BI 207: May FBA Income Report, New Products, Huge Mistakes, and More!
Welcome to my May 2016 Amazon FBA Income Report and general business update! I have decided to share my income reports here on my blog as a way of keeping a log of my journey towards my goal of building a $30,000/month eCommerce business by the end of 2016.
I have a lot more than just the income report to share in today’s episode/post, so grab a cup of your favorite blend of coffee and get ready to take some notes!
Note: this report does contain affiliate links to tools that I use. If you choose to use one of my affiliate links to purchase a product, I will receive a commission. If you do decide to use one of my affiliate links, you will not pay any more for the product than you would if you went directly to the product vendor’s website.
Listen to the Audio
May 2016 Income Report
All figures and screenshots below are from either Amazon Seller Central, or an Amazon FBA accounting application that I use, called InventoryLab. It’s a wonderful app that creates all the reports automatically. If you would like to purchase it, here’s my affiliate link.
First, lets start with gross sales. As you can see in the screenshot below, my gross sales from my 4 products that were live in May came to $4,311.94.
The four products that were for sale during May were all in the jewelry category, and as such, I have not had access to Amazon’s Sponsored Listings program…which has been a huge bottleneck to my sales (more on that later).
Now that we’ve seen gross sales, let’s take a closer look at what really counts: PROFIT.
As you can see below, the net profit for the month of May was $341.14; definitely not a huge sum of money by any stretch of the imagination. Based upon sales of $4,311.94, this equates to a net profit margin of approximately 8%.
When looking at this net profit margin, it is important to understand a few key things:
- I ran a lot of promotions during May and lost money on every one of the transactions that was a promo. The total amount of the discounts provided was approximately $1,716. I arrived at this figure by subtracting the $2,596.16 of “total sales” (shown in green) below, from the $4,311.94 of gross sales shown in the screenshot above.
- There is always a time delay between what is reported by Inventory Lab’s P&L statement (below) and Amazon’s gross income report (above) and that delay will result in a small discrepancy on the net profit margin. Over time, the figures between the two reports are accurate; however. It’s just that they don’t line up exactly for any given month. If you want the textbook explanation on why this is, you can get it here.
For June, I have completely stopped running promotions, and my net profit margin on these four products is right about 50%, so even though June’s sales (so far) are lower than for the same period in May, profits are much higher!
My 10 New Products
I’m writing this post on June 13, and by the time it’s live, I expect to have another 10 new products live on Amazon. You can get more details on this in a recent Facebook post.
Of these 10 new products, 8 are jewelry, and 2 are in the pet products space, and as you can see below in the JungleScout screenshot, the sales volume is quite high for this product. Suffice to say, I’m super excited to launch my product using a social media strategy that I’ll describe later in this episode/post.
My Biggest Mistake and How I’m Fixing It
I’ve always said that if there is a huge mistake to make early on in a business, I will find a way to make it, and in my FBA business, I have made good on that promise!
The huge mistake that I made is choosing products in a category that don’t allow me access to Amazon’s Sponsored Listings program to advertise my product listings. This is the #1 reason why I ran so many promotions in May. It was literally the only way – within the Amazon platform – to draw attention to my listings, which would have otherwise been buried way down in the search results.
Stimulating sales on Amazon is the #1 way to get your product listings to rank better in the Amazon SERPs because, more than any other factor, sales of products has a positive influence on the search algorithm, and even though promos are offered at a huge discount, in the eyes of the algorithm, they still count as a sale.
So, mistake #1: I picked a product that was in a category that didn’t give me access to Amazon’s PPC program. DON’T DO THAT!!
When you are picking your products, there are two factors that are critical:
- These products will be listed in a category that is “un-gated”
- The category your listings will be in will allow you access to Amazon’s PPC program
Luckily for me, I found another (gated) category that I can apply to sell in. Yay!
Oh, wait…getting ungated is INSANELY DIFFICULT!
In theory, it supposed to be easy as pie. Just submit 3 of your suppliers’ invoices that contain the following information:
No problem…or so I thought! I must have submitted my 3 invoice 20 times and every single time someone from some third world country would send me a boiler-plate reply telling me that my invoices were invalid!
When I asked what was wrong with the invoices, they would say, “I’m sorry, we can’t tell you that”.
OMG!! Talk about frustrating!
In the end, I learned that pretty much the only way to get un-gated is to obtain an FDA certification; which is an extremely complicated process that required me to spend $1,000 on a consultant for help.
The good news is that I should be un-gated any day now and as soon as I do, I’m going to have all my jewelry moved to a new category where I will have access to Amazon’s Sponsored Listings (PPC) program.
That, combined with having so many new products, should result in my seeing a massive increase in sales over the next 30-60 days or so.
My New Products and How I’m Using Facebook to Help Launch Them
Of the new products that I’ve just shipped to Amazon’s warehouse, two of them are pet products that I will launch using a Facebook strategy that I’ve been studying. The two products are in the two big and 3 of the small boxes below in my truck bed.
In a nutshell, here’s the strategy:
Step 1: Create a Facebook page around a topic that people are passionate about. In my case, I created a page all about dogs.
Step 2: Start sharing content on the page and buy LIKEs. This is dead-easy to do. Each day, I visit Pinterest and add 7 or 8 images to my Buffer account (I actually do it just once per week and it takes about 20 minutes), which are then posted on the Facebook page. So far, I’ve bought about 16,000 likes for about $0.04 per like…so about $640 in ad spend so far.
Step 3: Create a post with your product and offer it at a discount. This is the part that I will be doing in the next week or so. The posts will link to a landing page where a visitor can opt in and receive the promotion code via email. To make this work, you will need two things: an auto-responder and coupon software. I’m planning to use Mailchimp and Amazon Coupon Server.
