"Build" Guide - how to Build your Private Label Business
Today on the show, I have one of the first contacts I made when starting this show, David Aggiss. I had him on, all the way back in November of 2015. Since then, he has given up the day job and is his own full-time boss. He has a few business, one of which being an Amazon business. We’re going to dive in and find out David’s strategy for selling on Amazon.com.
David started learning about Amazon in April/May of 2015 and began receiving some training. In about four months, he started selling his own product. He took off quite well in Q4. At the time, incentivised reviews were still allowed so he made that a large part of his strategy. His sales exceeded his expectations going from 10 units a day to 30 on average. He launched his second product in Q4 last year and focused on his listing since incentivised reviews were no longer available.
There are a lot of techniques for finding products. David decided to simply look through Amazon. This is a great technique for finding good products. Look for lower prices and low competition items when first starting out. If you find a good product and the listing isn’t optimised, then there is definitely an opportunity for you to sweep in and take over. You can use Google Trends, Merchant Words to help you find what popular and what people are looking for.
David didn’t use any tools to find products, like Jungle Scout etc. He didn’t know what his products would be so he wouldn’t know what to search. Once he picked the products, he verified through Jungle Scout that there was a demand. Now he has about 5 products he’s working through launching.
He search Amazon to find his products. He narrowed his search to products between $15 and $50 and looked for products that interested him. If you are interested in the product then it’s easier to relate and figure out what those buyers are looking for. Then you can tailor your listing to those shoppers.
Getting reviews has become much more difficult since Amazon banned incentivised reviews. With this new world, you have to pay more attention to reviews since you can no longer give products away in exchange for a review. One thing to pay attention to when getting started with a new product is the number a reviews your competition has. If they have thousands of reviews, it’s going to be much harder to compete because it is more difficult to reach a competitive level.
Make sure you competitors only have a hundred or so reviews so you can better compete. Then you can use other services to help get legitimate reviews. You can also try to get traffic coming in from off Amazon.Ads on Facebook, Google, and Bing are great places to start.
There are also ways you can use Amazon to boost your listing. Spending heavy on PPC at the beginning is a good way to drive traffic when selling on Amazon.com. Once your listing gets going, then you can cut back to where it’s profitable. One thing David mentioned was participating in Lightning Deals. These deals on put on by Amazon that offers their shoppers very good discounts for a very limited amount of time. There is a link underneath your Advertising tab on the main screen of Seller Central. It’s not all the time, but Amazon will offer you a Lightning Deal when it’s relevant. This is a great way to drive a lot of sellers to you listing and gives a nice boost to new products.
Amazon sets the parameters. They will tell you the time slot, the minimum number of units, and the sale price which is based on your sales history. David, for example, recently got a time slot for 1am to 7am. Not the best time as many people aren’t looking at Amazon so early in the morning. Despite that, he had an additional 40 sales from the deal.
This 2nd way of increasing sales is so neglected, you can get ahead simply by implementing anything in this area!
The simple idea is to increase the AOV=Average Order Value.
It can be more difficult to implement on Amazon than just getting new customers but is potentially much more profitable.
If someone usually buys a $10 widget at 50% margin, you get $5 profit per sale. If you usually sell say 10 orders of 1 $10 widget a day, your profit per month=$5X10X30=$1500
If you can increase the AOV by say just $1, you would end up with $11X50%X10X30 profit=$1650. $150 extra ie 10% extra.
Multiply such effects across several products and it can add to your bottom line quickly.
The simplest way to increase your AOV is simply to increase price! But you have to weigh up against conversion rate changes etc. to see whether that increases or decreases your price.
Another way is to bundle together products physically eg a 3-pack, 4-pack, 6-pack etc etc. Easy and very very easy to sell on Amazon.
Another way that is even easier is to offer a discount via a promotion code. Eg BOGOF (Buy One, Get One Free) or buy 3, get 10% etc etc.
If you set things up wrongly, you’ll make less profit, not more, so know your numbers going into this! Done right, this is a simple way to edge up your profit margin.
A harder way but possible on Amazon, is to do cross-sells eg “this is also bought with X” (spatula with slotted spoon for example). It’s possible to influence this again using promo codes – you can offer a 25% discount off a slotted spoon, for example, when you buy a silicone spatula etc.
