Be Flexible - Amazon FBA in the Age of Covid 19

It's time for my annual post!

As in most sectors, selling on Amazon with Coronavirus around has been different and has presented its problems and challenges.  Thankfully, as opposed to many sectors, there has also been a push for more online shopping so while the challenges are there, opportunity abounds for those who are able to take advantage.

In my business I have seen both the challenges and the opportunities.  I want to walk you through them and how I've tried to deal with them and hopefully that is helpful for you.

FBA Inventory Limits

Problems:

1) In March, Amazon started falling behind on FBA orders.  Prime shipments for non essential items were delayed a month or more and amazon started severely limiting how much of any particular non essential item you could send in. 

2) There were lots of suspensions for price gouging on essential items as they came under short supply.  There wasn't a lot of logic to what caused a price gouging warning or suspension but it caused a lot of fear among sellers.

Solutions:

1) More FBM - This is not a solution that I was able to implement in my business (for reasons I'll explain) but if you switched to fulfilling items from your warehouse you could take advantage of the lack of supply of prime and you could even deliver the items significantly faster than prime.  Many times, Amazon gave the buybox to a more expensive FBM over FBA because FBA delivery was so slow.

2) This was the time I was able to get rid of a ton of excess inventory at Amazon.  Items that been a problem with way too much inventory, all of a sudden, I didn't have enough.  The speed of sales of some specific items switched extremely fast and you knew that other sellers couldn't send in very much to meet the demand.

3) Switch to essential items.  I've had to pivot my business many times over the years so this is pretty natural to me.  Instead of the usual items that I sell, I started switching to other items temporarily like food, feminine hygiene products, etc.  Inventory of these items were not limited and if you could somehow find them prices were excellent and you couldn't buy enough to meet the demand.

On the other hand, once things got back to normal, a lot of these items got overbought by everyone and now the prices have unsurprisingly plummeted.


4) Avoid Personal Protective Equipment (PPE) during a crisis.  I had many, many opportunities to buy various types of masks and gowns and gloves in the height of the crisis.  I've been around long enough in the selling community to know I didn't want to get anywhere near them. 

I would recommend avoiding them always unless your supplier is 100% legit.  The last thing you want is for someone to buy a faulty mask from you and you are responsible for that person's health.  Besides that, during a crisis Amazon has, is and will continue to crack down on items needed for that crisis (think water during a hurricane).  It's just not worth it.  Yes, you can make thousands or tens of thousands of dollars, but you can lose your business and have the attorney generals's office going after you..

Local Business and Warehouse Shutdowns 

Problems

1) During the crisis, many local business voluntary shutdown or were forced to shutdown.  This meant that your warehouse may no longer be available to you.  That could completely shut you down.  This happened to my local warehouse until they got an exemption because they were considered an "essential business."

2) People got sick.  In one of the warehouses that I used, quite a few employees got sick, some even had to go to the hospital and this was during the thick of the pandemic in NY/NJ.  It was a really scare time.  The warehouse, which normally had 1.5 employees per day working on just my stuff, now had 1 person 1x a week sometimes and sometimes no one was available at all.  I complete understood but it doesn't change the fact that it basically shut me down for a while, at least from them.   This is essentially the reason I could not pivot to FBM, see above.

3) Need for Social distancing.  Even after people returned to work and were healthy again, the employees needed to socially distance.  You couldn't have as many people working at the same time so again I went from 1.5 employees per day to 1 employee 2x a week.  This lasted for a couple of months and they are still limited in how many people work with my stuff and it is thankfully unrelated to anyone actively being sick.

Solutions

1) Be understanding with your warehouse, it is a pandemic after all, but be flexible and get access to more warehouses.  I don't use just one warehouse.  I have 2 that I often use and 1 that I rarely use.  I was able to pivot from 90% at my main warehouse to almost 100% at my secondary warehouse for a while.  This allowed my business to continue functioning.  We are now back to about 60% primary and 40% secondary. 

2) Pay your employees better.  During Covid, the same job took a lot longer and couldn't be shared among employees.  In addition, prices on Amazon went higher on my products.  I temporarily increased the commission I paid to my buyers (who certainly needed the money) to reflect how much longer to took to do literally the same thing.  This was especially important for those who lost significant income from their regular jobs.

Conclusion

The challenges of Covid have been real and numerous but if you are able to be flexible in your product choice and your warehouse choice, the demand for online shopping can more than make up for the challenges.  These can be some of the most profitable months you will see for a while so take advantage if you can.



What challenges did your business go through? How did you overcome them?  I would love to hear from you in the comments

2018 Recap and Looking Ahead to 2019

Every once in a while it is important to cover the big picture to clarify my goals, think ahead and hopefully help others in the process.



