Chapter 14 How to Make $5K an Hour Selling on Amazon
How to Make $5K an Hour Selling on Amazon
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You’ve seen the headlines and the data and the stories across the board. Selling on Amazon makes some people and brands a lot of money.
That’s because Amazon is a selling behemoth, attracting nearly 50% of all online product search traffic, with more than 70% of all U.S. consumers having bought from Amazon in the last 6 months.
Let’s just say that when consumers end up on Amazon.com, they are very close to being ready to pull out their credit card (or just one-click pay).
In total, Amazon’s share of the ecommerce market is expected to hit 50% by 2021. That’s in just a short 2 years.
And the number of third-party sellers on Amazon (i.e. sellers that are not Amazon) continues to rise, even as Amazon launches additional product lines of its own.
There is no better time than the present to launch your brand on Amazon or to grow your brand presence and revenue through Amazon.
Let’s dive into why – and the how.
Get Enthusiastic–Amazon is a Huge Opportunity
Amazon is the future. It’s time to get on board and excited about it.
Don’t just make Amazon part of a growth strategy.
Make it the growth strategy for your business.
I’ve worked with an old-fashioned manufacturer that has been in business for several generations. Within 18 months they were selling more on Amazon than through their traditional channels.
How did they do it?
They didn’t mess around when it came to selling on Amazon.
They tossed their whole product line on Amazon, identified the services they needed to outsource and created new internal processes specifically for Amazon.
According to recent industry figures and Statista, Amazon is the leading ecommerce retailer in the U.S. with close to 178 billion U.S. dollars in 2017 net sales.
The majority of Amazon’s revenue is generated through ecommerce sales of electronics and other products, followed by third-party seller revenues, subscription services, and AWS activities.
Let’s look at a few stats:
- Electronics & media is the most relevant category with a net sales share of over 50%
- Furniture and appliances are the second more purchased item at 18.85%, followed by food & personal care at 14%, toys, hobbies & DIY at 12.5% and fashion at 3.4%
- Over 80% of net sales are generated in the United States.
- Canada, the UK, China and Australia are also large markets at 1.5%, 1.2%, 1.7% and 1.7% respectively.
- 43.13% of Amazon’s traffic is direct
- 23.73% of Amazon’s traffic is through search
- Amazon’s net sales revenue in 2017 topped $177 Billion, a 30% increase from 2016
With 53% of Amazon’s items being sold through third-party retailers, and with a double-digit sales revenue increase YoY, Amazon is a good bet to grow your bottom line.
Determine Your Selling Strategy
There are two ways to sell through Amazon:
- Sell directly to Amazon
- Sell on Amazon yourself
Let’s break each of these down and look at a couple case studies so you can determine which is right for you.
1. Sell directly to Amazon.
Don’t try to beat Amazon at its own game.
Amazon is growing its direct catalog, so swim with the tide – not against it.
Aside from Amazon becoming your customer instead of your competitor, selling directly to Amazon eliminates the job new sellers are worst at, i.e. forecasting and marketing your product become Amazon’s duty.
The promotion of your products remains your brand’s responsibility unless you pay Amazon to do it for you.
According to James Thomson, former head of Selling on Amazon,
“If you sell to Amazon, Amazon doesn’t promote anything unless you step up and pay big marketing dollars. Promoting your brand remains your responsibility.”
Also, many items sold by Amazon sell for more and faster, all things being equal.
There will be a margin difference for FBA sellers that are not competing against Amazon here.
In other words, selling unique goods on Amazon currently not already sold there is how you make the most margin.
Re-read the chapter about why re-selling is the least practical method to Amazon success to understand why this is.
So, let’s see: selling directly to Amazon puts you on the right side of the future, is easier and leads to more sales.
Keep in mind; this doesn’t mean it is right for everyone, but it certainly is an option.
One Seller’s Growth with Selling to Amazon:
2. Sell on Amazon yourself.
This isn’t [necessarily] a contradiction to the previous section.
Start by selling on Amazon yourself if you find it easier to get up and going, or use this to complement your sales to Amazon.
Selling on Amazon along with selling to Amazon keeps Amazon honest and doesn’t allow the whims of their algorithm to lead to stockouts of your products.
Selling to Amazon also allows you to jump-start sales of new products by giving Amazon’s bots the confidence they need to start bringing it in themselves.
This practice is not recommended for most sellers, especially sellers that are novice to selling on Amazon.
Consult an Amazon consultant before using this method.
A Case Study: How to Sell to — and on — Amazon:
A sheet metal factory in the industrial space wanted to come out with a line of consumer products to sell on Amazon.
