It’s been a while since my last blog post, and there’s a good reason for that. I have been very busy launching two new businesses at the same time: one Shopify store and one offline business.
The time and energy that go into starting a successful new business are ENORMOUS! But I really enjoy the process, and I know that once everything is set up and all the processes are dialled in, it’s pretty much an easy ride. Well, at least for me, it has always been that way.
I have also started to realise that starting and building new businesses is my TRUE passion. It’s what I get the most enjoyment from. I love doing all the research, putting all the systems in place, modelling customer behaviour, coming up with marketing angles, etc.
Once all that is done and the business is up and running, I kinda lose that motivation and passion for it. This is probably the reason why I have started so many different businesses over the last decade…
As Gary Vee would say, it’s all about finding out who you really are. There are people who can work in the same business for 10, 20, 30 or more years. That’s not me. I couldn’t do one thing for that length of time. I get bored.
Well, that’s not entirely true—my blog and my information products business have been up and running for more than 15 years now. And that’s something I’m really proud of. The fact that I have been doing this for so long means that THIS—sharing my knowledge and experience—is another true passion of mine.
Anyways, today’s post is about one specific thing people struggle with when starting out selling on Amazon FBA:
Is it possible to be successful on Amazon selling cheap items? Or do we have to go after more expensive products to make it profitable?
This is especially important now. Many people are currently laid off work and have very limited budgets, but they want to start selling on Amazon. Is there any hope for those who are starting out on a small budget? Can you make it work? Let’s find out!
Number ONE Mistake Amazon Newbies Make!
There are many Amazon gurus who will tell you that you have to target a specific price point to be successful with selling on Amazon FBA.
Usually, they will tell you that you should aim for products that sell for £20 to £30 because:
- At that price point, it’s still considered an impulse buy online. People won’t click around too much, won’t spend hours on research, and your conversion rate will be pretty high.
- If you source the product at the right price, you will have plenty of margin left over to spend aggressively on PPC.
And I agree. Both of these points are valid, and I also give similar advice in my Amazon Sharks course, but it’s NOT applicable to everyone. This formula may not work for you if you’re starting out with a very small budget. Here’s why.
A typical product that sells for £30 on Amazon will cost about $10 to source from China. There will always be exceptions, but this is generally the case. To keep things simple, let’s say that with shipping and taxes, your landed cost is £10.
We also know that to source a product from a manufacturer at a competitive price, the minimum order will need to be between 500 and 1000 units. Ok, let’s be optimistic here and use 500 units.
500 x £10 means you need a budget of £5000 to properly get into this business. And that’s without any additional spend on branding, listing creation and advertising. With those included, it will be close to £6000 or £7000. However, you may also need to leave a reserve for re-orders/cash flow, which can easily bring this number up to £10,000.
Now, if you have a budget of £10k, this is all good! But what often happens is people who have just £1k or £2k try to work with these products and they fail. Why? Because their buying power is too low, they can’t deal directly with factories, they over-pay for the product, they over-pay for the shipping, and they end up with a product that simply costs too much.
If we go back to our example, due to over-paying across the board, their landed cost for the product ends up at £15 instead of £10. They then realise that they can’t afford to sell it at £29.99 (which they should), so they set their price at £34.99. As a result, no one buys their product because it’s too expensive compared to their competitors. In turn, their conversion rates are low and Amazon doesn’t give them good rankings. It’s a downward spiral and they inevitably fail.
That £5 difference in the landed cost WILL make or break your business on Amazon when you’re selling a product at £29.99.
At least, in most cases that’s true. And you will fail if you don’t plan it all out in advance. You should have known that this product was too expensive for you and not suited to your buying power.
How can you overcome this problem? It’s simple: choose a product that is compatible with your buying power. I have said this over and over, yet so many people repeat the same mistake. You can still make good money on Amazon selling cheap items AND your chances of success will be so much higher! Here’s why….
How to Succeed on Amazon
with just £1000!
Let’s say you have a budget of £1000 that you’re ready to invest into starting a new Amazon FBA business. You will have to set aside £500 of that to cover the branding, your trademark and good product photography, which means you’re only left with £500 to cover the product’s cost.
With this budget, if you followed the standard advice of looking for products that sell for £20 to £30 on Amazon, you would fail miserably. There’s no way you can source such products from China with a budget of just £500.
Yes, if you’re creative, then there is ALWAYS some rare exception, but I’m talking about the average person starting out here. People who don’t have unique product ideas that they can print with their £200 3D printer and people who can’t arrange special deals with manufacturers that will allow them to pay for their goods on 60-day net terms.
£500 is not a lot, but it’s still good enough if you’re looking in the right direction. And the direction you need to be looking is at SUPER-CHEAP items! I mean products that sell in China for $0.01 to $0.10—yes, super-cheap!
