My Amazon Guy

Pathway to Profitability on Amazon #33

April 15, 2020 Steven Pope Season 1 Episode 33
My Amazon Guy
Pathway to Profitability on Amazon #33
Chapters
My Amazon Guy
Pathway to Profitability on Amazon #33
Apr 15, 2020 Season 1 Episode 33
Steven Pope

If you have concerns about profitability, the first thing you should consider doing is raising prices. Do you have the right business model? 

Private label

Wholesale

Retail Arbitrage

  • SWOT analysis
    • Strengths
    • Weaknesses
    • Opportunities
    • Threats

Ultimately raise prices

www.myamazonguy.com

#Margins #Profitability #Profits

Show Notes Transcript

If you have concerns about profitability, the first thing you should consider doing is raising prices. Do you have the right business model? 

Private label

Wholesale

Retail Arbitrage

  • SWOT analysis
    • Strengths
    • Weaknesses
    • Opportunities
    • Threats

Ultimately raise prices

www.myamazonguy.com

#Margins #Profitability #Profits

speaker 0:   0:00
Are you profitable in selling on Amazon today? That's the question on our pathway to profitability. My name is Stephen Pope, and I'm the founder of my Amazon guy. This is the my Amazon guy. Podcasts. So thanks for joining me today. I'm gonna be having some discussion on this topic and really, the ultimate question on Can you find profitability? Selling on Amazon is yes, But how you get there can sometimes be a difficult conversation. Um, ultimately, after really sinking my teeth into this question the last 24 hours, I ultimately came across the idea that raising your prices is probably the quick and dirty easy solution to any profitability question when selling on Amazon. So if you are not profitable today selling on Amazon there's an 80% chance that you need to raise your prices. Um, so you probably don't even need the list into the rest of this podcast Phony. I say that I know if if you haven't raised your prices yet and you're not profitable, I almost guarantee that that is going to be the solution to your problem. Now, if you raise prices and you're still not profitable than clearly your business model is that question, and you probably should switch things up regardless. So today will be kind of going through some subjects and ideas on what you can do. The first thing I would do if I was you as an Amazon cellar and concerned about profitability is I would go download your payment report on Amazon, and I want you to look at the Excel file specifically for your payment report by transaction detail. That's a pretty, ah, pretty messy job, but it's simple to d'oh and Messi in the sense that it could be scary. Maybe, especially if you're not an accountant and you're not comfortable with numbers and Excel sheets. But But if you're an entrepreneur and you're a business owner, you need to be so the reason why I think you should start this research at that payment transaction levels because you're looking for anything that is out of the ordinary. So, for starters, is your K P I Index or I P. I score for your logistics below 400. If it is, is Amazon charging you extra for storage because that could be harming your profitability, and that's the fastest way you're going to find out if if you're being charged, erroneous things or things you didn't expect from Amazon is by checking your payment reports. And I would check a full quarter of your reports just to make sure you understand everything that Amazon's doing a nickel and dime you whenever I take it an on boarding consultation call. I usually tell my my perspective clients that Amazon is gonna be a 33% partner and for a couple of my clients, a CZ. We've taken the wool off the sheep, so to speak. We we've really come to discover that Amazon has be crept up and become much more than a 33% partner for some of some of those clients. Um, and and so we've been trying to wrap her head around. Why that is the case. It wasn't because we were spending too much on ads. Almost every time I look at ads, I usually say, Man, we should be spending Maur on ads and traffic. I'm a marketer, unbiased on this question. But typically speaking, most brands understand on traffic generation, so it's generally not ads where you need to make the cut, and if you do cut on marketing initiatives, you're gonna cause a death spiral. And I think of the U. S. Postal Service is one of the greatest death spirals occurring today, where all they could do is raise the price of postage. Ah, and go into debt. And, ah, they really don't have a good solvent model there in a death spiral right now. So to prevent the death spiral on Amazon, do not cut down on traffic initiatives that will caught your top line. And things will get worse, not better. But there are some operation things that you do need to do and do need to consider. Um, and raising prices is probably again 80% chance you just need to raise your prices are if you're selling an item that's £2 you know, bulky or consumable. Chances are you're paying at least 5 50 item to ship it, and that is going to eat your profits if you're selling under $20. So if that sounds familiar to you, you probably to raise your prices above $20 immediately. And even if your competition is under $20 that doesn't matter. Ignore the competition. If you're not profitable in Northern competition, you've got to do your own thing Now. If you raise your prices, can you risk reducing your