September FBA monthly update at $210K

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.

Re-prioritizing conversion

Overall, our account as a whole achieved a 21.4% conversion rate.

Conversion rate for September
Conversion rate for September

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.

  1. You can’t automate it
  2. It’s a lot of work
  3. 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.

Never settle.

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.

Bye-bye profit.

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?

I have.

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.

  1. Create a huge discount coupon from Amazon
  2. Set up a storefront or a landing page showing the discount along with the products
  3. Create the ad images
  4. Set up the automated Facebook messenger marketing sequence
  5. 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.

This means:

  • 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.

inventory sheet screen
Inventory tracking and monitoring stats

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.

Seasonal sales and inventory forecast calculator
Seasonal sales and inventory forecast calculator

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.

pro spreadsheets fba pricing

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.

August FBA monthly update at $216K

2019 August amazon fba revenue

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.


It’s over.

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.

august 2019 PPC spend
July and August 2019 PPC spend

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.

Streamlining operations

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
  • Freight
  • Product cost
  • Amazon fees
  • Marketing
  • Returns

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.

Fattening margins

There are 4 ways that work to fatten margins on existing products.

  1. decrease cost
  2. increase prices
  3. improve conversions
  4. bundles

Decrease Cost

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.

Increase Prices

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.

Improve Conversions

Our peak conversion rate was in 2017 where it was in the low 30% range.

Competition has lowered it to the low 20% range.

amazon conversion rate
Our Amazon conversion rate

The higher the conversion rate, the faster the cash flow, the better the prices from suppliers. All leads to fatter margins.

Bundles

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
  • hire
  • scale
  • 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

download amazon spreadsheet

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.

July FBA monthly update at $200K

2019 july amazon fba revenue

The numbers and information I share in these monthly updates are selective and for educational purposes as there are people I know personally who reads this. Keeping trade secrets and sensitive information under wraps of course.

The purpose of this monthly review is to organize my thoughts on the Amazon FBA side of things and reflect on the past month.

July FBA results

Prime day has come and gone and I’m sure everyone’s July has a bump thanks to it.

For the month, we ended up higher than last month at $200k. Last year in 2018 July, we did $165k. A 21% increase. Nice little jump but nothing huge.

On top of that, Amazon continues to get more competitive and expensive each year. The increase in competition means we have to spend more on ads and the higher tariffs cut into our bottom line.

Top line at 20% is nice, but the bottom line didn’t increase at the same rate.

Always something to work on right?

I didn’t list any products on Prime day actually. There were a couple of products that we were hoping to have listed and showed up on the list of eligible products, but for whatever reason, when I went to activate it the following week, the Prime day time frame disappeared.

The week following Prime day drops off, so no point in running any lightning deals during the summer.

In 2017 we were heavily doing lightning deals and was able to grow our organic rankings. Every week we were listing 5-6 different items. There was no limit on how many products you could run simultaneously.

But the new lightning deal only allows you to run one of your products at a single time.

No point in doing it now.

ACoS in June was 27.98%. This comes out to 11.2% of ad spend as a percentage of revenue.

I did a short interview last month on the topic of why I don’t focus on ACoS and why it’s not a good measure.

To summarize my points:

  • don’t focus on ACoS as it doesn’t give you a complete picture
  • High ACoS could be a result of low visibility and low conversions. More visibility and higher conversion could bring it down.
  • Low ACoS could mean you have a door open for the competition to walk through.
  • Track your sku’s as a percentage of total sales (ppc sales + organic sales).
  • Adjust your spend to get it to your desired range. For us, we want to keep it at 10% of total revenue. Just a tad above our mark, but it’s a big improvement compared to our Q1 where we were spending 13% of sales.
ppc acos sales amazon tips optimization
ppc acos sales amazon tips optimization

July Happenings

In this section, I can talk more small business related stuff other than Amazon.

July was stressful it’s rolling over to August.

We changed insurance companies to increase our liability coverage, but shortly after signing and getting our new policy, we received a letter stating they were going to cancel our policy because they didn’t want to insure anything related to personal care products that are applied to the skin.

