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HOT TOPIC Why Amazon Sucks: The Master Thread

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Timmy C

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The purpose of this thread is to present real, concrete facts and numbers on why starting a business on Amazon might be the absolute dumbest, lowest ROI thing you could do. It's not based on anecdotes. It's not based on hypotheticals. It's based around numbers published by one of the most pro-Amazon sites out there: JungleScout. However, instead of presenting it the way JungleScout wants to, I'll break down the numbers into what they really mean.

A quick summary: The average person fails at Amazon. Of those that succeed, the average person makes $9,000 a year at $10 per hour. To get there, they invest 10+ months of their time, and $4,000. Amazon has reached the point of "Uber" where it has misled people into believing that they're starting a real business that's generating real returns - when in reality the average seller is slaving away at $10 per hour.

In later posts, feel free to share theories and anecdotes. The Amazon-brainwashed crowd, feel free to post emotional responses and select anecdotes. In this post, I'll dive right into the numbers.

Before we begin, let me note the inspiration for this thread: @jpanarra's "New Sellers Earn Between $26,000 To $810,000 Per Year In Profit" - a thread based around data that was taken from the following primary source: How Much Money Do Amazon Sellers Make? | Jungle Scout. I was originally going to write a quick reply to his post, but as I started looking at the language and numbers, I started breaking them down and noticed exactly how bad they really were. That's how this thread was born. If the language is a little off, note that it was originally intended as a reply before the data became valuable enough to make its own thread.

So let's get to it.

First, let's start with the note that the data is published by JungleScout - whose primary incentive is to get more people selling on Amazon. Next, let's look at exactly who the data is based on:

"Between November 14 and December 10, 2019, Jungle Scout surveyed 2,063 Amazon sellers about their experiences. This article references responses from 1,046 experienced Amazon sellers who have more than a year of selling experience and at least one live product listing."

These guys literally surveyed 2,063 people. Decided that half of them suck and don't support their findings. Tossed them out, and kept only half the responses, 1,046 sellers that had attained "some" success.

Why?

Because the 1,017 others didn't fit their narrative and PR push.

If you look at what that actually means, it means that over 50% of preselected Amazon sellers (that were serious enough to have a JungleScout account), fared worse than the data that will be presented below. Add to that all the people without a js account, all the people that have already failed, or those that will fail, and you're left with a very high percentage of sellers that have been huge disappointments.

Of the 50% left, they further fudged the numbers using misleading statements and improper calculations. Let's start with an example of one of those statements:



This statement at face value looks impressive. Here's what it actually means:
  • 32.8% of sellers make between 0-10%
  • 31.2% of sellers make between 10-20%
  • 36% of sellers making profit margins above 20%
And here's what that means in terms of average person...

View attachment 29562

Using the chart above, it means that the median profit margin per Amazon seller is 15% (and note: I said MEDIAN, not "average" or some bullshit that Jungle Scout will use to change perception). That's from the product. Not net after including R&D, branding, EMPLOYEE costs, and all other costs. If you factor in those costs, then the true net margin will be a lot lower.

Is that still impressive? Could be. But is it as impressive as the statement that they built around the data? Definitely not.

Next, let's see how they present sales numbers:



Another quote that seems incredibly impressive. In reality, far from it.

That's what the article presents for sales numbers. Let's see what these numbers actually mean in terms of sales percentiles based on this statement:
  • 0 percentile: Lose money
  • 24th percentile: $1,000 in sales per month
  • 80th percentile: $25,000 in sales per month
  • 99.9th percentile: $250,000 in sales per month
From their statement, they made you think that 1 in 5 sellers do $250k+ in sales per month. However, one in five people don't do $250k in sales per month. One in a hundred does. The exception to the rule. The outlier.

To dive deeper, luckily for us, JungleScout was naive enough to publish their full data:

View attachment 29563

So using this info, we can continue and break down the data even more into what it actually means:

2% don't know their sales, so we'll just add them into the lower tier group (likely wantrepreneurs), making the rest of the percentiles as follows:
  • 0-17th percentile: Make under $500 in sales (aka - lose money)
  • 17-26th percentile: $500 to $1,000 in sales
  • 26-48th percentile: $1,000 to $5,000 in sales
  • 48-61st percentile: $5,000 to $10,000 in sales
  • 61-76th percentile: $10,000 to $25,000 in sales
  • 76-85th percentile: $25,000 to $50,000 in sales
  • 85-92nd percentile: $50,000 to $100,000 in sales
  • 92-97th percentile: $100,000 to $250,000 in sales
  • 97-99.9th percentile: $250,000+ in sales
The average person (50th percentile) makes $5,000 in sales per month. Think about that.

If you don't understand managerial or financial accounting, then you'll assume that the number is good. Afterall, the average person doesn't "make" $5,000 at their job every month. Amazon has to be the way. Or does it. We have to ask the next question...

So what's that mean in terms of profit per year? Not sales, but profit.

If we use JungleScout's bullshit metric, then that's a ton of money. If we use the median profit margin of 15% (which it is according to the chart above), then here's what that means:
  • 0-17th percentile: Lose money a year.
  • 17-26th percentile: $900 to $1,800 in GROSS profit per year
  • 26-48th percentile: $1,800 to $9,000 in GROSS profit per year
  • 48-61st percentile: $9,000 to $18,000 in GROSS profit per year
  • 61-76th percentile: $18,000 to $45,000 in GROSS profit per year
  • 76-85th percentile: $45,000 to $90,000 in GROSS profit per year
  • 85-92nd percentile: $90,000 to $180,000 in GROSS profit per year
  • 92-97th percentile: $180,000 to $450,000 in GROSS profit per year
  • 97-99.9th percentile: $450,000+ in GROSS profit per year
The average seller grosses $9,000 per year from their Amazon business.

And I know you wantrepreneurs will say "Yeah, but look at the top brackets, those guys are killing it". Yeah, they are, but how much are they spending on employees?

Those guys that are doing $450,000 gross per year? How many employees do you think they have? And how much money do you think they're actually putting into their pocket end of the year? I won't answer this question since there's too much variability, however I will give you concrete data for the next point.

"Ok, so $9,000 a year. That would help me a lot with my life. How much do I have to work in order to make that money?"

