The question of whether or not to register a Limited company is one of the first decisions you have to make when starting an Amazon FBA business in the UK. And I’ve written about this extensively and gone over all the pros and cons of operating as a sole trader vs a Ltd company so I won’t cover that all again now.
And when you are ready to take things to the next level and move from a sole trader to a Limited company, you’ll have any decision to make – which formation company should you use!?
As you can see there are no shortage of options out there, with the prices and services also varying hugely.
Can you register a Limited company without an agent?
But before we get into the different companies and who I recommend, let’s take a little step back and first decide whether you even need to use a formation agent to register a Limited company in the first place?
The short answer here is no, you don’t need to use a formation agent and can simply register your company directly with Companies House.
This costs £12 and is a fairly simple process. There are some documents you’ll have to prepare and you’ll need to provide information on all people involved with the company who are shareholders or have significant control.
Once completed your company is usually registered within 24 hours and you’ll receive a certificate of incorporation – a legal document which confirms the company’s existence and date of formation.
All pretty straightforward right?
So as I said you really don’t need a formation agent (despite what some of them make it seem like on their websites!) as it’s a fairly easy process with a lot of help available.
The benefits of using formation agents
BUT formation agents offer a number of additional services and extras that you may want to use! This includes:
• guidance on the type of company that best suits your needs • assistance naming your company, including those that require permission • ongoing company secretarial support • registered office address services • help setting up a business bank account
Coupled with the fact that their formation services are usually very reasonably priced, not costing much more than registering directly with Companies House, and I do recommend most people use them for peace of mind and to make sure everything is done correctly.
But as you can see there are over 120 different options for you to consider! So as always I will make life easier and recommend the 3 best limited company formation agents, based on their reviews online, my own experience, and feedback from my trusted blog readers and Amazon Sharks members.
Without any further ado, here you go:
Your Company Formations
With 4.9* from almost 4,000 reviews on Trustpilot and amazingly priced packages, starting from just £12.48, Your Company Formations are my no.1 recommendation.
While their Digital package offers everything you need for the same price as you’d pay Companies House to incorporate directly, for most people the Privacy package at £27.48 will be the best option:
With this option you get everything in the Digital package plus printed copies of your certificate of incorporation and share certificates plus a registered office address and director’s service address.
Now this is very important and something a lot of people ask me about.
Can people see my details when I register a ltd company?
Yes! All companies are searchable and you are able to see the registered address, director, and director’s address.
So if you don’t have an office and are using your home address for this, which most people do, then this will be public record… and that’s where Your Company Formations come in! Using their Privacy package will allow you to use their address for your registered office and director’s service address.
That way if anyone searches for you or your company your details will be kept hidden.
Well worth the £27.48 fee, which is great value if you ask me!
If for whatever reason you don’t want to go with Your Company Formations then that’s fine, they’re not the only company offering address services, and there are plenty more good options out there.
Once again their basic package costs just £12.99 and then you have multiple other options depending on which features / extras you need:
Last but not least we have Rapid Formations, who average 4.8* on Trust Pilot from over 10,000 ratings. Slightly less than our first two choices but still a very high score.
And actually I’m pretty sure that Rapid Formations and 1st Formations are white label versions of the same company as their websites are very similar, even down to their package names and prices:
That brings me very nicely on to the conclusion to today’s post.
While you don’t need to use a formation agent, I do strongly recommend it, as you really lose nothing and in fact you can see some significant savings if you need any of the extras such as registered addresses, as they cost significantly more if you’re signing up for them separately.
For example Rapid Formations charge £39 per year for their London registered office service.
In comparison their Privacy package gets you company formation, a London registered office, and a London director’s service address, all for £20!
That means you pay WAY less than registering yourself with Companies House and adding it on later, plus you save time.
It’s rare in business to have a no brainer decision, but this really is one.
For those of you who are transitioning from a sole trader to a Ltd company on Amazon, I know there are a lot of horror stories out there about how difficult this is and how it can lead to your account being suspended for months.
But not to fear as most of this is scaremongering and I am going to write a separate blog post where I outline step by step how to make the changeover on Amazon without disrupting your business and losing precious time and money.
As you will have most likely heard by now, from May 12th 2022, Amazon are adding a 4.3% fuel and inflation surcharge to FBA fulfilment fees for the UK, Germany, France, Italy, and Spain.
What has caused the fee increase?
This has mainly come about as a result of increasing oil and fuel costs:
I’ve seen a lot of reactions to this most recent fee increase announcement and they are understandably negative… after all nobody wants to pay more in fees! Especially considering that it’s on top of the small increase to fulfilment fees which already came into place on March 31st 2022.
But I’m going to go against the grain here and say that this fee increase was 100% expected and very reasonable when you consider the amount of money Amazon spent increasing their fulfilment capacity over the last few years of COVID and supply chain bottlenecks.
In fact they actually overspent here in an attempt to deal with the pandemic demand, leading to a first quarter loss for Amazon of $3.8 billion. This is the first time since 2015 that Amazon hasn’t made a profit and the news led to a 14% drop in their share price in a single day:
Overall, Amazon claim to have “more than doubled” their fulfilment capacity across Europe, which us FBA sellers noticed first hand towards the end of 2021 where we saw Amazon fulfilment centre check in times drop severely and the inventory and storage limits, which had plagued many FBA sellers, start to be lifted.
And it’s for exactly that reason that I’m more than happy to pay slightly more in fees, rather than have to deal with inventory constraints.
Now I know what many of you are thinking right now – “but Andrew 4.3% isn’t slightly more!”
But my answer is that it really is.
How much is this fee increase actually going to cost you?
Firstly let’s point out that it’s a 4.3% increase to the current fees, not a 4.3% increase in total.
So let’s say you currently pay £2.21 in fulfilment fees for an item that you sell for £20. That means that your FBA fees works out at 11% of your sale price.
From May 13th that fee isn’t going to increase to 15.3%! No, it’s going to increase from 11% to 11.47%.
And suddenly the fee surcharge seems much more reasonable when you consider it as a 0.5% loss of margin.
I know this is obvious for most of you, but you’ll be surprised at the number of people who see the headline of 4.3% fuel and inflation surcharge and immediately think they’re losing that much margin!
So as I said, I think it’s a very reasonable increase. Especially when you consider how cheap Amazon’s FBA fulfilment fees are to start with!
I showed this in black and white in our Fuflilment Centre Showdown post last year where I tested 4 different UK based fulfilment centres and compared their costs to Amazon for a theoretical product.
And the closest any of them could get was 61% MORE EXPENSIVE than Amazon (with the highest being 255% more).
I hope now you can see why I consider 4.3% to be a very small increase!
What’s the best way to deal with the fee increase?
So rather than get hysterical and start bashing greedy Amazon, let’s see what we can do, if anything, to offset this fee increase.
And really you only have two options here:
Accept a lower margin
This is really the do nothing choice, where you simply absorb the additional costs and keep your prices the same.
Increase prices to maintain your margin
The other option is to increase your prices to keep your gross margin the same.
If you’re using a sales and P/L dashboard, such as Shopkeeper, which is what I myself use and recommend, then you’ll be able to see exactly what affect this fee increase will have on your margins as they include a full fee breakdown for each product.
Should you increase your prices on Amazon?
Which option to choose really depends on your specific business and product and it’s impossible to give one blanket recommendation.
You have to consider your competitors (have they increased their prices?), where you’re positioned in terms of pricing vs other products, if you’ve already increased your prices recently (due to increased shipping costs for example) etc!
Generally speaking I would try to increase prices rather than sacrifice margin, especially if you haven’t done so recently and are presumably already absorbing recent supply cost increases. Sadly it’s the year of inflation so customers will be used to rising prices and it shouldn’t negatively affect your conversion rate and sales.
So that’s all there is to it for now! For most of us these fee increases won’t have made a significant difference.
If however you’re one of the unlucky sellers whose product has now fallen into a different size and weight tier then you may be looking at a much bigger increase in your fulfilment fees.
In that case stay tuned as I have a future blog post planned that could potentially save you a lot of money!
Product pictures can make or break your Amazon business.
Long-time blog readers will now that I’ve been stressing for years now how product photography is one of the most important aspects of selling online, and this applies more than ever with Amazon.
And don’t think I’m exaggerating here! For me product pictures and reviews are the two most important factors when it comes to being successful on Amazon. Even the listing and description, which some people agonise and spend hours over, are nowhere near as important.
Just think about it – customers can’t see or touch or test your product, so what are they relying on? Reviews and pictures!
If your product pictures are premium, then naturally buyers will assume your product itself is premium. So not only will you be able to get away with charging a higher price, you’ll also have a higher conversion rate.
And the importance of this can’t be overestimated – a high conversion rate increases the profitability of everything you do on Amazon!