Although a £500 budget gets you nowhere if the landed cost of the item is £10, you can buy THOUSANDS of products if the landed cost of the item is just 5p. In fact, with £500, you can buy 10,000 UNITS! And that’s something any manufacturer will be interested in!
Usually, super-cheap items like this are sold on Amazon in bundles of 10, 25, 50 or even 100 items. And that’s perfectly fine. Even if you sell a bundle of 50 units, that gives you a product cost of just £2.50 (50 x 5p), which leaves you a good margin to sell the product at £9.99, if the product is small enough.
Even if the item’s landed cost is £0.50, you can still buy 1000 units and be profitable selling on Amazon. These “more expensive” items often sell on Amazon individually for £4.99 or even £6.99, leaving you plenty room for profit.
The key, obviously, is to dig deep and identify items that meet these specifications, but trust me, there are tons of opportunities available. I find these items all the time when doing my research.
The most common product categories in which to start your research are:
- Beauty accessories
- DIY accessories
- Craft supplies/accessories
- All kinds of small plastic containers
- Small parts that are made of plastic
- Cleaning tools/accessories/brushes/pads/materials
Just to give you a few examples:
Cleaning sticks for IQOS – you can source these from Alibaba at cost of less than 3p per stick. This seller is selling a pack of 90 for £11.99, which means that their product cost is less than £3, leaving lots of room for profit.
Empty lip balm tubes – you can source these for 5p per unit on Alibaba, and people are selling 50 packs on Amazon.co.uk for £10.99. Again, a decent margin for such a small and lightweight product.
Table balloon stands – you can source these from China for 10p to 20p a piece and people are selling 4 packs on Amazon for nearly £10.
These are just a few quick examples that I found in ten minutes to illustrate to you what’s possible. I’m not saying that you should sell these exact products, as there’s more to doing product research than just getting prices off Alibaba and comparing them to Amazon, but I hope you get my point.
If you start with a small budget, you have to look for super-cheap items to make it work. There’s simply no other way.
When Your Ambition
leads to FAILURE!
Ok, so far, we have established the right way of doing product research for people on small budgets. “But Andrew,” I hear you say, “these cheap, niche items are not that popular. They make just £500 or £1000 in sales per month—and that’s from top sellers. I’m just starting out!”
Yes, exactly! What did you expect? Did you think you could get into this competitive game with just £500 and start making thousands in profit per month? I’m sorry, that’s not gonna happen, no matter what you have heard from YouTube gurus. If you start with a small budget, be ready to make a small profit and grow your business gradually over time.
People are so impatient these days, it’s unbelievable. For many, £200 or £300 profit per month, per item they sell is NOTHING! It’s not worth the effort. Well, if you’re that person, then, please, save us some time and simply don’t bother with this business at all. You will have to accept a small profit in the beginning—that’s just how it works.
In fact, I actually ENCOURAGE people to look for very small niches/products when they’re just starting out!
Yes, products, where the top sellers make £500 to £1k in sales per month, are perfect!
If you can find products with little competition, weak listings, low review scores, then you have a big opportunity to dominate that niche IF you everything properly and by the book! But you need to have an amazing brand, a great listing, good product images and an enticing offer. It’s so easy to rank organically in such niches, too, because your conversion rates will be higher than your competitors and Amazon will reward you for that almost instantly.
Trust me when I say this: it will be so beneficial for your mental health and confidence if your first product succeeds, even if it makes just a small profit per month. It will boost your confidence, skills and knowledge, allowing you to go after more competitive products in the future if you choose to do so.
Here’s the thing: I’m not just talking about theory in my blog posts. You have to understand that I personally sell on Amazon and, more importantly, I see HUNDREDS of stories and questions every week via my helpdesk or the comments section on this blog.
I get to see it all—the successes and failures. I know what works, and that’s why my Amazon Sharks program has been so successful. It simply works. My down-to-earth, realistic approach is what helps people win in this super-competitive environment. Not some fancy, temporary black hat trick you can play out on Amazon and then get banned.
What’s even more important, I also sell a super-cheap item on Amazon and it makes me crazy profits, 24/7, without me lifting a finger.
How I make £100k a year
selling a £7.99 item!
Yes, I do sell a £7.99 item on Amazon, and this year, I’m planning to hit £100k in profit with it.
How is that possible? Simple. By selling LOADS of items! 🙂
I have documented my progress in dozens of blog posts, and it hasn’t been a smooth ride all the time. For example, I lost significant money by trying the sell a variation of the product on Amazon.com in the United States. It also took me a while to find the right price point for my product, but all in all, I have been profitable with this product from day one, and I’m currently making £5k to £10k profit per month selling it.