sales? Absolutely. Chances are, though you're going to retain Ah, pretty similar velocity. How much did you raise your prices? Usually less than 10% of the time. And that's because you could lose your own by box if you raise more than 10%. Amazon may even accuse you of price gouging, which is, of course, ridiculous right now, especially if you're not selling an essential good. You're not so in toilet paper or whatever. If you raise your prices more than 10% though, you could still be accused by Amazon for price gouging. I think that's ridiculous. And I think capitalism can fix this quicker than controlled market, that's for sure. But nonetheless, Ah, I would be careful on how quickly you raise your prices and 10 percents generally right around the mark. I would recommend it until you find your plateau of profitability that you are seeking. Um, all right, so enough on the raise prices thought the one of the initial questions you may want to ask yourself is, Do you have the right business model. So if raising prices doesn't solve your problem, the next question, I would ask is. Do you have the right business model? So most of you listening or probably to be private label Er's And those are people who are representing their own items. They might be the duplicate item of somebody else, but they have their own white label brand name, and that's fine. Other people who are listening to this or host sailors and they just sell it to retailers. Um, some out there might be retailers that buy from wholesalers, and they're not private laborers, but they're just one of many different sellers. And that's fine, too. And finally, retail arbitrage. So those are the people who are buying, sometimes in bulk, but goods that discounts and they just resell them wherever they could find him. It's kind of like playing the stock market just with stock and goods. So those models from top to bottom private labeling, is gonna be the healthiest margin takes the most risk best margin available, though Host sale, uh, is the easiest probably to execute if you have a buyer to sell to some retailers because they take care of all the problems for you. It's the difference between running a Kroger where it's clean up on aisle nine all the time, or, uh, running a Costco where you're doing bulk in and shipping out pal. It's It is very difficult for sellers or businesses to migrate from ah ho scale model to a retail model. However, it's doable. It just requires a big mentality shift. Your profit margins are different. The amount of work you put in to go to retail is greater. Um, but it absolutely condemn Worf host cell if given the opportunity over time. Ah, but they're definitely very foreign worlds from each other and do not compare them. It's not fair to compare those two worlds, but I have worked in many organizations. Were going from wholesale to retail was a difficult at best. Ah, action plan and the resistance will occur in your organization to make the necessary changes the way you do business in Ho. So it's just so drastically different how how how your goods airships, how fast you ship and how you interact with thousands of customers instead of one or two customers when your ship in a book. Ah, finally being a retailer buying from Host Sailor. I think that's a lot of risk to do that same with retail arbitrage. And that's because at any point in time, other retailers could buy the same product from your host sailor, and your business plan can erupt very quickly. So, uh, if you're struggling in this area, then chances are need to migrate over to private labelled. And that's an easy migration to do. If you're a retailer already and you just need a manufacturer, your own goods so that's that's my thoughts on business model. I mean an AK next talk about SWAT analysis Ah, and SWAT, if you're not familiar, is strengths, weaknesses, opportunities and threats. And there are many ways you could go about doing this. It's basically a two by two card. You go through the list and figure out what your strength for your business. So I did a podcast recently about how there are three areas of your business, finance, marketing and operations, and I believe and will defend to the death that you need to be excellent in one of those three areas. You don't need to be excellent in all three. If you are great, you're gonna be successful. But if you but you have to be excess sect successful in at least one of those areas. So for me, at my Amazon guy, our excellence areas, finance and the way we built our business model allows for cash flow to be positive, Um and and we've we've created a good business model that deals with finance. Ah, for Amazon sellers typically operations or marketing or generally the areas that most businesses will be Maur Excellent in, um, from my experience, operations is probably the most common. And that is because operations has changed the least between those three areas in the last 50 years. In my opinion, beyond the fact that we're shipping cheap product fast everybody across the country, that's obviously a big change because of Amazon specifically but operations and how to run a business. I think there there's probably 100 operation excellent companies for everyone, marketing and for everyone finance, in my opinion, you know, it's a made up ratio, obviously, but but, uh, I feel like marketing has changed the most, and finance has changed some as well