For one thing it automatically means you make more sales and money off the bat as a listing with a 15% conversion rate will make 50% more sales vs a listing with an average Amazon conversion rate of 10%.
But this also has the knock-on affect of making Amazon love your product and bumping it higher and higher in the search results, meaning… more views and more sales!
And it doesn’t stop there. A high conversion rate can also be the difference between a profitable and unprofitable PPC campaign. Again, it’s all simple maths here – if you pay on average £0.10 per click for 500 clicks a day and make 50 sales from that (a 10% conversion rate) that gives you a PPC cost per sale of £1. But if you instead get 75 sales from your 500 clicks (a 15% conversion rate) that means you’ve lowered your PPC cost per sale to £0.67.
This all makes a HUGE difference when it comes to scaling your Amazon business.
So what am I getting at with all this? Well it’s simple really and the main point of today’s blog post – don’t cut corners when it comes to product photography for your Amazon FBA business – get the BEST pictures that you can.
And yes, that means NOT doing it yourself at home with a smartphone camera! The days where this was good enough are long gone and you need to use a professional for this.
How do you choose the best Amazon product photography company?
Now over my many years of ecommerce, eBay, and Amazon selling I’ve personally tried a lot of different product photography companies – ranging from big studios to small freelancers and even semi-amateurs.
And honestly I’ve had much more success with some of the “smaller” companies, especially local photographers who you can even meet with and discuss what you want to achieve with your product pictures.
For me the bigger photography agencies just don’t offer the level or service and customisation that’s needed for Amazon sellers to create a unique but premium look.
However, using local photographers and smaller freelancers, who are often one man (or woman!) bands, also has the problem of them not always being available, moving away or even stopping their business altogether.
And that’s exactly what happened to me. Margaret, of fineartimaging.com, who I had been using and recommending for years, retired and closed her business.
So last year I started searching for a new company to use for my own projects and also to recommend to my blog readers and Amazon Sharks members.
And from hours of testing and research – here are my recommendations:
This is my no.1 choice as when it comes to quality vs cost, you just can’t beat a good local photographer.
This is especially true when you have multiple products and go back to them often as once you build a good relationship and they know what kind of pictures you’re looking for, it’s plain sailing.
For me this is the main advantage of using a local photographer vs using studios where you usually need to give a lot of input in terms of ideas and copy for your pictures. Also the quality is way more consistent as it’s the same photographer every time. This was a big issue I had testing some bigger companies where the outcome was just too random.
Unfortunately the biggest downside to this option is that finding a good local photographer is sometimes easier said than done and it does require some work on your part as you have to look at local classified ads, check out forums etc. But don’t let that put you off as if you can find one you’re set and this is my no.1 recommendation for getting the best product pictures possible without breaking the bank.
Product Photography Studios
This is my second recommendation, which may be surprising after all the negatives I talked about BUT they can all be minimised by choosing smaller companies that specialise in Amazon product photography.
And this is a big point because never mind the technical requirements, the style of effective Amazon product pictures is different to even Etsy or your own ecommerce store.
Of course it’s not as simple as just searching for “best Amazon product photography companies” as you’ll be met with thousands of results – most of which are completely rubbish. Seriously, I won’t post pictures and attack businesses unnecessarily but so many of the options I looked at are just terrible. And if that’s what they choose to put in their portfolio then I’m scared to even see the normal results!
But thankfully you don’t have to go through this from scratch as I’ll start you off with a few recommendations for Amazon product photography studios in the UK:
Photography Works offer 3 different Amazon image plans, but for what we’re looking for we’re only really considering the Conversion Booster PRO as simple white background images won’t be enough to stand out against the competition.
This costs £299 and for that you get 7 branded images for your Amazon listing.
One important point to note here, you can’t have any branding on your main image and this will lead to your listing being suppressed so be careful with this. I’m sure Photography Works are well aware of this but I wanted to point it out just in case!
Overall I’m really pleased with the quality of their portfolio. That, along with some very reasonable pricing, makes them a solid recommendation.
Photograph My Product again offer 3 different packages for Amazon sellers:
And what I really like about their options is that they all include a lifestyle image! So actually in this case you could quite happily go for the Starter Pack as it includes 7 pictures in total in a variety of styles.
And for £225, considering the quality of their portfolio, it’s another a great option for your Amazon FBA product photography.
Now I wasn’t 100% sure about including this last option, for two reasons.
One, because they really specialise in clothing and jewellery, and two, because as I covered in our product photography test a while back, I find their images to be a bit too “clean” when we’re looking for something more lifestyle focused (think Instagram pictures here as that’s what really sells your product).
But there’s one thing I can’t argue with and that’s the unbeatable pricing they offer, with 3 product pictures starting at £15 + VAT and additional images only costing £2 on top!
So while it’s still not my main recommendation for all the reason written about above, 7 product pictures for your Amazon listing for £27.60 is a crazy price and a solid budget option for people that don’t have £300+ to spend here.
And there you have it!
As I talked about, I have had some great success using local photographers so I always suggest trying to go down that route initially. But if you’re having no luck there then here are some great options to consider.
As always I’d love to hear your thoughts and suggestions so if you have a product photographer that you’ve used and recommend, please feel free to share them below for other blog readers to see as well.
In today’s post I want to share a quick tip that I’m shocked the majority of Amazon sellers don’t seem to know about – how to remove negative reviews! And this is something that really does work 99% of the time.
But before you get too excited I’m talking about seller feedback here – NOT product reviews.
Product vs Seller Reviews on Amazon
For those who don’t already sell on Amazon, there are two types of reviews you can get for an order.
You can get seller feedback, where the customer rates you as a seller, and you can also get a product rating / review.
Now back in the eBay days seller feedback was so important – but on Amazon it really isn’t as unlike eBay you can’t even see the seller rating on a product page.
You have to go to the seller profile for that:
Product reviews on the other hand are to me the no.1 factor when it comes to your Amazon business. Why? Because they affect everything – starting with your conversion rate!
It’s doesn’t take a genius to figure out that if a customer is faced with two products at a similar price point, one rated 5* and one rated 4, they’re going to choose the 5* product… that’s just common sense.
And the knock on effect this has is huge!
A higher conversion rate means Amazon will improve your search ranking, leading to more traffic and more sales.
A higher conversion rate will also improve your ad performance, again leading to more traffic and more sales at a lower cost.
I can’t overestimate how important product reviews are for your Amazon business.
But that doesn’t mean seller reviews don’t matter at all and you can simply ignore them, not at all – I still suggest keeping a close eye on your seller feedback and removing any negative feedback when possible.
And it is nearly always possible when you’re using FBA to sell.
Which Reviews Can You Remove?
Though Amazon state that they do “not remove customer feedback even if it is unwarranted or the issue has been resolved” they also say “there are some situations when Amazon will remove or strike through customer feedback. In such situations, if your request is granted, the impact of the feedback will be removed from your feedback rating and Order Defect Rate (ODR).”
So let’s take a closer look at what these situations are:
• The feedback includes words commonly understood to be obscene or profane. • The feedback includes seller-specific, personally identifiable information, including email addresses, full names or telephone numbers. • The entire feedback comment is a product review. For example, “The Acme Super-Widget lacks the sharpness and speed of the Acme Ultra Widget.”
However, if the comment contains both a product review and feedback about your service, we will not remove the feedback. For example, “Seller’s delivery service was very slow, and the Acme Super-Widget lacks the sharpness and speed of the Acme Ultra Widget.”
Striking of feedback
Amazon might strike through feedback in the following cases:
• The order was fulfilled by Amazon: The entire comment relates explicitly to delivery experience for an order that was fulfilled by Amazon (FBA). In addition to the strike-through, the following statement will appear: This item was fulfilled by Amazon, and we take responsibility for this fulfilment experience.
• The order was shipped using the Buy Shipping service: The entire comment is related to a delayed or undelivered order, which you dispatched on time by using Buy Shipping services. In addition to the strike-through, this statement will appear: “The fulfilment issues associated with this order were not due to the seller”.
So there you have it, straight from Amazon themselves.
To sum it up, if your negative feedback is a product review, which is in my experience 80% of any negative feedback left for you as a seller is, Amazon will remove it.
And if your order was fulfilled by Amazon and the negative feedback is about the order fulfilment, Amazon will also remove the feedback (well in this case technically they strike-through it).
As there are practically no scenarios where negative feedback will be related to something other than the product or order fulfilment, that means it’s in fact quite easy to maintain a 100% seller feedback.
How to Remove Negative Reviews on Amazon
Just bear in mind that you need to request the removal within 90 days and it needs to be done via the Feedback Manager. Amazon are very explicit with this, even stating that contacting support teams via Contact Us to request feedback removal can result in account deactivation.
