Another month has come and gone. While the majority of people are enjoying their summer holidays, since mid-July, I have been spending most of my time in the office working on various business-related tasks. Of course, I could opt to extend my time off, but as I explained in my June update post, it does not bring out the best side of me. I feel so much better now that I’m back in my routine and making consistent progress on my business every day.
Also, there’s that great feeling inside that comes from knowing that I’m working while everyone else is holidaying. Maybe that sounds weird and maybe you feel the opposite way? Why should I work when everyone else is partying in Ibiza? It probably depends on how you look at things. For me, this feeling is magical—it seems to me that I’m getting ahead and will eventually be rewarded for doing this in the future.
It’s a similar feeling that I experienced 15 years ago when I was spending ALL my free time—evenings, weekends, holidays—learning about online business and e-commerce while my mates were hanging out, binge drinking every weekend, and basically living through the best time of their lives (probably). Back then, it also felt like I was doing the right thing. Even though it was hard work and I was missing out on some fun, I knew that I would eventually be rewarded for my sacrifice, and I have definitely enjoyed the fruits of that for many years now.
I really like how Gary Vee talks about this concept. He explains that TRUE success is created in July/August. While the majority of people are taking off time, you take this time as an opportunity to work even harder towards your dreams! And then, by the time Christmas comes around, you can relax and enjoy the fruits of your labour.
Nothing could be more true when we talk about Amazon businesses. Now is the perfect time to work on planning your sales for the holiday season, do your market research, find new suppliers, etc., so that you are months ahead of everyone else and don’t have to panic to get your stock in on the last week of November!
What am I trying to prove with this? Nothing! Just that working during the summer months can also be very satisfying if you look at it from the right perspective. Making progress while everyone else “sleeps” is a GOOD THING, in my opinion, and if you’re doing the same: congrats and well done!
OK, enough of the intro stuff. We have a lot to cover today; I have a lot of numbers and graphics to show you—so let’s get the party started!
Amazon UK Results
This month has generated RECORD sales for me on Amazon UK—not counting January, which was even higher. Part of this obviously comes from Prime Week and Prime Day, but even without those, the results would be very solid. Especially if we consider that July is typically the SLOWEST month of the year for many e-commerce businesses (possibly one of the reasons why Amazon does Prime Day in July? Most likely).
The Prime Week build-up in sales was very noticeable, as you can see from the monthly sales graphic:
And Prime Day itself was a record day—the best day of all time for my business in terms of sales! I reached almost £2k in sales on that day, selling 187 units, which was amazing! Basically, I managed to get 3X the sales on Prime Day compared to a normal day. It’s also great to see the report on how those sales were distributed throughout the day:
It is interesting to see that when Prime Day was over, there was a very sharp decline in sales. Then, the following week, things started to improve again. By the last few days of July, sales have come back to normal levels and are even exceeding them. All in all, July was a great month and—even without the Prime Day boost—it looks like it would have performed plus/minus as usual.
Let’s dive into the numbers, just so we have it all on record. Maybe some of you do actually go through these numbers every month when I do an update! 🙂
Total Sales: £20,992.27
Units sold: 2,103
Profit: 2,103 x £4 = £8,412
I get the profit number by multiplying the number of units sold by my “per unit profit” number, which is £4. I don’t want to repeat myself too much. I have explained in previous posts how I get that £4 number, but it’s basically what I’m left with after subtracting ALL the costs from the £9.99 selling price:
- Product cost
- Shipping to Amazon
- Amazon FBA fee
- Amazon referral fee
So, it’s a NET profit number after all the expenses/costs. I would be VERY happy with the £8,412 profit number in July, as it’s one step closer to my target profit for this business, which is £10k per month. Still, since this business is very new (not even one year old) and I’m only selling on Amazon UK, I know there’s lots of potential and room for growth, so I’m just looking forward to doing more and doing even better!
Remember, that £8,412 is not my final profit because I’m spending money on ads too. In July, Amazon switched over to a new dashboard for ads! I actually spotted that they were testing this new dashboard a few weeks ago, but it was NOT showing the right numbers at all and they probably switched back to the old interface until all the bugs were sorted out.
Now, in the new system, Sponsored Product campaigns and Headline Search ads are created and reports are shown in one place, which is handy. We also get some new graphics and more customisation options compared to the old version. To be honest, I’m not a huge fan of the visuals (campaign data look very small), but it’s probably just a question of getting used to it:
In July 2018, I spent £2,615.27 in ads (no point is separating Headline Search ads from Sponsored Products anymore as they’re shown/edited on a campaign level now), which means I made a NET profit of £8,412 – £2,615.27 = £5,796.73
In terms of ACoS, I have managed to stay around that magic 40% mark, which is my break-even point too. This means that I’m not making any profit directly on ad sales (probably losing some), but as I have explained in my previous posts, this is how you have to play in competitive markets. You spend money on ads to maintain sales velocity and high organic rankings, which is where the profit comes from.
