It’s time to do my monthly Amazon FBA business update for April 2018! As usual, I will show you my exact sales numbers, ad costs and net profit. PLUS, I’ll share my insights, lessons learned and my plans for the next month.
Before we get into actual sales numbers, I wanted to quickly talk about the business itself. Many blog readers have commented and asked me what products I sell?! For obvious reasons, I won’t be sharing that information with everyone—at least not for now. My blog gets more than 1 million unique visitors each year, so I don’t want to share my Amazon products as I know for sure that some will try to copy me and sell exactly the same product.
Not that I’m afraid of competition that much—this niche is already VERY crowded. However, because my product is THE BEST on the marketplace, I can still get very good sales, even when selling at the highest price. Sometimes even at double the price my competitors charge.
So, the competition is not what I’m worried about. I’m more worried about people trying to “cheaply” copy what I do. As they don’t have the knowledge or skills required, they will fail and say to me, “I tried what you do, and it doesn’t work.”
It does work, as proven by these monthly posts, BUT you need to have a certain skill set and know-how to do it all properly. How are you going to be able to compete, stand out from others, charge premium prices and be profitable, even after reinvesting a good amount of your profits on ad spend if you’re already taking shortcuts by copying someone else? If you put in the time and effort to build your knowledge and skills, it does work.
For this reason, I’m not disclosing this business on my blog, BUT I do show it in detail in my Amazon Sharks course. I actually use it throughout the course for all the step-by-step examples. So, if you’re interested in learning more about what I do, check out my Amazon Sharks course.
Also, regarding this particular Amazon business that I’m covering in these monthly posts series, there are some other things I want to clear up—especially for people who may be new to the blog and don’t know the history. This is NOT my whole business! I created this new Amazon account and new brand in Fall 2017 so I can document my journey from day one with a brand-new account and brand-new company to help show the entire process on my blog as well as for the Amazon Sharks course purposes.
I have other businesses and accounts on Amazon, which, for a variety of reasons, I still prefer to keep totally private. So, for people who ask, “Hey, Andrew—you’re ONLY making £4k to £5k per month in profit?” I just want to be fully transparent that this is just one of my businesses.
Lastly, you won’t see crazy progress here from month to month in terms of sales figures because I am intentionally not adding any new products. This account was created for one specific niche, one specific product, and I won’t be adding any unrelated products to it. That’s not the plan. I just want to grow this one product as much as possible, including selling on Amazon USA (more on that in a minute) to show you how it can be done, starting from scratch.
Without disclosing the product itself, it’s something similar to a bedding set niche. For example, pillow and duvet cover sets that come in various colours, patterns and designs. I also basically sell one main product, but it comes in various design variations. Currently, I have about 15 design variations. Of these, 5 to 7 are best sellers that account for most of the sales. I will probably cover some tips and tricks on how to make the most of items with variations in a separate blog post in the future.
OK, enough of the intro! Let’s get straight into numbers and see how much money I made with my Amazon FBA business in April 2018!
Overall, April has been a good month sales-wise. The only exception is that I made a big mistake with my PPC strategy. I will cover that in more detail in a moment. Some may look at these figures and say, “Hey, Andrew—it’s the lowest sales month in 2018 so far!” and they are correct, but sales do fluctuate all the time. If you’re in this business, you have to be willing to ride out the highs and the lows. Reflecting on the month, the main reason why my sales did not match or exceed March’s numbers is because of that PPC mistake.
Anyways, going back to actual numbers: in April 2018, I made £14,644.62 in sales:
This is from selling 1,442 units of the product. I sell the product for £9.99 and use the units sold number to easily calculate my profit. In the first post of this series, I broke down the cost of my product and explained that my profit after product cost, shipping, VAT, Amazon fees, etc., is £4 per unit sold. And this is the number I use to calculate my profit BEFORE subtracting my ad spend.
So, in April 2018, I sold 1,442 units on Amazon UK, which resulted in a profit of: 1,442 x £4 = £5,768
Almost £6k in profit! It would be awesome to pocket all of it, but as I said, this is profit before ad costs. I could have spent ALL of that money on ads and made no profit OR I could even spend more than that on ads and make a loss! To see how I really did for the month, I have to subtract my ad costs.