Another way that is hard to do on Amazon but possible, is to upsell eg from a $5 spatula to a $25 frying pan. Same kinds of methods.
Increasingly, we are looking at strategies that will work best when you have control – in other words, you start to build your own email lists (and other assets like social media subscribers/followers etc.).
There is one more basic way to increase sales that is used least of all by Amazon sellers but could be the most powerful of all…read on…to the next episode…
To find out more about the Amazing FBA London Mastermind mentioned in the episode, click here
Q.1 Stefan CONVERSION RATES
Lets talk conversion rates – what sort of % are you all getting through ads and through organic? I am in patio, lawn, garden and getting a terrible 2-3%. I think it might be my main image.
I have tried the price. Its really weird – I tried price points between $10 to $25 and am not seeing a big difference in conversion %. Obviously at $10 I am getting more conversions, but I’m also getting more sessions. The conversion % is still 2-3%…. 🙁
Broadly: below 10% is not good in most categories; 5% or under is emergency level.
I would test price, which sounds like you have, and test main images.
Yes it will affect CTR but it will also affect conversion as well.
Q. 2 Alexandros BREXIT
Hello guys, does anyone here have an idea on how the Brexit is going to affect FBA businesses (apart from making importing more expensive) ?
As you say, main effect is making importing more expensive if you’re converting out of pounds and buying from the Chinese in USD (or probably RMB too).
If you have USD, keep them! They are more valuable than they were to UK sellers and probably will stay so for a while.
If you haven’t already done so, set up a USD account in the UK (eg Metrobank, my bank; HSBC) and set up a receiving account to receive your USD from amazon.com with Currencies Direct.
The Euro is also more valuable at the moment if you have been selling in Europe, but seems to be a more troubled currency than the USD. You can set up a similar setup (I haven’t done this yet as not yet selling in Europe).
Q.3 David PROFIT/AMAZON ADS
PROFIT HUNGRY: Just looking for some advice on whether or not I should keep PPC running on one of my new products…really trying to maximize the bottom line, not just increase revenue. This maybe be only answered by A/B split testing +/- Ads.
Below is a quick snapshot. Thanks!
1. Launched with no reviews this month and ranking on page 1 for just about any keyword I can think of now with only 2 organic reviews.
2. 1/2 my sales are coming from PPC.
3. Avg. CPC is ~ $0.50.
4. A lot of keywords I am in position 1. For keywords where I am raking 4-5 organically, PPC pushes me to the top stop on all Ad keywords.
5. Eventhough, the ACOS is acceptable on the main keywords, this Ad spend is driving down my profit margin.
OVERALL, IS THE AD SPEND WORTH IT? WILL I GET ROUGHLY THE SAME # SALES WITHOUT IT?
Broadly: is your ad spend worth it?- depends on a. your conversion rate b. your profit margin. Your ACoS of 11-14 % roughly looks good as long as you have a healthy profit margin.
If you spend 50 cents a click average (As you say) and you have for example a conversion ratio of say 20% (1 in 5), it will cost you $2.50 ad costs per sale made though Advertising;
Then if your organic sales are 50% of your overall sales (as you say) then your average cost of advertising across ALL your sales would be $1.25 a unit. If you have a $5 profit margin, fantastic; if it’s $1, you’re making a loss.
So the missing pieces are: conversion %age and profit margin.
In answer to “Will I get roughly the same sales without advertising” – simple answer: no! You said yourself – only 50% of your sales are organic. You will nearly always get more sales with advertising; the P & L question is whether you make overall more profit with it than without. To answer that, you need to crunch the numbers.
Q.4 Ben PROMO CODE WORRIES
I’d just like to clarify some details regarding discount codes.
I understand that I can limit these to one use per customer.
But does that limit it to one ITEM per customer?
So, a customer might be able to use the code once, but in that one purchase wipe out loads of my inventory?
Thanks everyone 🙂
Good news: as long as you use only a $ amount off, you are perfectly safe.
customer has your coupon code for $19 off.
Buys 1 unit of your $20 product, pays $1.
customer has your coupon code for $19 off.
Buys 3 units of your $20 product, pays $41.
NEVER use %age off for a giveaway. Here’s why:
customer has your coupon code for 95% off.