Before I delve into how 2018 went, here were my stated goals from last year.

Goals for 2018

I have not been happy with the inventory channel software available currently that aren't $500+ monthly.  My sales on other channels just can't justify that type of expense, though it might get closer if I had one.  My plan is to work with a developer to create my own that suits my needs.  I hope to have that done early in 2018.

Private labeling.  I haven't done it yet but the plans are already in the works.  I am in the testing phase now.  The thought of getting suspended for an Intellectual Property claim on someone else's product scares me a ton.  I would like to have a full line of my own products on Amazon (and maybe my own site?) at some point but I will start with one :)  In order to not spend a ton of money importing a product that I don't know I can sell I am starting to slowly build a listing from scratch and once I have proven I can do it, it will be time to go the overseas route.

I have also stated:

Store Less at Amazon, Fulfill Less via Amazon

Storing outside of Amazon is more important than ever.  If you buy 300 of something and you only plan on selling 30 a month, don't send all 300 in.  In addition, if you fulfill orders on your own (FBM, Seller Fulfilled Prime or other marketplaces), you will avoid these fees entirely. 

Once you have your own facility and are doing more fulfillment on your own, other marketplaces will start to become more attractive, especially if sellers start to have to raise prices on Amazon to keep their margins within reason.  Customers may start looking elsewhere for better prices.

Part of doing more fulfillment on my own was to bulk up on my eBay and Walmart sales (I don't even consider Jet to be a marketplace on my radar at this point) and I'll break those down for you.

2018 Goals 

Develop my own Software for other selling channels 

This has not happened as quickly as I would like.  It is still in the development stage.  At this point I do have an inventory management software.  As items come in, my staff can scan what comes in and scan it as it goes out so I have an accurate count of what I have at the warehouse (as long as everyone is using it properly of course).  

I am in the process of adding Amazon FBM (and prime) so that inventory numbers on Amazon are automatically synced with the warehouse and adding my product to a particular ASIN can be done from within the software in bulk.  I am hoping to be do some live testing this week which is the last step unless there are bugs.  

We are also adding the Walmart API currently so that listings can be created and inventory synced to the warehouse. 

eBay will come after Walmart and once eBay is added I hope to add automated multi channel fulfillment as well.  Bye bye Joelister, eventually.

Private Labeling

I had a few conversations with companies about private labeling products but I am honestly no closer now to actually having a product than at the beginning of 2018 but that doesn't mean I haven't done anything.

I have been working with 2 companies as a consultant to build their companies own products on Amazon using their Amazon seller accounts (I have user permission for my regular login - similar to what you would set up before you give access to a 3rd party for shipping or email reviews, etc.).  It has been a wonderful opportunity for me to see if I can build a product without the risk of purchasing large amounts of inventory.

I've already learned a few tricks with creating listings (multipacks, bundles, GTIN exemptions), optimizing listings, optimizing advertising campaigns along the way so even if neither of them explode (I am on a commission basis), it has been a good learning experience for me and the plan is to continually learn the process while getting paid.  If all the products work out I can then feel comfortable doing it for my own product as well.

Store Less at Amazon, Fulfill Less via Amazon

This was my last stated goal for 2018.  Building out my fulfillment by merchant operation.  

How did I do?

Here are my 2017 stats from Shipstation.

My eBay sales were mostly not existent, my Walmart stats were ok and my Amazon stats (just FBM) were decently solid and 544 orders overall between everything.

Here are my 2018 stats:

You can see that the number of orders fulfilled directly by me doubled this year compared to last year. My Amazon sales went up about 47%.  My Walmart sales just about doubled.  My eBay sales went up by more than ten times and Jet is dead to me.

In addition to that, I started doing seller fulfilled prime on Amazon which was a significant reason for the increase on Amazon but hopefully I can do a lot more with that this year.

Only 12 days through January and I already have more than 100 orders and over $1000 of sales on both Walmart and eBay but January is often a good month for me as I am selling off my leftovers from Quarter 4 and stores haven't replenished yet.

Website

I also said I wanted to start my own eCommerce site in 2018.  That did not happen but the process has already begun for 2019.  I hope to have that finished by June or July of this year.

Overall sales in 2018 on Amazon

I had an almost 60% increase in overall sales from 2017 to 2018 on Amazon and had more than $1,000,000 in sales for the first time which is great!  I'm very proud of that.  That being said, it is not all good.  My profits barely increased.  I only had a 4.1% profit increase from 2017 to 2018.  

What the heck happened?

