While my own Amazon FBA business is still fully focused on private label products, I started a trial of flipping / arbitrage selling last year, using Imogen, an Amazon Sharks member, as our guinea pig.
So without any further ado from me, let’s get to it!
Rather than make you wait until the end to find out, let’s get straight to my final results and then I’ll work backwards and break it all down in more detail.
In total, from June 2021 to the end of May 2022 – I sold £100,520.82 with a profit of £25,755.21
Was I happy with this? Well – yes and no.
When Andrew first asked me to try flipping / arbitrage selling as a test I was fairly hesitant. I imagined it being very time intensive and something more like an online job rather than a true Amazon FBA business.
It turns out on this front I was almost completely wrong.
Yes, flipping does require a lot of upkeep compared to private label and it is very time dependant BUT there are so many different models within flipping.
You have retail arbitrage, online arbitrage, Amazon to Amazon, seasonal items, long term holds, etc!
So don’t make the mistake of thinking that flipping only means driving around tonnes of stores scanning items endlessly (not that there’s anything wrong with that sourcing model, plenty of people make good money with it).
But back to my point, and when I agreed to do this and document the results, I honestly would have been happy making £500 a month as a little extra side income.
So based on that I’m ecstatic with making over £25,000 profit! Especially when I consider how little time I really devoted to this.
But I also can’t help being a bit disappointed because I’ve seen what the potential is with flipping and I know I could have made even more, especially as it was really the golden age of flipping with lockdowns and no holidays abroad.
This can be perfectly illustrated by going through my results month by month.
The Amazon Cash Cow
As you can see I had an amazing start and in July and August, my first two full months, I made more than £4,000 profit each month!
If I had kept that going for the full 12 months I would have easily passed £50,000 profit for the year. But even at the time I knew that wouldn’t be possible.
Why? Because my sales in those months were nearly all coming from one single product…
And with flipping this will never last. Sooner or later I knew other sellers would find that product and the price and margins would come crashing down.
After all you have to remember that this isn’t like private label where you control the listing and are the only seller. With flipping you’re competing with tens and sometimes even hundreds of other sellers for any product and this invariably means that prices and margins come down over time.
Which is exactly what happened with this particular product for me and within a few months it wasn’t even worthwhile selling it anymore.
In total I sold 314 units of this product, which accounted for a huge almost 40% of my total sales for the entire year.
And that’s the main reason for the drastic drop in sales and profit in September and particularly October, where I sold a paltry 15 units, making £2760 in sales and a measly £335 profit.
Thankfully I managed to bounce back from this big setback and in fact in December I was close to matching the highs of the summer months in terms of profit. This is mainly due to the fact that I had bought and held quite a few toys from the summer onwards and tried to time selling them during the Christmas rush, which led to some good returns.
Long Term vs Short Term Holds
However I’m not 100% convinced by this long hold strategy as often it didn’t make sense from a pure ROI perspective.
If I buy a product for £100 and hold it for 4 months to get a 60% ROI, that sounds great right? It’s giving me a 3x higher return that if I sold a product for 20% ROI…
But really when you’re comparing ROI it’s much fairer to look at your annualised return. Or to put it simply, if I can buy a product and sell it for a 20% ROI but do that on a monthly basis, then after 4 months I’ll have more than doubled my money.
That 60% ROI suddenly doesn’t seem so great now does it (the power of compounding!)?
Of course to get a bit more advanced it’s not quite as simple as that either as you still have to take into account your available funding (it might not be a question of a 20% short hold vs a 60% long hold if you have the money to buy both) and also obviously your time loss from dealing with more units.
Either way ROI is integral to a flipping business as it shows you how well you’re utilising your money, so I’ll be testing and tracking these different selling methods further this year.
FBM vs FBA
Another important point is that during this transition where I had to find new products to replace my green origami duck (side note – I love this presentation feature on Shopkeeper!) I also switched over from FBM to FBA and this made a huge difference to my business!