Buys 1 unit of your $20 product, pays $1.
Looks okay, right?
customer has your coupon code for 95% off.
Buys 3 units of your $20 product, pays JUST $3
Buys 300 units of your $20 product, pays just $15!
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Q. 1 Mounir
I had a great news today: Top seller on my sub category after less than a month 🙂
In order to keep delivering good product, I now need to do inspection before products leave China. I already paid 30% of my new order which will be ready next week and I’m looking for inspection companies to insure the quality.
– What is the best practice: Should I pay for the 70% left before sending the product to inspection or after ?
– Are inspection companies fast enough to process the order or it will take them sometime ? days, weeks ..?
– According to your experience: Could a 250 items – 80g each take more than an inspection workday ? the product is very simple and has very few moving parts.
– Any experience with asiainspection, fbasourcingchina, topwininspection.. ?
Thanks in advance !
Normally an inspection company would visit your factory so you wouldn’t normally “send” your z products anywhere.
So normal process
1. Products inspected after completion and before packing for shipping (Pre shipment inspection) according to your inspection and or testing criteria.
2. Report sent to you by inspection company.
3. You either accept or reject the batch.
4. Then if you accept at that point you transfer the remaining 70% to supplier.
If you are struggling with details like this, chances are you need more than just a Facebook Group – you need a peer group and some input from others who have hit your problem and solved it.
Best thing is a mastermind – there are many options, including the one I run ( more details here) – pick one and go for it, just be sure that you will get real input into your business though.
If mine is full (we have two places left at time of writing), find one to support you, but don’t suffer in isolation!
Quality control revolves around the concept of 3 levels of defects:
When you define tests or inspection points, you need to define whether any defects related are critical, major or minor.
Inspection Level – AQL – Acceptable Quality Limit – see here for explanation
AQL basically defines the overall quality level of a batch of a product.i.e. the %age of critical, major and minor. There are 3 levels, AQL I (low severity) AQL II (normal severity), AQL III (high severity i.e. highest quality threshold).
AQL II is considered standard for most consumer products. However, I would consider AQL III, since Amazon customers are very fussy buyers and have a weapon in product reviews to instantly damage your reputation.
I would use in order of importance
You probably will have between about 10-20 points for a straightforward product.
I think 250 items if inspected at highest level would be less than one man day
If it is a simple product, I would use someone like www.trigo.com, which I haven’t used personally but some of our guests on the podcast have.
EBAY: Anybody use Ebay as a pricing model? For example, take the average selling prices people are using to re-sell your product on Ebay and test this as your selling price on Amazon. If I do this, I could likely dramatically increase my net profit. Just having re-sellers on Ebay tells me my price may be too low. Any thoughts?
My immediate thoughts: Just because someone has listed your product on eBay, doesn’t mean they have made any sales. And if they make sales, we don’t know if the sales volume is significant (and therefore overall profit per week/month etc.)
HOWEVER…the only way to really know is to TEST!
Use splitly.com (which I’ve used) or cashcowpro.com (which I intend to check out) or similar split testing software for Amazon (these are both only valid in the USA at the time of writing) – you can probably test the price specifically with the criterion of which maximises your profit. Certain splitly can do this. Then you will have some objective data to give you a much more reliable answer.
If you do this, please let us all know, I’d be fascinated by the result!
PRICE TESTING: Hi Guys! I have been doing a lot of price testing. Does anybody know if the price changes in the shopping cart? For example, if somebody added my product to their shopping cart as price X, but did not check out. Then, I change to price Y. Does the product, in the shopping cart, change to price Y or does it remain at the original price X as it was when it was added to the cart? Things that make you go Hmm!!!
Michael Veazey David, interesting question. I admit I don’t know the answer.
However I wouldn’t recommend changing price that swiftly or often! I’ve been guilty in the past. Problem is that you can’t make objective statistically significant measurements of the effects of price changes.
Michael Veazey I’ve recently been testing out www.amzsplit.com
Www.Cashcowpro.com also looks promising although I’ve not used it yet. It also does profit calculations to some degree. Hello profit may be better for the latter.