It really doesn’t matter if the product sells for £7.99 and I make a NET profit of just £2.50 per unit sold. If the market is big enough, that can lead to serious business with some serious profits.
If Q4 2020 goes well for me, I’m well on track to reach that £100k profit goal this year.
And the best part of it all is that I spend just two to three hours a month on this business—seriously! Sometimes I feel that it simply can’t be right. How can you make all that money while doing literally nothing? But that’s how the Amazon FBA game works. Once you put the hours into setting it all up, get your rankings up and your first reviews in, you’re all set!
The only work I do on that business right now is arranging shipments to Amazon and answering a few emails a month from customers, which, in 99% of cases, is simply customers asking for an invoice (which Amazon generates on my behalf anyway).
I’m not telling you all this to brag or make myself look superior. I’m telling you this so that you realise that even a £300 profit per month per item on Amazon can be a good thing, especially taking into account the amount of work you will put into maintaining the business.
If you start with a small budget, you can slowly build up your portfolio of products, and soon enough you will hit your £1k a month profit, £2k a month profit and so on. As long as you put the time and energy into finding a good product and making it the best offer on the marketplace, you will succeed.
If you’re looking for step-by-step training, check out my Amazon Sharks course. In it, I show you exactly how I built my Amazon FBA business from A to Z so that you can copy my systems and apply them to your business.
As always, if you have questions, I’m more than happy to answer them. You can leave a comment below the post or contact me via my helpdesk. I personally reply to all messages within 24 hours, Monday to Friday.
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I have ran a pop up shop business for over 20 years. It has been ran very simply, I bought items in for £10 then I added the 20% VAT then I would double the price and round it off to say £25. Does this pricing system also work if I was to try to sell on Amazon or would I loose money.
Regards from an old out of touch fossil.
Thanks for your comment.
No, on Amazon we don’t use that “old retail 2.4x multiplier”. On Amazon, we set pricing based on competition, sourcing price, Amazon seller fees, FBA fees etc. Mostly it comes down to competition though – we analyse current sales for any product and then work backwards the process – see for what price we can source the product and then, how much profit there’s left after all the fees.
For example, in my business, on every £1 I make in sales, only 16p is the actual product cost. You can learn more about the numbers in my latest blog post here:
Hi Andrew, another great post! 🙂
May I ask how do you go about getting feedback? I guess you’ve automated the process? Any particular software firm you recommend?
Thanks for your comment.
I have a recent blog post where I cover find detail what I do for getting reviews:
Sorry I forgot to ask should I get China to send it to us by sea or should I should have my freight people pick it up from China’s port? I heard the latter is a lot safer. Actually I think you said this lol.
Your freight forwarder should pick up the goods in China.
Thanks another inspiring article! I think I will lower the price when I’m doing the research next time 🙂 I haven’t learnt how to use sea yet, can you say the company that you use again please? I always thought that theres a lot more to take care of :/
I’m nearly able to get started again soon, this has definitely helped me go below my usual threshold 🙂
Thank you again
Sure, here it is:
I agree with you 100% it is possible to sell low price items in niche markets and make decent profit. I buy an item for approx 30p landed and sell in packs of 10 for £10 on ebay and make £4.50 profit. I may only sell a few per week but alongside other items in the same niche I can make £500 per month profit.
Anyone who thinks that is not worth doing has too much money already.
I’ve always found Amazon much more complicated to sell on but will be giving it a go in the next few weeks thanks to your advice.
Thanks Andrew for your amazing Blog.
Excellent real-life example! 🙂 Many thanks for sharing this with us!
With small products are you shipping by air or sea? I am guessing you need big orders to get the shipping costs down? That has always been my problem I have found freight to be to big a proportion of my product cost.
Thanks for your comment.
This particular product I manufacture in-house, so there’s no shipping from China involved. But if I would import this product from China, I would definitely use SEA freight, yes. We deal with pallets basically, selling 1 to 2 pallets worth of goods every month.
But it all depends on the product’s weight and size – there will be plenty of very small items that can be shipped via courier from China and your margins will still be good.
Again a very interesting post !
You always talk about your £7.99 product (and Inthink you have a lot if different variations). With all your experience of selling on eBay and Amazon, why didn’t you add higher-priced products over time to grow your profits?
Thanks again for everything.
Thanks for your comment.
I have other products on Amazon, under different accounts. I just use this one business throughout my Amazon Sharks course and blog posts to stay consistent, show progress etc. I don’t want to mix it all up as then people wouldn’t be able to follow it properly.
All my product sell for under £10 and although I am not making as much profit per product as you are with your £7.99 product my turnover is in six figures and profits margins are what I expect them to be. This is where I am at just over 2 years after doing your course.
Great to hear that! Well done on your success! 🙂