And this is how the year 2018 looks so far:
(Total number in Amazon reports is slightly different due to returns/refunds adjustments which can happen weeks after I have created my monthly reports and blog posts).
Another great month finished! 🙂
The biggest problem for me—as an entrepreneur and someone who is always looking to do more and do better—is seeing that sales are pretty much stagnant throughout the first year of trading. They are in the £15k to £20k range per month and, to be completely honest, I can’t see how I could double that number on the Amazon UK marketplace alone.
I have decently high organic rankings for all major keywords, my ads are plastered all over the platform, and demand is obviously a fixed element of the puzzle—I can’t increase it. Well, unless I go outside of Amazon and work on my own traffic funnels. I’m sure we’ll get to that eventually, but it’s not time for that yet. For now, I want to properly prepare for the Christmas season, so I don’t run out of stock like last year. PLUS, there’s the whole Amazon US saga going on, of course…
Amazon USA Results
As I have already explained in my June 2018 Amazon FBA Business update post, in July, I made two drastic changes:
1) I stopped running ads as they simply did not work out for this market and price point;
2) I changed the price from $12.99 to $9.99, just to see if it makes any difference in conversion rates and future plans.
It turns out that stopping ads DID NOT stop my sales completely! Quite the opposite; sales continued to come in, even though it was at a lower rate. I was finally making a profit WITHOUT spending a dime on ads!
In June, I sold 314 units but spent $2,129.84 on ads. In contrast, in July, I sold 200 units but did not spend anything on ads. Slightly fewer sales—but that’s still a lot of money saved and 200 units still sold! This just proves my theory that using the aggressive PPC ad campaign on this product in this niche won’t work (due to the price/variations/competition I explained in last month’s update).
As you can see in the report, there was even a day when I made 15 sales and more than a few days where I made 10+ sales! If it would average out at even 10 sales per day through the month, I would actually be very happy because it would mean I’m making $1000 PROFIT without spending anything on ads.
I also saw that I’m already ranking on page one for some good secondary keywords. While this is most likely due to the sales velocity I created by spending money on ads in first two months, it doesn’t change the fact that, as painful as the launch was, the product has started ranking and does create organic sales. Steady organic sales.
If we look at the exact numbers, I sold a total of 200 units in July, which resulted in total sales of $2,019.00.
Now, as I did change my price point from $12.99 to $9.99, we have to re-calculate my new profit per unit sold:
FBA fee: $3.19
Referral fee: $1.50
TOTAL fees: $4.69
So, after Amazon fees, my profit is $9.99 – $4.69 = $5.30
Product cost, including shipping to the US, is $2 per unit.
So, the actual NET profit for each unit I sell is $5.30 – $2 = $3.30
Which is not a lot, if you ask me. What is $3, right? But it’s still a 33% margin, which is lower than my own preference (40%+). Remember, though, that I made this price change as an experiment to see how it affects my sales conversion rates.
One thing is for sure: after seeing how expensive clicks are in this niche, it is simply impossible to make PPC cost effective when you’re making just $3.30 in profit per item—IMPOSSIBLE! Sure, I could put in 1000 keywords, bid very low, scrape together some low volume, cheap keyword traffic, but I would not get any profitable, major keywords when I have to pay $2 or $3 per click.
Anyways, I sold 200 units. When that is multiplied by $3.30, it means I made a NET profit of $660 as I did not spend any money on Sponsored Products ads.
If we look at sales for the first three months of trading, this is what we see:
Yearly sales: $8,449.05, units sold: 695
I did lose money in the first two months:
May 2018 – $98.08
June 2018 – $292.94
TOTAL – $391.02
Which means that I have finally made a REAL net profit! My $600 profit in July minus the $391.02 losses in the previous two months = net profit of $208.98 ($600 – $391.02).
Of course, $200 is nothing and not the result I was hoping for. So, for that reason, I’m making a BIG change to my USA expansion plan, which we’ll cover in a second. Before that, I wanted to quickly cover the results of my conversion rates experiment.
Testing conversion rates for your
Amazon FBA listings!
When we look at listing conversion rates, we always have to keep in mind that the conversion rate alone is NOT a metric to base your business decisions on. What matters is how much money you make, right? You could sell a product at half the price of the competition, get crazy high conversion rates and still make a very small profit. Or you could increase the price, have fewer units sold but still make a solid profit. I’m sure that I don’t have to point out which of these two scenarios you want to go for.
But to know which one works best for you, you have to TEST the price point of your products on Amazon, so that’s exactly what I did. I changed my price from $12.99 to $9.99 because my price point was not level with competition (at least that’s how it looked), and I wanted to see if it would make any major difference if I lowered the price.
