Note from Cathryn:
I invited Miguel to the blog to write the first ever guest post to share his answer to a simple question...
"How do you launch a successful product business on Amazon as a newbie?"
It's not an easy question, I have even struggled with how to do it in the past. However I have seen what Miguel has done and what he has taught some of his students to do, and the results are nothing short of incredible.
Miguel has written this epic helpful post that covers:
- Why Amazon is a great platform (especially for beginners with physical products)
- How he finds great products that he knows people are looking for
- Where he sources these products from
- How he configures the launches so he grows organic sales quickly
This post is nothing short of solid gold. Read it. Bookmark it. Share it.
So, without further ado, take it away Miguel!
This is a post is huge, coming in at almost 4000 words. In it, Miguel shares with you everything he did to create and launch millions of dollars worth of product for himself and his students. To download the PDF version, Click Here
It was a rainy day of November 2013, for the first time in my life I decided to give it a shot to the whole online selling world.
I was about to turn 30-years-old and just had my third son. I couldn't take it anymore… I was spending more time with “Uncle Sam” than with my three awesome kids and wife. And the worst part was that every time I tried to take a few days off, I had to come back to pick up the pieces of my disastrous job.
My goal was to make enough money to cover my expenses and have freedom to work from wherever I wanted, whenever I wanted. To be exponentially rewarded for my efforts and to live a life with less stress.
So I found an idea, created a product and launched it on Amazon.
Fast-forward 4 months later my first product was making around $15,000 per month, and it was the start of a new journey.
Later that year I went to this business conference, where I met Cathryn, to learn more about online marketing and I kept getting the same question:
“Miguel, what do you do?”
And I was like “I sell products through Amazon”,
And the typical answer to that statement was, “Oh, and what’s your day job?”
For the first time of my life, I was able to answer that question with pride “That’s it, I don’t have a day job.”
It felt good in my body, and I was free.
People started asking me about how I was able to build a hands-off 6-figure business with almost no management, so I created a blueprint to teach them the steps I took. (more on that later)
Today I want to share with an overview of what it takes to start an Amazon Business.
Sell as a Professional and FBA
I don’t want to say that it’s the holy grail of online business automation, but it will make things simpler if you are looking to start a business online.
5 reasons why I love the Amazon Marketplace:
- You don’t have to build a website. It takes a lot of work to build a site, and after you finish the technical details of it, then you have to build trust. With Amazon, you can take advantage of their easy-to-use platform and with only a few clicks you get to sell your products on their website.
- You don't need to drive traffic yourself.You can take advantage of Amazon’s growth and customer base. According to Forbes, Amazon is now the 8th largest retailer in the world, with a yearly revenue of 107 Billion dollars for 2015 alone.
“Meanwhile, e-commerce juggernaut Amazon.com AMZN +1.23% (No. 237) continues to dominate and is now the world’s eighth-largest retailer. The Jeff Bezos-led company is aggressively expanding its delivery network to get packages to Prime members faster”
And according to Compete.com, more than 100 million people went to Amazon last month. What if they could buy your product instead of any other option on the market?
- Easy to plug in to their existing infrastructure = less headaches.You can ship your products to Amazon FBA (fulfilled by Amazon) so that every time there is an order of your product, and they will pick the item, pack it, and ship it to your customers. They will even provide the tracking information for your customer and would process returns if necessary. With easy access to your inventory information. And with fulfillment centers in the USA, Canada, Mexico, Europe, Japan, India and Australia, you can expand your reach globally faster than ever before.
- No merchant account hassle. Amazon processes the payments for you and takes care of refunds. Not only that, most Amazon customers have their credit cards on file so they can buy with the push of a single button. You get paid every 14 days directly to your bank account even if you are outside of the US.
- Awesome customer support for both sides, for you as a seller and also for your customers. Amazon customer service agents are there to help you for any reason. And if you ever lose a box, they will refund your money at sale price.
So, how does it work? How much does it cost?
Pretty simple, you just have to open a “Sell as a Professional” account with Amazon. It’s only 39.99 per month and gives you access to their Marketplace and the Fulfilled by Amazon program. And then every time you make a sale they will charge you 15% of the invoice and around 2.65 per every item they ship for you.
Amazon Business Economics Example
Let’s say that you are selling a product for $80.00. Here’s what the general profit-loss might look like.
