Ask me anything about eCommerce (Ongoing)

[biophase]

If I plan on creating a design to put on it, how do I get my branding on the product? I know branding is important on Amazon, so I still want to get my brand name and logo out there, but I don't want it to take away from the design of the product.

Well without knowing what type of product you are designing is if would pretty hard for anyone to answer that question.

 

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[AnAverageJoe]

Well without knowing what type of product you are designing is if would pretty hard for anyone to answer that question.

Excellent point. It's a wall rack to store a yoga mat. The plan is to decorate it so it looks good hanging on your wall.

 

[MoneyDoc]

Actually it was a pretty competitive niche with high traffic. That product is now #1 organically.

That's really interesting... I had to spend thousands of dollars to get my supplements to the first page. They're still on the first page, organically now. So I guess it was worth it.

 

[amp0193]

That's really interesting... I had to spend thousands of dollars to get my supplements to the first page. They're still on the first page, organically now. So I guess it was worth it.

I'd argue that it's a lot harder to make a supplement stand out as being "better" than another. There's no real way for the customer to know how it compares, until they have tried your supplement and compared it to the performance of another.

If you have a product that is inherently better than it's competition, because of improved features that the others don't have, it would be much easier to be successful in a high competition niche without having to resort to brute force.

 

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[biophase]

Excellent point. It's a wall rack to store a yoga mat. The plan is to decorate it so it looks good hanging on your wall.

If it's wood, you can have your logo carved, engraved or burnt into it. If it's plastic, you can get it molded into it. Or, you can get a metal plate, rubber piece, etc... made and fastened onto it. If it's metal, you can get it etched, engraved or stamped into it.

 

[biophase]

That's really interesting... I had to spend thousands of dollars to get my supplements to the first page. They're still on the first page, organically now. So I guess it was worth it.

I think the main difference is that I drove traffic to it from Facebook and did not rely on PPC or just Amazon rankings. If you launch on Amazon and expect to PPC your way to page #1, it will cost you alot of money. My point is that when I drove traffic from FB to Amazon, they already were looking for my product, hence the number of reviews didn't matter to them.

If you wanted the Iphone 100, and then you went to Amazon to buy it, would it matter that there were no reviews on the listing?

 

[MoneyDoc]

I think the main difference is that I drove traffic to it from Facebook and did not rely on PPC or just Amazon rankings. If you launch on Amazon and expect to PPC your way to page #1, it will cost you alot of money. My point is that when I drove traffic from FB to Amazon, they already were looking for my product, hence the number of reviews didn't matter to them.

If you wanted the Iphone 100, and then you went to Amazon to buy it, would it matter that there were no reviews on the listing?

In that case, I agree. Reviews won't matter.

 

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[Denim Chicken]

In that case, I agree. Reviews won't matter.

How long did it take you to hit page 1 on your product? Did you ever want to just stop because it was getting too costly? I feel like at that point you either go all in until you're on page 1 or don't do it at all.

Did you use review/fb groups to get the initial 25 reviews?

 

[MoneyDoc]

How long did it take you to hit page 1 on your product? Did you ever want to just stop because it was getting too costly? I feel like at that point you either go all in until you're on page 1 or don't do it at all.

Did you use review/fb groups to get the initial 25 reviews?

I started in 2016 and it took me only a month or so. However, I was very aggressive with giveaways (when they were not against policy), advertising, and branding. I think it was all worth it. Being on the first page of a category in health and personal care, the biggest volume category on Amazon.com, is quite rewarding.

 

[biophase]

I would assume it was in a less traffic niche? Getting organic sales with 0 reviews in supplements is virtually impossible, especially now.

Found the image. This is a product in the dog niche that I had 1 review and was ranking really high after 2 months. Right now it's ranked #1.

 

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[TTG SS]

@biophase
Do you think it would be possible to still grow at a decent clip if you are taking a reasonable salary out of the net profits to live off of. I plan to reinvest all my profits for the first year but after a full year or so I would like to be able to take a small salary.

Provided there is still a positive cash flow each month would that majorly hinder growth? This is after a full year of reinvesting.

I assume this answer will have a lot to do with my goal for the business but would love to hear your input.

Thanks!