My profit per unit sold at $12.99 was $5.85. With the new price of $9.99, that profit number went down to just $3.30. So yes, it’s a MASSIVE difference in my margin, and this is how it will always be with cheap FBA products. We pay a fixed amount for FBA fees and seller fees won’t make much of a difference, so EVERY dollar in price change directly affects our bottom line.
Now, let’s take a look at one of the variations I’m selling and how the conversion rate changed after I reduced the product’s price:
Conversion rate at $12.99 was 34.62% in June:
Conversion rate at $9.99 was 44.59% in July:
Basically, a 10% difference! That means that out of every 100 visitors, I would get TEN extra sales at the lower price, which when put in numbers means:
34 sales selling the product at $12.99
44 sales selling the product at $9.99
Profit-wise it looks like this:
34 sales x $5.85 = $198.90
44 sales x $3.30 = $145.20
As you can see, it is actually MORE PROFITABLE for me to sell FEWER units at the higher price because my net profit at the end of the day is 25% HIGHER!
Every 100 visitors that land on my listing would net me $50 more when selling the product at the higher price of $12.99 instead of my current price, which I have set at $9.99.
So, will I change the price back to $12.99? Not yet….
First of all, 100 sales may not be enough to make a statistically sound decision here. I would like to see 300 sales or so before taking these numbers for granted.
Secondly, as you can see with the lowered price, for some reason, I have lost some Buy Box time. It now stands at 86% compared to 99%, which I found weird to be honest! A better price, a better conversion rate, but I lost some Buy Box time? Hard to explain that. Maybe it happened because I don’t run ads anymore? I’m not sure, but I’ll monitor the situation throughout August and report back in next month’s update post.
Thirdly, the conversion rate directly affects our search rankings. It’s one of the most important factors that Amazon takes into account when listings are ranked in the search results. So, obviously, the higher conversion rate of 44% definitely helps the listing with rankings! Even though 34% is also considered a very good conversion rate, I’m still not sure how much of a difference 34% vs 44% makes in Amazon’s eyes…
Lastly, the 34% conversion rate I got in June was when I was also running PPC ads! From my experience, I can tell that conversion rates on ads are generally lower on average than what we get from organic rankings. Could this mean that the actual conversion rate when selling the item @ $12.99 was closer to 40%? Maybe. It’s hard to say, but if that’s the case, it was NOT worth lowering the price to $9.99 as the conversion rate did not change that dramatically and, actually, I was already getting a very good conversion rate at $12.99, despite the fact that it was the most expensive version of the product on the marketplace.
I will let it ride for another month or two, just to see whether or not the listings improve naturally. Please note that I covered my BESTSELLING variation in these examples; other variations did not have such a high conversion rate, but they also improved with the lowered price:
What I can also clearly see from the screen is that one variation of the product I’m selling is a clear winner and outperforms every other in terms of sales and conversion rate. This makes me believe that there could still be a chance for me to make this work. Conversion rate of 44% is truly IMPRESSIVE and shows that people LIKE that particular product variation a lot! I will continue monitoring the situation, but I don’t put much hope into this….
That doesn’t mean I have given up completely on the Amazon US market for this niche! What I have is a Plan B—or let’s call it a second attempt to launch a successful product on the Amazon US marketplace in this niche!
So, what is this Plan B?
I’m going to create a new version of the product—a bigger and more expensive version.
In previous posts, I explained that the competition in this niche is massive on the Amazon USA platform. Not only are most sellers selling the product cheaper than I am, they are also selling bundles that contain “more of the product” than what I currently offer.
So, my idea is this: I will create a new bundle that combines three variations that I currently sell at $9.99 each, and I will sell them together for $24.99 (most likely). So, basically, I’m going super-sized and hoping that it will “stick”! This new pack and price point will leave me with roughly a $10 margin to work with, which “should” be enough to cover PPC costs—but it’s all theory at this stage, of course. I will never know how well the product will convert and how well it will rank before I try it.
So, I’m willing to give it a try. I will continue updating you on my progress and I’ll share the success or failure along the way. Right now, I need to start working on the new packaging for this new bundle. The product itself will basically stay the same; I just need a new custom packaging to create this new, bigger, improved bundle. I will probably do a separate blog post on custom packaging in August or September since that’s one of the topics I get asked a lot of questions about.
The plan is to sort out the packaging during the month of August, then work on the listing, images and descriptions in September. Hopefully, I will start selling the bundle in early October, right before the holiday season kicks in.
And I will document it all! I will write about every step of the process starting from keyword research, writing listing titles and descriptions, and taking amazing product images! All of that will be covered in my blog in the upcoming months!
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Lastly, if you have any questions about anything I have covered in this post OR you want to share your own experience, feel free to leave your thoughts in the comments box below. I personally reply to all comments within 24 hours, Monday – Friday.