We don’t do any in house manufacturing. We do contract manufacturing and all the products are under our name. But we are still classified as manufacturers instead of distributors or wholesalers. That puts us on a different risk category with insurers and they don’t want to bother with a company our size.

We have to be doing at least $10M for them to even consider it.

That’s been the struggle at the moment.

I have one of the best brokers working for us and she has been knocking on every insurer, but no one is interested.

With our move coming up in a couple of months, it’s getting down to the wire. The new landlord is a REIT firm so they don’t care who you are. The management company is a fortune 500 company, so again, they don’t care.

Some struggles of operating as a small business.

It’s why I wrote that it’s better to stay small or go big. If you are small,  you can contain operations and keep it lean to maximize margins.

If you get bigger, you get more leverage in other areas and can stand your ground.

If you are in the middle, you are in no man’s land.

Hiring and Firing

As our sales increase and more work and tasks need to be completed, looks like we need to keep outsourcing where possible and planning to hire.

We just fired our social media manager.

The results weren’t there based on the how much we were paying. Doing a post-mortem analysis, I realize it’s hard to expect much results from an external person or agency that is handling too many accounts.

There’s no way they can handle work involved, let alone put in the time required to carve a strategy and implement it.

We were paying excessively for someone to just post a few times a week.

I’ll be hiring somebody or training an internal employee to do this inhouse which will be more effective and controllable.

This brings me to expanding the team. With our thin margins, there isn’t much room to hire aggressively. To stay lean, we have to outsource or hire VA’s to do the easier tasks.

The goal is to track all the work our main team does that is repetitive and easy to train. Then to outsource it so that we can focus on ROI generating and strategic projects.

Margins for July

Summer sales is slow, but can’t forget that Q4 is around the corner. Product planning and ordering is required.

We have people who sell our products in different states so keeping inventory on hand is important.

New products arrived finally so we had some big bills to pay. The worst was two of our products being tagged for intensive exams at customs.

Argh…

On a cash based accounting, gross came in at 16%.

Each time I write these reports, I realize how off we are as accrual accounting shows a different picture. But cash is the life cycle of the business and good to track.

Nevertheless, if we want to sell our business one day, accrual will make everything easier and smoother.

As mentioned above, the account ACoS for July was 27.9%. We jacked up the PPC for prime day, but the increased sales make it even out.

Wholesale and our online store

I’m not including our direct or wholesale sales in these numbers. Amazon makes up the majority percentage.

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.

June FBA monthly update at $182K

2019 june fba revenue
Upfront disclosure.

The numbers and information I share in these monthly updates are selective and for educational purposes as there are people I know personally who reads this. Keeping trade secrets and sensitive information under wraps of course.

The purpose of this monthly review is to organize my thoughts on the Amazon FBA side of things and reflect on the past month.

We’ll see how these posts evolve based on how you find it, and what information is helpful or not.

June FBA results

I’m writing this during Prime Day. Amazon created their own sale event to fight against slow sales right in the middle of summer.

Brilliant.

I’m going to leave out what we did to prepare for Prime day for next month’s update. Don’t want to spoil the fun.

We ended the month at $182k. A 5% drop from last month. 10k sounds like a lot, but when you look at the percentage difference, it’s not as bad as it sounds or looks.

We were around 125k last year so a 45% growth in sales is great for us considering we haven’t launched any new products so far this year. Growth has come through optimizing existing products, creating different bundles, improving listings, photos and PPC.

For the second half of 2019, we have a good lineup of new products on the way with the first to arrive in July. Our product development always takes a long time because we are investing for the long term.

We don’t private label anything. Everything is OEM, meaning:

  • Custom designed
  • Mold investment
  • Patented in China and US
  • Then we launch

It starts slow, the momentum takes longer to build up, margins get compressed.

Yes it’s expensive.

But once we sell through our initial order and get the “snowball” past the tipping point and rolling down the hill, for us the hill turns out to be a very long one.

Happenings in June

(That’s not me by the way)

In last month’s update, I went over some of the things we do during the slower summer months.

Things like:

  • plan and develop future products
  • update processes
  • re-train staff
  • upgrade assets
  • and improve other areas we can identify

In the past month, we’ve already executed and started most of the 5 points above.

