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Deal or No Deal?

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pkom79

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Here is the deal:

You are given an opportunity to sell a product that is a best seller on Amazon. The current seller (brand owner) has to remove the product from Amazon so
would have to open your own e-commerce store. This product is patented and you would be the only seller. You can't use the brand's website, so you wouldn't have any SEO advantage. You can't use any customer data.

Here are the product details:
It's a leak and spill proof water bottle for kids - huge market
It has over 2,200 reviews on Amazon with the average rating of 4.5 (you will be able to transfer them to your store) - exceptional quality
Current sales are over 250 units a day on Amazon - high demand
The MSRP is very attractive - 2 bottles for $11.99. You can't increase the price - very affordable
Cost of goods sold is only $2.45/2 bottles (79% margin) - sweet margins

You have access to 100,000 units, so you won't have to worry about selling out. You are responsible only for the units you sell, so you won't have to pay for the inventory ahead of time. You won't be charge for storage either.

Brand owner will provide any images or videos you will need for your ads. Including customer video testimonials.

The cost of shipping with FedEx would be $4.99 per 2 bottles. You will charge your customers the same. Small shipping fee most likely wouldn't affect the conversion rate too much. Delivery time 2-7 days. Same day fulfillment.

Conditions of the deal are the following:

You have to use Facebook Ads to send traffic to your store. New ad account. New Facebook Pixel. Cold traffic than retargeting when you build your custom audiences.
You have to spend at least $5k/month on ads.
After 60 days: If you are profitable, you get $10k bonus. If you lose money, you will have to pay $10k penalty.

Would you take this deal?
 

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JScott

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Nope, because I know nothing about Amazon selling or FB ads.

But, for someone who knows Amazon and FB advertising, it seems like a no brainer. In fact, with a current 250 sales/day on a patented, branded, single supplier product, and with net income of at least $5/sale, I would think that you should be able to earn more than the $5K/month hurdle simply by sitting back and collecting organic sales. Even if organic sales drop by 80% to 50 sales/day when you take over, that's $250/day in net income. That's $7500/month, which exceeds your hurdle -- you get profit and bonus.

On second thought, I would take the deal. I'd find someone that knew Amazon/FB and I would fund the $5K/month in ads in return for 50% of the profit... :)


EDIT: I misread the post above...see my follow-up below...
 
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pkom79

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But, for someone who knows Amazon and FB advertising, it seems like a no brainer. In fact, with a current 250 sales/day on a patented
You can't sell it on Amazon. Just your new E-commerce store.

All you have is a unique market proven product with tons of social proof with great margins.
 

minivanman

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No. I don't follow rules very well so it wouldn't be for me. This is like working for someone else and following their rules.
 

pkom79

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I just saw on Twitter that the company that I used for the product example in this thread just recalled 5.7 million kids water bottles :eek: Disregard this information when making your decision if you would take this deal or not.
 

Champion

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Hehe... your conditions about the deal really got me scared now.

Im launching an UNTESTED product in my own shopify store and planning to get traffic through fbook ads.

Lets see how this goes lol :D
 

1step

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All you have is a unique market proven product with tons of social proof with great margins.

Margins sound good but you only have $9.50 or so to acquire customers. No way I would bet $10,000 that I could acquire customers at that price. I feel like most people with kids have seen the bottles that you are referring to so I doubt this would go viral and I don't see another way to acquire customers at $9.50.
 

Tourmaline

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Too low margins, as @1step pointed out
 

Jaden Jones

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So many things could go wrong here, and you have no control.
voGMGTr.jpg
 

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pkom79

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@1step and @Tourmaline are correct. Even though, you would be selling a proven high demand product with a great margin and minimal risk, the price is just too low to make Facebook Ads work.

Product Price - $11.99 + 4.99 shipping = $16.98

COGS - $2.45
Shipping - $4.99
Payment Processing - $0.79 (2.9%+$0.30)
Cost (before ad spend) - $8.23

Max Allowed Cost Per Purchase - $8.75

I'll create another post where I'll break down why CPP this low is extremely high to achieve at scale.

If your business requires Elite Top 1% Ad Performance to be profitable, it's probably not a business you want to be in.
 

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