and finance, like take the PPP loans and all these things that are changing by the minute. It's hard to keep up with finance, and I guess you could say the same about supply chain management and operations right now. But nonetheless, it's still shipping in and running your companies generally the same as it was 10 years ago. Even if there is a temporary black swan getting in your way to operate your business, marketing is changing the quickest. It's really hard to do that. That's generally why we're in business at my Amazon. Guy is an agency. People say, Hey, Stephen, I need help with generating traffic. My cells aren't where they want to be. Most common question we get, And so we come in and help build out traffic generation were excellent and class at generating traffic for other businesses. We're trying to get better at helping our clients become profitable, and there are experts out there who can help analyze that. One of our partners is Tyler Jeffcoat over at Seller accountant. We did a podcast with him last Friday and talk about PPP loans and a lot of the finance news that's going on right now, so you should hire my Amazon guy for your marketing needs. Keep doing operations yourself and higher seller accountant to do your finance. And if you do, if you figure out how to make that work Ah, that's a pretty big win. All right, So back to the SWAT analysis. So you know what your strengths and I you know, I'm gonna guess most people listening to this operations is probably gonna be where you're gonna be strongest. Most likely. Um, that's not true for everybody, obviously. But if you're listening to this, it's because usually you need an agency to help you with marketing, and that's where we come in. Um, and this is obviously very much a finance topic today, as we deal with how to become profitable, what is our pathway to profitability on Amazon? So if you're doing the SWAT analysis, figure out what your strongest in then take that to the next level. Figure out what your weekend. Are you weak and finance your weekend marketing? Um, and be more granular than my generic terminology here, of course. What? What makes your operations stronger week. What makes your marketing strongly what makes your finance strong and weak? Is it because you don't have, um, 10 years of experience in those areas is because ah, you have profitability issues on your operations or finance. What? What is it that's making those areas strong or weak? Then finally, 3rd 3rd quad here, going in opportunities. What could you do today? That if you had 15 hours to focus on over the next two days that you could drive home excellently and be a giant opportunity for your business? Get those things listed down and clear your schedules. Clear meetings that generally don't help your business grow anyway. And sit down and think about it. You know, with Kobe 19. Right now, you're not commuting as much. Most likely you're working remote. Got extra couple hours of your day. Put that towards your opportunities and execute and make changes and take action. That is the most important thing that you do as a business right now. Well, everybody is pausing their efforts and cutting back expenses and operations. If you're the guy that doubles down right now and you exploit the opportunities of the situation, you're gonna come out ahead and you're gonna be ahead of everybody because you took advantage of those opportunities. So definitely that's where I would say and hang my hat. You need to think the most about is opportunities now. Threats. I think this is probably the area I'd spend the least amount of time thinking about. And that's because I like to ignore my competition. And, uh, I like to use ah, um, the strategy that your actions dictate the strategy, right? So don't come up with your strategy and then go act on it. I think your actions dictate your strategy better. And Gary V. Is, you know, the guy I'm stealing that from. I'm sure he stole it from someone else. But he's really good at and and so we value speed at our organization. Where was constantly changing? Amazon News is hard to keep up with Amazon platforms constantly changing. So Amazon changing is a threat. Other other agencies are a threat to us. You as a seller, your competition obviously could be a threat. Somebody could undercut you on price. But if you win on price, you're gonna lose it on price at some point. That's why I think you're better off going for premium brand. Raise your prices. Um, other threats China. China is a threat on so many levels I can't count. And I'm not just talking about Kobe 19 I'm talking about Ah, they're going direct to consumer on Amazon. And so I think that manufacturing in China right now is, ah, necessary evil, but is changing. And I think you should look at getting manufacturing somewhere else and and go stateside so your supply chains not interrupted. Increase your prices to accommodate an American made brand. But you'll be thankful you did it before everybody else before that Gold Rush opportunity of bringing manufacturer the state's occurs. So that is my recommendation on what you should do, Um, and again raise your prices. That's probably the core aspect of what you need to do today. If you're worried about your pathway to profitability. Hope you enjoyed our podcast today. My name is Stephen Pope on the founder of my Amazon guy and this wasthe e my Amazon guy podcast