So why run a promotion this way instead of using ReviewKick as I have done in the past? There are a couple of reasons actually:
Reason #1: I like to test different things and then share my results here on my blog.
Reason #2: I have built an eCommerce site for my pet products and I want to find out if I can use Facebook to profitably drive traffic to this site. If not, I will simply use the mailing list to drive traffic to my Amazon listings in the future.
I’m not really a fan of trying to build my Amazon business and an eCommerce site at the same time, but, as you will see later in this episode/post, I needed the eCommerce site anyway, as a part of the branded products strategy that I’m going to focus on next.
How I’ve Decided to Handle The Issue of Collecting Sales Tax
Thanks to Scott Voelker’s podcast, I learned about the importance of collecting sales tax, and so I signed up for the Taxjar app.
In italics below, is the information they provided to me:
Since you are an FBA seller you could potentially have nexus with all of the states in which there are warehouses. That’s because all those states say that your inventory counts as nexus. blog.taxjar.com/internet-sales-tax-nexus/
Right now, we’ve shown you several states on your DASHBOARD as a way to inform you that you could be required to collect sales tax in other states. It’s up to you to decide if you want to collect there or not. (This blog post lists the Amazon fulfillment centers that we currently know about: blog.taxjar.com/amazon-warehouse-locations/)
If you’re not sure where your Amazon inventory is creating nexus, we show you how to track it here. blog.taxjar.com/amazon-fba-nexus/
After you determine where you have nexus, if you want to get rid of any states from your TaxJar dashboard, just click the wrench under the state name in your Dashboard to remove it.
Once you know where you have nexus, the next step is registering for a sales tax license, and the states expect you to register to before collecting any sales tax. We talk about the timing of registering here. blog.taxjar.com/when-register-sales-tax-license
When you’re ready to register, we tell you how to register for state licenses in all states with Amazon warehouses.blog.taxjar.com/register-sales-tax-permit-amazon-fba-states/
Another thing you’ll want to do after you have your sales tax registration is tell Amazon to start collecting taxes for you. Here’s a guide that talks about setting up your state settings and product tax codes in Amazon: http://blog.taxjar.com/how-to-set-up-amazon-sales-tax-collection/
When you’re ready to file a return, our state reports give you all of the information you need to do so and we show you how to do this here: support.taxjar.com/knowledge_base/topics/how-do-i-file-my-returns
If you haven’t collected any taxes yet, or if you weren’t collecting taxes for the entire filing period, you’ll notice that each state report has 2 tabs–one that shows your Actual Sales Tax Collected and a second tab that shows the Expected Sales Tax Due. This second tab is our estimate of what you may owe, based on the assumption that all of your sales are taxable. We explain more about this feature here: blog.taxjar.com/expected-sales-tax-collection/
If you are already selling on Amazon and aren’t collecting tax in states where you have nexus, you should definitely get this looked after!
What I’ve Learned About Selling Branded Products and Why I’m Focusing On It Going Forward
So far, my business has focused solely on private label products. In other words, products from China that I can brand as my own.
After interviewing Eddie (episode 205) and Dan (episode 206), I realized that focusing my business on branded products instead will make it easier for me to grow faster. Both Dan and Eddie have built businesses that will do $10 million (or more) in just their 5th year of being in business.
Wow! I’ll take some of that please!
There are a lot of differences between private label and branded wholesale and I strongly encourage you to listen to each of these episodes for a better understanding of these differences, as selling branded products may not be for you.
In my case, I’m attracted to it for a few key reasons:
- I get to deal with US suppliers so I don’t have to work evenings talking to China
- Access/sell a much wider range of products in multiple categories so I can diversify more
- Avoid having to create my own brand(s), shoot pictures, create product listings, etc…
- Will allow me to get to $10 million faster than just private label
So does this mean I’m abandoning my private label business? Hell no! I have 14 products that I’m planning to aggressively promote and so long as they remain profitable, I will keep stocking/selling them.
Answers to Listener Questions
This week’s question is from Carlos.
Here’s my answer: For the vast majority of people, I think starting an FBA business is a far more viable option…and it is much less risk. To help you better understand my answer, let me tell you about something called Retail Arbitrage.
The #1 Easiest Way For You to Get Started on Amazon With Zero Risk
So far in this post, and in prior episodes, I and my guests have discussed primarily a business model that sells private label and/or branded products.
There is a third model that is especially good for brand new sellers who have some free time, a small amount of capital, and an aversion to risk – and it’s called Retail Arbitrage.
Here’s how it works: Go to a store like Walmart and find branded products that you can buy (from Walmart) for less then they are selling on Amazon. Buy them, ship them to Amazon and sell them.
Voila, that’s it.
Today I stopped in at Walmart for 5 minutes on my way home from the gym to see what products I could find that were cheaper in Walmart than Amazon. Here are the products I randomly selected:
As you can see, every product I looked was an arbitrage opportunity. Check out the Farberware Slotted Turner! I can buy it for $3.97 and when I sell it on Amazon, I’d net $8.49!!
Are these the best products to start off with? I doubt it…but it took me only 5 minutes to find 4 opportunities!
In case you don’t believe it is possible to quit your job doing retail arbitrage, I encourage you to listen to episode 206 with Dan Meadors. Dan and his partner got started this way with just $600 and then, if I remember correctly, they did $50K in sales while they still had jobs. The next year, they quit their jobs and did $860K in sales!
If you want to learn this model from the same guy they did, his name is Chris Green and you can buy his book here.
Links Mentioned in This Episode
- Junglescout
- Inventory Lab
- TaxJar
- Retail Arbitrage Book
If you liked this episode, you might also enjoy:
BI 206: How Dan Meadors Built a $10M Amazon Business in Just 4 Years – Starting With Just $600
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