 

[Denim Chicken]

@biophase
Do you think it would be possible to still grow at a decent clip if you are taking a reasonable salary out of the net profits to live off of. I plan to reinvest all my profits for the first year but after a full year or so I would like to be able to take a small salary.

Provided there is still a positive cash flow each month would that majorly hinder growth? This is after a full year of reinvesting.

I assume this answer will have a lot to do with my goal for the business but would love to hear your input.

Thanks!

Anytime you take cash out of your business it'll hinder growth. There's only so much capital, it either go to salary or new orders.

 

[biophase]

@biophase
Do you think it would be possible to still grow at a decent clip if you are taking a reasonable salary out of the net profits to live off of. I plan to reinvest all my profits for the first year but after a full year or so I would like to be able to take a small salary.

Provided there is still a positive cash flow each month would that majorly hinder growth? This is after a full year of reinvesting.

I assume this answer will have a lot to do with my goal for the business but would love to hear your input.

Thanks!

I think it would be very hard. If you do the numbers you will see why.

Let's say you start with $2000 and order something that costs $10 and you sell it on Amazon for $30 and you net $10 profit after fees.

So each month if you sell out, you profit $2000 and end up with $4000 cash in hand. You can decide to take out $2000, and put $2000 back into the same product. At this rate, you withdraw $2000 a month for yourself, but your business never grows. This is assuming that your product sales stay the same.

So what if you took $1000 salary and waited 2 months to get the extra $2000 to start a second product. I guess that's not bad, but you are slowing your growth in half. At this rate you can launch 6 products a year vs 12, all by merely using 1/2 of profits as salary.

And again, this assumes that each product sales never grow beyond $4000/mo in sales.

 

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[Drew D]

I think it would be very hard. If you do the numbers you will see why.

Let's say you start with $2000 and order something that costs $10 and you sell it on Amazon for $30 and you net $10 profit after fees.

So each month if you sell out, you profit $2000 and end up with $4000 cash in hand. You can decide to take out $2000, and put $2000 back into the same product. At this rate, you withdraw $2000 a month for yourself, but your business never grows. This is assuming that your product sales stay the same.

So what if you took $1000 salary and waited 2 months to get the extra $2000 to start a second product. I guess that's not bad, but you are slowing your growth in half. At this rate you can launch 6 products a year vs 12, all by merely using 1/2 of profits as salary.

And again, this assumes that each product sales never grow beyond $4000/mo in sales.

This is what I have trouble understanding about eCommerce, pretty much due to lack of experience.

So in order to grow and get cash out of the business you need to eventually have more products because with one product it's pretty much impossible to withdraw profit for yourself and still grow quickly right?

So there's two ways to grow the business.

1. Keep putting the money back into the business (if you withdraw money, probably don't grow or grow much slower)
2. Sell other products (the more products you sell, the more you can withdraw some money to live off of and still grow)

Correct?

 

[AnAverageJoe]

This is what I have trouble understanding about eCommerce, pretty much due to lack of experience.

So in order to grow and get cash out of the business you need to eventually have more products because with one product it's pretty much impossible to withdraw profit for yourself and still grow quickly right?

So there's two ways to grow the business.

1. Keep putting the money back into the business (if you withdraw money, probably don't grow or grow much slower)
2. Sell other products (the more products you sell, the more you can withdraw some money to live off of and still grow)

Correct?

I've been thinking about this a lot lately. Keep in mind I'm no biophase or an expert whatsoever.

I think it depends on how much money you want and need to get out of the business. If you want a 6-7 figure business then you're not going to want to take anything out of the business at all to begin with and put all your profits back into the business by adding more products, etc. I don't think anyone can live off an ecommerce business that only sells one product.

If you have several products and you're making a decent monthly income, then I think it's safe to pay yourself a salary. I'm sure someone at the level of biophase can afford to pay himself, especially since he's paying an employee.

I think you just need to set goals and milestones you want your business to get to before you start paying yourself. Like, once I get to 12k profits/month, I'll start paying myself 2k, etc. Something like that. I don't think this is the type of business where you want to immediately start paying yourself.

Hopefully that makes sense. Maybe someone smarter than me can put in their 2 cents.

 

[Denim Chicken]

This is what I have trouble understanding about eCommerce, pretty much due to lack of experience.

