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231 Amazon for Beginners – The CORRECT Business Model for Beginners

I have a very special episode today if you're an Amazon beginner. If you’re not yet on Amazon or playing with the business model, this episode is for you. Read More
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162 Amazon Law Q & A with CJ Rosenbaum

Today we have CJ Rosenbaum with us to do answer some listen submitted answers. I recently sent out a newsletter requesting the listeners to submit their Amazon questions. Be sure to subscribe to the newsletter so you don't miss the next opportunity. Read More

149 How to Become a Wholesaler with Manuel Becvar Part 3 of 3

How to Become a Wholesaler

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.

Approach Local Retailers

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.

Go to Exhibitions

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.

Build Your Catalog

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.

Immense Potential

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.

134 Buying Wholesale for Amazon with Will Tjernlund – Part 3 of 3

Buying wholesale has been talked about a lot by more ambitious Amazon sellers. But is it still a viable business model, to approach a wholesaler and try to sell on Seller Central?

Buying wholesale from a  brand owner is still viable for sure; someone which owns one brand. As far as a wholesaler, that distributes several brands, it depends. They have to make their profit too, and there might not be enough margin to go around. They are also likely to be selling to other Amazon sellers which would cut into your sales.

If you go to Back Country, they would carry the Black Diamond brand, as well as many others. Will wouldn’t buy from them but rather buy directly from Black Diamond.

What do you do to get a product launched these days?

One of the big reasons Will got into Vendor Central is that he hates launching products. It’s much easier to start with a product that already has 10,000 reviews. His philosophy is not to do something that’s hard just because it’s hard. So many people are worried about building a brand and launching products from scratch. It’s a lot easy to just make money first. Then, when you want a challenge, build your brand.

One recent product launch Will and his team did, was they got ping pong accessories from China. Got them in, slapped labels on them, no real packaging to them. They sent them into Amazon. There was four different types that they bundled in two and four packs. They’ve sold about 357 units in a month in a half and they just got their first review.

They spent $1000 on PPC  to make $4000 so their A-cost is about 25% which is about break-even but gets them some traffic. It’s selling about seven units a day at $6 or $7 and he did nothing more than throw it up on Amazon. It’s all because he picked the right niche with the right keywords. He knew he could compete only on price.

If you are trying to go after a product that has 1500 reviews, then you will need 1500 reviews just to compete. What’s your strategy for getting 1500 reviews? If you do 1500 giveaways, that’s not sustainable. If someone wants to sell dog leashes because they love dogs, what can you do with that? You can’t put your love of dogs in the title. You can’t work with that. However, if you want to sell leashes because you see a gap in the market of seeing-eye dog leashes. They’re all 20ft long which makes no sense if the person is blind. It needs to be 4ft long. Great! You found a gap in the market. You found a specific keyword. There is a way to differentiate yourself and add value. Also, you didn’t need to do some crazy manufacturing. Just make a shorter leash.

Thinking off-Amazon, do you see any future with Wal-Mart’s third party seller platform?

No. No one really has that app on their phone. A lot of people will go out of their way to avoid shopping at Wal-Mart. Just Google “people of Wal-Mart”. There is a negative stigma. Much like eBay. Will they take a portion of the market? Yeah, but they won’t be a major competitor. People like the simple Amazon experience. Plus, if you’re going to buy something from walmart.com, why not just drive down the road and get it right now? The only real benefit Will sees from walmart.com is that if your product does well on their website, they might try to sell it in the stores and then you’ll be able to sell it in all the big-box stores.

Speaking of eBay, do you think their market share will shrink in the next couple years?

Will was recently talking with a hedge-fund manager that owns a part of eBay who said that eBay looks good compared to other retailers. Who are the competitors? Macy’s who’s closing thousands of stores. Sears who is closing thousands of stores. Of course their going to look good in comparison when the competition is about to go bankrupt. They may grow 3.5% year after year, but the S&P average was 18%. 3% isn’t that cool. The numbers of people that get online in America grows at 3%. So eBay is growing at the rate of the internet and slower than GDP.

If you’re wanting to get started in Vendor Express quickly, what would you look for in a product?

