The Art of Profitable Product Selection on Amazon FBA Wholesale [LNIM252]

Ever wondered what it takes to turn a profit with Amazon FBA? Let's unravel that mystery together! In our latest Late Night Internet Marketing Podcast episode, I guide you through the labyrinth of product sourcing and the pivotal factors that will chart your course towards Amazon FBA profitability. From understanding market demand to utilizing tools like Jungle Scout for pinpointing top-performing products, we've got the lowdown. And for those of you who are fans of checklists, I've got a downloadable gem that's going to streamline your decision-making process. Plus, I can't resist sharing a slice of life from Dallas – the weather's changing and so are the sports seasons, making it a perfect time to root for the Texas Rangers!

Now, let's talk numbers and the nitty-gritty of financials when selling on Amazon FBA. I'll peel back the curtain on the costs involved in getting those unique products, such as the antler-shaped toilet paper holders, all prepped and shipped. We'll navigate the treacherous waters of choosing the right suppliers, managing inventory effectively, and staying in Amazon's good graces with their ever-so-strict compliance requirements. It's not just about understanding the rules; it's about mastering them to stay on top of your game.

To cap off our nocturnal knowledge fest, I'm serving up a hearty dose of encouragement for all you online business dreamers out there. The digital realm is brimming with opportunities, and this episode is your reminder that your entrepreneurial dreams are worth chasing. So grab that vision, give it a good shake, and let's make it a reality together. Don't forget to share your success stories with us – they're the fuel that ignites this community's passion. Keep paving the path to your online business success, and I'll catch you in the next episode for more late-night wisdom. See you next week – same time, same place, always aiming for the stars. Ciao!

Transcript

Speaker 1: 0:00

Episode two five two.

Speaker 2: 0:03

Late night, edmund Herculecy.

Speaker 1: 0:08

This week on the Late Night Internet Marketing Podcast, we're going to talk about what you have to remember when you're sourcing products for Amazon FBA. These are the make or break things that will determine whether or not you make a profit on Amazon. All this and more on the Late Night Internet Marketing Podcast.

Speaker 2: 0:33

The Late Night Internet Marketing Podcast. You've been working for somebody else, but you want a business to run yourself. You want to know how to start and where to begin. Can you get out your comfort zone, my friend? Yes, you can do it right. When it's late at night, at the end of the day, your dreams burn inside. So keep it up and you will find that you're building your business one night at a time.

Speaker 1: 1:11

And now broadcasting late at night from a little studio in the big state of Texas, your host, mark Mason. Hey, hey, hey, how is everyone doing? I am your host, mark Mason, coming to you from the still frozen tundra of Dallas, texas. Again, I think it's like I don't know 29 degrees outside, so it's not exactly frozen tundra by most people's standards, but it's still pretty cold around here. We're huddled up inside and doing exciting things like recording this very podcast. I'm really happy to be with you here this week.

Speaker 1: 1:53

Sadly, my cowboys are no longer with us. They really laid an egg in the football playoffs and I should be used to that by now. But I live in Dallas. I'm kind of ride or die now with the cowboys, and so it is what it is. We've always got next year and I'm excited because being done with football season which I'm personally now done because my cowboys are done being done with football season means I'm that much closer to baseball season. As a matter of fact, baseball season for our high schoolers just started. They just started practice this week. First scrimmage for the public is going to be on February 2nd, weather permitting. We're excited about that. And, of course, the Texas Rangers the world champion, Texas Rangers, to follow soon after that, so we're super excited about that.

Speaker 1: 2:50

In the meantime, we're building internet businesses one night at a time here, and I know some of you are interested in building a big business on Amazon. If you're listening to this before February, you've still got a little time to check out what my buddy, aiden, is doing over at latenightoffercom. I've talked a lot about that. I'm not going to talk about it more today. Instead, today, what we're going to talk about is actually how to decide what to sell on Amazon, and so that you don't have to take a thousand notes, I've published a checklist over at latenightimcom forward slash Amazon. Again, that's latenightimcom Forward slash Amazon. There's a free download there for you where you can get a nice, beautiful looking PDF that has a lot of this information in it and will help you think about how to evaluate a product that you might be considering sending into Amazon.