Here's the breakdown from Junglescout:
  • Fewer than 4 hours per week: 13%
  • 4-10 hours: 24%
  • 11-20 hours: 20%
  • 21-30 hours: 15%
  • 31-40 hours: 10%
  • 41-50 hours: 9%
  • 51-60 hours: 3%
  • More than 60 hours: 6%
What's that actually mean in terms of percentiles?
  • 0-13th percentile: 0-4 hours per week
  • 13-37th percentile: 4-10 hours per week
  • 37-57th percentile: 11-20 hours per week
  • 57-72nd percentile: 21-30 hours per week
  • 72-82nd percentile: 31 to 40 hours per week
  • 82-91st percentile: 41-50 hours per week
  • 91-94th percentile: 51-60 hours per week
  • 94-99.9th percentile: 60 hours + plus week
The average person works close to 20 hours per week. That's what the means. For argument's sake, let's estimate that down to 18 hours per week.

The average person works 18 hours per week on their Amazon "business" to make $9,000 a year. Still worth it?

Let's break that down per hour:

18 hours per week * 50 weeks [two vacation weeks] = 900 hours per year.

$9,000 / 900 hours = $10 per hour.

The average "successful" seller works at $10 per hour to make $9,000 per year.

But wait... that's not all folks. There's also a startup cost!

You have to research Amazon, learn the Amazon skill sets, learn how to import, pay for courses, samples, moulds, manufacturing costs for products that you'll mess up and have to throw out, etc.

That all takes money and time.

How much money and time? Here's the breakdown from JungleScout:

They asked their sellers "How long does it take to become profitable on Amazon?":
  • Profits within 3 months: 22%
  • Profits within 3-6 months: 22%
  • Profits within 6 months-1 year: 23%
  • Profits within 1-2 years: 13%
  • Profits within more than 2 years: 3%
The median person took over 6 months of time to become profitable. My estimate, is around 9 months for the 50th percentile mark.

Disappointed?

Let me disappoint you further.

Here's the data set when looking solely at people that started selling in 2018 and 2019:
  • Profits within 3 months: 16%
  • Profits within 3-6 months: 23%
  • Profits within 6 months-1 year: 24%
For people that jumped in recently, the time to be profitable increased significantly. My estimate for the average: 10 months.

Oh, and to add even more salt: the data above doesn't include sample, research, or studying time, the entire wantrepreneur phase where you're taking courses and reading threads on the fastlane forum.

And note: "Time to be profitable" can otherwise be written as "Time to stop losing money". Because that's what it really is. It takes the average person ten months to stop losing money on top of whatever they spent on courses.

So how much money do people "invest" to get started on Amazon?

Here's how much JungleScout users spent:
  • Sellers spent less than $500: 17%
  • $500-1,000: 12%
  • $1,001-2,500: 13%
  • $2,501-5,000: 18%
  • $5,001-10,000: 21%
  • More than $10,000: 21%

The median person spent about $4,000 to get started selling on Amazon.

So all in all, using JungleScout's data...

The average seller spends $4,000 and 10+ months to get started on Amazon. Once they're up and running, they can expect to make $9,000 a year at $10 per hour. From that, they have to subtract out employee costs, and other expenses, likely netting them a lot less.

Oh ... and that's if you're successful. If you're in the 50%+ category of people that JungleScout deleted from its "data set", then just expect to lose money altogether.

Amazon still sound cool? @MJ DeMarco

I was thinking about doing amazon a while ago but ultimately decided against it after looking into it a bit further and reading a number of threads on here.

Unless you have a brand strategy and use it as one of many sales channels it doesn't appear to be the smartest thing to do.

Although the AU market is still quite fresh.

Nice write up.
 

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MJ DeMarco

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Amazon still sound cool? @MJ DeMarco
Not sure why you tagged me.

Amazon is a channel, not a business.

And those who do well on it experience a nice CAGR. I subscribe to many "business for sale" websites where these businesses are listed, including their numbers. Many are started with little cash and sell for 150K in a matter of years, sometimes months. Those are impressive numbers.

Providing data (who's source is not from Amazon to begin with) that indicates most "Amazon businesses" fail is not surprising to me, but expected. In fact, the data (as you alluded) is probably worse than reality since a bias is involved with Junglescout.

Most people looking to "make money" fail in business, including on Amazon. Likewise, most people who self-publish books and throw it on Amazon also lose money.

I'd also add that people who use "jungle scout" are likely money-chasers looking to make money, not create legit value or enterprise business value. As I've stated for many years, Amazon is a channel not a business. People who use it as such probably fall into the "95% failure" category.

If you own a business that sells products, you probably need to be on Amazon.

As biophase mentioned in the other thread...

The reason a quarter of the people make less than $1000/mo is because they hear that Amazon is a cash cow and want to jump in without thinking that this is hard and a real business. Amazon is a channel, a great way to jumpstart a business, but if you only think in terms of Amazon, you will get crushed.
Money chasers.

No different than the passive income chasers, the "do what you love" chasers, and the "follow your passion" chasers ... having an approach that is NOT market centered will get you crushed and lumped into the 99%.
 

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There was a "seller" who posted on the Amazon message boards a few weeks back. The short version of their message was :

"I created my account and listed an item for sale on Amazon. It sold, and Amazon sent me the order to fulfill. I thought Amazon shipped the product." When asked about the seller's "business" they didn't have one. They literally thought
1. Make an account
2. List an item
3. Amazon ships it from Amazon inventory
4. Lambo

THIS individual would be counted in the seller failure statistics.

I had a friend contact me a few years ago to ask me where the list was of the products that they could sell on Amazon. I thought they meant the restricted items. Nope. She was looking for the catalog of items she could list. As if, like the above "seller" Amazon just had to list something and then Amazon sent you money. Maybe like an affiliate?

In any case, Amazon is NOT what it used to be. I built a good business that was predominantly Amazon and sold it. I will do it again. But people like @AllenCrawley that are successfully building businesses with an Amazon component (like MJ said, a channel) but not solely reliant on it in the long run will probably be more healthy.

The scale of Amazon is hard to ignore, when 1 out of every 2 eCommerce dollars is currently spent on Amazon. I expect Walmart to change some of that in 2020, and eBay is still doing a lot of business in certain categories.

I agree Amazon is harder today, but that is not because of Amazon per se. It's because of Amazon's recruitment of Chinese sellers, and because of guru classes that have people believing they can just open an Amazon account and then pick the Lambo color.

