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Robyn Johnson will be talking about the essentials and best practices for sourcing models.
Background
Robyn was not at all capitalist. She was a youth pastor – but “the benefits are out of this world” when working for the church. They had to test their son for diseases – her 1st thought was: “How do I keep my kid alive and not lose my house?”
Robyn did the Dave Ramsey plan. She went from Craigslist to eBay to Amazon, built $100 into a $1 Million business and became a sourcing models specialist.
4 mainstream sourcing models for Resellers on Amazon
- Used Books,
- RA or OA,
- Wholesale
- Brand Management
Used Books
Quite a few people do multi-millions on this.
The margins are great but it’s dirty physical work.
If you have $100, $50K or $1M, you can start with used books; stay away from textbooks!
They are a great way to learn the platform because you eliminate a lot of the learning curve.
RA/Retail Arbitrage
If you can’t do used books, this is the next easiest.
You just go to a location – you need to be a treasure hunter.
Either in person (RA)
Or OA – Online Arbitrage.
There can be IP and scalability issues.
There are a couple of people doing this at scale but it’s challenging.
Scaling OA past $250K mark will mean you have to create some new infrastructure.
Wholesale ($1,000-$3,000 capital needed)
This is often how people move into the next stage.
It’s very delayed gratification- a lot of energy goes in and you’re not able to really check.
You have to put a lot of leads in, and you have a lot of back and forth with brand owners.
It takes 60-90 days to get approved for a brand.
It will then take 3-6 weeks to get your first inventory into Amazon.
You need to be analytical, happy with spreadsheets. You need someone steady and consistent.
There’s no big roulette risk like PL.
Robyn gets 60%+ margins on all her wholesale. But she goes through stacks of data! For example, she had a 7-foot high stack of brochures from suppliers from her last trade show visit.
Private Label $5K-20K
Robyn has family from China – but doesn’t PL! This is high risk – so Robyn doesn’t want the risk. You have risks around IP or liability. But above all, you need to bring some value to the marketplace.
Wholesale is blackjack, where PL is roulette. So you have to have to think about your risk tolerance.
Brand management
Usually, you’d need to start with value-added wholesale and get experience and case studies before transitioning over to this.
How do you match the entrepreneur and the sourcing models?
- Cashflow
- Experience in job
- What’s working so far
- Physical abilities
If someone is very analytical, they might be good at wholesale. Whereas for Brand management – you’ll have technical skills and people skills.
Personality and Amazon sourcing models
If someone’s very spontaneous and is willing to work very hard, they do well in RA and OA.
For RA to scale up, you’ll need to talk to managers.
OA people are probably more introverted and very analytical and data-centered.
Wholesale works for people who push well through numbers. It helps to be extroverted at trade shows.
Brand management is better for those who have done $250-500K on Amazon and have at least some case studies.
Private Label
For private label, you need super high-risk tolerance.
Someone who was a high earner and wants to short-cut the time to get started.
If wholesale is blackjack, PL is roulette
That first $5K can’t be your last $5K – be responsible for families and children and parents
So you need
Person type
-
- Good project management
- Higher risk
- Learn to absorb and learn new things – learn more all at once
Focus on one thing at a time!
Don’t get shiny object syndrome!
For at least 2-3 months, you need to focus on one model at a time.
Firstly, look at what’s working in your business, meet all your KPIs and set it up to be automated.
How else to identify what is the right model for you
Firstly look at the budget.
- If you have under $100, start with books. You can always move on to another strategic sourcing process.
- If you have $200-1000, you can start with OA or RA. You might buy a week’s supply at a time.
- With wholesale, you’re buying 4-6 weeks.
- PL is generally 90-120 days’ worth of inventory, so that needs a lot more capital.
