Let’s talk about failure. I’m not a huge fan of the concept, but let’s be honest, business is a risky thing and there are no guarantees. Whether you’re starting an ice cream shop or an Amazon FBA business, things don’t always go as planned. There may come a time when you simply have to face the fact that you have failed.
Luckily for us, with an Amazon FBA business, failure will usually only happen on a “product level”. That’s what I like about this business. There’s always another product out there that you can work on and be successful with. One failing product doesn’t mean you have to stop altogether. In fact, in most cases, you will come out of such situations much STRONGER. The additional knowledge and experience you gain will make your second, third and fourth product launch much easier, and you’ll have a much higher chance of success.
In today’s blog post, I want to share my thoughts on the right time to cut a losing product and move on. What indicators are there that show you that investing more time and money into a product is not worth it? What can you do to minimise your losses and ideally recoup your investment?
These are all good questions, so, without further ado, let’s get started!
Understanding how Amazon
So, you have done your homework, researched that perfect product, sourced it, branded it and started selling it. The first few weeks are hard. You don’t have many reviews, maybe just a couple from friends and family. You invest money into PPC advertising and sales are slow. Maybe you make two or three sales a day and all your profit goes back into PPC ads. Maybe you even have to invest additional money into PPC to run these ads.
Let me tell you one thing straight away: this is NOT the time to make any decisions at all. The first few weeks are the most difficult for almost any product, so unless you get extremely lucky and find something with little to no competition, this is how it works. You will have to be patient and you may have to invest money into PPC ads to get things going, but by no means can you tell if a product is a failure or not in just the first few weeks of trading.
First of all, it takes Amazon time to evaluate your product/listing and find an initial ranking spot for it for all the keywords you’re trying to target. The algorithm is simply not fast enough, so there’s always a slight delay. Even if your product initially lands in 30th position in the search results, you have to give it at least a few weeks to reach its actual position.
Secondly, when you’re just starting out, you won’t have many reviews, if any at all. I strongly recommend that you get at least two to three reviews as quickly as possible, but that’s still a very low number compared to more established listings with dozens and sometimes hundreds of reviews.
What this means is, in the beginning phase, your listing is simply not on the same level in terms of competition and conversion rates as the more established listings. Like it or not, that’s just how it is.
Most people don’t realise that their conversion rate is actually the most important part of the whole formula! From the moment you create your listing and start selling, Amazon will begin to track your conversion rate for that product. This is not just your overall conversion rate. It is your conversion rate on a keyword level. This is SUPER important to understand as this knowledge can help you turn around a failing Amazon FBA product and make it successful.
For those of you who don’t know, conversion rate simply means how many people buy your product compared to the total views you get. For example, if your listing gets 100 views and you make 10 sales, your conversion rate is 10%.
When I talk about conversion rate on a keyword level, I’m referring to the conversion rate you get for each search term you run ads for and/or search terms your listings rank for in the organic search results. And this is what most people get wrong. They don’t fully understand this concept and waste money on keywords that will never work for them—but more on that later!
To give you an example of how conversion rates for keywords work, let’s assume you’re selling a white LED desk lamp. You will run ads for keywords like:
- Desk lamp
- LED desk lamp
- Small desk lamp
- White desk lamp
- White LED desk lamp
And of course, your listing will be optimised with these keywords so Amazon can organically rank your product for these keywords.
After running some initial ads, you will quickly realise that not all of your keywords convert equally. For example, you may see conversion rates like this:
- Desk lamp – 5%
- LED desk lamp – 7%
- Small desk lamp – 4%
- White desk lamp – 10%
- White LED desk lamp – 15%
The numbers are all over the place! If you look at the overall conversion rate for all of your keywords, you will never gain insights into this data, and you will most likely be doing the whole PPC thing wrong!
Amazon doesn’t rank products magically for every keyword you put into your listing title, bullet points and description. No, they will rank you for keywords that DO CONVERT! And by that, I mean Amazon constantly monitors your listing and records the conversion rate (and also placement) for each keyword your listing shows up for on Amazon.
