how selling on amazon will ruin your business
TRANSCRIPT
How selling on AMAZON will
RUINBUSINESSYOUR
Amazon is the
in the world of e-commerce.
If you sell a physical product, you’ve no doubt had customers ask if your
brand is on Amazon. And if not,
The reality is, Amazon can be extremely lucrative and considerably widen
your market reach. But only if you know exactly what you’re getting into.
why not?
900 pound orange gorilla
Here’s how selling on Amazon will
ruin your business.
1|YOUR PROFIT MARGIN =
LESS THAN 50%
Amazon will ruin your business if...
FIXED, VARIABLE & OVERHEAD FEES
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VARIABLE FEES● A specified % of the item’s
selling price - between 10% and 30%
● A Variable closing fee based on item weight
FIXED FEES● Fixed $ cost, regardless of
item price & weight● Includes order handling, pick
& pack, and weight handling
Fee structure is different for Merchant-Fulfilled (non-FBA) orders
Unit-based feesFees directly related to the sale of an individual product
Overhead feesFees spread out over the cost of all your products
● Warehouse storage fees● Monthly membership fee● Customer returns● Ad campaigns● Inbound shipping fees
PROFIT MATTERS
Amazon’s fees are relatively high, especially if you use their FBA program
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All told, it can be complicated to know your exact fee structure for each item sold. But here’s a good rule of thumb…
Amazon will take 25% - 30% of your item’s retail price in fees. With this in mind, you’ll want
to have at least a 50% profit margin on your products (ideally 100% or more) to ensure you don’t lose your shirt.
2 |YOUR PRODUCT IS
LESS THAN $10 RRP
Amazon will ruin your business if...
EXAMPLEA <1lb product in a non-media category.
Fee breakdown: 15% of item sale price (variable referral fee) + $1 (Order handling fee) + $1.04 (pick & pack fee) + $0.5 (weight handling for 1lb) + $0.5 (variable closing fee)
THE $10 RULE (OF THUMB)
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LOWER PRICED ITEMS HAVE HIGHER FEES● The nature of Amazon’s fixed fee structure
means that lower-priced items have proportionately higher fees.
● Any product priced under $10 will generally be paying more than 40% in direct selling fees. The higher the price of your item, the less it will pay proportionately in fees (i.e. as a % of the item’s price).
● Note: this relates to Amazon’s FBA (Fulfilled By Amazon) program, where customer orders are shipped directly to the customer from Amazon’s warehouse and are “Prime” eligible.
Example taken at a specific point in time for a FBA-fulfilled item. Consult the current Amazon pricing tables to determine the fee structure in your product category.
HOW PRICE INFLUENCES THE % OF FEES PAID
Selling items priced at less than $10 can quickly erode your margins
8Example taken at a specific point in time for a FBA-fulfilled item. Consult the current Amazon pricing tables to determine the fee structure in your product category.
$7.00
$4.09(58% of retail price)
$15.00
$5.29 (35% of retail price)
$100.00
$18.04(18% of retail price)
if priced at...
FBA fees will be...
3 |NOT ENOUGH
DEMAND
Amazon will ruin your business if...
IS THERE ENOUGH DEMAND FOR YOUR PRODUCT?
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GET A QUICK & DIRTY SALES ESTIMATEOne way to gauge the demand for a product: look at the number of recent product reviews for a similar product.
We know that less than 10% of Amazon customers actually leave product reviews, so you can get a rough estimate of the monthly sales by multiplying the number of product reviews left in the last 30 days by 10.
This product had 11 reviews left in the past 30 days, so is potentially selling around 110 units per month.
Here’s another way to get a more accurate view of your competitor’s volume & revenue.
If you’re investing time, money and effort in launching products on Amazon, you’ll want to ensure there is existing demand first
4 |YOU CAN’T HANDLE
CRUNCHY CASHFLOW
Amazon will ruin your business if...
CONSIDER BOTH SHORT-TERM AND LONG-TERM CASH FLOW
1. Prepare for crunch-time. Amazon’s payment cycles run in 2-week increments, so you may also need to consider the effect of having your cash and inventory locked up for a longer period than other platforms.
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2. Run a thought experiment. One of the benefits of selling on Amazon is access to hundreds of thousands of customers who are ready to BUY. So imagine the ultimate scenario: you met or exceeded the unit volume of your competitors on Amazon.
Could you meet demand with your current operations, or would you have to change your processes/ suppliers/ partners to manage things?
Be prepared for cash flow which is tied up for several weeks or months; and also the best possible scenario, which might stretch your current resources
5 |THERE’S NO BUDGET FOR
PROMOTIONS
Amazon will ruin your business if...
