How to become a seller on Amazon – Series #07

Welcome to my series on how to become a seller on Amazon. In these posts you can follow my efforts and results in my attempt to become a successful seller on Amazon. As I live outside the USA this series may be of interest to both US residents and non-US residents. If this is the first time you have landed on my blog series on how to become a seller on Amazon, you might want to read the series from the beginning. You can find the collective posts under categories here.

Initial investment

As opposed to my other online businesses such as my affiliate marketing ventures and my own online courses that can be set up with a minimum investment my project to become a seller on Amazon needs some real money. I knew this from the start and I am ready to make this investment.

So how much do you need to invest to get started? Well, I am not a millionaire, yet. I do not have a large chunk of money in my drawer just waiting to get invested. The money for this project has to be carefully set aside from my day to day budget. If there was guarantee for success I would of course have no problem with investing a substantial amount but because nothing in life is certain I have chosen to invest just enough to get started. Just enough to go through the process, see what happens and learn from this.

How much is just enough?

A good rule of thumb when you price your product is that you should ad about 30-50% to your buying price. If you are not able to sell your product at this price you are probably not going to make money on it. If you follow this rule it seems fairly obvious that a more expensive product will make you more money than a cheaper product, right? But a more expensive product will of course cost you more in your initial investment. You also have to remember that you are not going to buy 5 or 10 units from your supplier. You are going to buy several hundreds. Your initial investment will easily become quite substantial if you don’t choose your product and the buying price of the product carefully.

Another important thing to consider is, that if you set your price to low on Amazon there is a risk that Amazon will categorise you product as an “add-on item”. As I said earlier – you don’t want that to happen. It is much harder to generate consistant sales with an “add-on”. There is not much information on Amazon on when they choose to make your product an “add-on” but it has to do with your pricing and it seems that if your product gets too cheap – somewhere below $10 – your product it at risk of becoming an “add-on”. So in your process of finding the right product you must find something that will end on a selling price of about $10. You can of course go more expensive but for my purpose of hitting that “just enough” investment I have gone with the $10 selling price.

Later I will, as promised, share my entire budget with you. For now I will talk a bit about some of the posts in my budget.

After getting price quotations on my chosen product from several different suppliers on Alibaba I have ended up with a buying price per unit of $1.39 from one supplier. I can see on Amazon that my competitors on the same product are selling it for prices in between $9 and $20. I aim to sell my product at a price around $11.

 

 

 

At first glance it would appear that I stand to make lots of money from this price difference. But there is more to it than that. On top of my buying price I have to ad posts like these: fee for printing my logo on the product, shipping, custom clearance, bank charge, fee for getting a sample sent to my home address, paying for my pro seller account at Amazon, pick-and-pack fee at Amazon, weight handling at Amazon, photo shoot for my product with my logo on it, advertising – and a few other things.

When I add all of these posts I end up with a buying price for my product at around $5.50. If I follow the rule of adding about 50% to my selling price – well I land on $11. This also gives me a bit of room to drop my prices now and again and still keep my earnings above the 30% margin.

 

The launch strategy.

When I get to the point where I am ready to launch my product on Amazon I am going to follow a strategy that I have learned about via different “gurus” on the internet. This strategy dictates that you should spend all your energy on one product at a time. You should use every mean possible to sell your first like fifty to a hundred units – and get to about 20 to 30 reviews as fast as possible. This should allegedly boost your rankings in the Amazon search engine and bring you on the first pages in your product category.

When your product turns up on the first pages in Amazon and you already know that your product is selling (you know this because this was one of the very first things you checked out when choosing your product) you should get to a point where your product gains automatic sales momentum. Meaning that it will start to sell itself without you having to promote or advertise the product.

This is the goal. Get your product on the first pages in the Amazon search engine and let the product sell itself. When you get to this point your product will, because it is a product that is already selling well, sell like anything between 10 to 30 units a day. When you reach this goal for your first product – and not before you reach this goal – you are ready to launch your next product and apply the same strategy to this product launch.

How many units do I need for my launch?

As a part of your initial investment you need to consider how many units of your product you have to order from your supplier. Even though you can get a better price on everything when you order large quantities I still have to limit my first order to something that will fit what I have to invest. So there is a financial limit to how many units I can initially order.

My order will be sent from China by ship – not by air. This means that there will be a delivery time of around 3 – 4 weeks from my order ships from China until it arrives at an Amazon warehouse. So I have to estimate how fast my initial order will sell out and make sure I order new stock from China in time.

Everything considered I have come to the conclusion that I need 400 units of my product to initiate my launch. As a part of my launch strategy I am going to “give away” 50 units of my product at a price of $1. This will be done via advertising. So the first 50 units will be gone in no time. After this give away I am going to spent money on advertising both on Amazon and on other platforms. This will hopefully get me to my goal of selling around 10 units a day ASAP.

When my product starts to sell 10 units a day I should have just about time enough to restock – this taking 3-4 weeks – before I am all sold out. My calculation is this: 50 units “give-away”, 350 units remaining selling at a rate of 10 units a day – this gives me 35 days to re-stock. The first days or weeks I might just sell a few units a day, but when my product gains momentum – well it’s time to order new stock.

That’s all for today.

See you in the next episode on How to become a seller on Amazon.

May the peace be with you, Niels

 



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