This seems extreme to me and I’ve never actually heard of that happening but better to be safe and follow Amazon’s guidelines here!
So simply head over to Feedback Manager within your Seller Central account. There you’ll see a list of all your recent feedback and beside each one there’ll be an Actions tab.
If you click on this you’ll get two choices: Post a public reply and Request removal.
And that’s all there is to it! As always when dealing with Amazon seller support they may sometimes answer saying it can’t be removed, even when it clearly should be. Simply reply politely stating that according to their own policy, which you can quote or link to, the feedback should be removed and 99% of the time it’ll be done.
So that’s it for today’s quick post and tip.
As always if you have any questions or comments I’d love to hear from you so email me at firstname.lastname@example.org or post below and I’ll personally get back to you.
I know the blog posts have been sporadic recently as I’ve been incredibly busy dealing with some personal issues. But I have some very big plans and ideas for this blog coming up which I’m very excited to share with you all!
This includes launching a brand new product on Amazon FBA and tracking the progress every step of the way on AndrewMinalto.com, right from the product research stage all the way to the launch and beyond.
I’m still considering whether to do it myself or possibly even select one of my Amazon Sharks members or blog readers to do it. That way it would make a perfect live case study for starting an Amazon FBA business in 2022, where you can see exactly what’s involved every step of the way.
Either way I’m very excited!
But more on that very soon as it brings me perfectly to the topic of today’s post.
How much does it cost to start an Amazon UK FBA business?
But I’m warning you in advance that the answer might not be what you want to hear! And I’ve spoken about this before, how I don’t agree with some “gurus” who claim you can start an online business with next to no investment needed.
Of course it is true that we’re in an age of opportunity for business and it’s not like the old days of bricks and mortar where you needed a lot of money to get started – for rent, staff, equipment, etc. BUT that doesn’t mean you can set up your own private label business on Amazon for £100.
Sorry, it just doesn’t work like that.
You’ll notice that I mentioned private label specifically as that’s what I’m talking about in this post. Flipping or arbitrage is a whole other matter and with that business model you CAN start with pretty much any amount (and start turning a good profit almost immediately as we showed in this blog post).
Also, if you’re not completely clear on the differences between private label and flipping then take a look at this post where I covered it all in detail.
But back to the question at hand, and rather than me just giving a blanket figure of how much you need, let’s instead go through the costs step by step as there’s of course a lot of variation depending on the product, and that way you can see where it all adds up.
Generally speaking I like to get 3 or more samples from manufacturers that pass my initial filtering system and this costs about £50-£75 each including shipping via courier. It can be a lot less and sometimes even free if you’re simply sampling one of their own products, but I want the sample to be as close to my final product as possible. That means OEM branding and custom packaging and any other changes I require.
At £75 x 3, that gives us £225 for samples.
I hope you can see why I get frustrated at the people who say you can start selling on Amazon with a few hundred pounds as we’ve just spent over £200 simply to help us choose a manufacturer!
Speaking of custom packaging, this is a must have for your Amazon business where branding is so integral to the success of your product launch. You may also need a logo and some other work done, but in total £150 for design work is enough to cover everything.
Product Inventory – Product Cost, Shipping, and Taxes
This is the big one – the cost to manufacture your product in China and get it shipped to you, including all import taxes that are due.
This can of course vary hugely but working backwards from an ideal product on Amazon can give us a pretty good idea of the initial product cost, so for example something with a £15-£20 selling price and 35% margin would like something like this:
Item cost – £5 / $6.50 x 500 = £2,500 / $3,250
Most real manufacturers will ask for a minimum order of 1,000 units but if it’s your first order with them you can easily negotiate that down to 500, so that’s what we’ll use for our order size.
Shipping – £1,000
For our shipping we’ll be using a freight forwarder as they handle everything when it comes to the import and paperwork, so you won’t be hit with any nasty extra fees.
Then there are a few other small costs that you need to get to this point and they are:
Jungle Scout Software
My long time blog readers will know I never suggest getting a ton of software when you’re just starting out as you don’t need most of it and if anything it just makes your life more complicated.
The big exception to this is Jungle Scout, which you 100% need to do proper product research and validation.
They have 3 different plans:
While you can probably get by on the Basic, it does have some limitations in terms of product tracking and searches, so I’ll use 1 month of the Suite cost instead, which is £50.
And while we’re on the topic of subscriptions that you need to sell on Amazon, a GS1 membership is a must have!
The Starter 10 plan is more than enough for most new product launches, adding another £60 on to our costs.
So we’ve now reached the point where we have our products in hand in the UK and our total cost so far sits at £4,860.
But unfortunately there’s still more to go before you’re ready to start selling on Amazon!
You need to register your Trademark to be able to apply for Amazon’s Brand Registry, and this costs £170 via the Intellectual Property Office.
It’s so often overlooked by new Amazon sellers who think they can do it themselves. After all how hard is it to take a nice picture when we all have high end smartphone cameras to hand? But product photography can make or break your Amazon product launch and even a tiny difference in your conversion rate can mean thousands and thousands of pounds in additional sales and profit.
So please don’t be penny smart pound foolish and skimp when it comes to getting professional product photography done for your Amazon business – I’m talking proper lifestyle pictures and branded infographics here!
£300+ is a good budget to set aside for this.
You’re now ready to send your product in to Amazon! And with the trademark registration and product photography on top, we’re now sitting at £5,330 spent.
And last but not least we have the product launch costs:
Amazon VINE Product Giveaways
Reviews are absolutely integral on Amazon but conversely they’re also very hard to get as Amazon customers just don’t leave reviews that often.
But we can’t simply wait for our product reviews to come in naturally as they’re a big factor in people’s buying decisions, and this is where Amazon’s Vine program comes into play.
I’ve covered this program in detail in separate blog posts but long story short is that you’ll give away up to 30 of your product in exchange for product reviews.
You can of course opt for less, but as long as the product cost isn’t prohibitive, I suggest doing the full 30. In our theoretical case that means 30 x £8.75, which is the landed cost per product, so £262.50 in product giveaways.
Amazon Sponsored Products Advertising
I considered leaving this one out as technically you can launch your product without it and wait for your sales to grow organically but the whole point of this post is to show you the true costs of a real Amazon FBA product launch and a PPC budget is vital here.
Of course the idea here in the long term is that you’ll be covering PPC costs from product sales but initially they won’t be profitable so you need to factor that into your budget. You can be more aggressive but £10 a day times 30 days will set you up nicely. So that’s £300 for advertising on Amazon.
And there you have it!
That brings us to a grand total of £5,892.50
Amazon Sponsored Products
I honestly think that’s a very realistic figure but as always I’d love to hear your thoughts. How much did it cost you to launch your first product on Amazon? Was it more or less than our £5,900 figure?
If you have any questions, or even your own cost cutting tips to share, then feel free to comment below and I’ll personally get back to you.
It’s safe to say the biggest struggle for most Amazon FBA sellers this year has been dealing with restock and storage limits. The change from ASIN based limits to category based limits came with no warning and created some real problems for a lot of Amazon businesses. Here is a typical perspective on the challenges.
Thankfully storage limits are fairly easy to handle once you understand how it works – you simply have to keep your IPI score above 500 and you won’t have any storage limits to deal with. If you do need help with your IPI (inventory performance index) and getting it above 500, then take a look at this recent blog post I did on the topic: https://andrewminalto.com/fba-inventory-limit/
But restock limits on the other hand can be much harder to consistently improve as while Amazon give very clear guidelines on how to improve your IPI in 4 key areas, this doesn’t contribute to your restock limits.
Now I know there’s a lot of confusion and misinformation about this, so let’s very quickly run through the difference between the two.
Restock Limits vs. Storage Limits
What it manages?
Inflow of Inventory
Physical Storage Volume
IPI score relevance
Applies irrespective of IPI Score
Applies if you are below IPI Threshold
Volume (cubic foot or metre)
Any applicable fees
Includes inventory at Amazon and shipments on the way
Includes inventory at Amazon
Difference between Restock and Storage Limits
So as you can see Amazon clearly state that your IPI is irrelevant when it comes to restock limits and they’re instead “determined on historical and forecasted sales and determine the maximum unit quantity you are allowed to send and store in Amazon fulfilment centres”.
Now this doesn’t mean more sales = higher restock limits, and I’ve seen companies with millions in revenue have their restock limits slashed!
What it mainly depends on is your inventory age.
What is FBA Inventory Age and why does it matter?
And this is exactly what it sounds like, the age of the inventory you have stored with Amazon, which is split into 6 ranges:
You can find this by logging into Seller Central > clicking on the Inventory tab > and then going to the new Manage Inventory Health page (which is a consolidation of the previous Inventory Age and Manage Excess Inventory pages).