Like @biophase I launched a bunch of new products on Amazon this past Fall, and did OK. It also helps any brand with social proof. My wife was searching for a product last year, and she couldn't understand why it WASN'T on Amazon. Customers just expect it to be there. If that product had been on Amazon, with NO PPC, the organic search would have returned the result and she would have bought it on Amazon. Instead, she bought something similar on Amazon that did return in the search results.

Amazon is a finicky lover but people go back to her time and time again because she's just hard to live without.
 

MJ DeMarco

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Amazon is a channel, not a business.

And those who do well on it experience a nice CAGR. I subscribe to many "business for sale" websites where these businesses are listed, including their numbers. Many are started with little cash and sell for 150K in a matter of years, sometimes months. Those are impressive numbers.
Here's just a bit of what I was referring to.

This was just today. The CAGR numbers are based on a $10,000 startup cost which I believe to be on the high-side. Obviously these numbers are not "average results" from "average people" who buy into average ideas.

Screen Shot 2020-01-06 at 8.46.25 AM.png
 

Kid

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The way is this:You make Amazon ripoff product and sell it on eBay!
[/sarcasm off]

It doesn't matter how you look at the numbers, or how they're flawed
The thing is that it does.

If i tell you that numbers are bad, and those numbers are artificially inflated from very bad, and very bad numbers are 50% best from even worse numbers, then all you can conclude is that reality of amazon wannabes is down to "being constantly broke or in dept" level.

My guess is that non-Jungle Scout data would be representative of this data or worse considering that the data was preselected for "successful sellers".
I guess it might be not a guess.
 

Jon L

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This was my experience on Ebay 10 years ago or so. I made $18k (actual profit) in a year's worth of work. That was 3 hr/day answering customer email, dealing with other issues, buying/listing product etc. That worked out to $20/hr, but still, not worth it for all the stress involved. My largest month, I shipped 2000 orders. I averaged 1 email per order from a customer. I would have made more money taking a second job.

I used a contract warehouse to do all my material handling. They said that I was by-far their largest customer. All the rest were small-er time ebay sellers and other types of companies. I remember thinking, 'if I'm big time, what the hell is a small time operator?'
 

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One of the brands I recently launched on Amazon will NEVER make money on Amazon. I could sell a bazillion units and answer a bazillion emails, and it will never sell for a bazillion dollars. The price/value ratio isn't right. If I were dependent on this for my liveleyhood, I would be screwed. Meanwhile, I will sell a lot of units.

So why bother? There are some products that aren't conducive for eCommerce. The gross margin % is acceptable, but the gross margin $$ aren't significant enough. I may make a $1.00 a unit net, sell 10k units a month, and net for the business $120k/year deseasonalized.

Why bother?

Because once I get some of the products to favorable reviews and ranked in their categories, I can then take the product to their destiny channels of distribution, and use the Amazon social proof as justification for retail placement. Amazon isn't by end game, it's the first quarter of a four quarter ball game.

I launched a stupid business on Amazon a few years back. I sourced some candles that I loved, and thought I could make a market out of them. They were great products. Problem was they cost a fortune to ship, and by the time I paid Amazon fees, shipping fees, and cost of goods, it was a losing proposition. I was fortunate to not sell thousands of them, because it would have been a pain in the a$$ for small reward. I quickly cut bait and moved on, learning better how to calculate ROI.

You can use Amazon to position your non-Amazon business. My non-Amazon targeted business/product line still needs to be on Amazon. Amazon still has the potential to legitimize a launch brand. I don't ever expect Amazon to be my largest channel for this product line. but it will probably always live in the shadows on Amazon. The key for that one is to figure out how to maximize the ROI, mitigate expenses, mitigate pain in the a$$, and get the platform to do what I need it to do.
 

MoreVolume

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Amazon has been very very good to me
But with that being said, I didn’t start my business on Amazon
I had a business and added my products to Amazon later on. It’s just another sales channel to me
 

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The more I use amazon (as a consumer) the more wary I'm getting because you just can't trust what you are actually buying anymore.

It seems like each timeI look up an item I would like to purchase, there are dozens of knock offs and cheap versions that all have the same stock photography from Ali Baba. Plus it's to the point that I don't trust the reviews nearly as much as I used to. There have been several times when I receive a product and there is a little slip of paper that tells me I will get a free gift if I give them a 5 star review.

Obviously they don't have faith in the product. They assume that the only way someone will leave a positive experience about the company is if they are bribed to do so. I don't blame them for gaming the system, but all it does it hurt consumers.

I will continue to use Amazon, but I really don't like the direction it's going. I used to trust it (it being the type of seller on the platform) a lot more than I do now. Articles like this just cause more "get rich quick" people to jump in and flip anything and everything they can find with no regard to quality.
 

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The more I use amazon (as a consumer) the more wary I'm getting because you just can't trust what you are actually buying anymore.

It seems like each timeI look up an item I would like to purchase, there are dozens of knock offs and cheap versions that all have the same stock photography from Ali Baba. Plus it's to the point that I don't trust the reviews nearly as much as I used to. There have been several times when I receive a product and there is a little slip of paper that tells me I will get a free gift if I give them a 5 star review.

Obviously they don't have faith in the product. They assume that the only way someone will leave a positive experience about the company is if they are bribed to do so. I don't blame them for gaming the system, but all it does it hurt consumers.

I will continue to use Amazon, but I really don't like the direction it's going. I used to trust it (it being the type of seller on the platform) a lot more than I do now. Articles like this just cause more "get rich quick" people to jump in and flip anything and everything they can find with no regard to quality.
I still believe that even though it is a slower route, that authentic reviews from real customers is the way to go. Maybe that makes me a fool, but I want to build real businesses based on good consumer value.
 

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Thank you @AgainstAllOdds for what I see as your exposé of JungleScout. I have posted many times about the folly of using such a system as the basis for setting up an Amazon based business.

JungleScout have set themselves up as high priced Amazon Gurus, and in numerous posts I have dealt with the sad fact that using JungleScout to find "hot selling" products leads inevitably to entering an extremely competitive arena, with hundreds or even thousands of sellers offering the same product. The result is a race to the bottom.

This would help to explain why JungleScout's average devotees perform so badly.