Speaker 1: 3:58

Again, the business model we're talking about we talked about in episode 251, in case you missed that episode or haven't had a chance to listen to it yet, we're talking about a business model where you find a product that's already selling on Amazon that you'd like to sell. You go out and buy some of that product and send it into Amazon and Amazon sells your version of that product exactly the same product, but a product purchased by you on that listing, it's sold by you and fulfilled by Amazon. We call that Amazon Wholesale FBA, because you buy the product wholesale and you send it into Amazon and it's fulfilled by Amazon, thus relieving you of all the hassle of trying to get the product to the customer, dealing with shipping and customer service and returns, and all that Amazon Wholesale FBA. And the question is, with hundreds of millions now I guess I don't even know exactly how many products there are on Amazon but with all those products on Amazon, how do you pick the ones that you want to sell? And the obvious top line answer is you want to sell the products that you can sell and make money selling. And the question is well, what are the things that you need to consider when you're deciding whether or not a product would be profitable for you? And again, you can get this list at latenightimcom forward slash Amazon. So let's talk about the first thing, and the first thing, of course, is market demand. We need to make sure that the product that we're trying to sell ourselves is already selling on Amazon. In fact, that is.

Speaker 1: 5:45

The beauty of this method of making money online is that you can know already whether or not something is selling on Amazon, and there's a few clues. You can use tools like Camel, camel, camel or KIPA to understand whether or not something is selling. You can tell usually that products that have many, many, many reviews are selling, because think about it how often do you leave an Amazon review? Most people don't. So if a product has a lot of reviews, it means that a lot of people are buying that product because out of everyone that buys it, only a few of them left to review.

Speaker 1: 6:27

But what I really like to understand demand on Amazon is Jungle Scout. Jungle Scout is by far my favorite Tool for this. There are other tools, lots of ways to do this. I've always used jungle scout. I like the people over there and if you want the best going pricing on jungle scout right now you can get that at late night. I am Com forward slash jungle and that's always got the link to the best affiliate deal that they've got and it's always their best pricing. Again, that's late night. I am calm Forward slash jungle. That's my affiliate link.

Speaker 1: 7:06

So you need to make sure it's selling, because we don't want to spend money on inventory and send something into Amazon and then have it sit in their warehouse. We'll talk about that why that's a bad thing here in a little bit. But you've got to make sure you're picking something that's actually selling. And then the second thing that you need to do Is you need to make sure that the competition is reasonable, and this kind of goes along with the situation of how much of the product is selling, how many people are selling it. So those two things go hand in hand, because the way the buy box works on Amazon this is the phrase we use for the technology that determines who gets the sale if there are seven people selling Exactly the same product, how does Amazon decide who gets it? We talked about that in the last episode a little bit.

Speaker 1: 8:00

But it's important to understand how many sellers there are, because if there are many, many sellers and the volume is low, that means you are only going to get the buy box every once in a while and your ability to sell will be slower. But if there's a high volume and few sellers let's say they're selling 10 a day and there's only two sellers Well, you might sell five items a day. Or maybe, if you're starting off more modestly, let's say they're selling 90 of these items that you want to sell a month and there are three sellers, well then you might sell one a day. That might be great for you where you're starting out, and so you need to consider this ratio of the number of sellers to the volume that you're estimating, based on what's in KEPA or camel, camel, camel or some tool like that. Like I said, my favorite is Jungle Scout to kind of get an idea of how many are being sold every month.