Going from having to package and post all orders myself to Amazon taking care of nearly all the work made everything so much easier. On top of the order fulfilment I also saved a tonne of time and stress not having to deal with customer queries and no longer worrying about my seller metrics (as it’s very hard to mess these up when you’re selling via FBA).
It’s safe to say that I now truly appreciate what Andrew’s been saying all these years about the dark days of fulfilling orders yourself on eBay and I will never go back to being majority FBM.
That’s not to say I don’t sell via FBM at all as it still has its place, mainly when you’re not 100% sure about a product and want to be able to return it if needed (one of the joys of flipping vs private label!) and also when it’s just more cost effective (usually for larger items).
But as you can see these make up a small minority of my sales overall:
Increasing ROI with A2A Flips
Moving on from December and the Christmas boost and I saw an inevitable big drop in sales in January, but actually Q1 of 2022 was very consistent for me and my profit held up really well from January to March due to increasing ROI and margins.
You can see what a huge difference margin makes to your bottom line as while January’s sales fell a big 66% from December, actual profit was only just a little under 50% less.
This was achieved by focusing more on Amazon to Amazon flips which I saw a lot of success with on a few products in particular. But don’t worry, it was still a good mix of profit and not overly reliant on a single item like before.
If I could go back in time I would have bought hundreds of the top two products as they were easily selling multiple units a day with a great profit per unit and more than a 100% return on cost price!
But unfortunately at the time I didn’t quite have enough knowledge and experience to go all in with these.
Unlimited Amazon Buying Account
And sadly as Q1 drew to a close another slight reinvention became necessary as I lost my unlimited purchasing on Amazon!
As you’ve probably already seen, as a buyer most products on Amazon have order limits preventing you from buying in bulk.
For a while I didn’t have these and could pretty much order as many of each product as I wanted and this of course helped hugely when I focused on Amazon to Amazon sourcing.
But in typical inexplicable Amazon style (nobody really knows for sure why some accounts get unlimited order quantities) the order limits came back on my account. And once again the effect of this can be seen by the drop in sales and profit in April and May, ending my first full year on a slightly negative note.
Projections and Goals for the Year Ahead
However I am not deterred and after seeing the potential of flipping I am determined and quietly optimistic that I can match and surpass my first year.
Some months will be undoubtedly hard to match but I should definitely be more consistent overall.
Looking back and the most vital point for me in year 2 is to avoid the big slow downs in certain months due to my overreliance on certain products and sourcing methods.
I plan to avoid this happening again but focusing a lot more on replens (items that you can sell again and again) and crucially – sorting out my storage issues!
Space was a huge limiting factor for me as I would order products, fill up my space, and then not be able to order anything until I sent off / sold my current stock.
This of course meant pausing my spending for periods at a time and in flipping, spending = profit at the end of the day, so fixing this storage problem is my no.1 priority.
I have a few different options here:
Add storage to my house
Get a storage unit
Use a prep center
1 is obviously my preference due to it being the lowest cost overall, but it’s not that feasible living in London with a tiny garden!
That leaves options 2 & 3 which will both cut into my margins and profit. But I already made the mistake of “saving money” on this and then losing out on significantly more sales and profit by not having the space.
And a prep center will not only help with that but it will also save me time, which again is a key part of my targets for year 2.
My goal with flipping has always been to spend as little time as possible on it while maximising profit and the two key areas I can do this moving forward are:
That means a prep center and a VA (virtual assistant) are integral parts of my plans looking ahead at year 2 and I will cover the options and costs here in more detail in further dedicated blog posts.
Overall I am very pleased with my results and am extremely excited to grow this business (and yes, I can happily call flipping a business now Andrew!).
To put an exact target on year 2, as I think setting goals is always helpful, while I could pretend and say I’d still be more than happy with £1,000 a month considering the time I put into this, the truth is anything less than year 1 and I’ll be disappointed!
So there you have it! A £26,000 profit target for year 2. I don’t think it will be easy without the big summer months and lockdowns, but I’m excited to see how Imogen gets along with this.
