ebb and flow of the tide, it’s almost like a force of nature. If we learn to recognise hear or see those rhythms, we can work with them not against them.
Examples of natural rhythms include:
If you can schedule things in these various levels of business in a way that works with the natural rhythms rather than against them, you’ll find you are riding the waves rather than fighting against the tide!
This episode is one of the **Summer Series** of bite-sized chunks of Amazon Strategic Goodness!