Speaker 1: 8:59

So competitive assessment Really important. You want to kind of understand that and there are things that go into that competitive assessment, like is the product hard to source? Is it in the category where you need approval and you have approval? We're going to talk about that in a minute. But what is the competition look like? Is it fierce or moderate? And, of course, I think the most important thing is what's the profit margin likely to be? So profits look like this on Amazon, you have a price that you're likely to sell that item.

Speaker 1: 9:34

Amazon will sell the item at a certain price and that price depends on what the other sellers are doing. What's the going rate in the marketplace. But you can estimate what that's going to be. Again, looking at a tool like camel, camel camel or KEPA, we'll give you an idea of what the historical price has been for that item. And from that price, what you're going to find is there are things you're going to have to subtract. Obviously, the very first thing you're going to have to subtract is what it costs you to buy the item.

Speaker 1: 10:06

So let's let's like we always do use an example, and let's use my favorite example a lot, because it's the one that everybody always wants to talk to me about. It's the deer antler shaped toilet paper holders. Okay, so let's say that the going rate of a deer antler shaped toilet paper holder on Amazon is $25. We think that we're going to be able to sell toilet paper holders on Amazon for about $25. So From that $25 we're not going to get to keep the whole $25. Obviously, we're going to have to pay Amazon a fee to ship and deliver that product to the customer. So that's the fulfillment fee, and we're also going to have to pay Amazon a marketing fee Because, after all, it's Amazon's platform and Amazon's traffic that we're using to sell that. So we've got those two fees and Amazon has FBA pricing calculators available to help you understand what those are and they vary by product and the weight and the price and all this kind of stuff specific to the product. But you need to understand that you're going to have to pay Amazon a chunk for the privilege of Using their platform. So let's say that for that privilege it was 20% just a random number there and that means that out of that $25 we need to pay Amazon $5.

Speaker 1: 11:40

Then, in addition to that, you had cost Associated with getting the product into Amazon. You had to pay for it. Let's say that we paid $10 for these antler shaped toilet paper holders and we had to pay someone to prep that Toilet paper holder and get it ready for Amazon FBA. We had to pay both shipping costs to get the item to the person who prepares it and shipping costs to ship it into FBA. So let's say, when it's all said and done, our total cost of everything Cost of goods sold into Amazon is $15. We bought it, we shipped it, we got it into Amazon for $15, we sold it for 25. So we made 10, but we have to give Amazon 5. That leaves us with 5. Is that good or not.

Speaker 1: 12:36

I think it depends on your idea of what you want to make from this business. But if you've got a profit margin of 20%, when it's all said and done, if your net profit from operations is 20%, as in this example, where your revenue was $25 and by the time you were all in on all your costs, you were left with $5 in your pocket that's a pretty good profit margin, especially if you're just starting out on Amazon FBA wholesale. So profit margin calculation is key, and there are a lot of resources online that tell you how to do this. Now the next thing you need to consider is when are you going to get this product and how are you going to get it, and is the person you're going to get it from reliable? I think this is very important in terms of brand name products particularly. Can you trust the supplier that you got? Do you have a reliable supply for this product, and are the minimum order quantities that your Supplier recommends? Are they compatible with what you're able to spend or the money that you want to have tied up in the Amazon Warehouse? Those are a couple of key things when you find a wholesaler that can supply the product that you're wanting to supply, you need to make sure they're reliable.

Speaker 1: 13:54

We do this either backwards or forwards. Sometimes we find a product on Amazon, based on analysis, that looks awesome and we go find a wholesaler that can get us that exact same product. Or we do it the other way. We find a wholesaler that we really like and we say give me your 15,000 product product list and I'm going to run software on that and find the five or six products that you sell that would be great on Amazon right now. We do it in both directions, but at the end of the day, you need to make sure that you're working with a great supplier. Another thing that you need to consider as you're doing this is Inventory turnover rate. You need to consider how long it's going to take Before that inventory that you send in is going to completely turn over. So if you spend a thousand dollars Sending 50 items in, that thousand dollars of yours is tied up. Amazon has it in the form of inventory until you run it through the process. You get it into FBA and you get the Revenue back and Amazon puts money back into your account. So if you pick a product that moves very slowly, then your money will be tied up for a very long time and that's not what you want.