I don't intend offering a critique of Jungle Scout, but I will make just a few comments. Their blog linked from YouTube is the slickest presentation I have seen among the numerous blogs by Amazon Course marketers.

As all the Amazon gurus (with one exception) tend to do, they seem to feel obliged to teach product sourcing and importing, and that is a major problem.

Just three examples:
  • As is universally taught by those who don't know any better, they teach the merits of only buying from Gold Suppliers on Alibaba. See my AMA to learn why you should not rely on the Gold Supplier status.
  • They teach reliance on Trade Assurance for protection. There is a detailed post on my AMA warning against this, and because Alibaba continually change their almost incomprehensible rules I update that subject in my annual book revisions. They even recommend communicating outside Alibaba's communication system! Absolutely contrary to Trade Assurance rules.
  • They teach that new buyers should get EXW quotes!!!! Potentially disastrous advice.
I can't just leave it there. Having warned of the risks of using JungleScout, I feel obliged to as delicately as possible suggest a far better, much lower cost, and safer, alternative.

DISCLAIMER: Because Jim Cockrum's Proven Amazon Course (PAC) gives new subscribers a free copy of my importing book, I sometimes use an affiliate link to direct people to PAC. I won't post it here. Inclusion of my book as an integral part of the PAC is the reason why they are the one exception I mentioned above. Their course includes reliable guidance on both product sourcing and importing.

A major factor in me aligning with PAC is that Jim's paid support team handle most of the support for people who have questions to ask after reading my book, and that takes a huge burden off my shoulders.

If you check out the PAC site you will see a mind-boggling quantity of testimonials, and a BBB+ rating. The testimonials are, like the ones on my importing book site, provable to the FTC if anyone challenges their authenticity.

Annual cost for following the advice in the JungleScout blogs substantially exceeds the once only price for PAC. You have to subscribe to a costly JungleScout program to proceed. But as AgainstAllOdds' examination has shown, the extra cost of their course is mediocrity, average results if you are lucky, and less than average in most cases.

Walter
[/QUOTE]
 

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Thank you @AgainstAllOdds for what I see as your exposé of JungleScout. I have posted many times about the folly of using such a system as the basis for setting up an Amazon based business.

JungleScout have set themselves up as high priced Amazon Gurus, and in numerous posts I have dealt with the sad fact that using JungleScout to find "hot selling" products leads inevitably to entering an extremely competitive arena, with hundreds or even thousands of sellers offering the same product. The result is a race to the bottom.

This would help to explain why JungleScout's average devotees perform so badly.

I don't intend offering a critique of Jungle Scout, but I will make just a few comments. Their blog linked from YouTube is the slickest presentation I have seen among the numerous blogs by Amazon Course marketers.

As all the Amazon gurus (with one exception) tend to do, they seem to feel obliged to teach product sourcing and importing, and that is a major problem.

Just three examples:
  • As is universally taught by those who don't know any better, they teach the merits of only buying from Gold Suppliers on Alibaba. See my AMA to learn why you should not rely on the Gold Supplier status.
  • They teach reliance on Trade Assurance for protection. There is a detailed post on my AMA warning against this, and because Alibaba continually change their almost incomprehensible rules I update that subject in my annual book revisions. They even recommend communicating outside Alibaba's communication system! Absolutely contrary to Trade Assurance rules.
  • They teach that new buyers should get EXW quotes!!!! Potentially disastrous advice.
I can't just leave it there. Having warned of the risks of using JungleScout, I feel obliged to as delicately as possible suggest a far better, much lower cost, and safer, alternative.

DISCLAIMER: Because Jim Cockrum's Proven Amazon Course (PAC) gives new subscribers a free copy of my importing book, I sometimes use an affiliate link to direct people to PAC. I won't post it here. Inclusion of my book as an integral part of the PAC is the reason why they are the one exception I mentioned above. Their course includes reliable guidance on both product sourcing and importing.

A major factor in me aligning with PAC is that Jim's paid support team handle most of the support for people who have questions to ask after reading my book, and that takes a huge burden off my shoulders.

If you check out the PAC site you will see a mind-boggling quantity of testimonials, and a BBB+ rating. The testimonials are, like the ones on my importing book site, provable to the FTC if anyone challenges their authenticity.

Annual cost for following the advice in the JungleScout blogs substantially exceeds the once only price for PAC. You have to subscribe to a costly JungleScout program to proceed. But as AgainstAllOdds' examination has shown, the extra cost of their course is mediocrity, average results if you are lucky, and less than average in most cases.

Walter


This is an incredibly insightful post. Thanks for sharing Walter.

Once again I appreciate you, @MJ DeMarco @biophase and @AgainstAllOdds with this breakdown of an article that looks like its legitimate laced with numbers that makes my logic part of the brain tingle.

Only through the eyes of an experienced individuals in this space can see the holes through their logic and I admittedly was excited about this article but at the same time I was somewhat skeptical. You've all shown me why I was right to be excited about this potential Channel, but at the same time understand that this type of approach needs genuine understanding of Amazon and how their systems work opposed to just signing up and and basically selling anything and i'll be making 2k a month within the first year.
 

Walter Hay

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Are we taking into account those that "Retail Arbitrage" on Amazon?
There are many ways to sell on Amazon, but only the insiders know a number of them. RA can be very lucrative if used correctly and as a seller you don't enslave yourself to bargain shopping.
What about the long term value of having your own website. You actually own your customers. So you email market to them for a cost of next to nothing in the future. I believe Amazon restricts direct marketing to customers. Correct me if I’m wrong.

Why pay traffic when you can get it organically and reoccurring ? Forums, SEO, blog posts, etc.
You can legitimately bypass Amazon's TOS by incorporating your URL in your labels and on your packaging. It can also be a great help if your URL is part of the branding on your product. An essential factor is that your Amazon customers who click on your link should find there a good reason to visit again.
Little life hack for ya, inside your package you can leave a note to your customer, IG link FB etc
I suspect that people might not notice your note, or simply discard it with the packaging. It's not a good idea to include an invitation to visit your site, or you might run foul of the rules. For a better way, see above.

Walter
 

TKDTyler

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One of the brands I recently launched on Amazon will NEVER make money on Amazon. I could sell a bazillion units and answer a bazillion emails, and it will never sell for a bazillion dollars. The price/value ratio isn't right. If I were dependent on this for my liveleyhood, I would be screwed. Meanwhile, I will sell a lot of units.

