My December 2018 Amazon FBA Update: When things go WRONG @ £30,000!

Welcome Back!

You should see my face as I’m writing this blog post at 5 a.m. on the 1st of January. I am SO excited for the new year ahead! I can’t even remember the last time I felt as energised and POWERFUL as I am today. This year will be the year of BIG changes and BIG achievements – and I can’t wait to share it all with you!

If you’re wondering WHY I am writing this post at such an early hour –and on a day when almost everyone else is lying in bed fighting a hangover – check out my 4 a.m. wake-up routine post!

This will be a long post as we have so much to cover! As usual, I will start off by sharing all the sales data, costs and NET profit numbers for both the Amazon UK and Amazon USA platforms. Then I want to quickly cover the whole year of 2018 so you can see the progress I have made.

Lastly, we’ll finish up with an IMPORTANT update on the next steps I will be taking—and already have taken—to move my business to an entirely new level in 2019! This includes expansion to eCommerce, wholesale AND other Amazon regional websites. As it’s January, it’s the perfect time to put some time stamps on all the goals I have set out to achieve in this year, so we’ll also be doing that at the end of this post.

Now, let’s talk business, and, more specifically, the details of my Amazon FBA business in December 2018 when I broke another record and surpassed the magical £30k sales mark! Well, it is magical to me as, in my mind, there are certain sales thresholds every FBA sellers is hoping to break:

• £1k (Wow, £1000 a month!)
• £3k (yes, finally! That’s £100 each day.)
• £5k (Things are getting serious.)
• £10k (Amazing! That’s a £100k+ a year business.)
• £20k (Now we’re talking! A quarter of a MILLION sales a year.)
• £30k (BINGO! On average, £1000 in sales EACH DAY!)
• £50k (At decent margins, that should be a minimum of £10k in NET profit per month.)
• £100k (Yes, finally—you did it! The MILLION+ per year club!)

These are my own milestones ranging from £1k a month to £100k a month in sales. Your numbers could be different, but you get the point. It’s always exciting to reach new sales records. And, of course, this was DECEMBER, so it’s not like I will have the same level of sales in January. Things will inevitably slow down now, but it was still a record month—and I am happy about it!

…or not?

Yes… the sad reality is that I made a massive mistake on stock planning and lost at least £20k in potential sales due to being out of stock. How did that happen and what I will do to absolutely prevent it from happening again in 2019? Let’s find out; we’ll start with the Amazon UK sales results.

Amazon UK Results

£29,204.29 – that’s how much I made in sales on Amazon UK in December 2018. It was a record month and that should make me very happy, right? Somehow, I’m not happy about that result at all because it should have been at least £50,000, if not more. And here’s why…

People who have been following me for a while now will remember that I ran out of stock on December 7th last year. It was a new business, and only my third month of trading, so understandably I could not have projected the demand accurately enough at that time. Lesson learned, so they say – no problem! But I promised myself that it wouldn’t happen this year as I had plenty of time to plan for the December sales in advance.

So, I did plan. I had stock worth £24,000 reserved for the December sales and I sent it out to Amazon in November. Unfortunately, my pallet was sitting at the shipping company’s warehouse for a while as they could not get a delivery slot for a week, then two weeks, then three weeks…

Obviously, if I knew this was going to happen, I would have simply taken the pallet back and sent goods in via the UPS as others were reporting no problems with delivery using the courier method. The problem was that I was hoping that the shipping company would get that delivery slot for my shipment, but I was waiting and waiting and waiting for it to happen until it was basically too late…

I did not have any additional reserve stock available as everything was on that pallet, so I couldn’t activate the merchant-fulfilled option even if I wanted to. But I wouldn’t really want to do that anyway as I don’t want to risk with my 100% perfect account metrics.

The funny thing is that last year I ran out of stock on the 7th of December, but this year, even with all the planning, I had already run out of stock on the 5th of December. I basically missed out on the ten most lucrative days of the year, which would have brought in at least £20k – maybe even £25k – in sales, and that’s in addition to the £30k I already made in December.