  • We took some time to update documentation
  • Brainstorm product ideas and improvements to current products
  • New packaging ideas
  • Upgraded simple equipment to make work easier

The biggest in June was our 2 week trip to Hong Kong, China and Taiwan.

We were exhibiting at an event in Hong Kong (nothing related to the Hong Kong fair or Canton fair). Once the show was over, we visited our suppliers throughout China and Taiwan.

I never look forward to China trips. It’s rough because we are traveling from city to city every few days, in factories from early morning to evening where the temperatures easily get over 104F (40C).

Not much to look around and do when you are in the industrial zones of China.

But one thing is for sure.

Every visit we make is a good move in hindsight.

There’s only so much you know when doing business over a keyboard. But when you visit in person and see the full scope, capacity and capabilities of what a factory can and cannot do, you can:

  • identify new products you didn’t think about
  • find ways to improve your current product without increasing costs
  • speed up the conversation and finish in 2 days what would have taken 2 weeks over emails
  • find out how incapable your supplier is and look for a new factory

If you are on the fence about visiting suppliers in China, I highly recommend you to.

2 years ago, we found our best supplier from a factory scouting tour. Rather than just doing it through Alibaba, this was an important product that we needed to replace with a new supplier. We set up dates with 4 factories over a 2 week period. Took trains from city to city and came away with a partner that has served us and protected our products with utmost integrity.

Having seen their facility and capabilities, we’ve scaled our production and line up with this factory.

Win-win.

On the flip side, during this same trip, we discovered how incapable one of our current suppliers were and stopped dealing with them immediately.

This is only possible when you visit and see in person.

Margins for June

Margins were hit hard again in June as we made a large container purchase. Gross (using cash accounting) ended at 26%. At the end of 2019 Q2, our gross is at 29%.

Far below the 40% I am seeking. So there is a LOT of work to improve that.

The double edge sword is that as we try to gain international accounts and also create a distribution business, the margins are going to get squeezed further as we go for volume.

With Q2 finished, I’m not rating our business too highly this year.

I’d give it a 6 or a 7 out of 10 so far.

  • Top line growth of 45% – pass
  • Gross margin of 26% – fail
  • New products introduced – fail
  • PPC goal – improving
  • Cash flow management – pass
  • R&D – pass

Our account ACoS for June was 26.7% which is a good improvement over the 28.4% from May. It was previously 31% in the earlier months.

Still working to get it down to 25% without affecting sales.

Overall as a percentage of sales, PPC spend was 13% by the end of Q2.

3% away from our goal which is a big task to improve.

Wholesale and our online store

I’m not including our direct or wholesale sales in these numbers. Amazon makes up the majority percentage.

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.

Gorilla ROI huge performance increase

We’ve invested a lot of time and resources into supercharging the data import.

Now you can load up to 2,000 data points in a few seconds straight into Google Sheets.

Try getting that much data manually or using pivot tables and you’ll be dizzy with the amount of data you need to pull.

Enter a formula, set your parameters and boom – you are done.

This ends the June update.

Come back for the July figures to find out what we did for Prime day and how the start to the second half went.

May FBA monthly update at $192K

May 2019 FBA Revenue
May 2019 FBA Revenue

Upfront disclosure.

The numbers and information I share in these monthly updates are selective and for educational purposes as there are people I know personally who reads this. Also need to keep trade secrets and sensitive information under wraps of course.

The purpose of starting this monthly review is to organize my thoughts on the Amazon FBA side of things and reflect on the past month.

We’ll see how these posts evolve based on how you find it, and what information is helpful or not.

May FBA results

Sales is slowing down for the summer months. We don’t sell seasonal products, but when the sun comes out, people tend to go out and delay their purchases.

You can see it from the chart above as well. Last year, we were flat from Feb to June.

This year is an improvement though.

Our slow month kicked in starting April this year. Our best month ever was March which was a major surprise.

For the month of May, FBA revenue was flat coming in at $192k. Same as April.

If we can keep things steady for the next couple of months, instead of experiencing any big drops during the summer months, that’s a win for us. With some major expenses coming up, I’ll need all the cash coming in.