Why? Why is Amazon doing that?
Because the conversion rate is actually the TRUE indicator of how GOOD your listing and product is!
If people buy your item after landing on your listing, it means that it’s a good offer, right? It means that the offer perfectly matches the search term and people like what they see in the product listing. Yes, that is true for that particular search term or keyword phrase, but for a different keyword, your listing will convert differently.
Let’s go back to the LED desk lamp example. Just think about it: If someone searches using the term “desk lamp”, they haven’t really narrowed down what exactly they need. They will most likely browse many listings until they find the type of lamp they want. All of these “views” mean that those listings will have a much lower conversion rate for that keyword, as many people will simply browse without buying.
On the other hand, someone who searches for a “white LED desk lamp” is confident about what they want to purchase. From the search results, they will pick a few listings to view based on the main gallery image. The chances of them making a purchase are very high, so the conversion rate for that keyword will be much higher compared to a general “desk lamp” search.
Obviously, Amazon also takes into account your seller metrics, price, returns, reviews and other information, but the conversion rate is by far the most important one, especially in situations where all other indicators are similar to your competitors’ listings.
So, it is vital that you understand how important the conversion rate is for keywords. But that’s not all. What matters even more is HOW your conversion rate for each keyword compares to your competition. There are no definite numbers that Amazon asks us to achieve. All they do is compare the conversion rates for each keyword across similar listings. This is the TRUE competition we’re dealing with.
For example, if your conversion rate for the term “desk lamp” is 5% but there are 30 listings that convert at 10% for the exact same keyword, you will have no chance of reaching the top of the organic search. Why? Because your offer is simply not good enough for that search term, and your conversion rate clearly demonstrates that.
To fully understand how the Amazon search algorithm works, you have to imagine a huge table of listings, keywords and conversion rates next to each keyword, like this:
The higher your conversion rate is for the keyword, the higher your chances of securing good organic rankings and having overall success with your product.
You don’t have to be super smart to realise that there are a few things that have a huge impact on the conversion rate. The three most important are:
- Product images
You can get your product images and your price right from day one—no problem there! Reviews are obviously the biggest challenge, but do not let that scare you off! Very often, Amazon actually features new listings higher in the search results just to test them out (record conversion rates), and if it does convert well, you can get very high rankings in the organic search even if you have fewer than 10 keywords. If you do any product research using Jungle Scout, you will see plenty of such examples with almost any product you research:
Why am I even talking about all this? What does this have to do with a failing Amazon FBA product? EVERYTHING! In a minute, you will discover how important it is to understand conversion rates on a keyword level as it can actually turn a failing product into a successful one, just like that.
What is a FAILING product
on Amazon FBA?
Ok, so far, I have tried to explain the importance of conversion rates on a keyword level, but why is that so important to understand? Because, in most cases, this information will help you to save a product, cut your losses, and possibly even make some profit. This information will also help you determine if there’s a chance to make it work at all OR if you simply need to cut your losses and move on.
So, what is a failing product on Amazon?
A failing product is a product that has a much worse conversion rate for a keyword compared to the TOP 20 to 30 other products ranking for that same keyword. That’s it.
If you can’t convert viewers into buyers, there’s something genuinely wrong with your offer—don’t you agree? And that’s exactly how Amazon looks at it. If there are 15 listings with a better conversion rate for the keyword “desk lamp”, why would they want to show your listing in those top 15 positions in the search? They won’t, because there are other listings that are better!
Yes, you may “reach” the 16th position in the search results, but that’s not enough to really make it work, especially when we consider the PPC costs. With a listing that converts in 16th position for a given keyword, you will never be able to run ads at a profitable level.
Why? Think about it: your competitors will always be able to bid higher because their conversion rates are higher. They can afford to pay more for each click. It’s as simple as that.
And no matter how much money you throw at PPC advertising, you will never make it because your offer is simply not good enough. Period.
