Houston, there is a problem.
There is a default assumption among Amazon private label sellers.
That business growth = growing revenue (aka turnover or sales).
The reality I see among 7-figure sellers is starkly different.
Want to pay yourself or support your family? That requires profit. Not sales.
Bills due to suppliers? That requires cash. Not turnover.
Keen to sell your business?
Smart sellers know that e-commerce businesses are currently valued as a multiple of profits. Not revenue!
Profit, then, is what counts.
How do we maximise profit in the simplest ways?
1. Maximize Profit per Unit - Pricing
Think pricing is for the nerds? Think again.
Let's say you have a gross margin of say 20% (after ads) on a product priced at $20. That's $4 profit.
Now let's increase that price to $22. Assuming no costs change, with a margin of $6, An increase of just 10% in the price has lead to a 50% increase in profit.
Can you just do that?
Questions like "Can I increase my price 10%? and still sell profitably?" (or better - "What is the price of greatest profit for this product?" are great questions.
The answers lie in continuous price testing. Using smart tech.
2. Keep Best-sellers…Selling- Stock Control
Going out of stock on your bestselling products kills more profit than anything else. We've seen this repeatedly with the high 7-figure sellers of our mastermind in London. Especially under COVID.
It's critical to develop a more sophisticated approach.
3. Get Clear What’s Working - and What Isn’t! - Numbers Clarity
Sellers who excel at marketing sometimes suck at measuring their own finances.
This is worse than it sounds.
These sellers fall most into the "sales is what counts" trap. They may be selling many products at a loss and not know it.
Results include: Restocking products that should be canned. Thus, not having the cash to restock bestsellers that are profitable. And which thus go out of stock! (See above). Etc. etc. etc.
4. Save wasted Amazon Ads Money
Too many sellers spend half or more of gross profits on Amazon ads. Some, on some products, spend all their profits!
Amazon ad costs have increased at least 50% over the last 18 months. Controlling them is critical to profits.
5. Increase Conversions - Better Branding
After revenue, the greatest Fool's Gold obsession I see is traffic. Paying directly for traffic to sub-optimal listings is even worse.
What matters is profitable sales. Period. Instead of obsessing over traffic, smart sellers obsess about two things:
- delighting customers, giving higher ratings, leading to higher conversions.
- Laser-targetted words, images and video that lead to... higher conversions. Only once a listing is fully optimised, do smart sellers drive more traffic.
6. Get YOUR Cash out of Amazon - Reimbursement
Amazon makes mistakes, like losing or damaging stock. On average, Amazon owes sellers 1-2% of revenue in reimbursements. $1 million in annual revenue could give $20,000 in cash. Few sellers even ask for it. So hire a service to get that money back!
Click here to take your free Amazon profit assessment [www.amazonprofitquiz.com] and identify your biggest Amazon Profit Killer.
To follow the 10K Collective podcast and blog, join us at www.10kcollective.com