Summer slow downs have a positive aspect though. It’s a great time to improve our operations like:

  • plan and develop future products
  • update processes
  • re-train staff
  • upgrade assets
  • and improve other areas we can identify

Once July comes around and sales picks up again, the goal is to be prepped with inventory ready to go and have the improved processes implemented and ready to go.

Our office relocation in September isn’t going to make things easier. More furniture, more office updates and more improvements are going to be needed.

If it was still me, I’d be working out of a cardboard box, but with a team to take care of and making sure each person operate effectively, efficiently and safely, I don’t skimp on expenses required for such operations.

Also, getting enough product ready so that we can have a full 1-2 week blackout period is going to be crucial.

Area of weakness year to date

One aspect of the business lacking is our product development and getting new products into the pipeline.

The pipeline is thin at the moment as some projects just continue to get delayed again and again. Other projects were also pushed back for a later date as we try and make smarter product development decisions.

There are products that I thought would be super easy to make and push to market. My initial goal was to get it finished and launched within 2 months.

  • Found a supplier
  • Made sure they were legit
  • Specs delivered and confirmed
  • Samples received
  • Samples failed testing
  • More back and forth to clearly define requirements
  • New samples received
  • New samples failed testing

Since we do OEM stuff and never rely on reselling existing products, the process takes longer. In this new case, I find out after testing that the supplier is trying to use cheaper raw materials in order to maximize their own margins.

Usual sneaky stuff. Rightfully called – quality fade.

If this is something you want to know more about, you have to read Poorly Made in China. One of the best books that I’ve come across on doing business in China.

 

Thankfully, I do have some new products arriving this month. We’ve created different variations of a good selling product to expand our reach on Amazon. Also makes it easier if we can reuse raw materials to achieve scale and lower cost – every penny counts.

Now, let’s get into the numbers.

Margins for May

Last month, I mentioned that our gross was 45% and not to get excited because it’s just a single month.

Not to be expected as the norm.

May proved that case to be true. Our gross was just under 38%. I haven’t finished cleaning up the numbers, but it’s close.

38% gross is just ok.

Not great.

But again, the same argument holds. It’s just one month.

I was looking up the financials for Proctor and Gamble which is a great template for us to follow. I try to model our company performance based on Proctor & Gamble as well as Helen of Troy.

Check out the financials for PG though.

Proctor & Gamble Financial Statements 2013 to TTM
Proctor & Gamble Financial Statements 2013 to TTM – click to enlarge

To make it easy, I highlighted 4 main line items.

  • Gross profit of 50%
  • Operating profit of 20%
  • Income after taxes around 15%
  • Net income around 15%

Knowing these types of numbers and having a model company to base your company and where you want to be is very important.

Your strategy is going to determine your margins.

Are you operating a dollar store concept? Reality is your margins will be lower with more volume. Think 3-4% operating margins.

Are you more of a reseller? Then follow the footprint of Target’s margins.

  • Gross margin of 30%
  • Operating profit of 5-6%
  • Net profit of 4%

You can’t expect to get 40-50% gross margins when you run a Target business model.

For us as OEM sellers and brand builders, we work towards the 40-50% gross range.

The hardest part?

The discipline and objective decisions required to execute on those margins every quarter.

Biggest expense item

  • Amazon fees eat up 40% of expenses.
  • PPC came in at 12% of revenue. Ugh.
  • COGS is what it is.
  • Payroll – nothing I can do

These make up the bulk of the expenses, but as you know, there’s no way around any of these.

The best option is to increase ROI on the PPC ad spend. Our account ACoS for May was 28.4% which has improved from 31%. I really need to get it down to 25% in order to stay within the allocated budget.

Staying at around 25% ACoS means that PPC will be 10% of total revenue. If we go above 10%, then that spells trouble. Last month, it was 12% because we are still optimizing as well as experimenting with some new PPC strategies.

Exploring new ideas in PPC always equates to higher spending and pain in the short term.

I’m also starting to get into Facebook ads to drive external traffic. ACoS needs to be optimized and improved further so that there is more buffer to explore and experiment with other platforms.