Speaker 1: 15:14

And I think a really good example is Christmas items. So let's say that you decide. You look at the Situation around Christmas lights. I, particularly at my house, in my neighborhood, we have a, an agreement with all the people on the street. We use a particular Christmas light to line our yards so they all look the same. It's, you know, it's like wisteria lane, super Suburbia, right, all the houses look the same. We've agreed on a particular model number of Christmas light incandescent, and that's very important and C9. So let's say that you found a great Deal on strings of C9's at a wholesaler you can trust. You can get them at a great price. You know you're gonna be able to sell them, but guess what? It's January, right now. Okay. So if you go buy a palette full of Christmas lights and send them in an Amazon FBA, generally speaking, they're going to sit there until Thanksgiving, okay, and so your money is going to be tied up there. So that turnover rate is important, because Return on investment is ultimately what you want to measure in any business. Profit is important, okay, profit is very important. But if it takes you 10 years to make that 20% profit on $1,000. That's probably not a good return on investment. You could have put that money somewhere else and had it work harder for you, and so turnover rate is important. So you need to imagine, based on the number of items that you're buying and the rates that you're seeing, you need to look and try and understand how long you expect your inventory is going to be in Amazon.

Speaker 1: 17:00

The sixth thing that you need to keep in mind is compliance with Amazon Really important that you're careful not to sell things, and sometimes Amazon will let you list things or operate on a listing that somehow later becomes a problem from a compliance standpoint. There are certain things that you can't sell in California, so that limits your Market. So if you pick a product that can't sell in California, that's something to consider. But there are other things that you can sell sometimes, and other times you can't like pesticides. Sometimes you you might have inventory in these kind of products and they might become banned, or I'm constantly getting Notifications. Please be advised that this thing that you were selling is now Restricted and so you have to be a little bit careful.

Speaker 1: 17:50

In general, I like to stay away from anything that is outright out of compliance with Amazon Weapons, things of that nature. I also like to stay away from things that I think have a lot of Potential liability. I usually try to stay away from most things like health supplements and other things that actually go into your body, because I don't like the liability implications there. Now you know, I understand people are making zillions of dollars doing that. That's just my risk avoidance. I'd rather show us I'd rather sell you a shovel Than I would sell you some kind of weight loss drug on Amazon. So Consider what Amazon's compliance policy is, consider the risk and choose accordingly whenever you're picking products. That's the. That's the sixth item.

Speaker 1: 18:45

The seventh item we've already talked about don't be fooled by seasonality, and I've seen this happen before, where people are fooled by the fact that something's selling when they look and they didn't look at a long enough Period and they didn't realize the item was seasonal. Like camping gear, for example, is seasonal. Christmas items are obviously seasonable. They are seasonal, they're not seasonable. You should not eat most Christmas items. They are Seasonal and so you want to be careful about seasonality. Or the other thing where people get caught is something that goes viral as a trend, something that's super popular and then that trend goes away. So particular kinds of toys are a good example that will get popular and then go away. Exercise gear can get popular and then settle down into a less demand situation. And what can happen to you is if you fall into these seasonality traps, what can eventually happen to you is that you send in too much inventory and then the demand falls off and you're stuck with that Inventory in Amazon. So that's the seventh thing.

Speaker 1: 19:57

The eighth thing is Is scalability and potential for adjacent products. I love this idea that you find a winner and then you find adjacent winners in that same Niche or from that same wholesaler, because the more and more volume that you're doing with your wholesaler, the better pricing you're gonna get, the better customer service you're gonna get, the better Financial terms you're gonna get. At some point the wholesaler might let you go net 30, for example, where they'll carry the float, and then all of a sudden you're selling products in Amazon and someone else is paying for the investment on those products. So there are lots of opportunities, but you're not going to start out there. You're not going to start out being able to get financing terms in general from a wholesaler. So it's gonna be your money initially for these products. So looking at scalability and what the opportunities might be To scale is the eighth thing that I recommend.

