Is Starting an Amazon Business Still Worth It?

May 2020 Update

We have now sold what was a fantastic Amazon business which funded our lifestyle and them some for the last 5 years.

We now buy & grow ecommerce businesses, both on & off Amazon and I’m hoping to build Your Lifestyle Business into a popular blog and educational brand to help people the world over build lifestyle businesses they can run from anywhere in the world.

This post was written & created in March 2017, but reading through it now some 3 years later, the information is as relevant now as it was then. I hope it helps. 😁

Original Post

The last monthly stat report I did was in September 2015, just as we were coming up to our first crazy Christmas period.

I fully intended to keep going with the monthly stat posts at that time, but as Christmas approached the work load intensified and it was all hands on deck.

It was just one of those jobs that got pushed back and pushed back and then it was too late.

I don’t plan on re-igniting the monthly stats posts as the whole monthly income thing has really been done to death and the business has moved so far forward it would make less sense now anyway.

But I thought it would be good to give an update on our business to date, talk about some of the changes over the last couple of years and look at what our plans are for the coming year.

If you currently have an ecommerce business or are looking to start one, then this should help!

Fast Money Making Opportunity?

Lots has happened since Sept 2015 both in our business and with Amazon as a whole.

We now have 18 products selling on Amazon within our brand, another 7 launching this year and a team in the Philippines helping us manage all this.

My partner is now a regular on the Chinese business scene (another discussion altogether), and after a long time has finally roped me in to setting up a brand new side of the business which I’ll talk about shortly.

Amazon, as with all fast money making business opportunities, has become infinitely more competitive and certain rules have changed making it harder to rank and forcing you to think more like a business than a quick money maker.

Which by the way, is always going to happen.

Whenever there is a fast money making opportunity, the fast adopters will cash out and move on, the fast and clever adopters will see it as a business from the start and continue to cash out long after the ‘get rich quick’ clan have moved onto the next thing and the slower adopters will be forced to treat it as a full time business and will need to put in more time and effort to make it work.

Case in point – Internet Marketing.

Think of some of the big names who made millions back in the early days and have since disappeared, then think of those who were around back then but built solid businesses – Ryan Deiss – Digital Marketer, Russell Brunson – Clickfunnels are great examples. Then think of those who came later to the game and created solid businesses from the getgo – Leadpages, Social Media Examiner, Hubspot etc.

The same can be said of Amazon.

There will be those who jumped in, made a mint and have moved on and then there will be those who worked hard to create a brand and a business and who are doing extremely well. I would include us in that second group. And now there will be those who start with a brand and a long term business in mind and it will be those people who do extremely well moving forward.

When building a business you have to know which part of the cycle you’re in and build your business accordingly.

Some Key Lessons Learned

As I said I have no plans to reignite the monthly stats, but here’s a quick breakdown of 2016.

2016 - Sales Stats

Costs

COGS & Direct Expenses which includes the costs of goods sold (ie cost of product, shipping etc), plus the Amazon FBA fees etc, came out at 64% of total income.

You could shave another 10% off that by not giving away any products or doing promos or discount codes, but that would make it infinitely harder to rank and achieve the sales velocity you need.

Other Marketing Expenses, including Amazon Sponsored Ads, Amazon Marketing Services, Google Ads etc, came in at 9% of total income.

Then for us General Operating Expenses came in at another 8%, which is high because we’re aggressively building the business. So a huge proportion of that was travel back and forth to China & the Philippines and building a big team to grow the business faster.

Even so it still left us with a healthy 19% profit margin, which is being plowed back into the business by way of more stock, more products, expansion into Europe and now our own site.

Without the desire for world domination, you could easily create a nice smooth business with just you and a couple of outsourcers and comfortably bring home 30% profits month in, month out. Of course the higher you price your products and the lower you negotiate the cost of those products you could continue to improve upon that number, but I’ll leave that for another post.

So we had a good year, but due to a variety of challenges we didn’t hit our targets.

We did learn a lot however, and continue to do so and using our learnings so far in 2017 we’re on track to double last years numbers. Yeehaa!

Some of the key takeaways from last year are;

1. Always remember Amazon is a 3rd party site, you are not in control, therefore it will be frustrating!

They will change your listing with no notice. Make it inactive, change your inventory levels, allow hijackers etc.

Your BSR will suddenly drop for no reason, sales will dry up, ads won’t show etc etc.

You name it, it will happen. You’ll then spend hours, or days or weeks depending on how unlucky you are, going back and forth with seller central, speaking to one person after another, each one telling you it’s not their department and you need to speak to X.