Let’s take a look at my actual ad spend, starting with my Sponsored Products ad costs for April 2018, which was £1,840.87:
That’s almost one-third of the “potential” profit gone in Sponsored Products ads alone—just like that. But running ads is just part of the game on Amazon. If you work in any competitive niche, you won’t survive if you don’t use paid ads. Seriously, if you don’t bring outside traffic to your listings or traffic via Amazon ads, you will never be able to match the Sales Velocity of your competitors, which means you’ll never see your products in those top 3 rankings.
Besides Sponsored Product ads, I also run Headline Search ads. These are only available to sellers who are registered in Amazon’s Brand Registry and allows us to get extra exposure for our listings in the search results, as well as various other placements throughout Amazon.
My spend on Headline Search ads in April 2018 was £322.22:
So, it’s not a huge amount but it still generated almost £1k in sales at an average ACoS of 35.90%, which is a good result for a cheap product selling for just £9.99. My breakeven ACoS is 50%, so Headline Ads actually generate a profit, along with generating extra sales for velocity and ranking purposes.
I’m telling you this because understanding ACoS and ad spend correlation with rankings is very important. My ACoS for Sponsored Product ads in April was 50%! This means that I did NOT make any profit on those ads! Yes, I spent £1,840.87 on those ads and did not make any profit on them. Why? You will find out in a moment.
Going back to the numbers, I need to sum up the Sponsored Product ad cost and the Headline Search ads to get my TOTAL ad spend for last month, which is: £1,840.87 + £322.22 = £2,163.09.
From this, we can calculate the NET profit! Obviously, this will be profit before tax, overheads, etc. I don’t calculate those at this stage as it would complicate things too much and, speaking of overheads, there aren’t that many! I have an office/warehouse space that I use for all of my businesses but as I only use FBA with Amazon, the direct overheads are actually very, very low because there’s no shipping, packing, customer support costs, etc.
Anyways, my profit before ad spend was £5,768, so now we just need to subtract the ad cost to get that final NET profit number:
£5,768 – £2,163.09 = £3,604.91.
And this is how the year 2018 looks so far:
Sales – £24,119.08
Profit – £7,373.73
Sales – £15,316.28
Profit – £4,340.22
Sales – £17,456.02
Profit – £4,956.73
Sales – £14,644.62
Profit – £3,604.91
Sales – £71,536.00
Profit – £20,275.59
(Total number in Amazon reports is slightly different due to returns and refunds adjustments, which can happen weeks after I have created my monthly reports and blog posts.)
So, that’s £20k already cleared in the first four months of 2018! If everything continues as planned, the Amazon UK platform alone should generate at least £50k in NET profit for this business in 2018. For the first year of trading, that would be a very solid result.
I plan to make more, of course! This particular business and product can generate very good sales throughout Nov/Dec/Jan, so I will hopefully make more than £50k in profit this year, especially after seeing how well the product was selling last Holiday season.
That is, before I run out of stock! 🙂
Plus, this year, I will expand to the Amazon US platform too. But before that, let’s talk more about what happened with my business in April 2018 and what you can learn from it.
April was a great learning experience for me, personally (and hopefully for you too). I did something that I KNEW was not a good idea but I still did it and I paid for it with a sales decrease.
In my March Amazon FBA business update, I told you that I optimised my Sponsored Products campaigns. Basically, I saw that my rankings were good and my organic sales were high, so I thought why not lower the bids on ads, right? I don’t need to spend that much money on ads when organic sales make up 80%+ of my revenue.
And I knew that it was a wrong move. I have actually tried doing this several times before; it’s something I specifically talk about in the Amazon Sharks course too. You don’t want to OVER-OPTIMISE your ad campaigns as it will hurt your Sales Velocity, which in turn will lower your rankings and organic sales. And this is exactly what happened:
I let it ride for the first two weeks of April in the hope that it was a sales fluctuation. It wasn’t.
As soon as I increased my bids on ad campaigns, my sales went through the roof and I managed to salvage the overall monthly sales target and profitability. It was that OBVIOUS!
In general, if your ad campaigns are doing well, if they perform BELOW the breakeven ACoS point, you basically want to keep them that way.