Now from a number of tests I’ve run myself and from speaking to Amazon Sharks members, it’s clear that Amazon want this number to be as low as possible and they actually start to penalise you for any stock that falls out of the first category of 0-60 days.
And really this makes perfect sense from Amazon’s point of view… they are operating fulfilment centres, not a storage warehouse, and they don’t want sellers keeping stock with them for long periods. They make much more money from fulfilling orders at a high rate and getting their FBA and referral fees with the shortest turnaround time possible.
So what does this mean for us sellers?
Well simply put we now have to only send the amount of stock into Amazon that we expect to sell within the next 2 months.
For example, say you normally order 6 months’ worth of stock from your supplier in China at one time. You now either have to cut down your order size and order more frequently, or you have to store the stock in the UK before sending it into Amazon. Which one should you do? The answer here is simple!
Don’t lower your order sizes on FBA products
In 99% of cases it won’t make any sense to lower your order size. Two months’ stock is simply way too low and you leave yourself open to any small delay leaving you out of stock, which will not only cost you a ton in lost sales, but it will also damage your listings’ search rankings in the long term.
That’s not even considering the fact that you’ll end up paying significantly more per unit with less price breaks from your supplier and higher shipping costs. So just don’t even think about this!
Instead focus on finding the best solution for storing your stock in the UK as you have a few options here.
Store stock at home
This is very dependent on your individual set up and the size of the products you sell. But if it’s something small and you have a spare room / garage available then this is the “cheapest” option.
Store stock at a warehouse
For most people this is a more feasible option, but it does come with the added cost. You can either look for local self-storage companies or speak to specific storage warehouses. As mentioned in a previous blog post I definitely also suggest speaking to the freight forwarder who’s handling your import as they can often offer storage at very good rates as well. The two I recommend are Woodland Global and Westbound Global.
Further to this there’s also one further “add on option” that works in conjunction with storing stock yourself or with a dedicated warehouse – Seller Fulfilled Prime!
Once again, I’ve mentioned Seller Fulfilled Prime (SFP) in a previous blog post and you might remember that I explained how I’m not a big fan as I simply love how Amazon handle everything to do with orders and fulfilment when using FBA.
There’s nothing quite like checking your phone at the end of the day and seeing Amazon have shipped out 100s of orders for you and you haven’t had to lift a finger.
But it’s something that many sellers have turned to in response to the inventory limits as it allows you to still offer Prime shipping and keep that coveted badge, without using up any of your restock and storage limits.
The SFP eligibility requirements are pretty basic and shouldn’t be a problem for most sellers:
Have an Amazon Professional seller account
Have a domestic warehouse from which to fulfil your orders
Ship over 99% of your orders on time
Have an order cancellation rate of less than 0.5%
Use Amazon Buy Shipping Services for at least 98% of orders
Deliver orders with our supported Seller Fulfilled Prime carriers
Seller must agree to the Amazon Returns Policy
Allow for all customer service inquiries to be dealt with by Amazon
The issue is more keeping up with the shipping requirements once you’re enrolled in the program!
As of June this year Seller Fulfilled Prime requires you to post orders the same day, with a 4pm cut off time, and you also have to dispatch orders on at least one weekend day. This is obviously a big problem for businesses operating Monday-Friday and also for anyone who uses Royal Mail, who won’t offer a Saturday collection.
Overall there’s no way I would want to handle the order fulfilment myself as it means a 6 day work week and hiring staff – flashbacks of my days selling on eBay!
Thankfully there is one other alternative – Seller Fulfilled Prime fulfilment centres. In theory this should be as good as using Amazon FBA. You send your goods to a fulfilment centre, who store it and ship out any orders. All while you get the Prime shipping badge and from a customer’s point of view it’s no different to you shipping directly from Amazon, but you don’t have to deal with any restock and storage limits…
It almost sounds too good to be true?
Well that’s exactly what we’re going to find out as I’ve contacted multiple fulfilment centres in the UK who offer SFP to have a little showdown and see if it’s a viable option for Amazon sellers.
Let’s get to it!
In total I contacted over 15 fulfilment centres, asking about moving my Amazon FBA inventory to them to be fulfilled under SFP. A surprisingly large number of them were unable to offer seller fulfilled prime shipping, usually because they couldn’t guarantee the same day delivery cut offs. That was an immediate no from me because it’s integral that we keep Prime shipping – the whole point is lost if not!
And then further to that I discarded a few more options as they had some questionable reviews – of course this is a bit harsh but I can’t take any risks when it comes to my Amazon business and account.
Lastly I also tried to focus on fulfilment companies that weren’t too small, where they don’t have the track record and expertise, but at the same time that weren’t too big and only deal with huge international companies as I’ve had some bad experiences with such fulfilment centres in the past.
This left me with 4 final companies to put into our showdown:
We Prep FBA
Multi Channel Fulfilment
Multi Channel Fulfilment
Now to keep things as simple as possible I’ll be comparing what I pay with Amazon FBA to fulfil each order – i.e. Amazon’s fulfilment fee – vs what I would pay to fulfil each order with these companies, and this is made up of two separate amounts:
the pick and pack fee
the postage cost
Now for the product I used when contacting the fulfilment centres, the FBA fee is £1.77 per unit.
This is a hard figure to beat considering it includes packaging and postage as well, so let’s see how the Seller Fulfilled Prime fulfilment centres get on!
Pick and Pack Fee – £1.08
Royal Mail Tracked 24 – £1.77
DPD – £5.10
So with the normal pick and pack fee and posting via Royal Mail, I’d be looking at a fulfilment cost of £2.85.
That’s £1.08, or 68%, higher than Amazon.
And unfortunately, that’s as good as it gets! As you’ll see fulfilment centres just can’t compete with Amazon’s pricing when it comes to shipping.
Let’s quickly run through the rest of the results so you can see the exact figures.
We Prep FBA
Pick and Pack Fee – £1.79
Royal Mail Tracked 1st Class Large Letter – £4.50
In this case the pick and pack fee by itself is more than Amazon’s FBA cost! And on top of that the only real postage option for SFP works out at £4.50, which completely wipes out any profit.
The total fulfilment cost of £6.29 is more than three and a half times higher than what Amazon charge.
Multi Channel Fulfilment
Pick and Pack Fee – £0.99
Admin Per Order – £0.35
Royal Mail Tracked 24 – £4.24
DHL – £5.45
Once again the postage costs destroy any chance of competing with Amazon, with a total fulfilment cost of £5.58.
And lastly we have:
The Storage Place
Pick and Pack Fee – £0.85
Royal Mail Tracked 24 – £3.15
DPD – £5.25
Amazon Logistics – £3.55
The Storage Place give us the lowest pick and pack fee so far, of just £0.85, but I have to point out that they also charge an account set up fee of £200 and £50 a week for account management support.
To try and make it tougher on Amazon I’ll even ignore those costs but that still gives a total fulfilment cost of £4.
So there you have it! Definitely disappointing results, which shows that it’s certainly not as simple as just using a fulfilment centre to get around Amazon’s storage and restock limits.
In the interest of fairness I will point out that maybe the item chosen was tough on the fulfilment centres as Amazon’s shipping is so low, and for a larger and heavier item the shipping costs will have been closer.
But I was using a real business and product for this test, so the results have to be taken at face value and the outcome is clear – Amazon FBA is still king and seemingly unbeatable. So where does that leave us? Is it all doom and gloom then?
Well no there is definitely light at the end of the tunnel as Amazon have already started to open up new fulfilment centres which will increase their capacity and then hopefully our storage limits. In fact we’re already starting to see some signs of this recently with a lot of Amazon Sharks members and blog readers telling me they’ve seen an increase in their restock limits recently, right in time for the evergreen Q4!
Other than that there’s really no other option but to store excess stock and send in enough to Amazon for 3 months max, ideally 2, as that’s the sweet spot for their aged inventory metric.
And if you weren’t already focusing on it, inventory management has become more important than ever and thankfully we have a ton of tools and software to help with this.
I’ve personally been using Shopkeeper this year after moving over from Sellics and they’ve recently introduced a new feature that helps tremendously with this, which I’ll be covering separately in a dedicated blog post, so keep an eye out for that.
There has always been a lot of interest in flipping, also known as arbitrage selling, but this has really taken off post-Covid where so many people have looked to start a side hustle after seeing how risky it is to rely solely on one source of income.
I covered the flipping business model in detail in this blog post and went over the differences between flipping and private label (the latter being my own, preferred Amazon business) and while I’m personally not a huge fan of the arbitrage model, I do recognise that it can be a great entry point for beginner ecommerce sellers.
Flipping allows you to build up a bank to invest in your private label product and you also get valuable experience selling on Amazon. It can also be started with pretty much any amount, I’m talking literally £100+ here, whereas with private label you’re looking at £5k as an initial investment – a huge difference!