Speaker 1: 21:01

The ninth thing we've also already talked about is make sure you understand your ability to win the buy box. So there are going to be two things necessary at least to win the buy box. One is you're going to need to have good seller metrics seller metrics on Amazon or determined by Shipping times, which, in terms of FBA, are not under your control. That's good because you're using Prime, so that's a good thing for you because your FBA you're gonna be using Amazon Prime, so you deliver fast all the time, guaranteed by Amazon. And then Customer service type things are there a lot of returns of your item? Do you? If you get a customer inquiry, do you answer it within a certain amount of time? Or you responsive to Amazon? Is your account in good Understanding? I have you tried to sell products that have been banned by Amazon, all these kind of things?

Speaker 1: 21:54

And again, when we say winning the buy box, we mean that when someone goes to buy that product that you're selling, it says sold by you, whoever you are in my case, sold by Mark Mason and Fulfilled by Amazon, that means I've won the buy box, and if that person that actual person, clicks by, that Revenue is mine. It's my version of that product that got sold, and so the main thing that influences that, besides your account standing, is the price. And so if you see that the price is super aggressive and going lower, or the price routinely Based on what you see on Kepa or camel, camel, camel goes so low that you won't make any money, then that means that you may not be able to win the buy box. On the other hand, you may notice that oftentimes the price goes low and those people sell out and then they run out of inventory and Then the price starts coming back up. That's the way Amazon works. It's a true supply and demand auction model where Buyers are competing to win the sale based on the demand. The stronger the demand is, the higher the price will go, and when availability starts to get restricted, of course demand goes up and the price goes up, and then you can make money, and so you need to make sure that you understand that by looking at camel, camel, camel or Kepa and understanding that, and then the last thing that I'll tell you is, in the rare event that you have some Customer interaction or interaction with Amazon, you need to make sure that you handle that and you you have a tremendously responsive posture when it comes to dealing with Amazon or in the weird case that you have to deal with a customer.

Speaker 1: 23:45

I Honestly cannot ever having remembered dealing with a customer on an FBA item. I guess it's possible. Amazon usually handles us, but in the case that that happens, you need to be responsive and you need to make sure that you respond to them very quickly. Now, one thing that I don't Mention in the handout again, you can find the handout at late night. I am comm forward slash Amazon. One thing I don't mention in the handout is Another thing that you need to pay attention to is you need to make sure that you are actually able to sell the product.

Speaker 1: 24:27

Some things require approval by Amazon. For example, let's say you want to sell gold necklaces on Amazon. They won't let just anybody off the street create an Amazon account and start selling gold necklaces tomorrow. They have to know who you are and that your gold is likely real and because that's a high fraud items. So think of high risk, high fraud items. They require approval by Amazon. Same name brands, same deal. You're not going to be able to sell Gucci bags on Amazon without talking to Amazon first, without getting approval in that category. Also, some things like electrical things, things where there's a risk of like fire, like if you were to sell defective wall plugs to a contractor who was building a house. So Amazon has these restrictions in place based on what they've learned about where, essentially where the bodies are buried, both literally and figuratively, for Amazon products, and so make sure you're able to sell.

Speaker 1: 25:31

The other thing that can keep you from selling is many products on Amazon. The brands are restricted to approved resellers, and so you'll need to get approval from that brand. Gucci's an example. Gucci's not going to give you permission to sell on Amazon. Many, many brands Rayban, other big brands require permission, and a lot of times that's because the company has decided they are going to sell on Amazon and they are going to be the only ones to sell on Amazon, so they can control what's going on on Amazon. A lot of brands do that, and so you may wish to sell something on Amazon, only to find out that you can't, that you can't get permission or you're not qualified for that category.

