I want to interrupt the typical Niche Site Project 3 blog post with an update on my Amazon FBA business. Just because I haven't written about my physical products business in a while, doesn't mean I haven't been actively growing and working on it.
If you have been following along, you will know that I started my Amazon FBA business less than a year ago. To say the least, things have been going quite well. I reported in September that I had sold just over $40,000 worth of my physical products.
I guess time flies when you're having fun, because it's now been over 3 months since I've really talked about my FBA business!
So, today I want to dive into what's been going on, my December revenue stats, and why 2016 should be a phenomenal year.
Ready for this? Pull up a cozy chair, but sit up and pay attention…you are going to love reading this report if you are curious at all about the Amazon business.
Revenue Report for December
I know that everyone likes to see screenshots and income numbers, so I am going to share the earnings for December below.
If you are familiar with Amazon, you will know that they don't account for discounts or giveaways. So, because of coupon codes that I used to giveaway on some product, the actual legitimate sales were right around $60,000 for the month!
I'm happy with the $60k in sales for sure.
So, what did I do to achieve so many sales in December?
The truth is that I didn't do anything special. The most “special” thing that I've done is choosing the right products to sell, optimizing my listings, and following a couple of easy principles of Amazon.
I knew almost from day 1 that I had ventured into a great niche. During this year, I have mainly battled being out of stock because I keep underestimating how fast my products will sell. It's a great problem to have.
In addition, I've continually expanded my product line as the previous products sell well. I now have a total of 7 products on Amazon. However, due to timing issues, 2 of my products were not even in stock for most of December.
As a result, I know my sales would have been even higher in December if everything had been in stock.
A Christmas Bonus?
I do think there was a bit more demand in December due to the holidays; however, I don't think the bump in revenue was as significant as I was expecting. I found that the competition really stepped up their game in December with sponsored ads and promotional giveaways. As a result, my sales weren't really much higher than they would have been on a normal month.
I know that's a bold claim, but early January is my back up evidence. Through the end of January 10th, I've sold $25,172 worth of product (yes, I took out any giveaway or coupon revenue). If my products continue to sell at the same rate, that's a total revenue for January of $78,033.20.
The truth is that I have 2 of my 7 products that are brand new and aren't really firing on all cylinders yet. So, it's actually possible that the revenue could be HIGHER if I can get these 2 newer products up to where I think they can be.
Bottom line is that I don't think my December numbers were inflated at all due to Christmas. I expect January to be better than December…hopefully by quite a bit.
What About Income?
My revenue numbers are nice to show off, but it's the bottom line that matters. Obviously, with physical products, there are lots of expenses involved with manufacturing, shipping, returns, Amazon fees, and more.
After all of these cost, my net margin is right around 40%. So, that means my net profit for December was approximately ($60k x 40%) $24,000. Not bad!
So, there is definitely money to be made in the whole Amazon thing, and not just revenue…but profits!
But What About Cash Flow?
Now, we are starting to get to the meat of the business. Revenue is nice, but profits are better…but cash flow tells you if you have any money in the bank.
An inventory based business is VERY capital intensive…especially if you are growing as quickly as I am. Building a business to $60 or $70k a month is not something that can be done without reinvesting in the business.
So, the reality is that my bank account is basically at break even right now. This means that for every dollar I earn in net profit, I am spending on ordering larger batches of inventory OR launching new products.
In other words, I have personally not pulled out a single penny from the business and my bank account isn't growing. This is a super important reality check for people that are considering getting into the Amazon business.
If you have a growing business (like I do), you can't expect to be taking a bunch of money out of the business and still expect to grow as quickly.
Now, I COULD just grow slower and take money out of the business if I wanted to pay myself a salary. However, I'm in the lucky position where I have other businesses that pay all my bills, so I don't need to worry about cash flow for this business right now.
In fact, I fully expect to continue reinvesting every single dollar that this business generates right back into new inventory and new products for the next 6 months or so.