So in order to grow and get cash out of the business you need to eventually have more products because with one product it's pretty much impossible to withdraw profit for yourself and still grow quickly right?

So there's two ways to grow the business.

1. Keep putting the money back into the business (if you withdraw money, probably don't grow or grow much slower)
2. Sell other products (the more products you sell, the more you can withdraw some money to live off of and still grow)

Correct?

Every product has a limit, so unless you're scaling and selling more of the same product, another way to grow is to expand your product line or go into a new vertical. Each product is essentially a mini business, and it requires capital to get started and continual cash for re-orders. If you take money out of the business, you are taking away money that is needed to grow your business.

Watch any shark tank episode, there is always 1 or 2 companies where Kevin offers a royalty deal where he gets $x for every sale, and what is the default answer? "Sorry Kevin, I don't need cash coming out of my business while I'm trying to grow. Thanks for the offer".

 

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[TTG SS]

I think it would be very hard. If you do the numbers you will see why.

Let's say you start with $2000 and order something that costs $10 and you sell it on Amazon for $30 and you net $10 profit after fees.

So each month if you sell out, you profit $2000 and end up with $4000 cash in hand. You can decide to take out $2000, and put $2000 back into the same product. At this rate, you withdraw $2000 a month for yourself, but your business never grows. This is assuming that your product sales stay the same.

So what if you took $1000 salary and waited 2 months to get the extra $2000 to start a second product. I guess that's not bad, but you are slowing your growth in half. At this rate you can launch 6 products a year vs 12, all by merely using 1/2 of profits as salary.

And again, this assumes that each product sales never grow beyond $4000/mo in sales.

Great explanation! Thank you

Very clear!

 

[Millenial_Kid5K1]

I'm always careful with newer factories and I place smaller orders ($10-$15k) with them for a few years. But even with my old factories I still get nervous when my order amount goes over $50k. You never know when they might just run. I try to keep smaller orders flowing in constantly, so I only have $25k orders out at each factory at a time.

I know I'm snagging this from the middle of the thread from a couple years ago, but is this still your perspective? If your cash flow has need to go much above this, would it be economical to buy a small factory in the same region? Have you looked into it?

 

[RoadTrip]

I started a beauty product on one of the amazons (not .com), I got about 20 reviews and I'm on the first page selling 35-40 units a day... Opportunities are out there, start branching out. Don't follow the crowd.

Did you private label this a a custom recipe or catalogue product?

 

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[JAJT]

This is what I have trouble understanding about eCommerce, pretty much due to lack of experience.

It's a really common misconception.

When you are living on profit, all you can really afford to do without debt is continue doing what you've been doing. If you buy inventory for $2,000 which results in $4,000 of revenue. You pay your bills with half, buy more inventory with the other half, repeat.

Anything outside of this equation is debt. Any debt that can't pay itself off with profit will snowball.

It sucks.

Re-look at those numbers but now assume you don't pay yourself. Things look a HELL of a lot rosier. Expansion becomes easier. Growth becomes easier. You can do tests and speculate and try different marketing approaches and spend profit, not debt, to grow your business.

Of course this isn't all or nothing. You do have to pay yourself at some point. But it's a tradeoff. Every dollar in your pocket is a dollar not spent on growth. You just have to weight that out.

 

[Drew D]

It's a really common misconception.

When you are living on profit, all you can really afford to do without debt is continue doing what you've been doing. If you buy inventory for $2,000 which results in $4,000 of revenue. You pay your bills with half, buy more inventory with the other half, repeat.

Anything outside of this equation is debt. Any debt that can't pay itself off with profit will snowball.

It sucks.

Re-look at those numbers but now assume you don't pay yourself. Things look a HELL of a lot rosier. Expansion becomes easier. Growth becomes easier. You can do tests and speculate and try different marketing approaches and spend profit, not debt, to grow your business.

Of course this isn't all or nothing. You do have to pay yourself at some point. But it's a tradeoff. Every dollar in your pocket is a dollar not spent on growth. You just have to weight that out.

Good thing about it is its 'passive' enough that you can work a day job or another business while it grows.

 

[biophase]

I know I'm snagging this from the middle of the thread from a couple years ago, but is this still your perspective? If your cash flow has need to go much above this, would it be economical to buy a small factory in the same region? Have you looked into it?