Product Sell Price ……………………………………$80.00
Total Revenue …………………………………………$80.00
Product Manufacturing ……………………………$10.00
Shipping From Manufacturer to FBA …………$ 1.00
Amazon Fees (15% of $80.00) …………………$12.00
Fulfillment …………………………………………………$ 2.67
Total Expenses …………………………………………$25.67
PROFIT (revenue minus expenses) …………$54.33
How do you factor advertising cost? If $100 ad budget or $100 in Amazon PPC produces eight sales, my advertising cost per order (CPO) is 12.50 per order. This makes the actual per unit profit $41.83.
But let's be honest, the Amazon Marketplace is just part of the equation. If you open an account today and send a product to sell, that doesn’t mean you are going to make any money.
How to choose your first profitable product
There are three types of products you can sell, they are:
- Other people’s product. Wholesale, drop-shipping or retail arbitrage; if you put a lot of effort into it, then you will do a great favor to the brand owner as you are helping them to build their brand and presence on the market.
- White label products or unbranded products. These are really inexpensive to source but as they are unbranded, people have a really low perception of the value of it.
- Your own brand of products (or private label products). These are the ones I love the most. You sell your own branded products at a high-profit margin and with time you also build up a name brand and a presence on the market.
In this article, we are going to focus on private label products, and for that, in today’s lesson you are going to learn one of the methods I use to find ideas and how to validate them with data before you commit to them. (You don’t want to invest in a product that you don’t know is going to sell.)
We are going to do a little exercise to help you understand the process.
Let’s start with making a list of product ideas:
Here’s how I begin the process when I want to launch a new product:
- Think about your hobbies and passions, and the items that relate to that.
- Think about your pains and problems, and the items that can help you solve them.
- Get a magazine that relates to a topic that you enjoy and look for product ads.
Try to make a list of 10 to 20 items.
But wait, I want to do an example along with you.
I am going to pick the “Uber” driver niche as more and more people are doing the Uber business as a side job in my area, so it’s relevant right now.
An Uber driver will need two things to operate. A car, and an iPhone. So here is a list of things I believe that can relate to the Uber Drivers:
- iPhone car mount
- iPhone 6 charger
- Car charger
- Coffee cup
- Portable vacuum cleaner
- Air Freshener for Cars.
Then, we want to answer these questions:
- How big is your market?
- How many people are looking for your product every month?
- Is it seasonal?
- Who are your main competitors?
To look for the answer to our first question, I used Google and found an artlicle on Times.com with the fact.
1. How big is your market?
There were more than 160,000 active Uber drivers by the end of 2014. (“Active” means that a driver gives at least four rides per month.) Some 120,000 of those drivers signed up with Uber in the last 12 months. - Time.com
So 160,000 Uber drivers is a really good number, and that’s without counting similar services like Lyft.com and regular taxis.
2. How many people are looking for the product per month?
To answer this question, we can use the free tool “Google Keyword Planner” to find how many people are looking for the product on Google every month.
Note: This tool will give us the Google data, not the Amazon search volume, but it’s a good point of reference.
Here is a screenshot of the results for “Car air freshener”.
So more than 140,000 relevant searches per month and a total of 6,600 average searches just for the phrase “car air freshener” alone per month… not bad.
3. Is it seasonal?
It is important to understand how your product behaves during the year to make smart decisions about your inventory and marketing.
For that, we can use the free Google tool “Google Trends” and look for the answer.
Here is a screenshot of the results.
As you can see, since 2007 this search has become more and more popular with a growing trend. So one more point for our product.
4. Who is our main competitor?
For that we can do the search on Amazon to find out. So the #1 best seller would be Moso Natural Air Purifying Bag, selling at $9.95 on Amazon.com.
Something to remember is that there are more people looking for products on Amazon than on Google, so the Amazon searches might be little higher than Google. If we click on the product and scroll down to the product details, we can find the Amazon’s Best Sellers rank.
And with this number we can estimate the sales per month of the product using the free “Instant Sales Estimator” tool of Jungle Scout.
So, that means that the “Moso Natural Air Purifying Bag” is selling around 3,988 units per month at $9.95 for an estimated monthly revenue of $39,680. Not bad at all.
Recap: With a niche size of 160,000 members that we can easily target, over 140,000 searches per month on Google, with a growing demand and the main competitor selling almost 4,000 units per month at $9.95, the Car Air Freshener might be an excellent choice to start.
In the Private Label Blueprint training I also learn how to make sure that the market is not too competitive (a key metric for first-time sellers) so you can rest assured that too many big competitors won't bully you.
This is a post is huge, coming in at almost 4000 words. In it, Miguel shares with you everything he did to create and launch millions of dollars worth of product for himself and his students.