Simple advice to be successful in sourcing models
For someone starting with no Amazon work experience
Even if have $50K to start with
Start with books, non-fiction no expensive textbooks
Most people don’t enjoy them – so get a quick win
Area/physical limitations/
If you’re in a rural area and have some physical limitations (and small capital)- OA is good
More urban, more energy – RA is good
Wholesale – provides a lot of scalabilities
- Need more capital
- People get stuck on persistence
- Someone is okay with delayed gratification
Case study of someone from RA leveraged
- Couple 50+
- $1M/year, profitable
- Wanted to be able to go on holiday etc. but struggled
- Hire some shoppers but do some themselves
Case study 2 – RA
Got profitable
- Outsourced
- Now Wholesale
- Now brand management
RA P & L
P & L with RA 20-25% net margin
There is a point with RA where you have to redo your strategy
Diversification
If you continue to grow and not diversify, you have more risk.
You have people relying on you for employment.
Using wholesale as a way to expand your PL business
Why add another sourcing model to PL?
Let’s say you have your PL widget to launch.
Kim Kardashian is posting about it!
Now instead of restocking scissors 100 at a time, it’s now a $70K restock for 10,000 units!
When things are rapidly growing, you may not have enough cash.
And since you’re buying 3-4 months’ stock, I may have quite a gap.
At a high level of growth and a high monthly salary, you’ll need a large margin for PL to work.
Recommended: 13-week rolling cashflow
If this flops, what would I do?
If it wins, what would I do? Wins can be just as lethal to your business!
How to add wholesale to PL
Go to trade shows.
If you do the reverse sourcing thing, you’ll need up at a lot of PL products.
Also, you end up fewer niche things [so more competitive markets].
If you want high margins, you need things in boutique shops but not in big box stores.
You’ll never get a discount on that. You’ll have people buying products on RA.
Demand curve
If you get it too early, there isn’t enough demand.
If you get it at the top, you don’t get enough margin.
The best area to focus on is when things are growing.
You can articulate “you’ll get really attractive, you’ll end up with unauthorized sellers”
That extends out
Like pillow pets – distribution via brick and mortar
How do you find products in this place?
Go to trade shows
Get info and contact them before going to trade shows.
At or at about MRSP eg Manufacturer says “it’s a $20 product” but Amazon says “$14 product”
- That tells where it’s at in supply/demand curve
- In many categories, the retail and wholesale prices are really close
Within 15% of the category-wide net
If new to the market, look at existing search volume for the brand.
Then identify profitable ones
Then find if someone can be bought in a way that is profitable e
Buy smaller orders
You don’t know how it will sell through until you try
So sometimes place an order for 2-3 cases
Then gather data, filter data, then go for bigger orders
Joe the brand owner only wants to sell you 2 SKUs
- Order of 3 cases each for D, E, F products
- 1st week, sold 10 of each, so can predict this should continue
- So next order needs to be for 40 each, round up to nearest case eg 42
- Then maybe optimize the listing etc.
Wholesale start
- Start with straight wholesale
- Once you have the experience, search for products with bad rank and bad listings
- Then you can move things really fast
- everyone else considers it trash by the time you’ve got some bad metrics on a product so that’s your opportunity
What Robyn offers
They have an academy – they have a wholesale course
$50 a month – a lot cheaper than other ones out there, and It includes the ability to contact Robyn
40 modules
- Finding leads
- Contacting leads
- How to restock
If you’re an RA, wholesale or PL, you need to learn optimization
marketplaceblueprint.com/facebook
What Robyn doesn’t offer
– Help with import and export.
- How to set up a bank account in the USA
If you’re buying a course
You should be spending 70-90% of your time on sourcing, the remainder on courses!
People out of a 20-hour workweek spend 10 hours taking courses – don’t do this!
One model is not better than the other either, but just pick one for a period and stick to it.
To contact Robyn
robyn@bestfromthenest.com
Contact on LinkedIn
About Robyn Johnson
Robyn Johnson runs Marketplace Blueprint – for brand owners and agency owners and Bestfromthenest.com for resellers, Private Label helps people sell more products online.
Watch my full interview with Robyn Johnson
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