So why bother? There are some products that aren't conducive for eCommerce. The gross margin % is acceptable, but the gross margin $$ aren't significant enough. I may make a $1.00 a unit net, sell 10k units a month, and net for the business $120k/year deseasonalized.

Why bother?

Because once I get some of the products to favorable reviews and ranked in their categories, I can then take the product to their destiny channels of distribution, and use the Amazon social proof as justification for retail placement. Amazon isn't by end game, it's the first quarter of a four quarter ball game.

I launched a stupid business on Amazon a few years back. I sourced some candles that I loved, and thought I could make a market out of them. They were great products. Problem was they cost a fortune to ship, and by the time I paid Amazon fees, shipping fees, and cost of goods, it was a losing proposition. I was fortunate to not sell thousands of them, because it would have been a pain in the a$$ for small reward. I quickly cut bait and moved on, learning better how to calculate ROI.

You can use Amazon to position your non-Amazon business. My non-Amazon targeted business/product line still needs to be on Amazon. Amazon still has the potential to legitimize a launch brand. I don't ever expect Amazon to be my largest channel for this product line. but it will probably always live in the shadows on Amazon. The key for that one is to figure out how to maximize the ROI, mitigate expenses, mitigate pain in the a$$, and get the platform to do what I need it to do.
Amazon social proof is a powerful thing.

Funnily enough, I recently launched my website and started driving PPC via adwords and facebook. I am getting a fair amount of impressions & views through to my site, but the conversion rate is far lower than I expected it to be.

Flip over to looking at my numbers for my Amazon sales, specifically looking at my Amazon PPC sales directly targeting my brand name and what do you know, there was a noticeable tick up in sales that I believe I can only attribute to adwords and website exposure.

The hard part is figuring out how to effectively get people to order from my website and netting the 15% fee vs placing an order on Amazon. I think a lot of it may have to do with people's familiarity with Amazon's shipping and guarantees on their products. Their distribution system is hard to beat. It's the burden of the beast.
 

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Amazon social proof is a powerful thing.

Funnily enough, I recently launched my website and started driving PPC via adwords and facebook. I am getting a fair amount of impressions & views through to my site, but the conversion rate is far lower than I expected it to be.

Flip over to looking at my numbers for my Amazon sales, specifically looking at my Amazon PPC sales directly targeting my brand name and what do you know, there was a noticeable tick up in sales that I believe I can only attribute to adwords and website exposure.

The hard part is figuring out how to effectively get people to order from my website and netting the 15% fee vs placing an order on Amazon. I think a lot of it may have to do with people's familiarity with Amazon's shipping and guarantees on their products. Their distribution system is hard to beat. It's the burden of the beast.
It's also security.

When you have major IT and information security people saying that Amazon is one of the only secure places to purchase online, then it's little wonder that everyone buys on there.

Do you want to enter your credit card into a random website and hope it doesn't get stolen?
 

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What about the fact that there's a whole ton of competitors and potential future competitors researching and copying your products on AMZ? Hasn't that worry those of you AMZ sellers here? I mean, you can build a brand etc., but those tens of thousands of hungry copycat wolves scouting AMZ to sell a me-too version of your product will do the exact same.
For several years I have warned against shipping direct from suppliers to Amazon, because if the product sells well Amazon will have a head start in taking the business away from their unsuspecting sellers.

They will know where to source the product, although they have the resources to find suppliers anyway, and they will know at what price it sells well. They will also have knowledge about faults, large or small, that bring bad reviews or complaints.

My advice to those wanting to sell on Amazon is to ship to an independent fulfillment service and have them prep the goods before forwarding on to Amazon. Margins will consequently be reduced, so sellers need to be sure they have secured the best possible prices. I know from experience that many importers think they have got a great price, simply because they don't know how to get a better price.

Private labeling does help secure a market segment on Amazon, but all sellers should have their own eCommerce store as well. Amazon are strict about how you can advertise to your customers when your goods are shipped out to them, but there is something everyone who uses private labeling can do to bypass that problem, as I posted above.

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It seems like each timeI look up an item I would like to purchase, there are dozens of knock offs and cheap versions that all have the same stock photography from Ali Baba. Plus it's to the point that I don't trust the reviews nearly as much as I used to. There have been several times when I receive a product and there is a little slip of paper that tells me I will get a free gift if I give them a 5 star review.
There are two main reasons for so many sellers having near identical listings:
  1. Amazon's greed. Several years ago they blitzed Chinese media offering to sign up Chinese vendors and "teach" them how to sell on Amazon.
  2. The success of JungleScout in persuading large numbers of people that selling "hot selling" items was the way to make a fortune.
1. As for the teaching Amazon gave to the thousands of Chinese vendors who signed up, all they did was to teach them how to handle their listings, and leave everything else to Amazon. They did not teach them how to sell to Westerners.
The only sales technique those hordes of new sellers knew was to have the lowest price. If Amazon had understood the Chinese mind set, they would have expected the massive breaching of their TOS with such things as fake reviews and paid for reviews.

2. It is only to be expected that there will be a large number of identical listings. After all JungleScout obviously don't care about the success or failure of their average subscribers, and all those average sheep follow the leader. There is a Chinese equivalent of JungleScout which I won't name, and having reviewed their subscription site I can tell you that they have no idea about marketing, but you can expect to see more and more following the leader.

Now that you can recognize the copycat and fake product listings together with fake reviews you should be able to buy with confidence.

Walter
 

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I totally understand the point you're trying to make. But I also think this could be said about almost anything that has to do with making money/winning a competition, because that's what amazon/business essentially is.

There will always be the top 1 percent who are killing it, the bottom 1 percent, and then people who are somewhere in between.

If there are 2 farms on adjacent properties, one of them is yours and one is your neighbors, and your neighbor is very successful while you're just average, they clearly know something you don't.

Most people will say this is unfair, meanwhile a very small percentage will try to figure out what their neighbor is doing and try to do it them selves.

I see Amazon that way, where 5% will be top earners, maybe 10-15% will earn a living, and the rest will scrape by. And the top earners will be killing it because they are doing things every one else isn't.

Well.. damn. My naive happy lil bubble has burst. Better now than later though.