It is what it is. I will make sure that I get it right the third time in December 2019. To avoid any risks with delayed delivery slots, I will have Christmas stock in Amazon’s warehouse by the end of October—that’s it. Yes, it means paying a bit more for storage fees, but that’s a very small price to pay for the massive sales numbers you can achieve in December.

Ok, with that information off my chest, we can now take a look at the actual sales data for December 2018. This will be for one niche-based Amazon FBA business that sells just one product in multiple variations. I am selling the product for £9.99 and after all the product costs, delivery fees, Amazon fees and VAT, I’m making a NET profit of £4 per unit sold.

As you can see, in December, I sold 2,925 units, which resulted in sales of £29,204.29, which has been a record month to date. To get my profit number, I simply multiply £4 per unit profit by the number of units sold, which is:

2,925 x £4 = £11,700

That’s an amazing number, but it’s not my NET profit because I also spend money on advertising via Sponsored Product ads and Sponsored Brand ads.

The total ad spend in December was £5,061.77, which resulted in direct sales from ads of £11,821.40.

As you can see, my ACoS for ad spend is 42.82%, which is basically my break-even ACoS. I maintain this ACoS number to gain maximum sales velocity at any given time, which in turn helps me greatly with organic sales. This is a different approach to what many other sellers do. Many try to get to as low an ACoS as possible, but as you can see, my approach works! I have covered my strategy in detail in my Amazon Sharks training program, which you can access from AmazonSharks.com.

So, to get my NET profit number, I need to subtract the ad spend from the profit number, which is:

£11,700 – £5,061.77 = £6,638.23

I’m happy with the profit of course, but it could have been so much better… the Christmas sales would have pushed this number to £10k+, which is my target profit number for this business, BUT it’s all good! This year, I will make sure not to repeat the same mistake, and I’m sure that by the end of the year, I will reach an average profit of £10k per month for this business.

This is how the year 2018 looks in total numbers:

Total sales: £239,271.02
Units sold: 23,820 (which is approximately 10 pallets worth of goods)

January 2018
Sales: £24,119.08
Profit: £7,373.73

February 2018
Sales: £15,316.28
Profit: £4,340.22

March 2018
Sales: £17,456.02
Profit: £4,956.73

April 2018
Sales: £14,644.62
Profit: £3,604.91

May 2018
Sales: £15,639.46
Profit: £3,942.98

June 2018
Sales: £15,850.70
Profit: £4,538.60

July 2018
Sales: £20,992.27
Profit: £5,796.73

August 2018
Sales: £15,068.33
Profit: £4,233.94

September 2018
Sales: £22,215.97
Profit: £6,118.70

October 2018
Sales: £21,127.09
Profit: £5,600.22

November 2018
Sales: £27,761.00
Profit: £6,592.69

December 2018
Sales: £29,204.29
Profit: £6,638.23

TOTAL 2018
Sales: £239,395.11
Profit: £63,737.68

I was planning for a turnover of £250k, and I would have safely reached this goal it if it wasn’t for the out-of-stock situation, but it is what it is, and situations like these just make us better and help improve our businesses further.

A net profit of more than £60k selling basically just one product on Amazon UK alone is an amazing achievement in my opinion. And what’s even more important is that, if taken in total, I only spent maybe 200 hours on the business. That turns my NET profit into a £300+ per hour salary.

To be perfectly honest, though, I know that I could have done much more and achieved even faster growth, but the problem is that I have so many other projects I’m working on that I didn’t have the energy to put more work into this business. However, in 2019, I will spend more time on this business as I want to turn it into a well-known brand name within that niche.

There’s plenty of great things coming up, which we’ll cover in a minute, but for now, let’s take a look at my progress on the Amazon USA marketplace.

