Get my step-by-step blueprint for how I’ve built a successful Amazon FBA business
I don't read a lot of blogs usually. As a result, in some respects I'm somewhat “naive” to various online business ventures that others are pursuing.
However, I do have a handful of blogs that I subscribe to and will peruse from time to time. One that I read is my buddy Chris Guthrie's blog. We've known each other for about 4 years now, so I like to keep tabs with his business.
I believe it was about 6 months ago when I read a post from Chris where he shared that making over $12k in his first 68 days on Amazon FBA.
Honestly, for some reason, that post was the first time it ever dawned on me how hands off the FBA business is. I always thought manufacturing and selling a product on Amazon meant producing designs to get manufactured, shipping product to your house, shipping it to customers when they ordered, and answering customer service emails.
In a nutshell, I was clueless about Amazon FBA. Because it turns out that none of those things are true.
So, for the first time ever I did a little bit of Googling about people selling their own products on Amazon, private labeling, and FBA. I was a total newb just 6 months ago.
I immediately reached out to Chris and asked him to come on the Niche Pursuits podcast, and we recorded this episode on Dec. 2nd, 2014. I also got some tips shared privately from Chris as I had questions.
Fast forward 6 months, and I now have a product on Amazon that has been listed for 30 days! Not only is it up and listed, but I've sold over $4,300 worth of my product in just 30 days.
I'm about to share my journey from totally clueless to unlocking a potentially huge new revenue stream for my business with Amazon FBA.
First, Here's the Money Shot
I know you guys want to see the screenshots of income, so here you go!
This is a screenshot from the past 30 days. This is also my very first 30 days of having a product listed:
I was NOT expecting to make $4,400 in my first month of listing the product! This just went from a little side project that I tried not to spend very much time on to a business with the potential to grow significantly.
I see so much potential, it's got me re-thinking where I should be spending some of my time.
I want to be clear that the above numbers are REVENUE numbers, not PROFIT. I don't expect to make much money on the first 100 units sold, but I expect my profit margins to be 50% or more for all units sold in the future.
Here's a quick breakdown of costs for my first batch of 105 units ordered:
- Manufacturing costs: About $1,000
- Logo/branding/photo editing: $150
- Shipping/Freight costs: $2500
- Amazon fees: About $15/unit
- Giveaways/Discounts: 20 units (about $1,000 in soft costs)
So, as you can see from the screenshot above, I've sold 83 units. The screenshot shows the full revenue, even on units I actually sold for $1. So, after coupons (12) and giveaways to family/friends (8), the actual revenue is about $1,000 less.
My total Amazon FBA fees on that is approximately $1245.
With some quick math, you can see my total costs are about $4,880. So, I'm still slightly in the hole, but I should end up breaking even after the final 22 units sell from this batch.
However, my net profit will be MUCH greater for each new batch. I was very happy to just break even with this first batch as it truly was just a test order of 105 units.
Also, my shipping costs were extremely high, and that was a conscious decision that I made. I chose to ship them via air to get them to Amazon faster.
Not only is air faster than ocean freight, there were also some port strikes going on that would have delayed things another couple of weeks most likely. So, I bought myself about a month by paying extra.
Maybe not the smartest decision from a dollar and cents perspective, but it DID allow me to test things quicker and I'm now about a month ahead of where I would have been in placing my next order.
I will be shipping via ocean freight from now on most likely.
Ocean freight for my first 105 units would have cost about $350. So, the extra shipping cost is really what eliminated my chance at a decent profit.
If I had gone ocean freight, my net profit would have been about $2,000…which is very close to a 40% profit margin.
So, even though I didn't really make any money on my first batch of units. I fully expect to make about 40 to 50% profit margin and all future orders from China. I will be able to get my product cheaper (because I'll be placing larger orders), I won't have logo and branding costs, and my shipping/freight costs will be significantly lower per unit.
So, I haven't “really” made any money today…but all signs are VERY good that this business can be quite profitable for me.
A Quick Timeline of My Product – Discovery to Today
As explained, I honestly first heard about this business about 6 months ago. After doing some quick research and my podcast interview with Chris Guthrie, I figured this business didn't seem too complicated after all.
I thought it might be interesting to recreate the timeline from when I discovered this business to where I am today. The idea behind this is to show you what kind of timeline you can expect if you decide to get into this business.
- October 2014 – I learn about the Amazon FBA business
- December 2, 2014 – I interview Chris Guthrie on my podcast about his Amazon business
- December 27, 2014 – I eat 12 donuts during the day. Don't ask.
- Jan 1, 2015 (at midnight) – Light off massive fireworks…possibly from China. A sign of things to come?
- January 8th, 2015 – I have my “aha” moment and decide on a unique angle for a product I can sell on Amazon (I know the date because I found scribbled notes in my notebook)
- January 10th – I go to Alibaba.com and contact about 4 manufacturers in regards to my product. Just a quick email to each with some basic questions. We exchange emails the next several days.
- January 20th – I order a sample product from the manufacturer that was able to best produce my product. (I only found one that was able to easily add the features I requested).
- February 3rd – I receive the sample product. It's exactly what I wanted!
- February 4th – I take pictures of the product
- February 5th – I hire someone on Elance to create logo and product packaging/branding.
- February 6th – Contact logistics company to work out shipping details. We exchange several emails over the next month.
- February 12th – I have my logo/branding ready and place my first order of 105 units from my manufacturer!
- February 13th – Manufacturer informs me that the Spring Festival Holiday is starting in China and that the factory is shutting down until March 5th (almost 3 week shutdown!). They expect my order to be completed 2 weeks AFTER March 5th. I'm sad about that 🙁
- March (sometime) – I create my Amazon seller listing and write product description, upload images, and get everything ready for sale on Amazon.