Shipping Credit - I prepaid $5,000 to a prep facility which is a credit I will use over 2019 but it took $5,000 off my profit numbers for 2018.  This is more of an accounting issue than anything else since I still have access to the credit.

Jewelry - I decided to enter the jewelry category on Amazon.  Amazon has a $5,000 non refundable fee for laboratory testing when you enter this category.  This so far has been a spectacular fail but to be honest I haven't given it the focus it deserves. 

Software and eCommerce development - I spent about $7,000 on this in 2018 and $0 on this in 2017.  As opposed to the first two, these expenses will likely continue in 2019 but hopefully less but when comparing 2018 profitability to 2017 it made a huge difference.

Reimbursements way down - reimbursements went from 4.3% of my sales to 2.4% of my sales.  My understanding is that this is a problem for sellers across the board as Amazon has been much more stingy in granting reimbursements.  Please let me know your experiences in the comments.  I actually had less money in reimbursements in 2018 despite the 60% increase in sales.

Inventory Writeoffs -  I overbought on some groceries and they expired.  This is a poor purchasing choice and ended up costing me a couple thousand dollars.  Until I have a better inventory process for items that can expire I will hold off on larger purchases of those items.

Transitioning to an out of country seller -  since I live outside the US I rely on prep services more than I used to.  I spent a lot more money on prep services but that is not changing anytime soon although I have a new deal with my current service.  I will pay less per unit and a larger per month fee.  As long as my volume stays as high as it is now or higher it will be cheaper for me and more predictable fees for them.

Amazon loan interest -  I took an Amazon loan (I'll write up a post about my experience when it is fully paid off) to increase my purchasing ability in the 4th quarter and I paid a bit more than $2,500 in interest on it in 2018.  I've already paid 2/3rds of the loan and I would have fully paid it off if not for a tax quirk related to having to start a new company.   A new loan  may or may not happen in 2019 as well.

Goals for 2019

As I showed, 2018 was a mixed bag for me.  I made more money but I should have made a lot more money than I did so what are my goals for 2019 and how will I make more money??!!

Storage Fees - I spent 1.6% of sales on monthly storage fees and long term storage fees.  Last year I actually spent 1.7% so that is a slight improvement.  I have a lot of room for improvement on storage.  Things were getting much much better after the summer but I am now in a bad storage place because of the 4th quarter.  I have made a conscious effort to send less in and allow myself to go out of stock more.  I have found that I get in trouble when sales are great for a short period of time and I send in more assuming that will continue for the next month or two.  I can always send in more every couple of days if sales continue or use SFP if I am out of stock.

Even though my percentages of revenue were lower this year, I consider my storage fees a fail for 2018 since I know I could and should be doing much better.  With a concerted effort I hope to get that number closer to 1.25%.

In addition, Amazon rules for storage fees have changed for the better of sellers starting in mid February.  Long term fees will not apply until items have been at fulfillment centers for more than 1 year.  I paid an extra $1,000 in long term storage fees in 2018 compared to 2017 and I hope to have that mostly eliminated after February 2019.

Refunds - Last year I lost 4.3% of my sales to refunds.  In 2018 it was 3.9% but this can still be improved.  Picking the right products is the most important factor here.  As I have moved further and further away from electronics and into lower price point items my refund percentage has come down with it.  

Even More Self Fulfillment -Walmart has been a real revelation for me.  There have been items that have not sold well on Amazon and have sold nicely on Walmart or have sold well on both but the price on Walmart has been much better.  The only problem is that I really have no idea of how to tell before I purchase so I still can't make purchases for Walmart until I test it.  It allows me to leave more inventory at my warehouse set aside for Walmart and lower my storage fees or to increase my price on Amazon if it is selling well on Walmart.  My goal for Walmart in 2019 is $50,000 in sales.

I've also removed unsubscribed from Geekseller which saves me about $20 a month and 1% of revenue from Walmart.  You can apply for Walmart as well but my understanding is that they need proof of about $1 million in sales to be accepted which is a big hurdle for most sellers.

eBay has been great as well.  I don't make a ton of money on eBay but it has really helped my frequency of sales and lowered my storage fees on items that weren't selling well on Amazon.  When I can finally get rid of JoeLister my monthly fees will come done as well.  My goal for eBay in 2019 is $35,000 in sales.

My own site - once this is built out hopefully my margins will be better since I won't be giving commissions out and I can have another place to sell which can lower my storage fees as well.  My goal for my own site in 2019 is $1.

Avoid Loan Interest - I am happy I took the loan and so far it has worked out but hopefully I do a better job of not having so much money stuck in inventory and I don't need a loan for 2019.  A full post about the loan will be forthcoming.

What are your goals for 2019?  I would love to hear them.