The numbers and information I share in these monthly updates are selective and for educational purposes as there are people I know personally who read this. Also to keep trade secrets and sensitive information under wraps.
Slow summer sales.
August Amazon revenue closed at $216K compared to $200K in July and I’m seeing an uptick in sales already.
I’ll share what went right and wrong in August and a look at our Q4 preparations as the calendar races towards the end of the year.
Without further ado~
August FBA results
For all the talks of the economy slowing and an upcoming recession, we aren’t seeing the effects yet. People continue to shop and our sales are coming in at a steady pace.
- Compared to last month, sales are up 8%.
- Compared to last year, sales are up 17%.
17% is low compared to our previous growth of 75-100% range the past 3 years.
But I like it.
It’s good for our current objective as we try to scale down the number of products to focus on higher conversion, improving margins, streamlining operations and diversifying to other channels.
This is similar to what happened for us from 2014 to 2018. We built the foundation to support the massive growth that followed. From all the projects and ideas we are trying to execute, I believe it’s laying the foundation for another strong platform of big growth.
PPC spend over the past couple months has hovered at 11%. My benchmark is to keep it to 10%. Every percentage point plays a big role to the bottom line when it comes to Amazon selling.
I’ve had questions whether I use an automated PPC software that you see everywhere lately.
This is something I’ve tried, tested, pondered and decided against.
I see the benefit and the beauty of automating PPC, but there’s a limit to how much a software understands the logic and objective of a seller and is able to keep up.
If you have products that don’t need refinement, and no adjustments other than bid tweaks, automated PPC can work great. But if you are applying advanced techniques and strategies, it can worsen your results.
I’ve used Sellics in the past and found that it was making bids and adjustments that were wrong. Had to go in and manually fix those again. Defeated the purpose of what I was trying to do.
The numbers and methods I use to analyze my numbers are also different to what software provides, so I end up having to do it manually again.
Gorilla ROI does not support PPC data, but with the PRO Amazon business templates
- I copy over my PPC report
- combine it with the Gorilla Sales function for any period I want
- get and easy to understand, actionable table of results.
We try to run a lean operation. Anything that can be automated, I want to automate.
During the early years, my biggest failure and hurdle was getting over my “save cost” mentality.
I grew up with frugal parents and my nature is to save where I can. I would go 20 minutes out of my way just to save $1. Whether it be for milk or coffee. Even though I could buy it directly next door to where I lived.
In areas of business, I preferred to spend 1 hour a day to manually fulfill orders. Spending $60 to automate, simplify and streamline operations was a ghastly idea. Not when I could spend 1 hour doing it myself.
Here’s some math to show what I mean.
- 1 hour a day = 5 hours a week (assuming M-F) = 20 hours a month
- 1 hour = $15/hr = $300 value of labor per month (see how little I valued my time?)
Cost of multi-channel fulfillment for my size at the time = $60/mo.
I was so proud of “saving” $300, but in reality, I was losing 20 hours a month + $240 + opportunity cost of new growth.
That’s the secret way of losing money in business. Wasting your time on tasks that don’t add value.
This summer, we’ve created more systems and processes in addition to the software and tools I wrote about before.
- Replaced laser printers with thermal printers. One thermal printer for each purpose. No need to waste time switching labels or rolls.
- Rearranged layouts to improve picking, packing and shipping.
- Integrating Zapier into as many processes as possible. All emails, tickets, orders, notifications, messages, invoices that come in to our system get filtered through Zapier first and then sent to the correct place. No longer dependent on a person to forward information to the correct person.
- Automated accounts receivables follow ups. Turns out Quicken has implemented this feature which I didn’t know about. Payment and overdue reminders are sent at appropriate intervals to customers. No more chasing people on the phone until it hits the 30/60 day overdue threshold.
These are just some of the areas we’ve streamlined and I’m looking to do more.
Amazon UK sales
We started selling on Amazon UK in Q1 of this year, and it looks like we’ll have to pull out.
Whether international Amazon marketplaces work for you will depend on the product you are selling. I realize for international markets, having higher priced items is key. Despite having grown the account to 5 figures a month, it’s eating up money and racking up losses so far.
The majority of our products are supposed to be priced between £10 – £15 but had to mark them down to try and get it moving.