For some balance and for those of you who are too lazy to go back and read my previous blog post, the main reasons I’m against flipping as a long term model are:
Flipping is time intensive
Continually sourcing products, especially if you’re focused on retail arbitrage (i.e. buying from stores rather than online), can be very time consuming.
Flipping is difficult to scale
Scaling is a lot less straight forward than when you’re making your own products to sell. You can’t simply put more money into advertising (doing PPC advertising on Amazon when you’re selling another brand is never a good idea!) or expand your product line (you’ll most likely be selling in multiple niches anyway).
You can never sell a flipping business to an aggregator
This is a big one for me, as you can never create a valuable business and brand which you can sell with flipping.
Flipping is a lot of admin work
When you’re dealing with multiple purchases, often at different cost prices, and hundreds of different SKUs, the admin work can get messy! Now this isn’t a huge problem as there’s always tools and software to help you with this, but compared to private label it’s definitely a lot more work keeping track of your expenses, sales, and profit.
In the interest of fairness, I will point out that the time intensity and scalability can be taken care of IF you do things the right way and build processes and outsource, rather than running around chasing the hot product of the week.
Now I know what you’re thinking – why did I even bother flipping then? Well the answer is I didn’t!
I simply don’t have the time to dedicate to this myself. I’m working hard to get to that elusive 4 hour work week, not go the other way back towards 40! But I have seen the interest from some of my blog readers and in the emails I get, so I still wanted to cover flipping properly. And that’s why I asked Imogen, someone who’s worked for me before, to see if she’d like to try flipping and then document her results on my blog for you all to enjoy and learn from.
And thankfully she said yes, so enough from me for now and I’ll hand you over.
How Imogen’s flipping business on Amazon started
When Andrew first asked me if I wanted to test out flipping for a blog post, I have to say I wasn’t that excited! I’ve been planning to launch a private label product using Amazon Sharks and this seemed like a little bit of a step down. But I thought why not give it a go, as I had a long summer holiday off from my studying, and I could hopefully make a little extra money. So after a bit of research and reading around, I dived straight in and made my first purchase – 10 swimming pools!
Definitely a very seasonal item but it was early June with promises of an impending heat wave in the UK. Coupled with the fact that with the traffic light system and isolation rules, it looked set to be another summer of local holidays, and I felt fairly confident in my purchase.
I placed this order on June 6th and fast forward just a week later and my mind had been completely changed about flipping. All 10 pools sold in one day!
I listed 4 of them at £174.50 first thing in the morning and by the time I got back from the gym 2 hours later, they had all sold. Then the next 6 arrived and I immediately listed them, this time putting the price slightly higher at £179.95 – and all 6 sold within an hour.
I couldn’t believe it was that easy, buying pools off of Amazon and then selling them back on Amazon 7 days later for more than double the price!
To delve into the actual profit, in total I paid £751.80 for the 10 pools. They sold for a total of £1,777.70 and Amazon’s fees were £326.40. I paid £14.33 per pool for next day delivery via ParcelForce, so £143.30 in total for shipping.
That left me with £1,308.00 or £556.20 in net profit. Not bad for about 30 mins work! It’s safe to say that at this point I was much more interested and ready to give flipping a real go. Fast forward one month, and after a LOT of mistakes and learning, I had total sales of £15,846.23 and profit of £3,065.19
I was incredibly happy with the result considering that because of my uni summer placement, I couldn’t put that much time into it. And on top of that I was actually suspended by Amazon for a week, in which time I couldn’t sell anything!
Getting suspended for flipping on Amazon
This suspension was my first taste of Amazon’s seller support and it really was as bad as everyone says. It was incredibly difficult to get any real help and the answers they gave were always different and never consistent from person to person. Thankfully just as I was starting to give up, someone explained exactly what was needed from me and I got my account back!
Just to illustrate exactly how inconsistent seller support is, after finally being told exactly what document they needed from me, I uploaded it thinking everything was finally taken care of, only for it to be immediately rejected. I then re-uploaded the exact same document and it was accepted…Definitely something to be aware of when you start your Amazon journey.
This is also a good time to point out that Andrew had set a rule for me when starting my flipping trial, that to make it a fair test I couldn’t ask him for any help whatsoever. So whatever my question was – about sourcing, products, shipping to EU, help with my listings etc, I couldn’t ask Andrew and instead had to rely on forums and flipping groups. And actually because of this rule I did run into a few problems and made some stupid mistakes, which I’ll go over now.
Not turning off international shipping when flipping on Amazon
One thing I was very scared of was getting any orders internationally as I didn’t know how it would work with Brexit and exporting to the EU, so I turned off all international shipping on my shipping template, or at least I thought I did!
One day I woke up to 4 orders from the EU, 3 from Germany and 1 from Spain.
After speaking to Amazon I found out that I was auto-enrolled in a program that lists your products internationally. So I was now left with two choices:
Cancel the orders
Ship them out
To me both seemed like terrible choices – shipping them out would have meant paying 3 times more in postage than what I had calculated and also had the whole problem of import charges to deal with. But if I cancelled the orders so early on in my Amazon selling journey, it would have messed up my metrics and risked my entire account.
So in the end I decided to ship out the orders, after messaging all 4 buyers to say that there would be import charges as the items were coming from the UK and confirming that they were happy to go ahead.
In the end 2 of the buyers received their orders and paid the import charges without any issues.
1 was stuck in customs for an entire month and then I refunded their import charges as an apology.
And the final one was the worst result – after refusing the delivery due to the import charges, I then paid it for them and re-arranged the delivery, only for the buyer to then request a return due to change of mind. When I replied saying that’s fine but they would have to pay the return shipping costs, they immediately opened an A-Z case saying the item had arrived damaged and Amazon refunded them in full.
So for this one order I paid shipping to the EU, paid import charges, then paid for shipping back to me as well! About as bad as it could have gone.
Moving on to my next mistake and something that I would have done differently if I had the chance:
Sending in items for FBA while flipping
As well as the 10 Intex pools that I sold first, I also managed to get some Bestway pools and kayaks to sell, but rather than listing these as FBM I decided to send them into Amazon to sell as FBA. My thinking here was that I could get a higher price, and while that was true, I didn’t realise how long it would take for my items to be checked-in at Amazon’s warehouses. For these two shipments, which were sent on 11th June, it took nearly a whole month for the inventory to become sellable.
In that time I could have sold them ten times over. And to make things worse some items were lost after being received by Amazon and I had to make a claim for reimbursement.
I’d heard horror stories with this, with Amazon sometimes reimbursing people less than their cost price, but thankfully for my claim they were incredibly fair. For my missing kayak they reimbursed the exact amount (minus their fees) that I would have received from selling it. So I was very impressed by Amazon here (less so impressed by their ability to lose a giant box but that’s another point).
Moving on to the last point which I would do differently if I started again:
Not properly tracking inventory, sales, and P/L
I thought about leaving this out so Andrew doesn’t see it, as he did warn me about this before starting! But I didn’t properly track my purchases and expenses from the beginning. I kept putting it off week after week and now it’s at the point where it’s going to take me a long time to get it all sorted out.
Thankfully there are a number of tools available to help with this, including spreadsheets and more in-depth software and I’m testing a few of them out now to see what works best for me. The majority of such software is geared heavily towards private label sellers rather than flippers, so I will test a number of them out before choosing one to stick with going forward. Speaking of which, to finish off this post here’s my conclusion and plans for the rest of this year and beyond.
Planning the year ahead while flipping on Amazon
I want to focus on building a more scalable system, relying a lot less on seasonal ‘hot’ items, which is what I’ve been doing so far. I’m expecting a few slower months as a result, which I’m already seeing this September with sales being less than through the summer, but that will be worth it long term if I can build some more consistency. I have also built up a good amount of stock for Christmas and Q4, so so I’m very excited for November and December, which I’m expecting to be good months, especially if the toy shortage takes place!
So there you have it! Imogen generated £15,000 in sales and £3,000 in profit in one month. I have to admit that’s better than what I was expecting.
This will undoubtedly slow down as the summer months and Covid restrictions created some opportunities that won’t always be there, but I’m still very impressed. It will be very interesting to see how Imogen does over the next few months and if she can start to create a real scalable business with flipping.
If there’s enough interest then I’ll be happy to turn this into a little series for the blog to both track her journey and go into more detail with the process, looking at flipping groups and software etc. So as always let me know what you think, either in the comments down below or you can get in touch with me directly.
And of course if you have any questions for Imogen post them below for her to see. Otherwise, until next time!
At this point your auto and manual campaigns should have been running for a few weeks and ideally are already generating sales.
I wouldn’t be concerned about whether or not they’re profitable at this point as we expect to make a loss in the first few weeks while we generate some sales, gather data and also climb up the search rankings.