Amazon USA Results

In my last month’s update, I briefly explained that things are not going that great with the US expansion, so I won’t repeat all that information today. In summary, the competition for this product on Amazon.com is EXTREMELY high, which leads to bidding costs for ads that are way out of scope. For me, it means that to build a decent sales velocity AND increase organic rankings, I would have to lose tens of thousands of dollars first, which I’m not willing to do.

So, here’s what I tried early in December. For ten days, I super-optimised my ad campaigns. I paused almost everything except for the few keywords that showed great conversion rates in November and were clear winners. It was just a few keywords, so I did not expect huge sales, but they were targeted and proven to sell.

After this ten-day test period, here are the results:

Ad spend: $1,494.69

Sales from ads: $1,074.57

ACoS: 139%

Terrible. Absolutely terrible results! If I can’t get at least close to the break-even point with such good keywords, it really shows that the market is way over-saturated and there’s simply no space for a new player. There are exceptions to this rule, however, which I will cover in a minute.

So, after the first ten days, I made the decision to pause all ad campaigns and see if I gained any organic rankings and sales after spending a few grand on ads:

As you can see from the sales graph, I did get some sales in during this period; to be precise, I got 13 sales over that 20-day period. It was Christmas time, though, and as this product is not Christmas-related, it could be that on another month of the year, this sales number would be even higher.

Before moving on to my plan for what to do next, let’s just summarise the sales and costs so we can put them into our totals.

67 units ordered, which resulted in sales of $1,674.33.

After product cost, shipping and Amazon fees, I’m making a profit of $8.62 per unit sold, which means the total profit for December was:

67 units x $8.62 = $577.54

Now we need to subtract the ad spend from that number to get the NET profit number:

$577.54 – $1,494.69 = – (minus) $917.15

So that’s a loss of almost one thousand dollars!

I would have actually made a profit if I didn’t run those ads at all! Those 13 organic sales would have resulted in a profit of over $100. But that’s not the sort of results I’m looking for, so it is really irrelevant….

Now, what’s the plan going forward in 2019?

Waiting it out; that’s my plan for now. It’s obvious that aggressive bidding won’t work for this highly competitive niche, so, for now, I will try to play it slow, grow my reviews slowly via organic sales and just see how it goes.

In January, I will not resume any ads and will just monitor organic sales to see whether they improve or not. Then, if things are looking ok, I will probably restart Auto campaign in February and try to make Amazon decide on how to best market my product and get those views to my listing. That’s the plan for the next two months; after that, I will re-evaluate the whole thing.

The good news is that I have six five-star reviews in place, so that should help boost my rankings and conversion rates. Hopefully, that number will keep rising and should have an effect on sales on its own.

The problem with over-saturated markets is that there are hundreds or thousands of products already on offer, and many of them with excellent, established track records. So why would Amazon show your listing instead of them?

If there are already 10 or 20 products that have amazing reviews from customers, great conversion rates, low return rates, etc., Amazon sees it as “customer demand is satisfied” and they don’t need any other offers.

The exception to this rule is if you come into a competitive niche with something UNIQUE. In that case, you actually have a good chance of getting noticed. By UNIQUE, I mean a product at a much better price OR much better conversion rate compared to other similarly priced products. Amazon measures these metrics very carefully, and it’s the core of the company’s ranking algorithm.

Unfortunately, I have to admit that my product was not that much better than the competition. It is a good, high-quality product, with great presentation, etc., but there are already MANY similarly great products available, so I don’t have much in terms of competitive advantage.

Anyways, enough of this rant! Don’t think I’m looking for excuses or that I’m super upset about these results. To be honest, it really doesn’t upset me in any way at all! I don’t actually care for such failures; they only make me look forward and look for new opportunities to explore! And there is some good news that I want to share with you on this, but for now, let’s summarise results so that we have the numbers in place.