How to source your product supplier
Now that we have a product idea let’s find a supplier that can give us prices and samples of the product so that we can evaluate if it’s the right fit for us.
When you are looking for suppliers you have two main choices;
If your product is ingestible like foods and supplements, or if it’s something that you apply to your skin, like creams and cosmetics then you should source it in the USA.
Everything else, China.
For this the Car Air Freshener example, we are going to use Alibaba.com to search for a supplier.
Alibaba is one of the largest and most trusted company directories in the world, and it's also the easiest way to find a supplier in China.
I did the search for our product and here is one of the suppliers:
The next steps would be:
1. Contact the supplier for an official quote
Even though they are advertising the product for under 30 cents a piece, you want to contact them directly to verify the price. Also, you want to learn about their delivery times, the cost of samples, the quality inspection process, if they can do they provide custom packaging, how many employees do they have, where is the factory, among other things.
2. Get samples of the product
Request a sample of the product so you can see it in your hands and compare it to other competitors. Most of the times they will provide you the sample for free or at cost and charge you for shipping. If you are shipping with DHL expect to pay anywhere from 30 to 60 for a box (consider getting more than 1 sample as the cost of shipping might be the same) When you receive the sample check the quality of the product. Do a drop test to see if it breaks. Also Compare it to your competitor's product, what are the pros and cons?
3. Verify the company’s credentials
Make sure you are working with a legit corporation. Google their name, ask for certifications or even hire an inspector to visit the factory for you.
4. Understand the numbers before you commit to the product
Do the math, make sure your business is profitable from day one. But more important, set a goal for your product.
Avoid the 3 biggest mistakes people make when selling on Amazon
A few days ago I went to Walmart to get a bike hook to hang my bike on my garage wall to save some space, and I’m standing in the aisle, and I have two hooks in front of me, one of them priced at 2.99 and the other one priced at 9.99.
The construction of the products looks similar. I think that with the proper installation, both of them could carry the weight of the bike and maybe a little bit more.
But, one of them was priced cheap and looked cheap, and the other one was the bit more than 3X the price of the first one but had superb looking packaging.
Not only that, the words on the packaging where answering the questions I had on my mind.
They were claiming the benefits that I sincerely desired.
It had pictures giving ideas of what else I could hang.
Also, on the back of the product, it had step-by-step instructions on how to install it.
And better yet, it came with two handy-dandy self-drilling screws as a bonus (that you could easily get for like 20 cents each if you went to the hardware department two aisles away).
Which one would you take? Instead of buying one, I ended up buying two of the 9.99 option, one for my bike and the second one for my son’s stroller…
So, let’s talk about the three biggest mistakes people make when selling private label products.
Mistake number 1: Really low-profit margins
There are many reasons why this could happen. Maybe you failed to negotiate with your supplier, or you entered into a crowded market, or maybe you are positioning your product as a cheap option (more on that later).
Having a low-profit margin makes it difficult to recuperate your initial investment and also to have a decent marketing budget.
Even scarier, it’s hard to make any profit due to inventory cost and fees with low-profit margin products.
To fix this issue, you must clearly understand all the costs that are involved in your business and have a profit-oriented business plan.
Let’s say that for this example we have a monthly profit goal of $3000 per month to cover your average living expenses. And let’s estimate a freight cost of 0.8 per unit to ship the goods from the manufacturer in China to the Amazon Warehouses in the USA.
So our profit plan would look something like this:
Product Sell Price ……………………………………… $9.97
Total Revenue …………………………………………… $9.97
Product Manufacturing …………………………… $0.30
Shipping From Manufacturer to FBA ………… $0.80
Amazon Fees (15% of $9.97) …………………… $1.49
Fulfillment ………………………………………………… $2.67
Total Expenses ………………………………………… $5.26
PROFIT ( revenue minus expenses) ………… $4.71
TOTAL UNITS / MONTH TO REACH THE GOAL…637
So to reach our goal of 3,000 per month in profits we only have to sell 637 units per month, just a fraction of estimated sales of our top competitor.
Also, this is considering that we are selling the same product without any upgrades or premium features.
Mistake number 2: Positioning your product as a cheap option
It is easy to source a product, pack it on a poly-bag, put a sticker on it and ship it to Amazon, but not necessarily profitable. Also, poorly presented products may result in poor customer experiences, returns, complaints and even bad reviews.
In the Private Label Blueprint, I teach how to pick up products with the right profit margin, products that you can market for 8 to 12 times your manufacturing cost so you can run a business that brings you profits instead of headaches. And also how to pack your product as the premium option so you can create a better customer experience and convert buyers into raving fans (and also charge premium prices).