This will lead you to blaming your partner, it all being their fault and arguments will ensue! Hahaha (Love you darling) ;)

It’s not great business practise, it’s not right, it is annoying, they should care, blah de blah, but it is what it is!

This is something that is out of your control and you cannot change it.

So don’t waste time complaining and moaning about the big bad corporate machine.

Be an entrepreneur through it all. Another word for entrepreneur? Problem Solver.

Amazon is an opportunity to make a lot of money in a short space of time. An opportunity like that doesn’t come without a it’s own set of challenges and hazards.

This will test your patience, your communication skills, your tenacity and your dogged persistence to the limit!

Be prepared for that and embrace it!

2. The later you come into this game, the longer term you have to plan.

Every decision Amazon makes is to grow their own profit and improve the end user experience.

The end user for them is the customer who is buying from their platform.

So when sellers and marketers come along and try to game the system, they will move in and make the relevant changes to ensure the end user is protected.

Case in point the reviews system change in 2016.

They want a platform based on integrity so they have put in the necessary changes to ensure it stays that way.

It doesn’t mean the system doesn’t work anymore, it means the rules have changed.

You need to think of the long game.

What other strategies can you put into place to adapt to this change positively and to ensure that any future changes don’t affect your business because you have such a solid system in place.

Here’s how we’re now launching our products on Amazon and improving our rankings and sales on an ongoing basis;

  • We’re growing our brand name off of Amazon. Using content, press releases and social media, we’re linking back to our Amazon listings via targeted campaigns for each of our products.
  • We’re approaching ‘influencers’ in our industry to review our products off of Amazon via their blogs & social media channels.
  • We’re still giving heavily discounted products in the early days of a launch to increase sales velocity and increase ranking.
  • We’re working much harder on SEO & keyword skills to ensure our off of Amazon content is SEO friendly and our listings are heavily optimised for the right set of keywords.
  • We’re launching and immediately using Amazon PPC / AWS & Google PPC to help boost sales.

Remember opportunity seekers & marketers generally ruin a marketplace for everyone else, so the faster you can get into a long term business mindset, the more it will benefit you.

3. If you want to play in Amazons Garden, you’ll have to play with their toys!

Don’t dabble with Amazon PPC. Make it an absolute must to master it.

It will be without doubt the fastest route to getting your products to page one of your main keywords, so don’t scrimp on this vital skill.

If you really can’t cope with it (PPC can be a complete pain), then outsource to someone who will become or is already a master. It will be worth every penny.

You don’t even have to employ full time, sites like upwork.com or freeeup.com will have the people with the skills you’re looking for.

4. Don’t get caught up in operational tasks and neglect the marketing

This is so easy to do!

There are so many pieces of the puzzle to put together from selecting products to dealing with suppliers, handling shipping issues, listing products, dealing with seller central, packaging, labelling etc.

It’s super easy to almost forget about the marketing part and believe that Amazon will do all the work for you.

To a degree as I said above they have done a lot of the heavy lifting for you, but you’re working in a very competitive marketplace now.

All the courses and trainings showing sellers how to sell property via the platform has created a raft of half decent competition on the site. (3 years ago 90% of the listings were shocking!)

The secret to success on Amazon is negotiating a bloody good deal on getting your product to market so you have a good profit margin and then out-marketing your competition on the platform.

Here’s a quick run down of how to do that;

1. Images

As people are scrolling through the Amazon feed, your product has to jump out at them amongst all the other products.

I know that Amazon have some pretty strict regulations on how images should look making it almost impossible to do this, but you just need to think creatively about how to angle your product, how are you using shadows, reflections etc.

Here’s a great image of a chef’s knife.

chefs knife

2. Listing

Again I know that Amazon have all kinds of restrictions on headlines & bullet points etc. But you need to work with what you have.

Your headline should say what your product is and include the main search term you think your customers are searching for.

The bullets need to be readable but very keyword heavy.

Keywords are the key here. You need to start with a huge list of potential keywords you want to rank for and try to include as many in your listing and in the keyword section in the backend of your listing (within seller central) as you possibly can.

Then as you start to make sales, you can keep an eye on which keywords seem to work best for you and optimise accordingly.

This is an ongoing process.

3. Reviews

To give your product credibility we have found over the last couple of years that it’s actually far less about how many reviews you have and far more about how many are 5 Star.

You need to keep that rating up.

You do that by offering a decent product in the first place. Make sure to get samples when ordering and ensure it’s a quality product that you’re proud to sell.

Make sure your images and product description describe exactly what the customer is going to get. There is nothing more likely to create a negative experience than if a customer receives something that looks significantly different than what was advertised.