The next step is optimising your campaigns – and this is where you can start to make some real money advertising on Amazon!
But don’t fear, I won’t leave you there to handle the rest by yourself. In today’s post I’m going to go over exactly how you should optimise your campaigns to ensure they’re profitable, money-making machines.
Because creating the campaigns is just the beginning! If you simply leave them to run like that the chance of them being profitable (i.e. your ACoS being less then your net profit on each item) is extremely low.
So without further ado, let’s get to it!
Optimising your ad campaigns on Amazon is really split into two different parts:
Bid optimisation – adjusting the amount you pay for each click for your campaign or keyword.
Keyword optimisation – adjusting the keywords that you target with your campaigns.
Let’s start with bid optimisation for auto campaigns, as that’s the simplest.
Bid optimisation for auto campaigns
All we really need to look at is whether your campaign is profitable! And we know this from the ACoS (advertising cost of sale) number.
We went over this in Part 1 and 2 of this guide, but here’s a quick recap.
The ACoS tells us what percentage of the item’s price we paid in advertising to get that sale. So for example if I paid for 5 clicks at £0.60 per click and made one sale of a £14.99 item, that means my total advertising cost for that sale was £3.00, giving me an ACoS of 20.01% (£3.00 / £14.99 x 100%).
And then all I have to do is compare this number to my net margin to see if my advertising campaign is profitable or not. Using the same example, if my net margin is 35% then I’m making good profit, but if my net margin is 15% then I’m making a loss.
So look at the data from the first few weeks of your auto campaign and compare your ACoS to your net margin – If it’s above, then reduce your bid amount.
BUT I wouldn’t be too aggressive with this as if you reduce your bid price too low to the point that a lot of your competition is outbidding you, your ads simply won’t be shown and you won’t get clicks.
And remember that the main purpose of the auto campaign is to gather keyword data, so ideally I would let it run for one month before making too many adjustments.
After that you’ll have gathered the majority of useful keywords and can start adjusting the bid prices down until they reach a positive ACoS.
Some people may find that they actually have a profitable advertising campaign right from the beginning, which is great. At this point you may be tempted to reduce your bid prices a little bit as well to make your campaigns even more profitable but DON’T do this.
Sales and Profit
While it may reduce your ACoS even further, making your campaign look more profitable, you’ll actually be making less sales and profit overall.
Let’s run through a quick example so you know what I mean.
Say I’m running an ad campaign with a bid price of £0.50, which generates 50 clicks a day on average.
From those 50 clicks I have a conversion rate of 30%, meaning 15 sales a day.
With a £15 product and 30% net margin, that’s £225 in sales and £67.50 in profit BEFORE taking into account my advertising costs – which is £25 (£0.50 x 50).
As you can see this is a profitable campaign as the ACoS is 11.11% vs 30% net margin.
So I can make this even more profitable by reducing my bid price right?
Because like I said, reducing your bid price will usually decrease your ACoS, which sounds great… but this is what really happens:
I reduce my bid price from £0.50 to £0.40, and because of the lower bid amount my ads are shown less by Amazon, so I only get 30 clicks a day now.
My conversion rate stays the same at 30% which means 9 sales a day.
So my ACoS has gone from 11.11% to 8.88% – which sounds great?
But while before I was making £42.50 daily profit (after all costs) I’m now making £28.50.
That’s a 30%+ drop in actual profit even though my ACoS has gone down! I hope you see now why I say you can’t simply look at one number in isolation to judge your campaign.
And I know all this talk of ACoS, margins, and percentages will completely bore some of you but you absolutely must know and understand all these numbers to make your Amazon advertising campaigns work.
Otherwise just don’t bother starting! So really my advice when your bid price is profitable is to leave it as it is. This applies not only to your auto campaign but also to your manual campaigns as well.
Big optimisation for manual campaigns
Optimising bids for manual campaigns is more in-depth as you can adjust it for specific keywords, which means we have a lot more control.
But the overall strategy remains the same – if the ACoS is at an unprofitable level then you adjust your bid down slowly.
You’ll also find some keywords that haven’t delivered any sales at all. What to do here depends on how many clicks they’ve had; if it’s just a few then there’s not enough data to make a proper decision so you simply let it run as is. If however a keyword has had 25-30+ clicks and still hasn’t made any sales then you delete it and add it to your negative keywords list in your manual campaign as well (to make sure it’s not used again).
But just like with our auto campaign, for profitable keywords within my manual campaigns I don’t adjust bid prices down. In fact I take things a step further here and often increase my bid prices to well above what Amazon suggest.
My reasoning here is fairly simple – the bid amount we set is actually the maximum we allow Amazon to charge but it doesn’t mean they charge that amount for every click and it’s often less.
This means that setting my bid prices high allows me to outbid my competition and grab that extra traffic and sales!
If you want a more conservative approach, then simply leave the bid prices for any profitable keywords as they are.
The most important part here is to monitor for any keywords that are unprofitable and then adjust your bid prices down. This will result in less clicks, but they’ll be profitable!
And that’s really it for monitoring and optimising your advertising campaigns’ bid prices.
When you’re first starting out with advertising on Amazon, I’d recommend you do this weekly, on a set day.
Next up is keyword optimisation and this is more in-depth than bid optimisation and can really allow you to uncover some hidden goldmines on Amazon if you go after less common, long-tail keywords.
The goal here is really to add as many (profitable of course) keywords to your campaigns as possible, allowing you to uncover additional traffic that your competition isn’t reaching!
The best place to start with this is by analysing the Search Term Report, which you can download right from Amazon itself within your campaign manager. This shows you exactly what keywords Amazon have used in your auto and manual campaigns and how many clicks and sales they generated.
This is really priceless information if used correctly and why I keep saying it’s not just about making money with your campaigns initially – it’s this keyword info that we’re really after.
So from the Search Term Report, the most important data for us to analyse is:
Customer search term – this is the keyword that customers have used in their search on Amazon
Clicks – how many clicks this keyword generated
Spend – how much I’ve spent on that keyword (clicks x bid price)
Sales – how much in sales that keyword has generated
ACoS – advertising cost of sales (spend / sales x 100%)
The goal here is very simple – we want to uncover as many keywords as possible that generate sales at a low ACoS and include them in our manual campaigns where we can then further monitor and optimise them.
But as well as this we also want to uncover poorly performing keywords (low conversion rate and high ACoS) and add them to our negative keyword list.
My strategy is to get as many viable keywords into my manual campaigns as possible so any keyword that generates a sale in my auto campaigns gets added to my manual campaigns for all 3 match types – exact, phrase, and broad.
From there I let them run for a week or two, using Amazon’s suggested bid amounts, and then I evaluate the results and start optimising.
That’s it! It’s so simple yet still incredibly effective. There’s really no complicated, magic formula needed here.
Run an auto campaign > add any keyword that generates a sale to your manual campaigns > monitor and optimise your bid prices and keywords on a weekly basis > watch the sales roll in!
One important point to note, as well as getting this keyword data from your auto campaigns, you can also get it from your broad and phrase match manual campaigns.
We covered this in detail in our previous blog post but when you run broad and phrase match campaigns, your keyword will be used in other longer tail searches. For example if my keyword is “mechanical keyboard”, it might show up for searches like:
RBG mechanical keyboard
Blue switch mechanical keyboard
Now some of these searches may be irrelevant to your product, in which case you’ll instead add them to your negative keyword list, but often you’ll find some amazing less popular search terms that you can then target specifically in your exact match ad group.
So that’s why we need to analyse our phrase and broad manual ad campaigns in the exact same way as our auto campaigns.
When you first start this process you’ll find that you’re adding loads of keywords to your manual campaigns and that’s fine, it’s to be expected. As time goes by there’ll be less and less keywords added as you’ll have already discovered the majority of them.
At this point you can take things even further and start searching for even more keywords using 3rd party software such as Jungle Scout, Google Keywords and other such tools.
I don’t recommend doing this until you’ve pretty much exhausted all the keywords generated by Amazon, as it’s less reliable and can also be a strain budget wise if you’re adding so many keywords at once.
So for now you should have more than enough to work on but I’m also planning a future blog post going over some of the PPC software that’s out there and putting them through some tests to see if they’re worth the money.
As always, if you have any questions at all just get in touch with me and I’ll get back to you personally.
Manual campaigns are an important tool in your Amazon Advertising toolbox. In a recent post I covered PPC advertising on Amazon and why it’s an integral part to any successful product launch that so many people skip out on, and then wonder why they’re not getting any sales and simply can’t climb up the search rankings!
In that post we covered everything you need to know to get started with advertising on Amazon and we walked through the steps needed to create your very first Amazon sponsored products advertising campaign, so if you’re completely new to this I suggest you check that out first.