Based on some cursory searches on Amazon for sheet metal products and knowing the limits of their machinery, they created a simple folding work bench to be used in congested garages and sheds.
It was made with the machines they already had, hardware they were already buying and sheet metal they already stocked.
Actual Prototype of Product on a Wall in a Factory Hallway
Their initial production run was four units.
The total cost of labor and materials was less than most people’s weekly grocery bill.
They put up an Amazon listing and sold two units in the first week.
Actual Amazon Listing Taken Shortly After Product Went Live
After that first week and with lifetime sales of only two units, the sellers, who had created an account to sell directly to Amazon, offered the product directly to Amazon.
The price offered to Amazon was similar to the net amount the company received from Amazon when selling through Seller Central.
Since selling commission and shipping costs were no longer part of the equation, the sellers could sell their product to Amazon for significantly less than $149.95 without actually cutting into their margin.
Within a week of submitting the product, the company received an order from Amazon for five units.
Although Amazon’s Order Had Not Yet Shipped They Still Promoted the Product
Despite only two sales, the product moved to the third result in relevant keywords, in a similar position to items with as many as 138 reviews.
Of course, a sale of five items to Amazon is small time, but the idea of going from product concept to the top of the rankings on Amazon in a few weeks is possible.
It is highly unusual, but it is doable.
How to Make Money on Amazon – Checklist:
Identify what items make sense for you to sell on/to Amazon.
Check if the items are already sold on Amazon. Check interest and competition.
Compile the necessary information to submit those items to Amazon. Collect pictures, feature data, and descriptions.
Identify the processes an Amazon order will follow.
Search for and implement software services that simplify these steps.
Outsource any tasks that are not already performed and core to your business.
Create and document processes.
Submit the product data to Amazon (Seller Central or Vendor Express).
Process order.Practice makes perfect. Test, learn and iterate to help drives sales.
Practice makes perfect. Test, learn and iterate to help drives sales.
Clever Ways to Make a Profit on Amazon
Once you have become familiar with the inner workings of Amazon, you should take a step back.
Look at your business with just Amazon in mind and figure out which services or methods provide you the most benefit.
1. Dropshipping with FBM.
Adding non-stock or custom items to Amazon and then dropshipping to customers can add to your revenue, but it can also help reveal new trends or overlooked items that should be stocked as part of a standard offering.
If you are setting up to dropship already, there is nothing to lose.
Here is a list of dropship companies that you may be able to source products.
All costs, including Amazon’s, are variable and since items can be added to Amazon with little setup, even the administrative hassle is minimal.
Think this seller has 2,000 sitting on a shelf? No, but if someone preferred to buy on Amazon, they would get the sale.
Amazon allows this seller to be available to millions of shoppers and only produce an item once it has actually been sold.
Amazon Price Discrimination:
Not sure how to price your items, especially newly launched products?
Play around by adjusting the price on Amazon to see what the effect has on volume.
Because pricing is relatively instantaneous, it is possible to offer a product at a variety of different price points so that in a few days or weeks a brand or retailer has a better idea of the optimal price.
This can be helpful because price tags and price sheets have a perceived permanency in the minds of consumers, but online prices do not.
Take advantage of this to test prices for better Amazon margins or velocities, and to optimize those numbers for sales outside of Amazon, like in a retail store or website.
If I didn’t know any better, I would think that the top two organic results for “Pour Over Coffee Stand” were really the same product sold at two different prices to test two different pricing strategies.
Hint: they are.
2. FBA for items sold outside of Amazon.
FBA is simply just that. Items are fulfilled by Amazon.
There is the implication that these items are likely also sold on Amazon, but that does not have to be the case.
Many sellers use Amazon’s fulfillment services to pick, pack and ship items that were sold elsewhere like a retail or online store.
This is done even when they may have stock in their warehouse.
Amazon’s shipping rates with the major carriers are so low that, even with the additional charges for picking and packing, their total shipment cost can be lower than negotiated carrier rates for many mid-market firms.
This can be true even for shipments within a company’s own state.
Sellers often use this service so they don’t have to split inventory for Amazon and non-Amazon channels.
James Thomson, former head of Selling on Amazon warns,
“If you use FBA to fulfill orders outside of Amazon (called multi-channel fulfillment), Amazon raises the shipping costs, and you aren’t likely to see much cost saving at all.”
Additionally, Amazon has extremely low 2-Day and Next Day rates, so during the end of the Christmas season, many sellers are able to offer quick shipping for reasonable prices by leveraging Amazon’s buying power.
Cost to Ship from a Warehouse Compared to Amazon Shipping the Same Item
Why not have Amazon ship every unit if you can save 25% in shipping fees, the cost of labor and materials by having them do everything?