Yes, even if it means that you’re NOT making any profit on ad sales, you still want to continue bidding rather high to get those extra sales for two reasons:
- Sales Velocity: one of—if not the most—important of the ranking factors. The more sales you generate, the higher your listings rank in the search. This can be outside traffic, Facebook traffic, etc. It’s whatever you need to do to generate sales, even if it costs you. Sponsored Product ads is the easiest way to BOOST your sales velocity.
- Amazon LOVE: It’s becoming increasingly obvious that Amazon gives more love to sellers who spend money with them. It’s hard to distinguish where the sales velocity and FBA effect ends and where pure business for Amazon starts. Based on my experience using the platform, I just feel that Amazon gives more love to businesses who use FBA and who spend good amount of money on ads. At the end of the day, Amazon is a business and they do want to make as much money as they can.While the second reason can be questionable (let me know what you think about it in the comments section), the Sales Velocity effect is undeniable. This “experiment” proved it once again, 100%! And as I said, this is not the first time I’m experiencing this. I have done it in the past and it always ended in same way: lower organic sales. I just thought that maybe this time it would be different. I know, I know. Lesson learned—again!
To sum it up, I will NOT lower my bids too much anymore and, as long as my overall ACoS for Sponsored Products stays below my breakeven point (which is 50%), I will continue giving away thousands of pounds to Amazon in ad fees. To keep Amazon happy, but also to keep my sales stats steady and my profits healthy.
The expansion to the Amazon USA platform comes next.
Here’s the thing: If you create an amazing product (like I do), have amazing listings (like I have), and you’re aggressive with Sponsored Products from day one (like I am), you’ll find that you quickly rack up dozens of reviews and get your listings ranked pretty high in the search results. This all happens in about 3 to 4 months or so (max. 6 months), unless you work in a very competitive niche.
Then, you optimise your ad spend (but not too much, as we just learned) and basically, you’ll see that your sales will reach a plateau at that point. Yes, they will go up and down slightly from month to month but, in general, once you reach that level of market saturation, you can’t increase your sales that much as you are limited by the demand for your product. No matter how much you spend on ads, there’s just a certain number of people that search for your product on Amazon each month.
I believe I have already reached that point with this business. I have some very good rankings for main keywords, I spend a lot on ads, and I can see that the market for me and for my product on Amazon UK is around £15k per month—maybe £20k on a good month. It is likely to be more during the Holiday season. And that’s basically it. I can’t increase it magically to £30k or £50k because the demand is not that high.
So, to increase sales and turnover, there are only two options available:
- Adding new products
- Expanding to other Amazon marketplaces
I won’t be adding new products to this business, for the reasons explained at the beginning of this post, BUT I do want to expand internationally to the Amazon USA website!
From the Jungle Scout numbers, I can see that the US market is at least five times bigger for this product than the UK:
So, there’s tons of potential to increase my sales just by selling on Amazon.com too. The downside, however, is that competition for this product on the US site is also much higher than the UK and the prices are generally cheaper.
The slight advantage I have is that I won’t have to charge VAT on US sales, which will increase my margin. Still, I will charge a premium price on the US site and just see how it goes! I need to at least give it a try.
Speaking of giving it a try, my first pallet of 2000 units have already been shipped to the US and I expect to start selling on Amazon.com within the next week or two, depending on how fast those goods reach Amazon’s warehouse and how quickly they are loaded into the system.
I will provide some smaller updates on my Facebook page, so make sure you follow my page to get the latest news on my journey!
If all goes well and the US customers love my product as much as people in the UK, there’s a potential to reach at least $50k in sales over there by the end of this year. But it could also be that my high price point won’t be attractive to US marketplace and I will find it hard to make it profitable in such a competitive niche.
For one, I will keep you updated on how I’m doing via my monthly blog posts and, hopefully, by the next time I’m doing this (in June), I will already have some Amazon.com sales data to share with you.
Ok, that’s it for now. I hope you’re enjoying these posts! 🙂
If you have any questions, feel free to leave them below in the comments block and I will personally answer them within 24 hours, Monday to Friday!
Enjoy the sunny May weather!