I am tracking down the creators of all of these things for the podcast…
So… I went on Jungle Scout to find the niche product
Started with Home & Kitchen -> Kitchen and Dining -> Kitchen utensils -> Cooking utensils:
A lot of Silicone spatulas came up as you would expect but what JS ran was a completely different story.
It would seem that there still is market for those wishing to sell Silicone Spatula…
Or am I reading the data wrong
According to Greg Mercer’s guidance:
1st 5 listing have under 50/100 reviews (Further down a few names dominate)
And the revenue for is good for all the top sellers and very high volume of sales
Wade I might be wrong, but I’ve always been sorting the results by rank, and then those are my top 10 ones to look at and assess. Please someone tell me if I am wrong!
Michael Veazey Well, this is the first phase or first filter of any sensible product picking system.
First of all quite a few results are for steel tongs so those need to be eliminated as irrelevant.
Then you need to be aware of giveaways.
Look at the top ranked seller.
With just 23 reviews, I don’t believe they are doing 3000 organic sales a month in this market.
Next and most important, price. At $6.49, you have to wonder what the profit is.
let’s look at ad costs which are frightening with a very competitive keyword.
If we guesstimate PPC costs per click on such a competitive keyword at say $2 per click, and if we are optimistic and say 33% conversion, that gives a cost of $6 as cost per ad driven sale.
Even if say 1/2 of sales are organic that would give an overall average ad cost of $3 per sale.
That leaves $3.49.
I don’t know what the fulfilment fees are but let’s say $1. Referal fee is $0.97 so basically $1.
So that leaves $1.53 to:
1. buy your unit, 2. inspection, 3. freight, 4. duty and customs costs 5. Receiving warehouse in USA 6. Amazon inbound shipping.
Sales can be achieved if you drop the price, spend a lot on giveaways and spend aggressively on PPC.
That’s a good set of launch tactics.
The issue is whether after that, there is profit to be made.
Hello Amazing FBAers!
How do you pay your freight forwarder to ship your goods to Amazon USA? Do you pay 100% directly before shipping?
I have been trying to get freight forwarders to use Escrow or to pay them 30%/70% through Alibaba’s Trade Assurance but they won’t agree to it….
Is there a way how I can be safe? Because if you pay them 100% of the sum at the beginning, then you are at their mercy and they will not put a lot of effort because they have already been paid
Btw Michael, keep up the good job, one of the best podcasts out there!
Peter Zapf I’ve usually seen the bill/invoice issued right when goods are about to get delivered (this would be US freight forwarders shipping into the US). Not up front before goods are even picked up.
But this is also different than the 30/70 for suppliers. For suppliers, the 70% is the hammer to make sure you get the quality you need, which is why you should do a pre-shipment inspection. I’ve never seen anything like 30/70 for freight forwarders.
Michael Veazey Hi Sergei,
I assume your freight forwarders are in China, is that right?
Are they are very small firm or are they an established large one? Is there a particular reason you feel worried about fraud with them?
Michael Veazey So Sergei, are these FF based in China? And where are you shipping to? US? U.K.? Europe?
I’ve not heard of anyone doing a 30/70 split with a FF. If you’re really worried then I’d suggest
1. Get one in the USA If that is where you are importing to. Or UK or wherever you are based.
2. Find one who will talk through the process on the phone and generally help you avoid newbie mistakes.
Hi Guys – I’m new to this group! I am in the process of arranging shipping from china to FBAI by air express (arranged by the supplier), however after reading a few posts could air freight be an option? I will exceed the $2500 customs threshold so will have to engage a customs broker anyway so will it make more sense/cost effective to go air freight? This is my first shipment so a bit unsure about the whole thing but trying to work my way through it! Additionally when you say door to door (in this case does that mean to FBAI instead of having to engage a FF to move from port to FBAI). Thanks 🙂
Yes air freight could well be an option. If it’s a small consignment it probably won’t save you much over air express but The thing to do is to get some quotes then you can work on hard data.
Air Courier is nearly always the simplest option. Ask for DDP =Delivered Duty Paid. If you get DAP=Delivered At Place (sometimes called DDU Delivered Duty Unpaid which is not technically an INcoterm) you can in theory just have the courier invoice you for the Duty but it is wise to use a customs broker at least first time out.
Ask your supplier what they can get from their air express guys. Then get quotes from several freight forwarders and compare.