Then consider, the pricing includes VAT, so after factoring the following, margins are super tight at best and negative throughout.
- VAT and compliance
- Product cost
- Amazon fees
The problems with our UK account is that a single 1 star review has nuked the one of our flagship products. It’s the same product that sells fast in the US, and we sent in large pallets assuming it would do just as good.
That one start review has annihilated the listing.
1,500 units of dead inventory. Ouch.
Even slashing prices does not work as people only look at that single review.
Unless you have mega fat margins to begin with, if your product depends on volume it’s a tough nut to crack.
There are 4 ways that work to fatten margins on existing products.
- decrease cost
- increase prices
- improve conversions
We’ve decreased our packaging cost, working on optimizing carton sizing and the way products are put inside the carton.
This all adds up and brings in large savings.
For products affected by tariffs, we have to pass it to the customer. As Amazon is a convenience platform, there has been no push back so far.
Our peak conversion rate was in 2017 where it was in the low 30% range.
Competition has lowered it to the low 20% range.
The higher the conversion rate, the faster the cash flow, the better the prices from suppliers. All leads to fatter margins.
As we slow down development of new products, we’ll be shifting towards creating different bundle variations with our best selling products.
As our products are based on families, it’s easy for us to mix and match to create an assortment of bundles. The margins are bigger and I sell more of the same product. Win, win.
Sales vs profit
A mini rant. Feel free to skip.
There’s so much bad advice on the internet. Especially on the topic of sales vs profit.
If you are looking for a quick buck because you heard FBA is the next gold rush, then you deserve to lose your money.
If you are serious about selling as a real business, define what your goals are and don’t expect to take a salary for a while. There are no excess profit as your grow.
Newbies and small sellers who stay small, focus on how much they can take out of the business before they have even scaled.
In the beginning, I was so focused on saving pennies that I missed opportunities.
The gorilla size sellers do something that’s unheard of for small sellers: reinvest, scale and build equity to reap the rewards later rather than now.
They plow money back into the business to:
- try different products
- implement new strategies
- go to networking events
- spend on self improvement
- break through plateaus
- upgrade equipment, services, training
- acquire new leads and penetrate different channels
Next time you read a comment on the internet asking “but what about your profits?” ignore them because they have already lost the forest for the tree.
I’m currently running on low margins, but if taking out as much money from my business was the goal, I could literally fire everyone, stop selling at trade shows, cut out excess fat and start coasting on cruise control to take out 30% in cash every month.
Don’t fall for the same small minded thinking that plagues most small sellers and beginners.
Preparing for Q4
I talked about improving conversions above but the added benefit is the increase in sales velocity. Amazon gives you better visibility in the results and pushes your product.
We’ve seen our best selling product increase in sales by 20% over the past month and to anticipate the Q4 sales, keeping track of inventory is pivotal.
Last year, we went out of stock for certain sku’s and missed a lot of sales. These are all hidden costs.
It may not seem like a big deal, but if I spent an extra $200 on improving our systems, we would have been able to capture anywhere from $2,000-$4,000 in additional sales for this single item.
With our new improved inventory spreadsheet and ability to load FBA data into spreadsheets with Gorilla ROI, everyone on the team knows the inventory level that needs to be maintained.
This has made ordering and keeping stock levels much easier. No sudden surprises. We can track of multiple data points to make sure we are ready for sudden spikes.
If you have issues with not knowing your data and numbers, Gorilla ROI gives you full access to your data via spreadsheets. So easy and convenient.
Wholesale and our Online Store
I’m not including our direct or wholesale sales in these numbers. Amazon makes up the majority percentage.
Wholesale continues to increase YoY for us. One of the benefits of having a unique product line that we can sell at trade shows. Our best accounts continue to increase their volume helping us to diversify away from Amazon.
We want to expand to east coast cities, which means travel and shows that we don’t have the time for at this time.
Free FBA spreadsheets for all
If you’re looking for free FBA spreadsheetsto help you run your numbers, you can get the templates for free.
You can download it immediately without having to sign up for anything.
Just copy straight to your account.
If you want to get updated data straight into your own Google sheets, you can use Gorilla ROI. Makes work so much easier when you don’t have to manually update data or log into accounts constantly and wasting time.