Total Results

So, we have to sum up both Amazon marketplaces to get total sales and profit numbers for December 2018. As always, I will be using XE.com to convert US dollars to British pounds, and while these rates are approximate, you can get very close rates from the US sales by using a Transferwise borderless account:

SALES

UK: £29,204.29
USA: $1,674.33 converted to £1,334.36

TOTAL Sales: £29,204.29 + £1,334.36 = £30,538.65

Now let’s take a look at the profit numbers.

Amazon UK: £6,638.23

Amazon USA: a loss of $917.15 converted to GBP = £730.88

TOTAL Profit is £6,638.23 minus the loss of £730.88, which equals £5,907.35

Even with the losses from the US side, the overall NET profit is just below the £6k mark, which I’m still happy about. I’m not overly excited about it, but still happy.

Now, let’s get to the most interesting and exciting part of this update: what’s next for this business in 2019!

What’s Next?

I hope you’re still with me after all those numbers. I know how boring such technical details can be, but let’s be honest for a minute here, if you’re in business, especially the Amazon FBA business, you have to know your numbers. I mean REALLY know your numbers so well that you can call out your margins, ACoS, sales data and net profit in the middle of the night. Get used to it.

But now, let’s talk about my plans for the business in 2019! I have already given you some hints about my expansion plans in my previous monthly updates. Now, let’s really nail it all down so I have a clear path to follow and, more importantly, something to keep myself accountable to in a year’s time when I plan to write a very similar post for 2020.

So, the business did £20k a month in sales in 2018 if we average it out across the year, which was short of the goal I set 12 months ago. To remind you: I had a goal to reach £30k in sales per month, which I only managed to do in December. I did not reach this goal in terms of my average monthly sales.

A massive letdown, of course, was the US expansion, which didn’t go as planned. I had big hopes for the US market, but it is what it is. You go through trial and error to find what works and what doesn’t.

Now, in the year 2019, my plan is to achieve an average target of £40k in sales per month. Or to put in another way: reach £500k in sales from all of my combined sales channels. And here’s how I plan on breaking it down:

• £300k on Amazon UK—a 25% increase from this year, which won’t be easy to achieve as I can clearly see that there is a certain sales limit I will hit on the UK platform.
• £100k via my own eCommerce shop.
• £50k via wholesale.
• £50k via other Amazon websites.

In total, that’s £500k, and of course, this is only a plan. I don’t know how it will all play out, especially when it comes to the proportions of the sales. Maybe I will make more via my own eCommerce shop or less via wholesale, but at least I now have a clear goal set and something I can refer back to later on when progress is made on each platform.

Now, let’s quickly cover each of the four sales channels I plan on utilising in 2019!

Amazon UK

The plan is simple: continue doing what I have been doing and try to improve a few elements of the game. For example, I want to create videos for the products I sell, as well as landing pages for each product containing videos and using videos in Sponsored Brands campaigns.

I tested this in the US and it worked very well. In fact, these were the best campaigns I had in terms of ROI, so I want to do this in the UK too. I also hope that Amazon will allow us to add product videos to the listing page itself, just like we can on the US platform.

I also plan on creating few additional product variations, but the expansion won’t be anywhere close to as wide as it was last year. There are a certain number of SKUs that are profitable to work with, but if you give too much choice to people, it can confuse them and you may even end up with no sale. I want to increase variations to around 24 or so and keep it at that. I may want to drop slow-selling lines and replace them with new ones, but I don’t want to add more and more variations for the sake of doing it.

I will continue optimising PPC campaigns and just try to cover as much search space on Amazon as possible. As there won’t be any drastic changes in my action plan, I project a 25% growth in sales, taking me from £240k last year to £300k in sales this year.

eCommerce Shop

This is obviously a big project, and I have already started working on it. The launch date is set for the end of March if everything goes as planned. As we all know, things NEVER go as planned, so I’m more than prepared for the launch in April.

That leaves me with nine months and £100k in target sales. I plan on using Google search, Facebook, Instagram and Pinterest advertising platforms to push the business and, if my projections are accurate, that sales goal is quite reasonable and achievable.