You will want to find a product in a category that Amazon isn’t sourcing and selling already. Then they will want to get their hands on it. Plus, if you have sales history on top of that, Amazon will love it. If you find that Amazon isn’t selling in climbing ropes, but they are selling 9 of the 10 dog leashes, then they’re not too excited to get anymore dog leases. Buying wholesale is a good way to start this. 

FBA selling VS. Vendor Central?

It really depends on a lot of factors. It depends on how much cash flow you have, what kind of distributor you have, what the competition is like. Let’s say you have one Chinese supplier that you buy iPhone cases from. They’re the only ones that are waterproof and you buy 10,000 at a time and you have $100,000 in the bank. From they, maybe you build momentum in Seller Central, then move it to Vendor Central so they see the momentum. In Seller Central, you might be ranked in the thousands for iPhone cases, but in Vendor Central you might be rank 1 for waterproof cases.

There is a company in Hong Kong that does Vendor Central so they don’t have to pay taxes in each state whenever they sell in Seller Central. There is all sorts of different scenarios that will affect the decision. Amazon pays for inbound shipping when they order from you in Vendor Central. So if you have a large product that is expensive to ship, you can save a lot of money by using Vendor Central.

What are your predictions for 2017 and beyond?

So 2017, third-party sales will still grow from 2016. However, at the same time, Amazon will condense. If you look at their earnings report, the number of items offered for sale has gone down; the number of items fulfilled have gone up. Amazon is clearing up a lot of junk sellers. You have people like Will going through and condensing their listings. Once they get rid of the riff-raff, it’ll be much more simple, and you can tell who the private labelers are that care, and who’s selling junk. Eventually, the junk ones will phase out. The sales of third-party sellers will go up, but the amount of third-party sellers and third-party products may fall over time. So, by the time 2018 rolls around, everyone will try to find a way to differentiate themselves because the third-party selling will become a thing of the past.

Where to find Will:
goatconsulting.com
Email him at [email protected] for a Vendor Central VS Seller Central profit calculator.
Twitter: @wtjern
Facebook: facebook.com/tjernlund

133 Will Tjernlund on Selling to Vendor Central – Part 2 of 3

What’s the process when you find an opportunity to work with a brand?

It’s just a matter of contacting the brand when you find an ugly looking Amazon listing. It takes 60 seconds to do a Google search to find their contact information and send off an offer. It doesn’t make sense when people say that they’ve been eyeballing a company for two months and can’t decide whether or not to pull the trigger. Just contact them and move on. If there is something that you need to do that is causing you anxiety, just pull the trigger and do it.

What are Vendor Central and Vendor Express? And how does that tie into the selling to Amazon conversation?

Vendor Express is for everyone, anyone can sign up. Vendor Central is invite only. They are basically the same. Instead of sending inventory to Amazon and waiting for it to sell, Amazon will place purchase orders with you. As soon as they place the order and you ship it to them, it’s already sold. For some companies, especially bigger companies, it works better with their cash flow. This way their inventory only leaves their warehouse after they’ve been paid rather than sending off $40,000 worth of inventory and waiting three months to get the money.

Plus, once you’re in Vendor Central, it says your product is shipped and sold by Amazon. You get invited to Amazon marketing services that allows you to put videos in your listing. It allows you to make your listing an A+ listing where you get images in your description.

How does the cash flow work, exactly?

Some companies have negotiated it down to 30 days, but for the most part Amazon pays you every 60 days. Some of these old-school U.S. vendors still have 60 and 90 day payment terms. So if you can get one of these vendors, you can grow on vendor central forever. You can buy $100,000 worth of product from the distributor, sell it to Amazon for $130,000, then you don’t have to pay the vendor until you get paid from Amazon.

This works well for bigger, established companies that can have unpaid accounts. But if you’re small, not getting paid for 60 days can kill you.

I have heard a lot of people say they are wary of Vendor Express because it has a lot of problems. What are some of the problems areas you have found?

Unlike Seller Central, you can’t edit your images and description whenever you want to. If it’s, something like 90 days old, you have to email them and ask them for permission to edit the listing. It’s annoying that you have to contact them to do stuff, but the plus side is that when you contact them, they are willing to do a lot more. If you’re on Vendor Central, then you’re seen as more of an established company rather than some random seller on Seller Central. They trust you more and that you’re trying to do what’s best for the company rather than trying to find loopholes.

