The numbers and information I share in these monthly updates are selective and for educational purposes.
Lots of action in September, so let’s not waste any time and get straight into it.
It also marks the end of Q3.
Here are the September highlights to start.
- Ended September with $209,820 in revenue.
- 20.8% increase vs last year
- Gross profit 40%
- Conversion rate of 21.4%
- Diversifying away from China
- Finally found a liquidation strategy that worked
There are lowlights as usual, but not as bad compared to earlier in the year.
- Newest product hit with 25% tariff
- Amazon UK losing money and Brexit looming
- Increase in fixed costs
- More SKUs = more work
September FBA results
We are well short of the $300k/mo goal and ended at a little under $210K. However, we are putting into place new strategies that should get us close, if not meet the goal by the end of December.
I explain the overall strategy in the “liquidation” section below. Same concept.
Revenue is up 20% compared to last year, but what I like more is how our gross profit margin is holding up strong.
Our net profit needs more work as we continue to cut out fat in operations and automate more of our workflow so that more profit drops to the bottom line.
Our best seller continues to chug along and in September, this product alone had a conversion rate of 50%.
This brings me to the next point.
Overall, our account as a whole achieved a 21.4% conversion rate.
If you have good private label products, then the conversion rate is around 15-30%.
Don’t quote me on that, but that’s the range I believe it should be in, and the range from talking with other sellers.
I do have lower converting products than the 20% cutoff that needs more attention and love.
If you are a reseller of branded products, then your conversion rate can easily be in the 30-70% range depending on the strength of the brand.
E.g. if you were authorized to sell Apple Airpods, then your conversion rate hovers close to 70%.
This is straight from Amazon’s brand analytics page. #2 in the search result for “airpods” gets a measly 5% conversion.
That’s why conversion is the name of the game and the area that we are re-prioritizing in Q4 and the plan for next year.
Focusing on marketing
For much of last year and early this year, we were slammed with creating new products. The bad thing is that none of them did as well as I hoped.
No big winners as you can see from my monthly updates. No big jumps.
Because we got scattered, our marketing flailed and fizzled out. Then the passion behind the products died as the ROI didn’t materialize.
Consider that we could have spent some of that energy and resource into better marketing, advertising existing products and re-launching existing products.
It would have been a whole different story.
I prefer to sell more of a single product than spread myself thin. Prefer going deep into smaller product lines vs selling thousands of SKU’s with only a couple of units moving per month.
Conversion optimization is a long topic and most of it is straight forward. It just takes a lot of time and effort to figure out, implement, test and verify.
- Review keywords and update titles as needed to rank better for stronger and bigger keywords
- Test prices
- Spice up images that trigger emotions
- Create Enhanced Brand Content
- Create videos for added trust
- Get reviews
These are basic stuff but there are so many steps before you get to do it. That’s why many sellers overlook analytics and conversion optimization.
- You can’t automate it
- It’s a lot of work
- Takes a long time to do properly
It’s exciting and sexy to source new products, as opposed to polishing an existing item over and over again.
That’s why we are looking to build a better internal system for marketing and improving our conversion optimization process. All products must be consistently marketed, optimized and reviewed.
Diversifying away from China
Our products were safe from the tariff hikes as it was outside the targeted categories. Come December, it changes for everyone, but we felt the first hit in September when our newest product was pummelled with a 25% classification.
I still believe that this particular product will do well because of how unique it is, and our patents will protect it for years to come. However, it isn’t easy adding another 25% on top of the COGS.
It leaves less room for error, advertising, operations, experimentation. Sales volume has to be big in order for us to come out on top.
Luckily for us, we’ve always diversified our manufacturing. In hindsight, my wife is the genius because she knew that every country is a leader for something.
She figured out early to find the best country for the product we wanted to make, rather than doing everything in China.
- Our main home category products are made in China
- Our cleaning products are made in USA
- Our skincare comes from Korea
- Our newest foray into oral care is manufactured within Europe
With the different manufacturers already set up, it’s a matter of dialing up the sales from the non-China suppliers. Easier said than done though.
Liquidation strategy that works
Ever bought a container load of stuff that didn’t sell?
The annoying part is that I have to see my mistake e.v.e.r.y.d.a.y and remind myself of the bonehead mistake.
Oh, can’t ignore that it takes up a huge amount of space making it costly to keep on hand.
I’ve tried to liquidate in many ways over the years.
- Give crazy deals to wholesalers (they couldn’t sell it too)
- Give it away for free as promotional items
- Combine it as part of a bundle
- Sell it on eBay
- Contact liquidators
So far, none of them worked out for one reason or another.
Liquidators literally offer you 2-4% of the retail price, which is the same as an insult. It’s more work to get it ready for them than the money they pay.
As a last resort, I tried putting it up on Facebook.
Instead of just posting randomly on Facebook and hoping somebody found the post, we created a campaign to offer huge discounts for people to buy straight off Amazon.