It is only when you fully understand how this all works that you will be able to tell whether a product has a chance or not.
Once you have run your PPC ads for at least three to four weeks, you will have valuable information about conversion rates that you can act on. You will see which keywords convert well for you and which don’t. Maybe none of the keywords you’re targeting convert, which could be a clear sign that it’s a bad product altogether and you need to cut it completely to minimise your losses.
Hopefully, you won’t have to do that. With some adjustments, you may be able to turn your losing product into a winner.
How to Turn a Losing Product
into a Winner!
Before we get into this, I’m assuming that you have done your homework with your product research, have created a great offer, product images, listing description, etc., and that your price is competitive and your branding is spot on. If you feel that you haven’t done any of these to the highest standard, the first thing you will need to do is work on your listing. We can’t talk about any kind of success potential if your offer is not up to the highest standard.
Going back to the main topic: in most cases, your conversion rates will be all over the place for various search terms, and while you may have no chance of making the keyword “desk lamp” work for you, it could be that “white LED desk lamp” actually converts really well.
This is a classic mistake that many people make. They think that they can make every keyword work for them. In most cases, that’s simply not how it works. Very rarely can you get good conversion rates for generic/high-traffic keywords as your conversion rates simply won’t be good enough. If you do such searches on Amazon, you will often find that, for generic searches, the top listings have a very low price and a large number of reviews.
This super-low price helps them achieve slightly better conversion rates than other listings. While those conversion rates are still poor, they’re often better than others’ rates, and that’s why they rank in the top search positions. Most of these sellers will also make very little in profit because their margins are squeezed by their extremely low prices.
What you have to do is to evaluate how well your keywords are performing by looking at the conversion rate as the main metric.
If the keyword has a really good conversion rate, you need to top up your investment on ads for that keyword to further increase your sales velocity! If that keyword converts well in PPC, it will also convert well in the organic search, and Amazon knows this. They will slowly increase your rankings and, depending on how good your conversion rate is compared to others, they WILL rank you in the top search positions.
What is a good conversion rate?
Unfortunately, there’s no right answer for this as it will depend on the product, price point, competition, level of complexity, product category and other factors. We can’t see our competitors’ conversion rates—that would make this task extremely simple!
For an everyday product, something selling for less than £30, here are my guidelines:
- Less than 10%: Poor conversion rate. Unless the competition is non-existent, you will find it very hard to rank keywords and make PPC work with a conversion rate of 10% or less.
- 10% to 20%: Good conversion rate. This is an average conversion rate. It’s nothing to brag about, but it can work if your competitors are on the same level.
- 20% to 30%: Great conversion rate. If one out of every three to five people who view your listing make a purchase, that’s a great conversion rate and a clear sign that your listing converts well.
- 30%+: Excellent conversion rate. If you see that a keyword converts at 30%+, you have found a real winner. With such an amazing conversion rate, you will have no problem getting PPC advertising to work for you. Sooner or later, your listing will rank in the top organic search positions too.
As I said, these are just guidelines. There are product categories, like clothing and design-driven products, where the average conversion rates will be lower because people like to browse a lot before they make a decision to purchase, but this should at least give you a framework to work with.
So, once you have been running PPC ads for at least a few weeks, you will start to get results in the form of clicks, sales and a conversion rate. The more clicks you have, the more accurate the conversion rate will be. In most cases, it is enough to wait for 20 clicks before you use the conversion rate to make any decisions.
Obviously, 20 clicks is still not that high of a number, especially with low-converting keywords. You might get 1 sale out of 20 clicks and think that your conversion rate is 5%, right? But it could be that you get another 2 sales on the 21st and 22nd clicks and suddenly your conversion rate is 14% (3/22 * 100)!
Ideally, you should assess these results after 50 to 100 clicks, as that will give you more accurate results. If your budget allows it or if clicks are very cheap, I recommend you do this. But in most niches, clicks won’t be that cheap and you will have to make a decision about what to do with the keyword after 20 to 30 clicks.