There’s a few very good reasons why I always suggest starting with an auto campaign, rather than a manual, even though the manual campaigns are more important and profitable for us in the long run.
Why do we need to start using PPC Auto Campaigns?
1. It’s the easiest and fastest way to start PPC on Amazon
With an auto campaign you really don’t have to do much to get started – simply create your campaign, set your max bid, and off you go! Amazon takes care of the rest and you don’t have to provide them with a list of keywords to target.
2. It provides valuable data to use in our manual campaigns
There’s simply no tool or software out there that will give you every possible keyword to target, it’s impossible. So no matter how meticulous you are, you’ll always miss some. And this is where the auto ad campaigns come in; you can download a special report via Amazon called a Search Term Report, which will not only show you what keywords have been used but also how many clicks and sales they generated!
This is incredibly valuable real life data that you can use when building the rest of your advertising campaigns on Amazon.
3. Auto PPC ad campaigns can still be profitable by themselves
While in most cases I would happily run my auto ad campaigns at a slight loss, purely for the data and added sales velocity, often they can still be profitable by themselves!
So it’s a definite win-win situation here.
And that’s why we always start with an auto campaign and then let it run for a while before moving on to creating a manual campaign as well.
How long should you let the auto campaign run for?
Well this really depends on your max bid and daily budget as ideally you need 100+ clicks before doing anything further.
It obviously goes without saying that you’ll get 100 clicks faster with higher bids and a higher daily budget as Amazon will show your ads more…
As covered in Part 1 of this guide, I suggest a minimum of £20+ for your daily budget and then going a few pennies above Amazon’s suggested bid amounts.
You can be confident you’ll get a good amount of clicks at those rates and it should only take a week or two for you to get enough data. Of course if you’re being more aggressive with your launch and have a bigger budget, then go for £30-£50 daily to speed up the process.
Sometimes you’re even able to do this on a smaller budget if you see that your auto ad campaign is delivering a profitable ROI by itself, then it’s safe to increase the daily budget as you’re making money on it anyway!
Alright, let’s now move on to the real action – creating your first manual ad campaign on Amazon. I already covered the process for creating an auto campaign step by step in Part 1, and they’re largely the same, so I won’t repeat it all now.
How to create a Manual Campaign?
Of course the main difference is that this is a manual campaign, so change the name to “Product – Manual” and make sure you select manual targeting as well:
And you’ll see that this brings up two more tabs that we didn’t get with our auto campaign:
We’re going with keyword targeting, which as the name suggests means our ad is shown when people search for specific keywords on Amazon.
Then in the next tab where we can add our keywords, you can see that there are three match types we can choose from:
And it’s really important that you understand the differences before we move on.
Three Different Match Types for Keywords You Must Master
1. Broad match
When you use this keyword match type, Amazon will show your ad for any search that contains your provided keyword(s), regardless of the order, if it’s plural etc. And it will also show your ad for searches of related keywords.
For example, if my keyword was “mechanical keyboard”, this would show up for searches such as:
Keyboard and mouse combo
As you can see a lot of the searches are clearly for a different product, even if they do contain the word keyboard. And this is why broad match is the cheapest keyword match type, as they’re less targeted and relevant, which means a lower conversion rate and higher ACoS.
2. Phrase match
With this keyword match type, your ad is only shown when the keyword is used in full and in the same sequence, such as:
Blue switch mechanical keyboard
Gaming mechanical keyboard
Mechanical keyboard for girls
Mini mechanical keyboard
So the search terms with phrase match are much more relevant and it removes a lot of the false positives we saw with broad match. As a result the bid prices are generally higher, but so are the conversion rates.
3. Exact Match
Lastly we have exact match, which means my ad will only show when someone searches for the exact keyword I’m targeting, so “mechanical keyboard”.
This is obviously the most relevant and targeted match type and will give the highest conversion rate. Now I know what you may be thinking – “why would we even consider using broad or phrase match? After all exact match means we won’t show up for any irrelevant searches and we’ll get the highest conversion rate…”
Well true, but you’ll miss out on loads of traffic like that!
Like I said before, it’s simply impossible to find every good keyword that people use to search for your product – there’s just too many variations and it would be a full time job constantly researching and updating your list.
Not what we want to be doing!
But with broad and phrase match we can still target these other searches and make extra sales.
Yes they will in general have lower conversion rates due to some false hits, but this is usually made up for by the fact that they have lower bid prices as well.
So long story short – we’ll be using all 3 keyword match types in our ad campaigns.
But I do still like to keep them all separate to make tracking and optimization easier, so what I do is create a new ad group for each match type.
Creating an ad group for each match type in Amazon Advertising
Again, just stick to the same simple naming we used for the ad campaign. So for my ad group name I just use “Product – Manual – Exact”:
Just to go over it again – we create 2 ad campaigns for each product. One automatic and one manual. And then under the manual campaign we create three different ad groups (one for each keyword match type). I hope that’s all clear!
After selecting the product you want to advertise, it’s then time to add keywords!
Now Amazon will give you a long list of suggested keywords, which is a perfect starting point. All you have to do is click add and they’ll be added to your keyword list:
This really depends on the product but generally I suggest using the top 5-10 suggested keywords as a starting point.
But as well as that you should also have a good-sized list of keywords of your own from your own product research as well as from the auto campaign that you’ve been running for at least a week. Can you see now why I said it’s going to come in very useful when creating our manual campaigns?
To add these keywords as well, just click on enter list and enter them one by one (one on each line):
Simply click add keywords and they’ll also be added to your list along with the suggested bid. Sometimes certain keywords won’t have a suggested bid, so just judge by other similar keywords and put something that makes sense.
Remember we want to adjust all of the bids to be a few pennies more than what Amazon suggest, so do that as well.
Lastly we have the negative keyword targeting tab, which we won’t use for our exact ad campaigns. This will be very useful later on for our broad and phrase ad groups, as we want to remove any keywords that we can see are performing very badly.
And that’s it – click launch campaign and you’re done!
Congratulations, you’ve now got both automatic and manual ad campaigns (with three different ad groups) running on Amazon.
The next step is to again let them all run for a week. And that’s where the fun starts – optimisation!
Optimisation is what separates successful Amazon ad campaigns, that become profit making machines, from failed campaigns that just burn money day after day.
So stay tuned for part 3 of this guide, where I’ll share the exact strategies I use to optimise my Amazon PPC campaigns.
Before we get into today’s post, a quick welcome back to everyone as I know I haven’t posted a lot recently.
This is only because I’ve been incredibly busy with some business ventures over the last month or so, including some new offline businesses which I’m excited to hopefully share more about in the future.
But I have a ton of great content and posts planned for the blog and it should be business as usual from now on as we start to gear up for Q4 – the busiest and best time of the year for Amazon FBA businesses.
And I know what some of you may be thinking, it’s only July… Christmas and Q4 are still months away! But anyone who’s been selling on Amazon for a while knows that you have to start preparing way in advance. This is more important than ever with all the shipping and fulfilment center delays we saw last year – and this year on top of that we also have inventory and storage limits to add to the headache.
So no question about it you need to start planning and preparing now. I’ll have more posts on this coming very soon.
Back to today’s post, which is all about advertising on Amazon.
How to do PPC advertising in Amazon?
It’s a topic I get so many emails and questions on as for a lot of people, especially new sellers, it’s very complicated and intimidating. Especially if you’re switching from selling on eBay where promoting a listing is as simple as choosing a percentage!
So does this mean you should simply ignore PPC and sponsored ads on Amazon and rely purely on natural, organic sales? After all that way you have higher margins as well right? 100% NOT!
PPC is vital on Amazon, especially when it comes to a new product launch, and it can be the difference between a successful, profitable product and a failure. You can also read our previous article about Amazon PPC Auto Campaigns.
Every week I get emails that go something like this:
“Hi Andrew, I’ve launched a new product on Amazon and my listing has been live for a few weeks now but I have barely made any sales. Can you check it and tell me what’s wrong?”
And the truth is a lot of the time there’s simply nothing wrong with the listing itself. Especially for blog readers and Amazon Sharks members who know how to create a great listing, with:
great product pictures
well written and engaging descriptions
top quality enhanced brand content
Why new Amazon Sellers aren’t making sales?
Simple – Amazon isn’t sending any traffic to their listing!
If you think about it this makes perfect sense, right? After all, Amazon sends traffic to listings that they think will make a sale, and for a new listing they simply have no data to go on – they don’t know what your conversion rate is for different search terms.
So it would be a risk to send valuable traffic to your listing / product without getting anything in return.
Which can leave a new product in a vicious negative cycle:
no traffic = no sales, which = no traffic! And that’s where sponsored products comes into play.
What is sponsored products on Amazon Advertising?