Here’s an example from my own product set.
Offering Competitive Products
Odds are that you have competition – and that they are pretty successful, too.
Why not cash in on their sales and success by offering their products on Amazon as well?
Not only might you get better insight into their sales numbers and product features, but you’ll be getting paid to do it.
More sincerely, you probably have holes in your product line:
- You don’t carry a certain color.
- They have metric versions you don’t.
- They have a unit that sells for under $100 and your cheapest offering is $119.
Even if you don’t offer the whole line, you may be able to generate more sales on your own site and on Amazon by extending your product line to include items your competitors offer for which you don’t have a substitute.
Look at these four different clothes dryer lint traps from four different manufacturers.
The only way to make money off of every version sold on Amazon is two win the Buy Box for each one like the seller below, Professional Grade Products.
3. Amazon Private Label.
Consider offering a line of products on Amazon that is only available on Amazon.
What makes a product unique, technically?
To Amazon, a unique UPC. To most customers, a specific model number.
That’s it. Not a different patent number, manufacturer or even color.
Whether it is a specific bundle or the same item as normally available, but in a different box, many sellers see the best results by having a unique offering on Amazon.
Often, dealers or brands are only concerned about their products and not a brand’s or reseller’s version of a similar product.
In the example below, Vortex is selling the same product, but at a different price point to try to be true to their main “premium” brand, but also get more volume through a generic brand item.
The HUGE Opportunities in Private Labeling on Amazon
In the late 2000s, and continuing on today to a degree, most brands that had traditionally dominated big box retail channels shied away from selling on Amazon.
They feared having their items sold on Amazon would diminish their brand and annoy their existing retail partners.
This led to holes in Amazon’s catalog in many high-velocity categories because the brands that dominated that space everywhere else were not represented on Amazon.
Naturally, new “Amazon Only” brands are continually created to fill that space.
Can you create the top brand on the world’s top marketplace?
We are in a rare moment in time when you really might be able to.
In a search for “flashlights,” for instance, why isn’t it dominated by Maglight or Rayovac, like many retail stores would be? Have you ever heard of any of these? Some aren’t even branded!
As a private label seller, you are still responsible for respecting existing trademarks and patents and doing appropriate testing on your products.
Processes You Should Automate and Software to Help
Many new sellers make the mistake of focusing on the small stuff.
They are so eager to succeed on Amazon that they put all their effort into fine-tuning a single or handful of listings even though it makes almost no difference to the customer.
There is no software program that reshuffles your product images in different orders, rearranges your bullet points and A/B tests “cozy” versus “comfy” as adjectives in your listing title.
Yes, you want good listings with beautiful pictures. You want to generate some reviews.
But, with competition always on the same page and just a click away, remember that five minutes negotiating a better price with your supplier or using a cheaper shipping service is more valuable than spending 100 hours perfecting an Amazon listing.
Here are some tools you can use now.
Automatically change your price for an item (with parameters you set up front) to optimize sales velocity.
- Appeagle: Inexpensive way to automate pricing, but very limited. Basically, it lowers your price from a base level if your competition lowers theirs.
- Feedvisor: Very expensive algorithmic repricer that optimizes your margin by trying to win the Buy Box most of the time and takes into account other factors that affect who wins the Buy Box aside from price. Unlike any other repricer, it will raise your price (again, within limits) if you can still win the Buy Box despite the higher price. It also has a bunch of other great reporting and tools.
2. Inventory management.
Keep track of your Amazon vs. non-Amazon inventory and know when to reorder from suppliers.
- Stitch Labs: Great integration of sales and inventory when selling across multiple channels, like a BigCommerce site and Amazon.
- RestockPro: Simple but accurate and customizable methods for knowing where your Amazon inventory is, how much it is worth and when you need to reorder more.
3. Feedback management.
Keep your product and seller reviews frequent and positive.
- Feedback Five: Automatically send emails to buyers requesting feedback.
4. Logistics snafu recovery.
Get credited when shippers or Amazon make mistakes.
- Refund Retriever: Scans your FedEx and UPS bills for charges that should be waived due to them not honoring their guarantees. 100% variable cost (they simply get a portion of what they recover).
- Refunds Manager: Audits your inbound shipments to Amazon to file claims for discrepancies (and they do happen). 100% variable cost (they simply get a portion of what they recover).
All ground services available for orders from all channels on one screen.
- ShipStation: Easy set up, few bugs and integrates with any existing shipping accounts. Also, allows non-Amazon orders to be fulfilled with inventory at Amazon fulfillment centers with one click. I ship orders from my phone with their app daily.
6. Sales tax.
Compile sales tax data and file all in one place.