At this stage, it’s really not so much about the cost of the click or the ACoS as it is about the conversion rate. Yes, it could be that you’re in the negative, but if the keyword has a good conversion rate, you can still work on it! You can burn some cash on PPC ads to get your sales velocity up. If you can maintain it for at least one to two weeks, this will boost your organic rankings, which, in the long term, is where your profit will be coming from.
But if you see that a keyword performs really badly, say less than 10%, and your ACoS is super high, it’s a clear sign that, unfortunately, you won’t be able to rank for that keyword because your conversion rate is too low.
There’s no point in burning more cash on that keyword in PPC ads as it won’t rank well organically.
There could be another scenario, one where the conversion rate is low but your ACoS is also low/good. This usually means that no one in your niche for that keyword has a great conversion rate. In cases like these, I recommend you increase your bids and try to get as much traffic as possible! With a little bit of luck, Amazon could actually rank you very high in the organic search for that keyword simply because no one else has better conversion rates.
In most situations, though, you will have keywords that have to be taken out and keywords with good/moderate success. What you need to do is stop spending money and time on keywords that clearly don’t work for you and double down on the ones that do. By that, I mean:
- Do new keyword research based on the keywords that do work for you. Keywords that convert well in both Manual and Auto campaigns.
- Redo your listing title, bullet points, description and back-end keywords. Optimise all of these for the keywords that you know are working for you.
- Maintain or increase your spending budget on PPC ads for keywords that do convert well so that you increase sales velocity. Maintain a higher PPC spend (even if it means losses) for at least 10 to 14 days, which should be enough for Amazon to rank your listing under those keywords in the organic search too.
There’s also a question of timing here. Depending on how competitive the niche is, you may need to run ads at a higher cost for longer. However, the main idea is clear: stop wasting money on keywords that will never work for you and concentrate on the ones that do.
Often, this is all you need to do to turn a failing Amazon FBA product into a successful one.
But what should you do when all of the keywords you’re targeting are no good and have poor conversion rates? In cases like these, the only viable option is to cut your losses and move on to the next product.
How to Minimise Losses
Sometimes, there’s just no way around it. You realise that you have made a bad choice with your product selection, none of the keywords are converting well, and you’re just burning money on PPC ads with no possibility of them ever ranking well organically.
If you follow the guidelines set out in my product research process, this won’t happen often. But on the rare chance that it does, what is the best way to minimise your losses and get out of that product?
First, try to turn off ads completely and monitor the situation for seven to ten days to see how many (if any) organic sales you’re getting. Depending on how many units you have in stock, if you can sell off the inventory within four to six months via organic sales, I would simply leave it as it is and allow organic sales to recoup your investment. Ideally, you might even make some profit.
If you don’t get any organic sales or if your sales rate is too low to sell off inventory in the foreseeable future, lower the price of your items. Lower the price to a level where you don’t even make any profit. The aim is to simply get rid of the stock and get your investment back. You should monitor this situation for ten to fourteen days.
If that doesn’t help either, consider running some ads on the keywords that converted best for you when you were first doing PPC ads. Again, do it for ten to fourteen days to see if the situation improves (your conversion rates should improve as your price is now much lower).
If that doesn’t help either (very rare), consider liquidating your stock at an even lower price. There will be a price point where the product will start selling, so you need to gradually decrease your prices until you hit that point.
The last situation is very rare, though. Usually, with a great product and listing, you will be able to move your stock at the cost price so that you’re not out of pocket (or have minimal losses). In most situations, just by selectively eliminating the poorly converting keywords from the ones that convert well, you will be able to turn things around and sell the item for a profit. Yes, it may not be at the level you expected when doing your product research, but it is what it is.
I hope this helps. I have tried to summarise the whole process and make it easy to understand for everyone, especially for people who are new to the Amazon FBA game and are struggling with their first product launch.
If you take anything from this post, please let it be about conversion rates and how they affect your overall success, organic rankings and the PPC game. Conversion rates really are the KEY element you need to understand. Once you do, everything else will suddenly become so much easier to understand. And most importantly, you will know exactly what to do to turn things around.