They’ll combine duplicate listings, it’s easier to take down people that are selling bogus stuff. There was one company that had a cheap product for people to retail arbitrage. It had about 30 listings for the same product from all these different sellers. Will went to Amazon, had them combine all of them into one listing. It’s now the #1 listing in its category. It had 3,000+ reviews from all the different listings. Then they went and gated that listing, kicked off all the other sellers, and the company he’s working for is making a lot of money from this product, whereas before, they weren’t making anything.

You can make parent-child a lot easier on Vendor Central, if you have a high ranking product already. Or under one SKU, you can bundle together multiple ASINs. If you’re selling a fishing rod, and the parent-child, comes with different fishing lines. Those are two different ASINs, and they’ll actually combine those in Vendor Central. Whereas on Seller Central, you would be sitting there trying to do giveaways. Or I can take it seriously, wipe out the competition, add all the bestsellers to the number one listing, and really take this thing to the next level.

How do you deal with the cash flow issues? How do you handle it when Amazon orders just one or two units?

The one or two unit orders are just going to happen. Especially, if you have a small catalog with only one or two SKUs. If you have 1000 SKUs, then one or two units of each product isn’t that big of a deal. The main issue is price control because you don’t know what Amazon is going to sell at. With a lot of these brands, they want to know they their products are selling at the right price because they don’t want to screw over their brick-and-mortar stores. Whereas Amazon will sell it at whatever price they want, even below cost.

Another big issue Will had with a client, was that there was a hot seller in that category, and then they have Amazon basics, and they had the third best one, and Amazon quit placing purchase orders. They had someone in Vendor Central, and they had their AmazonBasics, they didn’t need another. Now that one listing, they also had on Seller Central. If Amazon doesn’t order it, then it’s not in stock. If it’s not in stock, then it can’t be prime. Then they can’t run PPC. Since it didn’t sell, Amazon wouldn’t order it. It was a vicious circle. To fix it, they had to kick-start it on Seller Central, generate some sales to remind Amazon that it actually does sell.

What’s the best way to get on Vendor Express?

The best thing is to sign up immediately. Amazon wants a lot of SKUs, they don’t really care about the price. So if you have a catalog of SKUs, like 100, then Amazon will get a lot more excited than if you had just one.

I would imagine have 50 suppliers would be a nightmare, so how do you get to the point of having a lot of SKUs to offer?

Minimum number of suppliers. Good luck having 50 SKUs, from 50 different suppliers. However, if you have one supplier that has 50 SKUs, then they add 50 more. Will’s brother added a supplier with 10,000 SKUs. He put then on Vendor Central and Amazon order one of each. He sold 10,000 units that day.

132 Will Tjernlund on Selling to Amazon Directly – Part 1 of 3

Today, we have one of the giants in Amazon, Will Tjernlund. He’s a man that is always ahead of the curve and is always willing to help the rest of us catch up. This isn’t Will’s first time on the show, you can find his last interview in episode 45, and episode 46.

The big trend coming to 2017 will be selling to Amazon directly using Vendor Express, Vendor Seller, AMS, and all these other buzzwords we have to learn now. 

First off, why is it a good idea to sell to Amazon directly?

Will says that it’s inevitable. Eventually, Amazon does want to source and sell themselves. If you can get ahead of the curve and get on their side early, it will only help you in the future. It’s one of those things that you know you’re going to do it three years from now, and you’re going to ramp up three years from now, why not go ahead and do it today. Will’s of the mindset that if you’re going to have to do it in three years, then do it now and be the expert in three years when everyone has to do it.

What’s behind the statement that it’s inevitable?

Because it’s their game plan. If you read The Everything Store, Jeff Bezos’ biography, he talks about it being the game plan to make it easier for third-party sellers to sell on their marketplace, take care of the annoying aspects like fulfillment, customer service, storage, and marketing.

Then, all they need is us third party sellers, essentially, glorified sourcing agents, to find the best SKUs and see what sells the best. Then they start from the top and decide if this product is easy enough to manufacture that they just want to come out with their own Amazon Basics version of it, or if they want to work with the biggest brands in that category and source their products directly.

So, if you’re not selling directly to Amazon, eventually they are just going to try to squeeze you out.

Third-party sales are becoming a bigger part of Amazon, something like 50% of sales were from third-party sellers this past Christmas season, but from the different advantages Vendor Seller gives you and the heads up if gives you, and also that it works better with Amazon’s business model, it’s for sure, the way of the future.