And of course we’ll be covering it in detail on this blog and we already have loads of additional content planned around flipping, such as:
• The Best UK Flipping Groups • Must Have Flipping Software • Prep Centre Showdown • VA Service Showdown
And much more!
So stay tuned for that.
As always if you have any questions at all then leave them below.
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.
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!
Let’s put the technical stuff and business aside for now and talk about life!
I have been in the online selling business for more than 10 years now (actually I’m quickly approaching the 15 year mark – I’m starting to feel old!) and have worked directly and in-directly with thousands of people over this time. By working with directly I mean all of my Easy Auction Business, eCommerce Magnates, Second Income Generator, and Spicy Auction Templates customers and of course in-directly by answering tens of thousands of emails/messages and forum posts.
So I can safely say that I’ve seen it all.
Many people contact me with lengthy emails, explaining their life stories, complex medical conditions and un-employment situations. And I always try to do my best to give at least some advice to every person who contacts me. Of course, my time is very limited and I can’t reply to every email with an essay but still – even a short answer pointing them in the right direction is better than nothing, right?
One of the most common situations people write to me about is how they’re sick and tired of their job and how they want to start a full-time business, selling stuff online. And that’s great! Being an entrepreneur for so many years, it still always touches me personally when someone wants to make a big change in their lives and do their own thing. This is exactly what I did all those years ago, quitting my first and only day job at a Primark warehouse (you can read more about that on the About Me page).
However – there’s a problem. Not everyone is made to be a business owner, that’s just the truth. It does take certain skills, attitude, and way of thinking to become a successful online entrepreneur in this day and age as make no mistake – millions of other people around the world want the same thing and there’s simply not room for everyone.
On the other hand – I have seen some phenomenal successes achieved by “ordinary” people during my 60 Day Blueprint program. Sometimes all it takes is hard work and dedication and you can basically achieve anything you want in life. It has nothing to do with how smart you are (I don’t consider myself as super smart) or your previous work experience (even though a business environment helps) – it’s more about that attitude – hard work, patience and just working towards your goals.
So I’m not saying you can’t become that super successful online entrepreneur BUT there’s a small chance that you’re simply not cut out to be one. You may simply not have a big enough desire or you may not truly be willing to work as hard as is needed to survive in the business world. Read More…
It’s 1st February today, congrats – we have moved passed the year’s darkest month and slowest sales period and can start looking forward to spring and summer!
Today I’m starting a weekly, 4 part blog post series covering the most common and important terminology used in the online selling world.
Today we’ll start with General Business terms and in the following weeks we’ll cover:
Importing & Shipping
eBay & Amazon
So in total there will be 4 posts that should cover most of the terms you need to know about.
It may be geared towards people who are totally new to selling online but still – even experienced sellers sometimes mix up important stuff so it’s not a bad idea to go over the basics every now and then. And as we all know from Dragons’ Den – there is no bigger problem than not knowing your numbers, right?
So let’s get started with a list of the most common business terms that every entrepreneur should know about!
Sales/Revenue – amount of money you have received for the sale of goods. Example: if you sell an item for £10 and you sell 100 items, your sales would be £1000. Usually, when showing sales, you don’t take off ANY expenses associated with these sales. For example, this means that you wouldn’t take off PayPal fees from this number.
Turnover – basically the same thing as Sales but the term “Turnover” is usually used to show sales in a certain period of time. So if someone asks you what your turnover was for the last 12 months, you would give your total sales number for that period.
Gross profit – this is one of those numbers every Dragon is looking for! Gross profit means your Sales minus Cost of Goods. So for example, if you buy an item for £50 and sell it for £80, your gross profit is £30 (£80 – £50).
However you do not deduct any further expenses associated with sales, like taxes, salaries, rent etc. Only the cost of goods.
Net Profit – this is the REAL profit as we speak – money you make after ALL expenses are paid. This includes cost of goods, salaries, shipping costs, rent, utility bills etc. This essentially means the money you take home, after paying tax (if taxes are applicable). Read More…
Anyone who has been reading my blog for a long time, or better yet has purchased either my Easy Auction Business or eCommerce Magnates video course, will know just how much emphasis I place on BRANDING.