- TaxJar: Simple, effective and low cost. Not what you associate with taxes.
Store or even process your Amazon inventory as needed.
- Flexe: Rent local storage space for as little as $5 per day. Take on larger orders or stock up for the holiday season without flooding your store or warehouse.
- FBAPrep: Send your items (even straight from overseas) to be organized, QA’ed, packed and shipped directly to Amazon’s warehouses according to Amazon’s requirements.This allows you not even to touch the products you sell on Amazon.
8. Competitive research.
See how your product sales stack up.
- Jungle Scout: Follows your Amazon searches and seamlessly provides data regarding estimated monthly sales volume. Use this to find new products or estimate your market share.
The Benefits of Outsourcing Tasks to Help You Increase Sales
Listen, a lot of Amazon experts and courses will emphasize the value of pictures, bullet points and listing titles. I am not saying those are not important.
They are, as is:
- Customer service.
- Listing management.
You need to make sure all of these things get done and are done well.
But, you certainly don’t have to do them yourself.
1. Increase efficiency.
Are you genuinely adding value to or eliminating waste within the process (like using Amazon integrated shipping software or automating sales tax reporting) or are you trying to “hack” Amazon?
Make no mistake, Amazon doesn’t want to be tricked, so even something that works, for now, may not work in the future.
Stick with proven productivity enhancers like the software programs out there for sellers like you.
And always gut check yourself: “Are you productive or busy?”
Focus on productive to get the most efficiency.
2. Free up time for more important business activities.
The more you outsource, the more you can focus on increasing your margins, finding and negotiating better prices on products and with services and building out your longer term strategy for increased revenue.
If you are bogged down in the details, you can’t see the bigger picture.
3. Start new projects quickly.
Test fast. Fail fast. Course correct.
Amazon is constantly coming out with new tools and products.
For instance, Store Pages, Enhanced Product Content, Amazon Homemade and more.
As a general rule of thumb, in a large technology company invests in building something out, it isn’t a bad idea to be an early adopter on the tool.
Doing this can help you to gain early visibility, traffic and sales and the company works to market the new tool.
And, you can’t keep track of all the updates if you’re head is too far in the weeds. Outsource manual, repetitive tasks and focus on growth.
Ideas and Services That Can Use to Outsource
Divide and conquer.
Hire and work with independent consultants and freelancers to help take work off your plate.
Here are a few places where you can find quality freelancers.
1. Use Fiverr.
Fiverr is easy to set up, has great results and is only $5.
- Need the backgrounds removed for some product shots? 5 bucks.
- Want someone to research relevant keywords and add them to your listing? Just 5 dollars.
- Need someone to scrape data from your site to add to your Amazon listing? $5.
This site also has a bad rap for having been the destination to get fake product reviews.
Do not pay for product reviews on Amazon.
2. Use UpWork.
Thousands of people with Amazon experience are available for custom jobs through Upwork.
The general process is:
- Search for people with a particular skill set or simply post a job description and wait on applicants –– usually you will have two dozen within 24 hours.
- Select candidates, submit any interview questions.
- Choose a person to hire.
There are extensive reviews on most freelancers and Upwork has programs that allow you to monitor progress and keep the workers honest.
Many are well-versed in Amazon-specific tasks and can be hired for a single job or on an ongoing basis.
Users can create a stable of new freelancers that have delivered well in the past, helping you to build a network that is more and more efficient over time.
The productivity gains here are substantial.
3. Use FreeeUp.
Don’t have time even to worry about hiring people for specific Amazon activities? Of course not, you have been reciting your mantras.
Freeeup was created by an Amazon expert who created a corral of hundreds of Upwork freelancers. Freeeup assigns and manages your team freelancers based on the complexity of the Amazon services.
If you need to create listings, fulfill orders, advise on reorders and handle customer service, you can try to recruit all those people or just send a message to Freeeup and they will handle it all.
3. Hire a consultant.
Software and outsourcing services can help you execute your plan, but what if you need help developing your plan?
This book should give you a working knowledge of how to concoct an Amazon strategy, but invariably each business has its complexities and complications.
There are a handful of good Facebook groups and message boards, but for tailor-made solutions, consider reaching out to someone who walks the walk.
In all, growing your sales on Amazon starts with getting smarter about your selling strategy as well as how you spend your time.
- Determine if you will sell to Amazon or on Amazon.
- If you will private label, if you will use FBA or you will fulfill yourself or through a 3PL solution that can get your products ready for FBA.
- Then, focus on outsource manual, repetitive tasks so you can focus on growing margins through negotiation and finding better tools.
Now you’re ready to build yourself a 7-figure Amazon business.
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