It looks something like this.
- Create a huge discount coupon from Amazon
- Set up a storefront or a landing page showing the discount along with the products
- Create the ad images
- Set up the automated Facebook messenger marketing sequence
- Create and publish the ad
The objective was to liquidate product so it didn’t matter if a code was shared in other Facebook groups.
But that’s exactly what happened and the entire FBA inventory we had was wiped out by the time I woke up.
There wasn’t much inventory at Amazon to begin with as it sold so slow. Hundreds were fulfilled by us via FBM and then we decided to shut it down temporarily until we could prepare better.
If we run more liquidation sales, you’ll see a jump in the reports, but at the same time, the gross profit won’t keep up.
However, knowing this method works means that I’ll finally be able to clear up space in the warehouse and get something back from the dead inventory.
The math is simple.
If my landed cost is $2, my goal of liquidation is to lose less than $2.
If I lose more than $2 using this method, it’s cheaper to throw or give away. The max I should be losing is 100% at $2. Not more.
So far, I was able to make $0.90 per item after all COGS and expenses. So the math tells me I lost $1.10 which is 10x better than what liquidators were offering.
But wait, there’s more.
The side-effect of the huge boost in sales velocity, even though we offered it at 75% off, was that organic ranking increased for some of the products.
Discounted giveaways seem to work. It doesn’t have to be 100% full-priced.
My team will be running more tests to verify this, but if this is true, I may end up having to reorder if I start to rank and sell organically.
It’s going to be exciting and will make product launches easier and faster.
Those were our highlights. Now the lowlights.
Amazon UK sales
This is the part that pains me as I want to melt away into the corner.
Oh well. Picking at scabs is fun sometimes.
Last month I went over our Amazon UK story.
The plot thickens now.
We applied the same liquidation strategy via Facebook for the UK product. Because the listing has one 1-star review, even the liquidation doesn’t work.
No one wants to get it for 75% off. The English and Europeans are much pickier than US shoppers I’ve found.
Then Facebook users started to suddenly mass “unsubscribe” to the messenger bot which triggered Facebook to unpublish our brand page which shut down the ads.
Amazon UK is becoming the bane of my existence.
Now throw in the looming Brexit with thousands of dead inventory.
There is a lot of uncertainty in the air and the worst-case scenario is that everything out of UK will be considered an export. This means higher costs for everyone.
It’s a lose-lose at this point and I can’t wait to get out. At least I can say I’ve tried.
Increase in fixed cost
One of the big deals for us in September was finally moving into a much bigger space.
Our new office is 3x the size of our previous place.
- expensive lease
- more insurance required for everything
- more utilities
- big “corporate” property management companies to deal with
- more expenses that add up
Fixed costs alone related to property, plants and equipment (PP&E) has increased 2x.
Seeing how revenue didn’t increase 2x, it’s motivation to focus hard on generating more sales to offset the added increase.
This is the first time in 7 years that we’ve had everything under one roof so I’ll be able to make some of that back via improved efficiency. Soft and hidden costs should always be factored into your ROI too.
New SKU’s for the end of the year
Don’t mix up SKU’s with an actual product.
Above I said we have stopped the development of new products. Instead, we are making new bundles and combinations of existing products to target new keywords.
Many of our products can easily be applied to different markets. By repackaging it and making a tiny change, we can create new SKU’s from the same product. By doing this along with various new bundles, we can market horizontally and vertically.
That’s still a lot of work to get up and running.
Preparing for Q4
With the added tariffs coming up, it’s time to put in orders to try and get as much in before the December cutoff. China factories are getting backed up, so if you haven’t planned, be sure to stay on top of your numbers.
From our Amazon Business Spreadsheet package, an inventory monitoring spreadsheet will help you keep an eye on velocity and the seasonal forecast calculator helps to know what to expect with upcoming months.
I have some PPC campaigns that will be re-activated soon, made specifically to target holiday shopping intent. It does very well during Q4.
We’ll also be rotating campaigns to target the different occasions that occur from now until Valentine’s day next year.
Overall, with our team and systems put into place, it’s mainly housekeeping from now until next year and to focus on maximizing sales and keeping inventory in stock.
The worst way to lose money is by going out of stock during the best shopping season of the year.
Wholesale and our online store
Thanks in large part to our growing wholesale business our margins are fattening up.
This side continues to grow and I’m working to come up with ways to help our wholesalers sell more. Hopefully, we can grow this side of the business to offset the Amazon side of things.
The beautiful thing with wholesale orders is that orders are large, business is sticky, it’s efficient and much easier to manage.
Finding the right distributors and partners to expand to other territories is the difficult part to set up.
Free FBA spreadsheets for all
If you have messy sheets and need something refined to help you run your numbers, get the free Amazon spreadsheets.
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.
Hope you enjoyed the monthly update and got some tips that you can take with you.