Wholesale and our online store

I’m not including our direct or wholesale sales in these numbers. Amazon makes up the majority percentage.

Free spreadsheets for all

The free FBA spreadsheet resource page is now up and available to download for free.

These are spreadsheets I’ve been sharing via email but now you can download it immediately without having to sign up for anything.

Just copy straight to your account.

Some are simple, manually updating spreadsheets that analyze your data. Others can be used with the free addon from the Chrome store to auto load your Amazon data into Google Sheets

You can use it for free for any 3 FBA sku’s. FBM is not supported.

Bookmark, share and download it as I’ll be updating the page with more free spreadsheets to make it a destination for your one stop free FBA templates resource page.

Gorilla ROI now saves historical inventory levels

You can now extract your historical inventory data by dates and using the preset time periods we offer. The purpose of this function is to know when you went out of stock.

When you are planning and forecasting for inventory purchase, you can exclude the days you were out of stock from the equation for a more accurate picture.

Documentation and the functions page will be updated soon.

Here’s how it works if you happened to come across it while working with your spreadsheets.

It works exactly like GORILLA_SALESCOUNT() and SALESTOTAL()

=GORILLA_INVENTORYHIST(periodskumarketplacestatusstart_dateend_date)
=GORILLA_INVENTORYHIST("Custom""US", A1:A500, "INSTOCK", "2018-01-01", "2019-01-31")

this example will dump your historical “instock” levels from Jan 1 to Jan 31.

For Agency users, the formula includes the seller ID as the first variable.

GORILLA_INVENTORYHIST(sellerIdperiodskumarketplacestatusstart_dateend_date)

This ends the May update.

Come back for the June figures as it will be the halfway point of 2019 and I’ll have a better picture of our progress as we work towards our mid term goal of $5M in revenue.

April FBA monthly update at $192K and new PPC spreadsheets

April Amazon FBA revenue
April Amazon FBA revenue

More stuff for you today and an update to our April numbers.

The numbers and information I share is selective and for educational purpose as there are people I know personally who reads this. Trade, company secrets and sensitive information need to be private of course.

The purpose of starting this monthly review is to organize my thoughts on the Amazon FBA side of things and reflect on the past month.

Maybe monthly will be too often. Who knows?

We’ll see how these posts evolve based on how you find it and what information is helpful or not.

New updates for April

In April, we added more free and PRO templates and documents to the library of PRO Business Spreadsheets.

I already posted a detailed version here, but in addition to that, we added 2 new spreadsheets last week that everyone can take advantage of.

To date, we now have the following spreadsheets added to our library of PRO templates.

  • [NEW] PPC dashboard for keywords and customer search – manual spreadsheet. Not automated.
  • [NEW] English/Chinese NNN agreement template to use with suppliers.
  • [NEW] English/Chinese Manufacturing PO agreement package to use just before you place an order.
  • Seasonally adjusted sales forecasting calculator
  • Accurate product pricing calculator
  • Simple inventory check in/out
  • Amazon cost analysis database
  • Amazon sales performance report and dashboard

The list and value of the package continues to grow. If you don’t have the PRO access yet, get it before prices go up.

One price. One payment. Access to all future templates, docs and tools for life.

Two new PPC Spreadsheet Templates for everyone

Amazon FBA PPC analysis spreadsheet template
Amazon FBA PPC analysis spreadsheet template

As we are working on adding PPC data to Gorilla ROI and Gorilla Agency, I’ve tweaked and prettied up my manual PPC spreadsheets that I’m happy to share in the meantime.

Amazon has plenty of data, but the area they lack is providing insights into the data. I always end up coming back to spreadsheets because I can see things the way I want and create my own KPI’s.

  • Number of converted keywords
  • Ratio of converted keywords to non-converted
  • The ratio of spend for conversion to total spend
  • CTR of converted keywords
  • and so on

Amazon does not provide this type of insight and no other tool provides the metrics I want to see.

This is a manual spreadsheet version. You export the reports from your Amazon Seller Central, copy and paste the data and that’s it.

Export your report, then copy over the entire contents of the report to the spreadsheet and everything is automatically calculated.

how to download PPC keyword targeting report from seller central
how to download PPC keyword targeting report from seller central – enlarge

The free version has a simplified dashboard.