I have no aspirations to own or run a factory overseas.

 

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[RoadTrip]

I receive the shipment from China. I usually open up one box and one package, inspect it to make sure it is to par. Then I make a shipment in Amazon's seller central website, print the labels and put them on the boxes and Fedex comes and picks them up.

Cost is fairly cheap as you get to use Amazon's Fedex rates.

Do you have experience with FBA prep companies? I live in Europe so can't do the checks myself, though would prefer to do so.
Or will it be better to focus on Amazon UK first so I have more control on shipments, also taking into account the lesser degree of competition?

 

[biophase]

Do you have experience with FBA prep companies? I live in Europe so can't do the checks myself, though would prefer to do so.
Or will it be better to focus on Amazon UK first so I have more control on shipments, also taking into account the lesser degree of competition?

No Sorry, I have never used any of them. I probably would go straight to Amazon USA. The market is bigger.

Also, one of my clients wrote me today and told me that shipping China to AMZ USA is about 25% cheaper than China to AMZ UK.

 

[illmasterj]

Hey @biophase, thanks for taking the time to answer questions in this thread.

When it comes to a startup product sales business what do you favor? Margin or volume?

Say you have $10,000 to invest in product, and due to MOQs you can only afford 2 products to start out of a possible 4. 2 have great sales volume but lower margins (15-20%), while 2 have better margins (~25%) but lower sales volume. Is it better to get cashflow at an early stage?

 

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[Longinus]

@illmasterj That's an interesting question and I'm not sure how biophase will answer this, but I also made this reasoning myself.

Let's say we can sell the product for $50 and $100

$50

• Your landing costs are $25.
• Amazon referral costs are 15% + handling price, say $7.5 + $2.5 = $10
• Profit is $15

$100

• Landing costs remain the same: $25
• Amazon referral will be more but handling costs will be the same: $15 + $2.5 = $17.5
• Profit is $57.5

For each $100 product you sell, you must sell almost 4 $50 products. You will also have more clients, have more competition, have to place more orders.

On the other hand, you will have to pay more stock costs for the $100 product since you will sell slower. But that argument can be neglected because your margin is way higher.

Conclusion: I'd go for low & slow.

 

[biophase]

Hey @biophase, thanks for taking the time to answer questions in this thread.

When it comes to a startup product sales business what do you favor? Margin or volume?

Say you have $10,000 to invest in product, and due to MOQs you can only afford 2 products to start out of a possible 4. 2 have great sales volume but lower margins (15-20%), while 2 have better margins (~25%) but lower sales volume. Is it better to get cashflow at an early stage?

My first question is? Which product will you provide better value on?

I don't even look at margin vs volume because if you can't sell or rank your product it doesn't matter.

 

[biophase]

Conclusion: I'd go for low & slow.

Well you have a case study. Compare your current product now to your VR goggles. Which is better?

 

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[Ecom man]

@biophase
Do you think it would be possible to still grow at a decent clip if you are taking a reasonable salary out of the net profits to live off of. I plan to reinvest all my profits for the first year but after a full year or so I would like to be able to take a small salary.

Provided there is still a positive cash flow each month would that majorly hinder growth? This is after a full year of reinvesting.

I assume this answer will have a lot to do with my goal for the business but would love to hear your input.

Thanks!

I'm know I'm late to the party but just a quick bit of personal experience on this.

I had a friend who I helped set up a website for at almost the exact same time I set up my website. I helped him get advertising running taught him how to add products the entire bit. The friend decided his niche just wasn't working out so he copied every product I had and started competing directly with me. To top it all off he was charging $10 less per item on every single product so he would take sales away from me. There was one thing that I did differently than him... I reinvested everything into adding more products, marketing, etc. He used his business to live on barely reinvesting anything. Fast forward to December 2016. I closed the year out grossing nearly 2 million in sales. He closed the year out going back to a job because his business had dwindled to almost nothing. Yes, reinvesting the profit back into the business is vital!

 

[Striver]

I had a friend who I helped set up a website for at almost the exact same time I set up my website. I helped him get advertising running taught him how to add products the entire bit. The friend decided his niche just wasn't working out so he copied every product I had and started competing directly with me.

A friend, eh?! WOW!