Thank you for the time and energy spent on this. Much appreciated.
You shouldn't let this stop you from trying. You're already in a good frame of mind if you're on this forum, plus from what I understand @biophase has a lot of experience with ecommerce and I know he has a big AMA thread about ecom.

You just can't go into amazon with the mindset that you'll copy everyone else and be entitled to success. You have to be different. You have to make a product that solves a new problem, or an existing problem more effectively.

This is "hard" and that's why most people don't do it. They would rather go on alibaba and sell what everyone else is already selling. I would argue that most people selling on amazon aren't true entrepreneurs to begin with.
 

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The purpose of this thread is to present real, concrete facts and numbers on why starting a business on Amazon might be the absolute dumbest, lowest ROI thing you could do. It's not based on anecdotes. It's not based on hypotheticals. It's based around numbers published by one of the most pro-Amazon sites out there: JungleScout. However, instead of presenting it the way JungleScout wants to, I'll break down the numbers into what they really mean.

A quick summary: The average person fails at Amazon. Of those that succeed, the average person makes $9,000 a year at $10 per hour. To get there, they invest 10+ months of their time, and $4,000. Amazon has reached the point of "Uber" where it has misled people into believing that they're starting a real business that's generating real returns - when in reality the average seller is slaving away at $10 per hour.

In later posts, feel free to share theories and anecdotes. The Amazon-brainwashed crowd, feel free to post emotional responses and select anecdotes. In this post, I'll dive right into the numbers.

Before we begin, let me note the inspiration for this thread: @jpanarra's "New Sellers Earn Between $26,000 To $810,000 Per Year In Profit" - a thread based around data that was taken from the following primary source: How Much Money Do Amazon Sellers Make? | Jungle Scout. I was originally going to write a quick reply to his post, but as I started looking at the language and numbers, I started breaking them down and noticed exactly how bad they really were. That's how this thread was born. If the language is a little off, note that it was originally intended as a reply before the data became valuable enough to make its own thread.

So let's get to it.

First, let's start with the note that the data is published by JungleScout - whose primary incentive is to get more people selling on Amazon. Next, let's look at exactly who the data is based on:

"Between November 14 and December 10, 2019, Jungle Scout surveyed 2,063 Amazon sellers about their experiences. This article references responses from 1,046 experienced Amazon sellers who have more than a year of selling experience and at least one live product listing."

These guys literally surveyed 2,063 people. Decided that half of them suck and don't support their findings. Tossed them out, and kept only half the responses, 1,046 sellers that had attained "some" success.

Why?

Because the 1,017 others didn't fit their narrative and PR push.

If you look at what that actually means, it means that over 50% of preselected Amazon sellers (that were serious enough to have a JungleScout account), fared worse than the data that will be presented below. Add to that all the people without a js account, all the people that have already failed, or those that will fail, and you're left with a very high percentage of sellers that have been huge disappointments.

Of the 50% left, they further fudged the numbers using misleading statements and improper calculations. Let's start with an example of one of those statements:



This statement at face value looks impressive. Here's what it actually means:
  • 32.8% of sellers make between 0-10%
  • 31.2% of sellers make between 10-20%
  • 36% of sellers making profit margins above 20%
And here's what that means in terms of average person...

View attachment 29562

Using the chart above, it means that the median profit margin per Amazon seller is 15% (and note: I said MEDIAN, not "average" or some bullshit that Jungle Scout will use to change perception). That's from the product. Not net after including R&D, branding, EMPLOYEE costs, and all other costs. If you factor in those costs, then the true net margin will be a lot lower.

Is that still impressive? Could be. But is it as impressive as the statement that they built around the data? Definitely not.

Next, let's see how they present sales numbers:



Another quote that seems incredibly impressive. In reality, far from it.

That's what the article presents for sales numbers. Let's see what these numbers actually mean in terms of sales percentiles based on this statement:
  • 0 percentile: Lose money
  • 24th percentile: $1,000 in sales per month
  • 80th percentile: $25,000 in sales per month
  • 99.9th percentile: $250,000 in sales per month
From their statement, they made you think that 1 in 5 sellers do $250k+ in sales per month. However, one in five people don't do $250k in sales per month. One in a hundred does. The exception to the rule. The outlier.

To dive deeper, luckily for us, JungleScout was naive enough to publish their full data:

View attachment 29563

So using this info, we can continue and break down the data even more into what it actually means:

2% don't know their sales, so we'll just add them into the lower tier group (likely wantrepreneurs), making the rest of the percentiles as follows:
  • 0-17th percentile: Make under $500 in sales (aka - lose money)
  • 17-26th percentile: $500 to $1,000 in sales
  • 26-48th percentile: $1,000 to $5,000 in sales
  • 48-61st percentile: $5,000 to $10,000 in sales
  • 61-76th percentile: $10,000 to $25,000 in sales
  • 76-85th percentile: $25,000 to $50,000 in sales
  • 85-92nd percentile: $50,000 to $100,000 in sales
  • 92-97th percentile: $100,000 to $250,000 in sales
  • 97-99.9th percentile: $250,000+ in sales
The average person (50th percentile) makes $5,000 in sales per month. Think about that.

If you don't understand managerial or financial accounting, then you'll assume that the number is good. Afterall, the average person doesn't "make" $5,000 at their job every month. Amazon has to be the way. Or does it. We have to ask the next question...

So what's that mean in terms of profit per year? Not sales, but profit.

If we use JungleScout's bullshit metric, then that's a ton of money. If we use the median profit margin of 15% (which it is according to the chart above), then here's what that means:
  • 0-17th percentile: Lose money a year.
  • 17-26th percentile: $900 to $1,800 in GROSS profit per year
  • 26-48th percentile: $1,800 to $9,000 in GROSS profit per year
  • 48-61st percentile: $9,000 to $18,000 in GROSS profit per year
  • 61-76th percentile: $18,000 to $45,000 in GROSS profit per year
  • 76-85th percentile: $45,000 to $90,000 in GROSS profit per year
  • 85-92nd percentile: $90,000 to $180,000 in GROSS profit per year
  • 92-97th percentile: $180,000 to $450,000 in GROSS profit per year
  • 97-99.9th percentile: $450,000+ in GROSS profit per year
The average seller grosses $9,000 per year from their Amazon business.