Download with the following links:

PRO Version of the PPC Dashboard

The pro version is also manual at this time. Once we are able to pull PPC data, this will be automated.

The PRO version is available from your account, and comes with in-depth KPI’s like I noted above. Here’s a screenshot of what you’ll see.

PPC analysis and kpi dashboard
PPC analysis and kpi dashboard – click to enlarge

Your KPI’s will be different, but breaking down the data like this for us helps our team see what we are doing good and what we need to improve.

Free FBA Spreadsheet resource page in the works

I’ve received a number of requests and seen a lot of people posting for help related to getting a handle of their Amazon numbers.

To help with this, we are in the process of putting together a free resource page where you can download free versions of the spreadsheets we’ve created for Amazon FBA sellers.

If there is a particular spreadsheet you would like us to create and post for free, leave a comment below.

Trying to grow online sales

Finally got around to finishing this website and one of our ecommerce sites. All for the purpose of getting into paid marketing outside of Amazon.

I’m not including our direct or wholesale sales in this number. Amazon still makes up the majority percentage.

Our goal is to try and ween as many sales off Amazon and directly onto our own site. Our products and presence has grown where we can do 4 figures through our site with no marketing. All repeat purchases or people who found us through trade shows.

Now onto the FBA numbers.

April FBA Monthly Revenue

April Amazon FBA revenue
April Amazon FBA revenue

Coming from an investment background, one of the things I won’t do is breaking things down in too much detail.

No tables of income vs expense.

If you have been selling for a while, you know that all the fees, services and expenses that go back to Amazon eats up about 50% of revenue.

  • FBA fees
  • Pick and pack fees
  • Shipping fees
  • Storage
  • All the charges that Amazon takes from your account related to customer service
  • PPC costs

For April, we ended with gross margins of 46%. It sounds impressive, but it doesn’t mean much because the quarterly and annual numbers are more important.

The problem with providing month over month analysis and change is that I may end up focusing too much on trying to make the numbers look good.

That’s why most public companies succumb to please wall street analysts as they try to get their stock higher, rather than make decisions that hurt in the short run, but add value to the long term health of the business.

Why were margins so high?

I wish our margins were always like this.

Typically, we range between 36-40%. So last month was an anomaly because of reduction in PPC spend, and reducing costs in fatty areas.

Fluctuations naturally occur depending on the month and the season.

On the flip side, March is an example where we reinvested large sums of money after China came back from their holidays.

Whereas for April, it was the start of our slow season. We cut back on expenses and optimize areas of the business that haven’t received the attention it needed.

Most likely for the next 3 months, our spend will go through the roof as we move to a large location. Lease will be around 40% as we need to reinvest in a bigger space and grow into it.

New office means more furniture, shelving, equipment, and more expenses.

Not something I like, but need to bite the bullet as I don’t want to go through the ordeal of trying to find new space when we are at 150% capacity. Not a good feeling.

What about profit?

Another thing with providing too much detail is that there are always people who whine about “profit”.

They most likely are talking about Free Cash Flow. Money you can take out of the business that is not required to run the business.

I’ve analyzed hundreds of public companies and valued them, and what most Amazon FBA entrepreneurs don’t understand is that businesses operate at different stages of the life cycle.

business life cycle. Source: IdeaBuyer

The problem with prioritizing profit as #1 is completely wrong because it is dependent on the stage you are operating at.

If you have been in business for 20+ years, have everything established and happy with 12% top line growth, then profit and FCF is a high priority.

If you’re still young and trying to grow at 50-200% YoY, forget about profit. Focus on growth, gaining market share and increasing the value of your equity value.

Once you hit the tipping point of large numbers, wind down the growth and rake in the profits.

For us, we are currently aiming for $3M in revenue this year, however, we could easily dial it back to $2M like what we did last year. If we did, I could reduce staff hours, cut back re-investments, new product developments, trade show costs, travel and other expenses to fatten margin by 5-10%.

Just a long winded way of saying we are barely breaking even from a financials point of view, but our investments will pay off in several years.