- March 12th – Manufacturer completes the batch of 105 units (a week ahead of schedule!)
- March 16th – The product is loaded on a plane and flown to the US.
- March 24th – The product has gone through customs and the logistics warehouse. The product is shipped to the Amazon FBA warehouse.
- March 28th – Amazon has processed the product in their warehouse and my listing goes live!
- March 29th – A stranger buys my product. I'm super excited to make my first sale using Amazon FBA!
- March 30th – I go on a week long vacation with my family (Spring break) and totally ignore the FBA business other than checking stats.
- April 29th – In 30 days, I have sold $4,400 worth of the product!
I hope this breakdown of the timeline gives you an idea of what it takes to get a product up on Amazon. This is not an overnight business.
So, from product idea (my aha moment) to having a listing up on Amazon was about 2 and a half months.
Why Is the Product Selling So Well?
Now comes the more meaty question. “Why is your product selling so well on Amazon?”
First, I DO think a big part of the reason is because it's a slightly unique product. I discussed the importance of being the one in my last blog post and last podcast here. I don't want to give away my product, so it's difficult to explain what that unique feature is…but it's nothing revolutionary.
I just took an existing product, and made it very slightly different (think about something in a different color, or something that has more padding like my dog carrier example in previous post).
Now, because I'm pretty much the only listing that offers this exact product and I KNOW people want this feature, it's selling.
The second reason it's selling well is that my product is ranking well on Amazon for several long tail keyword phrases. Yes, this was intentional. I treated my product description like a niche site and used my targeted keywords in the product title and the product description.
Because of these 2 factors: unique product and showing up for long tail phrases, I was making about 2 to 3 sales a day after about 2 weeks of being listed. I did have a few “sales” from friends and family over the first 3 weeks…but that was 8 units total.
I was making 1 to 2 sales per day before I had a single review on Amazon. I honestly didn't do any marketing outside of getting a few friends and family members to buy the product (which I reimbursed them for doing).
I WOULD have done more marketing if I hadn't been so busy (vacation with family, New Media Expo, and running a full-time business outside of Amazon). However, the natural sales raised my eyebrows and I thought, “Okay, let's see what happens if I do some basic marketing!”
This brings me to the 3rd reason I think the product is selling so well: Promotion. As you can see from the image below, I had a huge spike in sales on April 23rd. I sold 14 units that day…but 11 of those sales were from $1 coupons.
I issued $1 coupons to a group of Amazon product reviewers (not sure I'm ready to reveal the source), and they got redeemed. I didn't make any money from those coupons, but this sudden spike in sales also boosted my Amazon best seller rank.
As a result, my product was listed higher on Amazon in various categories AND for the keywords I was targeting. As you can see after April 23rd, the sales continued to be much higher than before…but these were natural sales now!
I started selling so much product, that I'm now worried I will run out of inventory. As a result, I've been raising the price over the past couple of days…people are still buying after a 50%+ price increase!
Here's a screenshot from my highest revenue day so far. And yes, all of these sales are from people I don't know…all sold at full price (no coupons):
I have started to get a few reviews over the past week or so that I'm sure has helped with the sales as well. At the time of this writing, I still have less than 6 reviews though…so these sales really are coming in with minimal reviews and marketing.
About 10 days ago, I decided that this business was the real deal and that I needed to order some more inventory. At the rate I was selling at 10 days ago, I figured I still had a couple of months before inventory would run out.
However, after doing my coupon promotion, getting a few more reviews, and selling lots more product per day…I'll run out of inventory in less than a week! I only have about 22 units left and I sold 11 units on my best day…so you do the math.
As a result, I've been raising my price to slow down the sales each day to prevent my inventory running dry too quickly. Unfortunately with the sudden spike in sales, I've come to accept the fact that I probably won't have any product to sell for probably close to 3 weeks during May.
My manufacturer will take about 2 weeks to produce the product (which they started on a couple days ago), and shipping via ocean freight will take at least 2 more weeks. So, I won't have any product ready for sale on Amazon for at least a month.
I wish I could wave a magic wand to make it all work out, but honestly, I'm not too worried about it. The point of my first batch of product from China was to test the market to see if people were willing to buy. The market has spoken loud and clear to me that people like my product!
So, even though May won't bring in too many sales…I'll be gearing up for bigger things down the road.
I think it's very feasible that I can sell 10 units a day at close to $70 each. This would be a monthly revenue of $21,000. (The net profit on this would be about $11,000). I'm obviously not quite there yet, but after my first 30 days of selling this product the market is definitely there.
Next Steps for My Amazon FBA Business
Because I've now tested the waters and can clearly see the revenue coming in, I'm going to scale this business.
- I've already contacted my current and other manufacturers to get samples of similar products to what I'm already selling. I believe that I can easily get 5 or 6 products up in my chosen niche. I have no idea how each product will sell, but it's clear that there is a very healthy market here.
- I will also be doing a bit more marketing (once I have inventory) to get more reviews, increase the Amazon best sellers rank, and make more sales naturally as a result.
- Finally, I plan on going outside of Amazon as well in the future. I want to build a niche site related to my product. I'll write informational articles to get natural traffic from Google and then people can buy the product directly from my site as well.
That's right, I'll be building an eCommerce site.
Yes, this is a new business venture still and this blog post is clearly dripping with optimism, but I plan to capitalize as much as possible on this opportunity. Will everything work out as planned? Probably not exactly. But I see no reason why I shouldn't pursue this and try to grow this into a healthy business.
Overall, I haven't been this excited about a business in a very long time. We'll see where the ride takes me.
As always, I would love to hear your thoughts on the subject. Are you currently selling a product on Amazon? Do you have any comments or questions that you would like to add to the discussion? Let's hear it below.
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