And I know you wantrepreneurs will say "Yeah, but look at the top brackets, those guys are killing it". Yeah, they are, but how much are they spending on employees?

Those guys that are doing $450,000 gross per year? How many employees do you think they have? And how much money do you think they're actually putting into their pocket end of the year? I won't answer this question since there's too much variability, however I will give you concrete data for the next point.

"Ok, so $9,000 a year. That would help me a lot with my life. How much do I have to work in order to make that money?"

Here's the breakdown from Junglescout:
  • Fewer than 4 hours per week: 13%
  • 4-10 hours: 24%
  • 11-20 hours: 20%
  • 21-30 hours: 15%
  • 31-40 hours: 10%
  • 41-50 hours: 9%
  • 51-60 hours: 3%
  • More than 60 hours: 6%
What's that actually mean in terms of percentiles?
  • 0-13th percentile: 0-4 hours per week
  • 13-37th percentile: 4-10 hours per week
  • 37-57th percentile: 11-20 hours per week
  • 57-72nd percentile: 21-30 hours per week
  • 72-82nd percentile: 31 to 40 hours per week
  • 82-91st percentile: 41-50 hours per week
  • 91-94th percentile: 51-60 hours per week
  • 94-99.9th percentile: 60 hours + plus week
The average person works close to 20 hours per week. That's what the means. For argument's sake, let's estimate that down to 18 hours per week.

The average person works 18 hours per week on their Amazon "business" to make $9,000 a year. Still worth it?

Let's break that down per hour:

18 hours per week * 50 weeks [two vacation weeks] = 900 hours per year.

$9,000 / 900 hours = $10 per hour.

The average "successful" seller works at $10 per hour to make $9,000 per year.

But wait... that's not all folks. There's also a startup cost!

You have to research Amazon, learn the Amazon skill sets, learn how to import, pay for courses, samples, moulds, manufacturing costs for products that you'll mess up and have to throw out, etc.

That all takes money and time.

How much money and time? Here's the breakdown from JungleScout:

They asked their sellers "How long does it take to become profitable on Amazon?":
  • Profits within 3 months: 22%
  • Profits within 3-6 months: 22%
  • Profits within 6 months-1 year: 23%
  • Profits within 1-2 years: 13%
  • Profits within more than 2 years: 3%
The median person took over 6 months of time to become profitable. My estimate, is around 9 months for the 50th percentile mark.

Disappointed?

Let me disappoint you further.

Here's the data set when looking solely at people that started selling in 2018 and 2019:
  • Profits within 3 months: 16%
  • Profits within 3-6 months: 23%
  • Profits within 6 months-1 year: 24%
For people that jumped in recently, the time to be profitable increased significantly. My estimate for the average: 10 months.

Oh, and to add even more salt: the data above doesn't include sample, research, or studying time, the entire wantrepreneur phase where you're taking courses and reading threads on the fastlane forum.

And note: "Time to be profitable" can otherwise be written as "Time to stop losing money". Because that's what it really is. It takes the average person ten months to stop losing money on top of whatever they spent on courses.

So how much money do people "invest" to get started on Amazon?

Here's how much JungleScout users spent:
  • Sellers spent less than $500: 17%
  • $500-1,000: 12%
  • $1,001-2,500: 13%
  • $2,501-5,000: 18%
  • $5,001-10,000: 21%
  • More than $10,000: 21%

The median person spent about $4,000 to get started selling on Amazon.

So all in all, using JungleScout's data...

The average seller spends $4,000 and 10+ months to get started on Amazon. Once they're up and running, they can expect to make $9,000 a year at $10 per hour. From that, they have to subtract out employee costs, and other expenses, likely netting them a lot less.

Oh ... and that's if you're successful. If you're in the 50%+ category of people that JungleScout deleted from its "data set", then just expect to lose money altogether.

Amazon still sound cool? @MJ DeMarco
You took real data and showed the true side, however that doesn't mean you actually presented selling on amazon correctly....

I sell on amazon very successfully (although it takes a lot of time to become successful, to become the top 1% - Just like in every business...)

I am more than glad to show you some numbers/calculations and arguments why you post is inaccurate.

I wonder if you sell on amazon and how well you know the business??

You and others following here should understand - Jungle scout is the #1 place any bored or unemployed person goes to, they are the number one spot for all the "get rich quick guys" - most (I would even say as much as 99%) of JS clients are people that belive the BS that you can invest $500 todays and cash out after 6 months with a million dollar profit per month!

So although you presented the data of JS well, you didn't really present the amazon business correctly.

Like @mjdemarco pointed out, its a platform, its a site that people come and people trust, - If we want to have a viable business for the long run, we need to innovate, provide value, brand and protect well, market well, diversify (other platform, email lists etc.) and so on.

Only a idiot would think its a push of a button and we make a million dollars.

If the traditional offline retail or the real estate market would have such a low entry barrier {$39.99 per month for an Amazon account and $99 for JS) then you would also have 2 Million people trying and most of them failing!!!

I am working on amazon for 4 years already - this last November we launched a new brand - Our total landing costs is $60.01 (Cost of goods, Shipping, Duties) we are selling it for $149.97 - amazon takes $25.57 - so our net profit is $64.4 - we sold about 30-40 units per day over november and mid December - I will let you calculate the total.

Best part? 0 Work! - BUT I did a lot of work the last 4 years to be able to pull this off - once you can do it, you can do it again and again, and easily scale, and have healthy exists.

Obviously, this is only part of the story, we invested in innovations, branding, design, and marketing, and so much more,

In the end Jeff bezoz did us an amazing favor allowing us to take advantage of the following, infrustructure and trust he built.

Its up to us to see through the BS (and by that I mean the meaningless promises of JS telling you, you can make a million dollars in year ) and putting in the effort to build a real business.

All in! Amazon is a tremendous business, but the business is not in amazon, amazon is a platform, you need to build the business, building a business is hard, takes times, costs money and takes a lot of consistent effort - if your not up to the challenge, go work a 9-5 but dont blame amazon for anything!!! (although you CAN blame JS and all these other Scammers gurus out there )
 

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You took real data and showed the true side, however that doesn't mean you actually presented selling on amazon correctly....

I sell on amazon very successfully (although it takes a lot of time to become successful, to become the top 1% - Just like in every business...)

I am more than glad to show you some numbers/calculations and arguments why you post is inaccurate.

