Leaky pipes are a big problem. You start with a gush of water and you end up with just a trickle after it’s all leaked out of one little hole or another.
An FBA leaky business is the same. You start with a great selling product, but when you come to look at the profits, somehow they all leaked out along the way.
So let’s look at where those leaks are and how to stop them up!
A big one is Amazon fees. You need to build those into your business plan from the get-go.
But you can also help yourself not pay too much. For instance, a tiny difference in packaging could ‘leak’ hundreds of dollars if it puts your product into a bigger size/weight category. Look for all your products that are on the borderline, and make sure they fit the smaller and less expensive size.
You also need to look at storage fees. Any inventory that’s been in the warehouse for more than 365 days will get slapped with an extra charge. If you have slow selling products, they can leak out quite a lot of your profit. Either ramp up your advertising, discount them, or get them released from the warehouse, liquidated (you might get 5-10% of the cost back) or destroyed.
Not having inventory in the warehouse can cost you almost as much as having too much! You may be losing revenue through stock-outs. Amazon doesn’t do back orders; if you don’t have inventory it won’t let you sell, and your product will lose its ranking. That gives you an uphill task once you’ve reordered as you’ll need to get back your sales ranking and the Buy box. So make sure you know how much inventory you have, and roughly when it is likely to run out. Ensure you reorder in plenty of time to restock the Amazon warehouse before you have a problem.
Another leak in the pipe through which money can escape is when you source your product. Are you leaving money on the table? Always see if you can get a better deal from your suppliers. Be creative; they may not want to give you a lower basic price, but they might cover part of the shipping costs for free, or discount on the regular price if you order above a certain amount. If you’re reordering, you’ve already proved you are a customer who can shift the product, so you can present any discount as an investment in success and in a profitable future.
If you used your credit card to pay for an order, because it was the most convenient way to pay, beware of another leak in the profit pipeline. Fail to pay it off smartly, and you will be charged high interest rates for your loan, even if you didn’t actually want to borrow the money. Get used to checking your balance weekly and paying off the debt.
Not monitoring your Amazon account can spring leaks all over. For instance, if you don’t check your keywords, you won’t know whether you’re spending on useless ads that never convert. If you don’t check your ACOS, you won’t know if you’re spending more on ads than the product is worth. If you don’t optimize your ads, investing more in the good ones and less in the bad ones, you’re spraying money all over.
And finally, procrastination is the biggest enemy. Imagine you have a leak in a pipe in the house, you don’t wait till it has filled the basement with water, you get it repaired. So with your FBA business, don’t put things off. Do them, or outsource them, but make sure they get done.