Speaker 1: 26:17

Yet you don't have the experience. Baby products. This is another example. You don't have the history with Amazon that will let you sell into a sensitive category. So the way you find this out is, before you ever buy the product, you try to create a listing in the inventory section of FBA. You try to act as if you're going to send some in and it will either approve you to send some in or not, and if it doesn't, then you either have to jump through the hoops that they ask you to jump through. Sometimes they ask to see invoices to prove that the products are real. Sometimes they ask for a letter from the supplier, and so forth.

Speaker 1: 26:59

Whatever it is that you need, you can do that, or you can move on and find another product. After all, there are hundreds of millions of products for sale on Amazon. I don't know how recent this information is, but there are 12 million products sold by Amazon, 350 million products sold by Amazon sellers like me and you. So hundreds of millions of products to choose from out there on Amazon. You just move along and find another product, no big deal. So go get the free handout from latenightimcom forward. Slash Amazon.

Speaker 1: 27:39

And again you know one of the things that Aiden teaches in his course is how to select products and in fact this week he is again if you're listening to this before February. He's showing 16 case studies of 16 real products. He's giving away that information for 16 real products that he would sell today on Amazon, fba, and you can find that information at latenightoffercom. Again, if you want to see some real products that you can sell and it's before February go to latenightoffercom, sign up and Aiden will email you that PDF with those 16 case study products. So I hope that helps you understand the kinds of things you need to think of when you're buying something from FBA. As always, I am Mark Mason, latenightinternetmarketingcom. It's awesome to talk to you today and I can't wait to talk to you next week. We'll have something fun next week, but it's a surprise. Ciao.

Speaker 2: 28:43

You can do it right when it's late at night. You've been listening to the late night internet marketing podcast. Be sure to visit L-N-I-M podcastcom today to leave feedback for Mark, download special bonus content, access the show notes and more. See you there. Until then, go and make some great progress on your internet business one night at a time.

Speaker 1: 29:20

Hey, okay, okay. So I have been in full on 2024 goal attainment mode. I don't know if I talked to you guys about this yet. I've got some huge goals for 2024 for the late night internet marketing brand. I am presenting my 2024 plan to my mastermind Wednesday, a couple days from now, on the 24th. They will tear it apart and critique it and give me feedback, but the plan is an eight six week sprint plan. So I have eight six week sprints plan.

Speaker 1: 29:51

I have a big overall goal and it's broken down into eight large milestones that I'll achieve throughout the year and I'll work on those using the sprint and scrum model for those of you that are familiar with that kind of project management and I'll be my own scrum leader and I'll be having a one person scrum every morning figuring out what exactly needs to be accomplished today. And today the thing that needed to be accomplished was actually the recording and the editing and handoff to the virtual assistant of this podcast. So that's what I'm doing now. I've got a couple of other things on the scrum list, including finishing up some cleanup of Google analytics. We probably need to have a whole episode on Google tag manager and Google analytics. I don't know how that will play for a podcast, but I struggled mightily until almost two o'clock in the morning last night trying to untangle myself from some legacy old, bad Google analytics setup from 10 years ago. I think I got that mostly handled, but that's what I was working on last night, so maybe we'll have an episode about the importance of Google analytics, the kinds of things you can do with it and the resources that I recommend to learn about that.

Speaker 1: 31:12

I found some amazing resources on YouTube that are great for that, so maybe I'll put that in the hopper for some future episode on the late night internet marketing podcast. Until next week, I hope. Your week is just incredibly amazing. We're living in kind of a crazy time, but it's also sort of a wonderful time where almost anything is possible for you Almost anything that you can dream you can really achieve when it comes to online business, and so I encourage you to dream those dreams and make some crazy things happen and then tell me about them, because I love to hear your stories. See you next week, ciao.

Speaker 2: 31:51

Late night internet marketing. See you next week. Light good day.