At that point, if the business continues to grow as well as it has, I will likely slow down on launching new products and let the cash flow “catch up” a little. I don't want to get crazy projecting numbers (ok, I DO like getting crazy projecting numbers, but won't share those in this blog post), but if you can imagine the kinds of numbers possible here; it's quite exciting.
So, the business has great profit margins, but my cash flow is right at break even due to the fast growth and investments in new products. I expect a much bigger payoff in the second half of this year, than if I was to be siphoning cash out of the business right now.
The Principles Followed to Make These Sales
I hope this section doesn't bring up more questions than it answers; however, I do want to share some quick points on the principles I followed to grow this business so quickly.
- Launch products with low competition (look for at least a couple results in first page with under 50 reviews).
- Make sure there is a market for the products (check Best Seller rank of existing competitors, or use tools to estimate revenue).
- Try to make your product unique in some way. This could be as small as a different color or as big as a patented idea.
- Manufacture a quality product.
- Higher price is better than lower price. Try not to get stuck in the trap of being the low cost option. You don't have to be highest price, but I would stay away from being lowest.
- Write a high quality description and include great product photos.
- Do keyword research to make product listing keyword focused…include lots of keywords. I use Long Tail Pro for my Amazon keyword research.
- Get a batch of reviews by giving away units for $1 to Amazon product reviewers. I use AMZtracker for this.
- Use sponsored ads to drive sales on Amazon.
- Build a website to drive visitors to your Amazon products.
Honestly, these are all of the basic principles and strategies that I followed to grow my current FBA business.
Amazon FBA Website
I've mentioned previously, that I started a niche site related to my FBA products. This website has continued to grow and see success in it's own right.
I launched my Amazon products in March of 2015. The website was created in July 2015. So, the site is about 6 months old right now, and is just starting to really gain traction in Google.
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Here's the traffic stats from the website:
As you can see, a brand new website takes a few months before Google will send it very much traffic. It really wasn't until November that we started to see a noticeable increase in traffic. So, just a heads up if you have a new site…this is normal!
Long Tail Keywords for the Win!
I also wanted to make a quick note about where the traffic to this site is coming from. You guessed it, long tail keywords via Google search.
For example, one of our highest trafficked articles is targeting a 3 word phrase that only gets 50 searches per month. We are ranked #5 for that 3 word phrase, and of similar variations.
However, we also started ranking for the shorter tail, 2 word phrase with the same article. In other words, if the keyword we were targeting is “best mouse pad”, we rank #5. But we also started ranking for “mouse pad”! We are currently ranked #7 for this shorter tail phrase (ex. “mouse pad”) that gets 2,400 per month.
In other words, you should ALWAYS target the longer phrase, because doing so allows you to capture the long tail traffic and possibly the short tail traffic as well. If you only targeted the short tail phrase, you might not ever get the long tail traffic.
Many of the articles written for this site target phrases with less than 100 searches per month.
Earnings for the Niche Site
The great part about this site is that it's earning money outside of selling our own products. We are monetizing the site in 2 ways: Amazon Associates and our own products through Shopify/Amazon FBA.
Here's a quick look at the Amazon Associates earnings for December:
So, this site on its own earned nearly $1,700 for December. Not bad for a niche site less than 6 months old. However, we also sold several of our own physical products either through Amazon or through our Shopify checkout right on our site.
It's not a lot, but I'm super happy to say that we are selling some product completely off of Amazon now.
So, less than 1% of the product sales took place on our website when compared to Amazon…but it's a start. I hope to grow this side of the business quite a bit through paid traffic and of course good ol' content marketing (the exact stuff we are teaching during Niche Site Project 3.0 right now).
The potential to grow this business is substantial. I've set a goal to order 6 new products by the end of next month. It will take a little while to have the full order manufactured, shipped, and launched; however, I plan to have 6 new products picked out, sampled, and ordered before March 1st.
I've seen the potential from last year, and I expect 2016 to be a big growth year. I'm investing a lot right now and will continue to do so as long as my cash flow is at least break even. Most of my profits are tied up in inventory, but I'm okay with that for the short term.
Overall, I hope you've enjoyed this quick update on my Amazon FBA business! As always, if you have any comments or questions, feel free to leave them below.