Stay in touch with customers on Amazon, ensure you’re answering any customer service emails, sending out new products immediately if any are reported faulty.

Use a software like Salesbacker to follow up with customers after they have purchased and offering them the opportunity to contact you directly with any issues, or leaving a review if they’re super happy with the product.

If you get any negative reviews on your listing, act quickly. Respond apologetically and be generous. Even if the review seems desperately unfair, a good friend of mine once said “kill em’ with kindness”.

If however the review is about fulfilment rather than the product or includes bad language etc, then quickly report the review to Amazon and get it removed.

The key with review management is staying on top of it and trying to create awesome customer experiences at every opportunity.

4. Maintaining a High Seller Rating

Yep, out marketing your competitors means keeping Amazon very happy.

You need to be responding to customer enquiries, quickly and satisfactorily. You need to be managing your inventory properly. You need to be keeping your return / refund rate under 1% and if you’re doing FBM as well as FBA, you need to ensure you ship, fast and efficiently.

The management of your business on Amazon is as important as the marketing you do.

If Amazon don’t feel you’re a responsible seller and could tarnish their reputation then your listing will fall out of site no matter what you do externally.

5. Sales Velocity + Conversions

You will get a lot of Amazon love if you can show a steady sales velocity (sales over time), coupled with a solid conversion rate (meaning when people click on your listing a good percentage of them buy).

Your conversions will come from ensuring you have quality images, copy, keywords & high review ratings on your listing ensuring your item is both relevant and attractive.

Sales velocity will come from ensuring you have lots of high quality traffic clicking & converting on your listing.

So to start the ball rolling and to help improve your rankings on Amazon, sending out discount coupons every day for a specific period depending on your budgets, marketing campaigns etc, will increase the sales velocity.

Unfortunately you can’t get the double whammy of reviews anymore as it’s against Amazon TOS to ask for a review from a discounted product, but you can still run a launch campaign and increase your sales pretty quickly over a short period of time to give your product some momentum and to ensure it’s picked up by the Amazon machine!

Couple that with a targeted Amazon Sponsored Ads campaign, a well thought out press release campaign and an ‘influencer’ review campaign and you have the beginnings of a ‘crush it’ style launch!

I’ll talk about each of these more in a post more specifically about marketing strategies.

6. CANI

The real success to marketing on Amazon is to do something every day. Without a doubt this has been the key to the success we’ve had.

CANI – Constant and never ending improvement.

Whether it’s running & tweaking the sponsored ad campaigns, sending out a press release, contacting an ‘influencer’ to review our product, tweaking our follow up emails, creating content etc.

This is not a set and forget and that is the fastest way to see your listing and your sales decline.

What’s Next??

Our own platform!

Yes, we have finally decided that as Amazon holds all the cards including all our customers, the sensible option moving forward would be to create our own website and start to sell off of our own site, all the time building a customer database that we own as opposed to Amazon.

Now clearly the landscape is very different here.

We don’t have the trust, the authority, the credibility, the list or the sheer presence that Amazon has created.

We are a very very small website in a very very big pond!

So this is going to be an interesting experiment and I’m looking forward to sharing the journey with you!

In the meantime….

Is Amazon Still Worth It?

We started with that question so let’s summarise the answer.

Categorically YES!

It’s a great business opportunity.

Is it fraught with danger?

YES! This is a business. All business is fraught with danger.

That’s why 70% of businesses fail. Starting, growing and running a business is not easy and you should only ever consider it if you have the stomach for it.

However, from the day I started speaking about Amazon I have always said that this is a simpler business model. Not easy, but far simpler than say something like digital marketing.

For the very reasons I identified above – they’ve done the heavy lifting for you and have created the site, the audience, the trust etc etc.

But that doesn’t mean it’s easy.

You still have to source the products, organise the logistics, out-market your competition and work hard to make it a success.

And it’s not getting any easier. As with any maturing business model, the competition is growing and it gets harder and harder to get seen.

It’s the same in any business, but you still see new banks, law firms, restaurants, dance studios, pet grooming services, hairdressers, landscapers, web developers, software companies, information products, you name it, setting up every day of every year.

There will always be competition, but where there’s competition there’s a market so why shouldn’t you have your slice!

The online retail business is set to double in the next 5 years and Amazon is at the head of the pack so if you want to get started now is the time! (Source – Statista.com)

However, please only consider starting a business in any industry if you truly believe you have the stomach for it.

Will you accept full responsibility if things don’t go to plan. Have you got unbending determination to make it happen and will you do whatever it takes to ensure your business or the next one or the next one is a success?

If your answer is YES, YES & categorically YES then what are you waiting for??

 

 

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