What you’re saying is that you want to be one of these big brands that Amazon goes to for sourcing, because it’s easier to source from you than from the Chinese, is that correct?

Right. Just think of a general catalogue, think of kitchen knives. Like a block with 10 knives in it for $29.99. Amazon can come out with that knife block for $29.99 and then there will be, like German manufacturers with brand names.

The customer has to decide if they want to get those cheap Amazon knives, do they want to get the expensive German knives, or something in between. That’s were you, as a third-party seller, has the advantage. You can offer that middle product that better than Amazon’s version, but not as expensive as the German brand. You make sure it’s good quality and all your packaging looks good, and Amazon buys directly from you because you’re filling a gap in the market.

Are you trying to find those mid-points in the market between Amazon basics and the expensive brands? Is that the general strategy?

It’s different for every category. For that category, that may be the best route taken. Also, think of it this way, when you jump on Vendor Express and get upgraded to Vendor Central in six months and you’re selling directly to Amazon, then everyone else who is selling those mid-level knives will get blown out of the water because yours are going to be shipped and sold by Amazon.

Two or three years down the line you’re going to have a lot more reviews than everyone because you’re shipped and sold by Amazon. They do different sales and they do different marketing things to push your products. Then, when these other mid-level sellers try to jump on Vendor Central, Amazon doesn’t want to work with them because you’ve got them covered.

How do you find these gaps in the market that works with this business model?

Will’s been taking a roundabout way by looking for big brand names that have terrible accounts and I go and consult with those companies. He will offer to run their Amazon accounts. He will then optimize their listings, fix violations, and get everything back in stock. From their, he’s been using these big brand companies as his private label arm. He will suggest new products. If they’re selling a bunch of kitchen accessories, he will suggest another one, which is smart for them since they own their own factories. They then will fly to China to get samples, and then buy every product on the first page of Amazon as comparison.

Right now, Will is looking for niches of these companies that he is already consulting for, let them handle the research and development, and he looks for products that are within their wheelhouse, but not being manufactured yet.

Let’s say they sell 40 different types of ladles, he will suggest a slotted spoon. He’ll look up that product on Jungle Scout, and find their review-to-revenue ratio. Check the revenue to review ratio: Let’s say slotted spoons have 10,000 reviews and $100,000 revenue a month, so $100 revenue to review ratio is good. He takes that information to the company and shows them that there isn’t much competition, it has proven sales, and it’s in the category they are already selling in.

Will uses the review-to-revenue ratio as a way to quickly gauge the lifecycle of a product and it’s maturity. Determine if it’s easy to ship. If every listing on the first page is being sold by Amazon, then you’re probably too late. From there you look at every facet and see if will work, and if you can’t find anything wrong with it, it’s worth a shot.

Do you have any other criteria you use to judge a product?

Will likes to find products that you have to explain what it is. It’s that niched down. 

Would that not lead to negative reviews, if you have to explain it to the customers?

It wouldn’t be unusual within the niche. For example, a little tool that is only used for cutting fly fishing rod lines. Yeah, it’s a weird product. It’s a small piece of metal with a blade. It’s costs $.50 to make and the guy is buying it for $10. Not much by the way of sales, but there’s no competition and it’s $8 profit.

It also has to have a very specific keyword that the customer searches for. A woman recently came up to Will talking about her product that was a wireless bluetooth headset that you can sleep in. When asked how a customer would search for that, she replied with “bluetooth sleeping headphones that are wireless.” The problem with that is it’s too specific, no one will search for that, and you can’t rank with “bluetooth headphones” or with “wireless headphones” as as that’s too general/generic. Since she didn’t have a keyword in mind, she could even do a revenue-to-review ratio because she did know where to start.

First, we’re searching for keyword niches and then finding products to fit, is that right?

Exactly. Will recently started climbing and there is a tool called a grigri. Now, no ones knows what a grigri is, but if you’re in mountain climbing, everyone know what it is. Plus, how easy is it to rank for this very specific word, grigri? No one else is going for it. Anyone who searches for it, knows what it is and wants to buy, and if someone doesn’t know what it is, they wouldn’t need it anyway. Also, if no one know to search for it, then there isn’t any private labelers nipping at my ankles, looking it up on Jungle Scout.