However, some people still view branding as something frivolous… something that you can do if you have the money and business is strong, but certainly not something that’s necessary.
I disagree with this completely! I view branding as an integral part of my online businesses, and creating my own brand products is my no.1 strategy for building real, profitable, and sustainable businesses.
But for anybody who’s not completely familiar with the term, what is product branding?
Well to put it simply – it’s when you take an unbranded product, i.e. a product that doesn’t have a brand, logo, company etc. shown on it, and YOU brand it – either the product itself, the packaging, or as in most cases both.
This in effect creates a completely NEW product which you own and can sell online, be that on eBay, Amazon, or your own ecommerce store.
But I know that some of you will now be wondering “why?”
After all, branding a product will add to the cost and it really doesn’t add any practical value… so it’s a waste, right?
WRONG! Premium packaging adds to your brand and increases the perceived value of the item you’re selling.
Perceived value is something I actually mention quite often, particularly in my video courses, but it’s still something that most small time eBay sellers complete ignore – despite the fact that it’s honestly one of the most important factors in creating a real brand and business.
Just look at some of the world’s top companies… Apple are in fact a perfect example. Some of their products cost a fraction to produce in comparison to some of their competitor’s offerings, yet the perceived value (among consumers!) for Apple products is unparalleled.
This is all down to their brand and you simply can’t create a brand with an unbranded product!
The other big benefit to branding, which I briefly mentioned above, is that you create a unique product and this helps hugely with comparison shopping, where the buyer simply chooses the cheapest option, as it’s much harder to compare two different products – even if that difference is only the branding. Read More…
I’ll talk more about what this machine is and what it can do a bit later on, but for now I want to share some valuable tips on shipping & transporting such heavy machines from the US.
Shipping Heavy Machinery
First off, this machine was manufactured and shipped from the US. As it’s a heavy piece of equipment (the total shipment weight was 340 kg), I was considering using sea freight to get it delivered BUT as I needed it quite urgently, I decided to go with air freight in the end, and it only took seven days to arrive.
Now, here’s a hot tip – if you need to import anything like this from the USA, shop around for prices!!! And don’t only compare quotes you get online/over the phone but bargain as well – and I mean bargain HARD!
In the end, it was a fight between TNT and DHL to deliver this to me and they basically placed counter offers to each other. DHL won (by some £30 or so) and the final price was almost 45% less than my initial quote. So with such large/expensive air freight shipments, it’s always worth it to negotiate the best possible rate DIRECTLY with the manager.
As this machine is so heavy, I knew that I’d need at least 4 men to move it around and place it on the special desk it came with. In such situations, you should always make sure you have arranged people to help you beforehand as courier company drivers are usually not very willing to help with any moving (they’re not really supposed to) plus in this case it wouldn’t have been enough anyway due to the extreme weight. Read More…
As covered in that guide, there is really one main exception to this rule, and that’s if you sell zero rated goods. Zero rated goods have a VAT rate of 0% so in this case you’d actually be better off registering for VAT from day one as it wouldn’t affect your sale price but you would still be able to reclaim VAT on all business expenses (more on that later).
The products that qualify for 0% VAT or the reduced rate (usually 5%) are very rare, so it’s highly unlikely that this will apply to you.
You can take a look at this page for a full list of reduced or zero rated goods and services:
Some of the more common products that qualify for 0% VAT include:
Leaflets / Flyers
So if you happen to sell one the above products, then you should definitely look in to registering for VAT, if not – then hold off for as long as you can!
Let me say this again, so that it’s 100% clear:
You will (almost always) be worse off if registered for VAT!!!
Strangely there is actually a lot of confusion about this point, especially online, and I think this stems mainly from a misunderstanding of the figures and in particular – reclaiming VAT on business expenses. I don’t want to spend too long on this aspect of VAT registration, as I have covered it previously, but let’s do a very quick example calculation:
Minalto’s Muscle Machines
Let’s say I have a business selling workout equipment and gym gear.