With sponsored products you pay Amazon to send traffic to your listing. You then make sales. This shows Amazon that your listing / product is in fact good enough to send customers too and suddenly not only are you making sales through your ads, you’re also climbing up the search rankings and making organic sales too.
This is a key part of PPC and sponsored products on Amazon that so many people don’t get. It’s not solely about making profit directly from these ads, but also using them to increase your sales velocity. And now instead of the negative cycle, we have something amazing:
Sponsored products = traffic to your listing = sales = increase in search rankings = traffic to your listing = sales!
I hope you now understand why sponsored products aren’t something you can simply choose whether to do or not – it’s vital. And actually it’s nothing to be scared of anyway, IF you know what you’re doing it can be a profit making machine for your Amazon FBA business.
In today’s post I’m going to break it down, make it as simple as possible and give you a basic plan of action for how to get started which you can apply to your own products.
Simply put sponsored products is a paid advertising system built directly into Amazon that allows us sellers to create and customize ad campaigns.
However, this isn’t some basic low-level listing promotion like on eBay, with Amazon sponsored products we can set:
keywords to target
set maximum bids / cost per click
set when our ads run
set the type of ads we use
set the total amount we spend
You get the idea!
How it works is that you pay every time someone clicks on one of your ads, i.e. you pay every time someone is sent to your listing. This is known as pay per click, or PPC, and is much better than paying per impression, which means you pay every time someone sees your ad.
PPC is a lot easier to calculate and control as in effect there’s only a few important numbers that will make or break your advertising campaign:
Your cost per click – the amount you pay every time someone clicks on one of your ads on Amazon
Your conversion rate – the percentage of people who end up buying after viewing your listing
Your net profit per sale
Example PPC Amazon Advertising Calculation
As an example, I have a product which is £15 and I have a 35% net margin, giving me £5.25 profit per item.
My cost per click for my sponsored products advertising campaign is £0.50.
And finally my conversion rate is 29%.
That means for every 100 people that view my listing, I get 29 sales. Those 100 people (clicks) cost me £0.50 x 100 = £50. And those 29 sales give me £5.25 x 29 = £152.25 in profit.
So £50 spent on ads to make £150+ in profit – sounds good to me!
Obviously this is just a basic example so you understand how it all works together (and why I’m always talking about the importance of conversion rate!).
How to set-up PPC the first time
Again, this is actually a lot simpler than most people think. I know a lot of Amazon gurus like to make it sound like rocket science where you need complex software and spreadsheets to make it work, but it really isn’t that difficult.
Once you understand the basics and know enough to be able to create your own campaigns, then the rest is easy enough to master.
Let’s get to it.
To start with, login to your Amazon seller central account and then click on the Advertising tab and then Campaign Manager which will open a new Amazon Advertising window.
This is where we’ll create our campaigns.
When you click Create Campaign, you’ll be given three options for the campaign type:
If you want to learn more about what each of these campaign types are, simply click the explore button beneath each option and a very useful pop-up appears, with a clear explanation and video on each one made by Amazon.
For now we’re only interested in Sponsored Products so select that to start creating your campaign.
Creating A Sponsored Products PPC Campaign on Amazon Advertising
The first thing you need to do is set a campaign name – to keep things simple I just use the product name followed by Auto or Manual (we’ll cover that in a little bit!).
So “Widget – Auto” for example.
Next you set the start and end date and your daily budget.
Now this will of course depend on your individual business, but when launching a product I suggest a minimum of £10 for your daily budget, ideally more. This is because anything lower than that and you simply won’t get enough clicks. With this first campaign we’re trying to achieve two things:
We want clicks and sales
We also want to gather data which we’ll use later to create and optimise more ad campaigns
So anything less than £10-£20 and the process will be too slow.
Next you select the campaign targeting type, from two options – Automatic targeting or Manual targeting. With manual targeting you provide Amazon a list of keywords that you want your ad to be shown for.
With automatic targeting, you guessed it, Amazon automatically generate a list of keywords to target with your ad. This is based on your product, listing title, bullet points, and description.
For our first campaign we’re going to choose automatic (more on how this ties into our overall strategy a bit later).
So our campaign now looks something like this:
Set your PPC Campaign Bidding Strategy. Three options!
There are three options to choose from here:
Dynamic bids – down only: This allows Amazon to sometimes lower your bid amount when it’s less likely to convert to a sale.
Dynamic bids – up and down: This allows Amazon to both lower your bid amount when it’s less likely to convert to a sale as well as increase it (by up to 100%) when it’s more likely to convert to a sale.
Fixed bids: Amazon won’t change your bid amount based on whether it’s more or less likely to lead to a sale.
If these three options weren’t confusing enough, Amazon also offer additional settings which allow you to increase your bids based on where your ads are placed.
So you can allow Amazon to increase your bid amount, by up to 900%, to have your ad shown at the top of search (the first page) or on other product pages.
Now don’t worry if this is starting to get a bit confusing or if that 900% increase sounds a bit scary, because I actually don’t suggest using these options. I’ve tested them personally in my own business and find it very difficult to achieve a positive ROI with these bid options.
I think they’re purely for big brands looking to burn through an advertising budget to get their products seen as much as possible, but it’s very hard to make them profitable…
So just keep things simple – ignore these final options and just go with either Fixed bids or Dynamic bids – down only.
Dynamic bids – down only is what I suggest as it’s the safest and simplest option.
Let’s move on to the next section – create an ad group.
First up, the ad group name. I use the exact same name I used for my campaign. And the reason for this is that I create a new campaign for each product / listing I want to run ads for. I don’t combine multiple products into a single campaign.
That way it’s so much easier to monitor your ad campaigns and to optimise them and I really don’t see any benefit to grouping them together.
So just copy the same name for the ad group and then search for / select the product you’re creating the campaign for.
Next up is the really important part – your bid amount!
Here you set your default bid, which is the maximum amount you’ll pay for each click for your ad.
You may be wondering why not just set this as low as possible then?
Well because then your ads simply won’t be shown!
Just think about it, you’re not the only one running ads for that keyword on Amazon (well it’s extremely unlikely at least) so if you’re bidding £0.20 per click and another seller is bidding £0.50 per click, then Amazon aren’t going to show your ad to many people!
You’ll need to increase your bid to a competitive level or there’s simply no point.
BUT it’s not as simple as highest bid wins, no Amazon are a little smarter than that and they also take into account the click through rate of your ads and the conversion rate of your product.
What’s the click through rate (CTR)?
It’s the percentage of people who view your ad who click on it and is calculated by:
clicks / impressions x 100%.
For example if Amazon show your ad to 10,000 people and you get 600 clicks, that means you have a click through rate of 6% (600/10000 x 100%).
And let’s say your competitor is running an ad that only gets 400 clicks from every 10,000 views, giving them a 4% click through rate.
That means that even if you were bidding £0.50 per click and your competitor was bidding £0.70 per click, Amazon would still make more money from showing your ad even though they’re bidding 40% higher!
And conversion rate is as you know the percentage of people who make a purchase after viewing your listing.
This is also incredibly important to Amazon as they don’t only care about their ad revenue (shocking I know) but also about how relevant the ads they show to customers are.
And a higher conversion rate means that people found what they were looking for. So what does this all mean? What bid amount should we use for our campaign?
Well actually there’s no complicated math needed here, at least not at this point. To start off I even suggest using Amazon’s suggested bid amount, but increasing it ever so slightly – if they suggest £0.50, use £0.52. If they suggest £1, use £1.02, etc.
This is simply so that you can outbid other sellers who are using the suggested amount, even if it’s only by a penny or two.
Next up Amazon auto select to launch your ad campaign on other marketplaces at the same time but you can deselect this as it’s not needed.
Then last but not least we have two optional sections:
Negative keyword targeting
This is where you enter keywords that you specifically want to be excluded from your ad campaign.
There’s nothing I would suggest adding at this point but this can be extremely useful later when you’re monitoring and optimising your campaigns as you may find certain keywords that have a negative ROI.
Negative product targeting
Negative product targeting stops your ad from being shown on certain products. Again, I wouldn’t suggest adding anything here when creating your campaign, but it’s something you can come back to once you start getting some data in.
Next is to click that launch campaign button. Congratulations you’ve created your first Amazon ad campaign!
It wasn’t that hard was it?
Definitely, this is only the beginning. The plan is to run this automatic campaign for at least a week and then we’ll come back to it. At that point we’ll create a manual campaign using the data we’ve got and then start optimizing.
I’m going to cover this all and more in Part 2 of our Amazon sponsored products guide. I’ll share with you the system I use to launch, rank, and run profitable sponsored products campaigns for all my Amazon listings.
We’ll also dive into a bit more detail and compare Amazon sponsored products to other advertising options, including driving external traffic to your listings via Instagram, Facebook, and more.
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