Wholesale

This channel and projected £50k in sales will be the most difficult to achieve, in my opinion. In June, I will be ready for wholesale customers only, and that’s also when I will attend the first trade show of the three planned for this year. Plus, the wholesale price is HALF of what the retail price of the product is, which means I will have to sell 10,000 units in six months to reach the £50k sales target.

That is a lot, to be honest, as building relationships with retailers takes time and many of them will only start looking at you after the third or fourth trade show.

Well, I hope that my plan is workable, but if not, at least there will be TONS of great content for me to share with you on my blog. I know that trade shows and wholesale business are topics that many of you are interested in, so fingers crossed!

Other Amazon Marketplaces

So, the last £50k in my “sales target pie” is allocated to other Amazon websites and this will include Amazon US and a few European Amazon platforms.

Now, when it comes to the US site, we’ll just have to see how it goes. Maybe I will cut it off, maybe I won’t. I’m not putting much hope into it, so even if it makes £10k in sales from the planned £50k, that’s fine.

What I am betting on, though, is the expansion into the Amazon Europe websites, specifically Germany, France, Italy and Spain. Yes, I am expanding the business to EUROPE and going through all the VAT hassle, etc. just to test it out and see whether or not it works for my business.

The reason I say that is because my products have text in ENGLISH on them, so I have always assumed that my products are not really suitable for regional European sites. However, my mind was changed while doing some online research on these sites when I saw that Amazon is actually already selling a few of my products on Amazon France and it already has some good reviews and sales.

This leads me to believe that there is a market in Europe for my products. I also checked out what my competitors do using the Jungle Scout tool. While the numbers are not super high, if I combine three or four countries, it could actually lead to £10k in sales per month or even more!

Just like the US expansion, I will only know for sure when I do it, so I have simply decided to do it. Actually, I had the idea in my mind for a very long time but the final push was the email Amazon sent me in December about the VAT promotion they’re doing.

For the whole year of 2019, Amazon will cover the cost of registration for VAT numbers in all European countries needed for the FBA as well as the cost of VAT returns!!! That is an incredibly generous offer—one that is undoubtedly worth thousands of pounds—and I simply could not resist it!

I have already signed up with VAT Global and I’m in the process of sending them all the information needed to register for VAT numbers. This process will take a few months to complete, so I will continue to update you on the process in my upcoming monthly updates videos.

By the way, I shared the information about this promotion in our Amazon Sharks Facebook group, so make sure to join the group if you haven’t already! We welcomed our 1000th member on the 31st of December. The group is full of active and helpful members—and it’s 100% FREE to join!

Also, staying on the topic of Facebook, I have published lots of great content on my Facebook page in 2018 and plan to continue in 2019. So, if you want to stay connected with me, follow my Facebook page!

So, to wrap it up, when we combine these four sales channels—Amazon UK, European Amazon sites, wholesale and my eCommerce shop—suddenly the goal of £500k in sales per year starts to look very achievable, even in the second year of trading. There are many things that can and will go wrong, but at least I have a very clear plan in front of me. Now I know exactly what I need to do to achieve my goals in 2019 on a monthly, weekly and daily basis.

That’s it for today. Thanks for reading my update and I really hope that some of the information covered today was helpful and interesting to you.

If you’re still thinking about whether to start an Amazon FBA business—just GO FOR IT! Seriously, January is such a great month to start something new. Remember, Amazon truly is the opportunity of the decade. If you’re reading this information and not jumping on the opportunity right in front of you, you’re simply letting a life-changing opportunity pass you by.

If you need help and training on how to build your own Amazon FBA program from scratch, check out my Amazon Sharks video course, which is the UK’s most comprehensive Amazon FBA training program. It comes with my personal support and free lifetime updates! Hundreds of people joined the program last year and many of them have already achieved phenomenal sales results.

Until next time!