Turnover is £75,000 a year and gross margins are 60%, which means a mark-up of 150% (100-200%+ is what I aim for when importing from China).
So if I’m NOT VAT registered, the calculations are simple – I pay 20% VAT on the total value of the goods I import, which is £25,000 a year.
20% of £25,000 = £5,000 VAT paid per year.
Now let’s see how it works out if I am registered for VAT:
So the first difference is that the VAT I pay on the import value of my goods is reclaimable, so I’ve saved £5,000 already!
Plus I can also reclaim VAT on all of my business expenses, and this includes:
Postage (some postage is VAT exempt though, such as 1st and 2nd class stamps)
Using our £75,000 annual turnover, let’s be generous and assume £15,000 in VAT reclaimable business expenses. Read More…
As an entrepreneur, I always try to keep up to date with general business happenings, even of companies and industries nothing to do with me.
One thing in particular that I enjoy is following successful companies in order to see what I can learn from them, be it their general business practices, a terrific marketing campaign, great product design etc.!
There are so many innovative companies out there, that if I can learn just one or two things to use for my own business, then it’s worth my time.
And today I want to talk about one company in particular – Kia Motors.
Twenty years ago Kia was considered nothing more than a below average South Korean car manufacturer with just a few, fairly mediocre models available.
But fast forward to 2015 and KIA has achieved phenomenal success in the UK, Europe and the rest of the world.
So how did they achieve this?
After all we need to analyse the how and why to be able to learn anything that we can use ourselves.
Well, Kia’s success has undoubtedly been a combination of a number of factors – after all you can’t build a company worth over £9 billion with sales of over £28 billion with a few good ideas – but purely from a customer’s perspective, these are the main factors which I believe has made Kia into the company it is today:
1. Peace of Mind – 7 Year Warranty.
This for me is the no.1 selling point for Kia!
Everybody loves a long warranty and when you can offer 7 years rather than the norm of 2-3 that your competitors offer, then you really differentiate yourself and it’s a huge selling point.
The takeaway here for eBay sellers is obvious – emphasise the reliability and quality of your products.
Not a single day passes without me receiving at least one email from someone who says they can’t compete with the lowest priced sellers on eBay and my answer is always the same – “you don’t have to!!”
Nobody wants to buy cheap if the item isn’t going to work so rather than compete on price alone and cut corners to bring your costs down, instead concentrate on providing a reliable and quality product that you can stand behind proudly. Read More…
Quite often online you’ll see people saying how “it’s cheaper to sell on Amazon vs eBay”… but is this really true?
Well that’s what we’re going to find out today, to put this claim to rest one way or another!
But rather that just list all the fees for selling on eBay and Amazon in a boring table, instead we’re going to take a few examples and go through them one by one. That way we’ll get an easy to compare head to head battle between eBay and Amazon!
Before we get started with that, I also want to quickly go over the fee structure for selling on Amazon, as it differs slightly from eBay, and I know that this can sometimes cause confusion for new sellers.
So as most of you will already know, when selling on eBay you’ll pay the following fees:
This is the fee paid to start your listing. The exact amount depends on your shop subscription, how many listings you create each month, and whether it’s an auction or buy it now listing, but the most you’ll pay for an insertion fee is £0.26 per listing.
Final Value Fee
This is the fee you pay when your item sells, calculated as a percentage of the total transaction amount (including shipping). Depending on the category, the final value fee ranges from 5% to 11%.
Lastly, there is the PayPal fee, which is 3.4% + £0.20 (again calculated on the total transaction amount, including shipping).
Now let’s take a look at Amazon’s fee structure and how it compares to eBay:
First things first – Amazon offer two different pricing plans, depending on your volume of sales – the Basic (sell a little) plan and the Pro (sell a lot) plan. As the Pro pricing plan is better value if you sell 34 or more items per month, that’s the one we’ll be using for our comparison today. Read More…
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