I wonder if you sell on amazon and how well you know the business??

You and others following here should understand - Jungle scout is the #1 place any bored or unemployed person goes to, they are the number one spot for all the "get rich quick guys" - most (I would even say as much as 99%) of JS clients are people that belive the BS that you can invest $500 todays and cash out after 6 months with a million dollar profit per month!

So although you presented the data of JS well, you didn't really present the amazon business correctly.

Like @mjdemarco pointed out, its a platform, its a site that people come and people trust, - If we want to have a viable business for the long run, we need to innovate, provide value, brand and protect well, market well, diversify (other platform, email lists etc.) and so on.

Only a idiot would think its a push of a button and we make a million dollars.

If the traditional offline retail or the real estate market would have such a low entry barrier {$39.99 per month for an Amazon account and $99 for JS) then you would also have 2 Million people trying and most of them failing!!!

I am working on amazon for 4 years already - this last November we launched a new brand - Our total landing costs is $60.01 (Cost of goods, Shipping, Duties) we are selling it for $149.97 - amazon takes $25.57 - so our net profit is $64.4 - we sold about 30-40 units per day over november and mid December - I will let you calculate the total.

Best part? 0 Work! - BUT I did a lot of work the last 4 years to be able to pull this off - once you can do it, you can do it again and again, and easily scale, and have healthy exists.

Obviously, this is only part of the story, we invested in innovations, branding, design, and marketing, and so much more,

In the end Jeff bezoz did us an amazing favor allowing us to take advantage of the following, infrustructure and trust he built.

Its up to us to see through the BS (and by that I mean the meaningless promises of JS telling you, you can make a million dollars in year ) and putting in the effort to build a real business.

All in! Amazon is a tremendous business, but the business is not in amazon, amazon is a platform, you need to build the business, building a business is hard, takes times, costs money and takes a lot of consistent effort - if your not up to the challenge, go work a 9-5 but dont blame amazon for anything!!! (although you CAN blame JS and all these other Scammers gurus out there )
mic drop..

This is it. For anyone looking for an answer to the subject of this thread. This is it.

Thank you for this.
 

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You and others following here should understand - Jungle scout is the #1 place any bored or unemployed person goes to, they are the number one spot for all the "get rich quick guys" - most (I would even say as much as 99%) of JS clients are people that belive the BS that you can invest $500 todays and cash out after 6 months with a million dollar profit per month!
This pretty much sums up what I was trying to say. :thumbsup:

But I also understand what @AgainstAllOdds is saying (and agree determinant on perspective.)

Once again we come down to two distinct groups of people; entrepreneurs who are trying to create a legitimate brand with value skew, and dreampreneurs looking for easy "plug and play" money.
 

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Hey! I failed at this.

Thats a datapoint.

Down 2100 in 6 months I think. I made money one month.

Shoulda gotten 2100 dollars in scratcher tickets.
 

MoreValue

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Here's just a bit of what I was referring to.

This was just today. The CAGR numbers are based on a $10,000 startup cost which I believe to be on the high-side. Obviously these numbers are not "average results" from "average people" who buy into average ideas.

View attachment 29578
Where exactly does it state the startup amount? Is that 10k solely an assumption?
 

The Irish Guy

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If they have "0ver 100%" listed an an option they must me talking about markup annd not margin which makes all the figures worse. By definition its impossible to make a margin greater than 100%...
 

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Amazon social proof is a powerful thing.

Funnily enough, I recently launched my website and started driving PPC via adwords and facebook. I am getting a fair amount of impressions & views through to my site, but the conversion rate is far lower than I expected it to be.

Flip over to looking at my numbers for my Amazon sales, specifically looking at my Amazon PPC sales directly targeting my brand name and what do you know, there was a noticeable tick up in sales that I believe I can only attribute to adwords and website exposure.

The hard part is figuring out how to effectively get people to order from my website and netting the 15% fee vs placing an order on Amazon. I think a lot of it may have to do with people's familiarity with Amazon's shipping and guarantees on their products. Their distribution system is hard to beat. It's the burden of the beast.
Thinking about how to take customers from Amazon's site and onto yours to save the 15% fee is a mistake imo, I sell on amazon and also do adwords to my website which spike my Amazon sales, what I've found is that getting that external traffic coming to and buying on Amazon effects my position in Amazons algorithm enough to more than offset the loss of the 15% fee...

I've actually thought about cutting out Amazons PPC altogether and just using adwords and the increased ranking that gives!
 

TKDTyler

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Thinking about how to take customers from Amazon's site and onto yours to save the 15% fee is a mistake imo, I sell on amazon and also do adwords to my website which spike my Amazon sales, what I've found is that getting that external traffic coming to and buying on Amazon effects my position in Amazons algorithm enough to more than offset the loss of the 15% fee...

I've actually thought about cutting out Amazons PPC altogether and just using adwords and the increased ranking that gives!
I’m more interested in building an email list and obtaining contact information of customers I know enjoy my products and service. It makes launching a new product and building a reputable brand much easier, not to mention, it’ll make launching any product on amazon much easier as well since you have an instant source of reviews.

Why let Amazon retain all of your customer information. Even if I get only 10% of the sales on my own website that I do on Amazon. If I sell 25000 units a year, that’s 2500 paying customer list that is immediately available to do market research and launches with.
If running a kickstarter campaign is in your list of things to do (it is for myself), that list becomes priceless imo.

One of my main goals is to increase the LTV of every customer, and sometimes it’s just not possible without more customer information
 

The Irish Guy

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I’m more interested in building an email list and obtaining contact information of customers I know enjoy my products and service. It makes launching a new product and building a reputable brand much easier, not to mention, it’ll make launching any product on amazon much easier as well since you have an instant source of reviews.

Why let Amazon retain all of your customer information. Even if I get only 10% of the sales on my own website that I do on Amazon. If I sell 25000 units a year, that’s 2500 paying customer list that is immediately available to do market research and launches with.
If running a kickstarter campaign is in your list of things to do (it is for myself), that list becomes priceless imo.

One of my main goals is to increase the LTV of every customer, and sometimes it’s just not possible without more customer information
They are going to your website first, I sell a pullup bar and if I wanted to capture their email address's I'd have a popup which offers to email them a free workout booklet showing all the possible exercises and sample workouts.
 

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