THE SALES/REVIEWS PARADOX
To get sales, you need reviews
To get reviews, you need sales
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AND… Less than 10% of Amazon customers leave product reviews
● When getting started, this is a negatively-reinforcing cycle of no sales and no reviews
● Buyers trust products & brands with reviews, and are more likely to buy those products with more positive reviews than competing products
● Increased trust & sales drives better conversion on your listing and a better position in the Amazon search results
PRODUCT REVIEW SOLUTIONS
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PAID ADSPRODUCT EXCHANGE FOR REVIEW
● Boosts your BSR by increasing the ‘velocity’ of sales in a short period
● Running Amazon Product Listing Ads drives more traffic to your listing then you’d be able to achieve in organic search results
● Works best when your product listing is already optimized and primed to convert visitors
● Boosts your BSR by increasing the ‘velocity’ of sales in a short period
● Kick-start sales by giving away some your product for free or at a significant discount in exchange for reviews
● Having lots of genuine product reviews to build trust
● Follow Amazon’s Terms of Service closely to avoid penalties and uncompliant reviews “disappearing”
REVIEWS FROM FRIENDS & FAMILY
● It’s tempting to write reviews yourself or ask family & friends to do this for multiple products
● This is a big no-no, and Amazon is almost certainly going to remove the reviews at best, and close your seller account at worst.
The best results occur when there is a strategic promotional strategy in place
AN ADDITIONAL CAUTION AROUND REVIEWS
“
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EXCERPT FROM AMZ TERMS OF SERVICE (AUGUST 28) Reviews are important to the Amazon Marketplace, providing a forum for feedback about product and service details and reviewers' experiences with products and services — positive or negative. You may not write reviews for products or services that you have a financial interest in, including reviews for products or services that you or your competitors sell. Additionally, you may not provide compensation for a review other than a free copy of the product. If you offer a free product, it must be clear that you are soliciting an unbiased review. The free product must be provided in advance. No refunds are permitted after the review is written. You may not intentionally manipulate your products' rankings, including by offering an excessive number of free or discounted products, in exchange for a review. Review solicitations that ask for only positive reviews or that offer compensation are prohibited. You may not ask buyers to remove negative reviews. ”
● Don’t attempt to circumvent Amazon’s terms of service around generating customer reviews
● Keep current with policies and ensure any vendors you work with do the same
● Play by the rules and avoid suspensions & penalties
6 |YOU CAN’T HANDLE
THE TIMEINVESTMENT
Amazon will ruin your business if...
Like any new initiative, there is a learning curve
UP-FRONT TIME INVESTMENT TO LEARN A NEW PLATFORM
Compared with other platforms your own e-commerce store or dealing with retail buyers, Amazon has a lot more rules, requirements and processes designed to keep their shoppers happy.
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Beyond the effort spent learning the rules and processes, up-front effort is needed to:● Create your Seller Account● Upload product listings● Create and manage a paid Ad campaign● Source & manage legitimate customers to
review your product ● Figure out what makes a high-converting
product listing and make adjustments
ONGOING TIME COMMITMENT
DAILY MUST-DOS● Check your vitals. Your Seller Rating is
impacted by your responsiveness to buyer questions, returns, shipping delays, and other metrics. Never wait more than 24 hours between checking your key account metrics
● Check inventory to ensure you’re not going to run out
● Respond to reviews & feedback. Especially in the case of negative feedback and reviews, its imperative to respond quickly and do damage control. Other potential customers will judge your company & product based on the speed and thoughtfulness of your response
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MONTHLY MUST-DOS● Keep current on policies and news. Amazon is
known for a “shoot first, ask questions later” approach with policy violations. Policies change over time, so follow updates and announcements to avoid potential restrictions and suspensions
● Check competitor activity. Unauthorized resellers may ‘squat’ on your product listing and erode your good reputation; new competition may appear and bring new challenges
● Review your account for unfulfillable inventory, lost inventory, and file cases for discrepancies
● Review your sales numbers and look for trends & opportunities
Without proactive oversight, you’re open to penalties from Amazon … or at least missed opportunities
While selling on Amazon has the potential to ruin your business,
it also has the potential to super-charge it and take it to the next level.
Be one of the success stories by considering all the potential pitfalls and
being prepared for the ride.
in conclusion...
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|BONUS
ROUND
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WANT TO KNOW EXACTLY WHAT THE OPPORTUNITY IS FOR YOUR BUSINESS?
Get a free, customized REPORT about your industry
not yet on Amazon
Click here for your free competitor & market opportunity report
if you’re...
1. A detailed spreadsheet showing the estimated monthly units sold & revenue of your competitors’ products & similar products
2. Concise market analysis, showing you the opportunities and challenges in your niche
LEARN MORE
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| WHAT WE DO
1. Launch your products or optimize existing listings
2. Boost your product ranking in Amazon search = significantly more sales
3. Increase conversion by generating genuine customer reviews & compelling copy
4. Deal with Amazon’s fussy rules & systems so you don’t have to
5. Daily account management & customer service
Website: bobsledmarketing.com | Phone: 347-356-2260 | Email: [email protected]