Mistake number 3: The “If you build it, they will come” mentality
Poor marketing is the main reason why a TON of small businesses fails every year. The good news is, marketing your product with Amazon is not hard at all. If you do the right steps, then marketing can be easy and even fun.
Now that you have an excellent idea on how to find a product and source it, let's talk about how to promote it effectively on Amazon.
7 Ways to Market Your Product Effectively on Amazon
1. Starts with your main image
Your main image is one of the most valuable assets of your product page. It is the first thing people will notice about your product as it’s the image Amazon will use to showcase your product on the search results, browse pages and ads.
Make sure to use a high-quality image, easy to understand, clear, with a pure white background, information rich, attractive and zoomable.
Having the right image will increase traffic and sales.
2. Express the benefits of your product
People care about specifications but more important than that, they care about the results they get from those specifications. When writing your bullet points and descriptions, make sure to write them with the result people want from your product in mind.
Avoid being too salesy and fluffy.
Having a highly compelling product description and bullets may increase your conversion rate and sales.
3. Follow up with your customers
One email or a phone call can go a long way. Make sure to prepare a high-value follow-up sequence to create an excellent customer experience. This type of practice may result in repeat buyers, referrals, seller feedback and product reviews.
You can use a software tool like Feedback Genius to automate this process.
4. Get social proof
Ratings are the name of the game. People use ratings as a reference for how good and popular is the product. Also, it will be the main reference point for a buyer looking to see if the product works.
The review system is one of the unique selling points that made Amazon the behemoth online retailer it is today. Make sure to plan ahead for reviews. You can use techniques like promotions and follow up with your customers to get awesome customer reviews.
Having a constant stream of reviews will make your product stand out from the crowd and may result in an increase of traffic and sales.
5. Optimize for SEO
To optimize your product to show up in the customer’s search results for organic (FREE) traffic on Amazon you will need to monitor three main things.
- Your product relevancy to the customer search terms,
- The conversion rate of your product and
- The Product Rating
Optimize your product title and bullets so it carries relevant customer search terms or keywords without make it look spammy.
6. Network with bloggers
Bloggers, YouTubers, Instagram rockstars, Pinterest Boards, email newsletter, they are all influencers. Having them on your side will improve your marketing results. Contact influencers to promote your products with high-quality content to their audiences.
You can send then an email offering a free product so they can review it on their channel and also offer them a discount coupon for their audience. They might do it for free.
If done right, you will have a constant stream of buyers coming from outside of Amazon to your product.
Most people feel afraid to advertise because it requires paying for the ads. But if you could invest 100 dollars to get 200 dollars back in profits, would you do it?
Amazon Sponsored Ads is the first type of advertising platform you should try if you are selling on Amazon. You will be targeting your ideal customers right there while they are searching for your product, so usually you will see an instant result. Also, it’s measurable and optimizable.
Here’s some questions I get asked whenever I speak with people wanting to get into products on Amazon.
How long would it take to launch a product?
Well, it depends of the product you choose. But let’s do a typical timeline from zero to launch would be around 60 days.
How much money would it cost me to create a product and launch it?
Great question, it depends on the product that you choose.
I recommend starting with at least 500 units to reduce the cost of the product and shipping per unit.
Also, you should consider starting with a product that cost less than 4 dollars per unit.
For our natural air purifying bag example, this will be the estimated cost (*Please note that this priced are based on the example quotes from Alibaba, and we are estimating a high cost for shipping)
Cost of sample with shipping…… $45
Competitors products…………… $25
Branding Design with upwork…… $100
Product Pictures with fiverr…… $50
Cost of production of 500 units at 0.30/unit…$150
Estimated Cost of Shipping for 500 at 0.80/unit…$400
Total Initial investment ………… $770
How much time do I need to invest for this to work?
Well the more the better, but because you are outsourcing most of the hard work (production, graphic design, photography, and selling the amazon) I am comfortable saying that if you spend at least 1 hour a day on your business for the next 60 days, you should be able to have a product available for sell on amazon in the next 2 months.
Do you have to be in the USA to be able to sell on Amazon?
The answer is no. You can ship everything directly to the Amazon FBA warehouses so they can take care of fulfillment and have your payment sent directly to your account in most Countries.
Also, you can sell in other Amazon websites including Canada, Mexico, Australia, Europe, Japan, India, and China by taking advantage of the Amazon fulfillment warehouses in those locations too.