That’s a really good strategy since there’s no competition, and I would imagine conversion rates are really high since the only people searching for it know exactly what they want.

Yep, and it works really well with US brands. Will contacts these climbing brands that have been in the niche for years, and they’re selling these harnesses for $140 when they sell them wholesale for $40 because they have this established brand. So, no one knows who Black Diamond Climbing is, but every mountain climber knows who they are. So when someone searches for them on Amazon, they are astounded that they can get the entire cataloge because no one else carries as much. From Will’s perspective, it’s amazing. There is high demand, he doesn’t have to do any research and development, and he can still make huge margins, and he only has to place an order once a month with a U.S. based distributor.

How do you begin to develop the relationships with these wholesalers and distributors? And what kind of capital do you need to get started?

Many of these distributors have very small minimum-order quantities. One particular company said their average yearly order volume from one of their distributors is $2500.

Will finds them by searching through Amazon. As he’s looking for climbing stuff, he notices that these major brands have three of the five bullet points filled out, their out of stock, or they have one of the five images. All sorts of these red flags exist and they tell you that these Amazon accounts are being managed poorly and they don’t understand the Amazon ecosystem.

It’s easy enough to contact these companies, become a distributor, and send them a message. Tell them who you are and that you were looking to buy one of their products on Amazon and saw that it was a mess. Let them know about the issues you found and that you can help them get their account in order. Ask them to make you the only distributor on Amazon, you won’t screw over the brick-and-mortar store by selling their product too low, you’ll pay up front, and keep their product in stock. All the things you can promise them that their distributors can’t promise them. These other sellers are only using them and not adding any value whereas you can actually add value to their company. You can be this A+ consultant, but you’re paying them instead of them paying you.

Another selling point is that it’s in their best interest to work exclusively with you. You can make sure to keep their listing looking good and their prices at the right level. They wouldn’t let big-box stores carry their products if they didn’t know who was selling it, at what price, or what the packaging looked like.

It really seems like these companies don’t understand e-commerce, or at least Amazon.

Imagine you’re a big mountain climbing company that specializes in making the best carabiner. You have been in business since 1975, you have 10 people working in manufacturing, 1 person in accounting, 1 person in HR, and 5 people in sales. Each salesperson has their region in the U.S. and they call up local shops asking if they want to place an order. Their whole job is to get as many accounts under their belt as possible. Then, all of these distributors start selling out the backdoor, and now they have 40 people selling on Amazon. This puts the company in a tough situation. They told these stores that they can only sell in the store. They can’t cut them off because they have been doing business for 40 years and they want as many accounts as possible. However, the Amazon market is hurting their brand.

These old-school companies will gladly sell to you because they still have the mentality of “sell to everyone,” but some will question the sale if you are selling it on Amazon because of this issue.

What do you say to those companies that are hesitant?

A lot of these companies don’t know the first thing about Amazon. They will contact seller support and demand they stop sellers from selling their products.

How do you deal with that? My understanding is that you can sell any product on Amazon.

There are some gated brands like Nike or Louis Vuitton, and there is no way you can sell their stuff on Amazon. You can go onto Amazon and gate your brand. If you explain that customers are getting hurt by counterfeits, then they will likely approve it. Make sure to put in the customer first mentality and use the word counterfeit and you’ll have a better chance.

Would you do that yourself, or would you persuade the brand to do it?

It depends on the company. When Will calls up these companies, he just feels them out on how they want to go about it. They might just want him to be a distributor, that’s fine. Or they might want him to be a distributor only if he can keep the price high, that’s a different conversation. Or they might want him to run their Amazon account, but it’s all going to be under their brand. Each time a company will ask for something different, and usually he will say yes because they are simple things. You just have to feel the company out.

If they’re making $20 million in sales on Amazon, then they’re making enough money to go and hire a whole team. Until they get to that point, it’s better to hire a someone like Will to handle it. It’s not worth it to take six months to hire and train a team when they don’t even know what to train them on. 

Basically, you’re offering to be their Amazon front-end allowing them to focus on what they best.

Exactly. Amazon is like this big scary monster in retail. Instead of them trying to deal with it, Will is like the band-aid on the wound. They are sick of dealing with it, it’s not working with their business model. Just hand over that part of the business to an expert that will take care of everything. All they have to do is deposit a check.