No one likes to fail, including me, but even I have made mistakes from time to time. I have had products in my portfolio that I had to sell off slowly to recoup my investment. I have also had products that I had to liquidate and take a loss. That’s just how it is. We can’t predict everything, and even if you do your best at the market research stage, things can change over time, so you might have to cut your losses and get rid of that product.
The great thing about an Amazon FBA business is that you’re not limited to just one product or a product in any specific niche. One failed product doesn’t mean your entire business has failed. You will learn so much from the process, and next time, you will be much smarter and know exactly what to do to minimise your risk of failure. What matters most is that you don’t take the whole experience as defeat and that you learn from your mistakes and move on.
That’s it for today. If you have any questions or specific situations you want my advice on, please leave them in the comments box below. I personally reply to all questions within 24 hours, Monday to Friday.
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Thank you Andrew for this article.
I have been pondering what to do with rising PPC Costs and minimal sales ( 1 per day). I am a new seller , my product has been available since September, after a bad review in October I have struggled with sales. I’ve been throwing money at PPC based on clicks and ACOS so it’s so nice to see another way of doing things. I was all but ready to pack it in after Christmas but this has given me a plan going forward. Hopefully can turn it around once I’ve implemented your suggestions. Great article … big thanks 👍
Thanks for your comment.
Glad to hear I have given you a different view on the strategy and good luck with the business growth in 2020! 🙂
I hope you can do a article about IEN number because it’s very confusing for me now. All frieght forwarding companies I have reached out so far in China does not provide me with IEN number if i choose DDP service. If I choose ddu service i have to register a VAT for that happen. Well, I am a sole trader and also a newbie to this game, I don’t wanna register VAT to spend thousands pounds on accounting and higher the retail price for 20% as well. So seems like If I don’t have a VAT i can’t really sell things on Amazon anymore. Get VAT = Get IEN. Is that true? Whats your advice?
Thanks for your comment.
Are you sure you’re not mixing up something here? As VAT is a UK/EU thing and IEN – used in the US.
How does IEN number relate to shipments to the UK/EU?
Based on the information about IEN on Amazon UK page. IEN (Import Entry Number) are allocated by EU Customs authorities when goods are imported into the EU. It’s a quite recent policy started from 1.st April.2019. I was about to ship something to UK Amazon warehouse, my freight forwarding company told me they can’t provide me with IEN number if I choose to use DDP (Delivered Duty Paid) service. It definitely alerted me, so I contacted Amazon and they told me i will need IEN number even I am a UK seller.
My freight forwarding company just told me if i don’t have IEN number, my products might not be listed at all and they are not responsible for that. So I really want to get this clarified before send out the shipment.
If I register VAT now then I can use DDU service (Delivered Duty Unpaid), the IEN number will be on the custom charge invoice. But I don’t wanna go down this road just yet, since accounting for VAT cost another £1000+ a year.
Thank you for this article, A boost of morale
Its a funny coincidence that this came out this week when I just realise that I may have made a mistake making me feel upset.
I made a mistake of choosing a product with a 15 to 20% profit not considering the actual ppc campaign cost but as you have said in the article, time for me to cut down loss and prepare another product with the new found experience
Yes, it’s a process you learn from every day – for all of us. What matters is that you don’t give up and continue working towards your goals.
Great article Andrew!
You’re welcome Henryk!
Hello Andrew – great article as usual! Where can you find the data on conversions per product/key word In seller central?
Thanks for your comment.
Keyword level conversion rates you will only see for PPC campaigns – via the Search Term report.
Product overall conversion rates you can see via Reports > Business Reports > Detail Page Sales and Traffic. Unit Session Percentage is the conversion rate number to look for.
Thank you, Andrew. Really appreciated.
No problem, you’re welcome Simon!
This is a great article and easy to understand for me, having some keyword experience from my blogging days. Makes total sense.
Good stuff Kris! 🙂