Please see below some top tips to get you started from one of our customers who managed to make 40% net profit in just three months.
1. Not all marketplaces are equal
My first mistake was to assume that Amazon was pretty much the same as eBay. I would often compare prices on Amazon and eBay and make buying decisions on that basis.
Often prices for the exact same new products on Amazon can be much higher and still sell extremely well. So my first tip is to check the long term pricing stats for Amazon on sites such as CamelCamelCamel and make buying decisions based on the facts rather than comparing prices to other websites.
2. Buy products according to demand not personal preference
This second tip is similar to the one above in that it highlights the importance of utilising the data which is available. Your own personal opinion on whether a product is valuable or not will certainly differ to potential buyers out there. Don't be fooled into thinking that because you have enjoyed a DVD for example that others will. Try to put these emotions to one side when making buying decisions as they may cloud your judgement!
SourceMogul display the Best Seller Rank for each product which shows its performance within a category. They also have a new feature to give you an average number of products sold each month. This is ideal for those new to the Amazon terminology.
3. Compare suppliers and search for voucher codes
It may seem like an obvious one but before you commit to making any purchase put the item description into Google, click the “shopping” tab and double check to see if there are any better deals out there.
When you have decided on a supplier also search for “[supplier name] voucher codes” as there could be an extra 10% or so to be knocked off with a code if you are lucky. This all helps in maximising your profit margin.
Some suppliers limit the quantity they will sell to a single customer so a quick Google search may also show another supplier without any quantity restrictions (price matching amongst the big retailers is quite common so there’s a good chance you will be able to get the same price too).
4. Avoid over-stocking
Having a good cash flow and stock turnover will be critical to the success of your business. This basically means making sure the items you sell wont end up in stock for months on end.
My advice is to study the sales rank trends carefully, look for the “heartbeat” of regular sales and calculate the monthly sales figure. You can also use the average monthly units sold data provided by SourceMogul. Also keep in mind that the more sellers there are for a particular item the longer it might take to shift your stock.
5. Spreading the risk across a variety of products
Try to avoid investing too heavily in a single product, by building a portfolio of products across a wide range of different categories you will be more resilient to seasonal trends and there will be less chance of getting caught with all your eggs in one basket.
Having a good mix of “fast moving but low profit margin” and “slow moving but high profit margin” products will also help to spread the risk.
6. Don't get caught in a price war, patience can be a virtue
From time to time you will see sellers engage in a price war, some sellers use re-pricing software that will undercut the competition by 1p to win the buy box, this practice often quickly results in a race to the lowest price with no real winners along the way (other than the buyer).
Try to avoid getting drawn into these types of price wars if you can, I recently waited out a price war and after a couple of weeks I was the only seller left with FBA stock, I was then able to command a much higher price for my product.
7. Be willing to share the buy box
To avoid triggering a price war of your own try to price match the competition rather than undercutting them, if there are several FBA sellers with the same sell price the buy box is usually then shared between them with everyone getting a fair chance to sell their stock.
8. Use buying tools to save you time to spend on other things
When I first actively started to look for more products to sell on Amazon my strategy was to spend hours scouring the sales and offers pages on big retail websites and checking the top price drops on CamelCamelCamel.
After a while I found that this was becoming unsustainable as the business was growing fast and I needed to spend less time on manually sourcing products. Subscribing to SourceMogul shouldn’t necessarily replace all these other buying strategies, but in my experience it made a big difference to the amount of time I can devote to other areas of my business (or just enjoy a bit of additional free time).
9. Managing expectations
If you do sign up to SourceMogul, stick with it for at least a month or two before making a judgement call on or whether or not it is worth the money. The reason for this is that you definitely will not want to purchase every product you see.
Thorough due diligence before every purchase is critical and this will identify the higher risk products such as products reaching the end of a seasonal high, or in some cases a price differential caused by Amazon running out of stock and marketplace sellers making hay with inflated prices. Some days, you will find that elusive perfect product only to find that the potential supplier has already sold their stock! Keep at it, and it will pay back (in my personal experience one deal alone has paid the monthly subscription several times over but this did not happen on day one).
10. Give it the time and effort any new business deserves
Your success as an Amazon seller will be directly proportional to the amount of effort (and money) you put in. For me personally it supplements the income I get from my day job with a relatively small commitment of spare time, I can't think of any part time job that would deliver the same results and work 100% around my own schedule in the same way that being an Amazon seller does.
I know that it takes a lot of courage to take the first step and set up an Amazon pro-seller account and then make your first FBA shipment, it seems like a daunting prospect but once you make those first steps and see the sales rolling in I hope you get the bug like I did. Good luck!