2016 Amazon FBA Wrap Up
2016 was the year that I started my Amazon FBA journey and now that we’re in 2017 I think it’s time to look back.
I was initially inspired from a video on Location Indie and after hearing about it on multiple episodes on varying podcasts I made the jump just before summer.
It started with a simple trip to Walmart and turning $45 worth of clearance toys into $550. Of course I also managed to lose $8 on a box cutter (which in retrospect I should have never bought such a dangerous item) and I still have this stupid Red Sox lamp that I’ve been too lazy to sell but it’s ok. I still made over $400 in profit on those items.
That was allll the way back in May. After that I transitioned from Retail Arbitrage to Online Arbitrage. This decision, despite knowing there were larger profits in retail arbitrage, had to do with my feelings about shopping. I hate shopping. I dislike buying things in general actually. Which may make this seem like a strange business to start but business is different. I love business.
Speaking of which, there were some compelling business reasons to switch to online arbitrage. It would allow me to be able to work from anywhere. This means outside the US and away from retailers. This would allow me to travel wherever I wanted and practice geographical arbitrage. Online arbitrage is also much easier to scale with software and virtual assistants. I could grow the company much easier if I wasn’t wasting time driving to stores and hunting for products. Software allows me to do that much easier and by creating specific sets of instructions I could have virtual assistants do the research and data entry tasks.
I started with some purchases of Paw Patrol beach towels. I don’t have kids so at the time I had no idea what Paw Patrol was. Now, I love Paw Patrol. It sells so fast.
Shortly after verifying that I could buy things from online stores and ship them into Amazon I decided to get a third-party warehouse service. Originally, I had shipped the towels to my house, packaged them and sent them out but shipping things to my own home would leave me tied to one place. A warehouse service would allow me to ship things to them, have them prep it, and ship it to Amazon. This all costs money of course but is taken into account when making purchases.
It was still June at that point and the clock was ticking. I was going to Brazil in August and I wanted to have things as automated as possible before I left. It was time to get a virtual assistant. I found an assistant in the Philippines through a small site. We moved over to Skype and PayPal to make things easier. I also began my subscription to office 365 to make things easier for work. I wanted to keep things separate from my personal accounts and I was familiar with Office 365 from being the administrator at work.
There have been a lot of difficulties with my virtual assistant. While she is nice and works hard it was difficult to gain momentum. This has, unfortunately, been largely out of her control. Power and internet outages due to severe weather have meant I would go long periods of time without hearing from her. As I write this, it has been one week since I last heard from her, the longest period. Hopefully everything is alright.
On the business end, having a virtual assistant has hurt more than helped. I have not scaled my business enough to cover the costs and in retrospect should have focused on that first. I tried to have to much up and running to fast for when I went to Brazil when I should have just done what little I could from there. Outside of the lessons I’ve learned along the way I have not seen any results from the $1600 I spent. As a result I have seen a loss overall on the year from my business.
Because of this I have decided to forgo the virtual assistants for a while. I will focus on doing everything myself and building out a better system. This will require a lot more work but not too much. I will still have time with all the benefits of the new software I have switched over too. There is going to be a bit of a learning curve as I get used to learning it but I think it will be much easier to build systems around. It is also much more powerful and thankfully, costs the same as what I was using.
An important part of any end of year analysis is looking at the numbers. I did a lot of this in a previous post and not much has changed so I’ll keep it simple. I’ll give the yearly overview and a month-by month snapshot. I’ll do this with the reports out of Amazon. My hope is that seeing the numbers that make up the whole will give a better idea of how this can be done.
As a whole, 2016 was a good year. I think it definitely could have gone better but some caution (combined with some laziness) led to more of a trial period than anything else. Fourteen thousand dollars over 6 months is not much in terms of sales, especially without profit, but it’s exciting.
If you look through the picture above you can see that I sold a wide variety of items in a bunch of different categories. Home and Kitchen has been the easiest place to source for as it is a large category. About 650,000 items fall within the one percent rule for sourcing. Office product have turned out to be some of the most profitable when you can find the right items and Outdoors have the largest price tags. It’s really been interesting trying all of them out.
Below you can see the breakdown of the different items I’ve sold and the profit percent. The report is from Inventory Lab which has been invaluable in keeping track of everything.
Like I said above Home and Kitchen has been my biggest seller but a lot of profit came from Office products. I’ve also recently started playing around with shoes. Shoes are by far the hardest item to source for but the margins are great. They come with a little additional risk too though so I’ll continue getting into it slowly.
I’m going to focus breaking down everything by month now but if you want to see another post summarizing a lot of stuff you can check out A look at the year so far which I published in November.
I didn’t actually sell anything in May, just did my retail arbitrage. In June, I sold the 5 toys I had bought from Walmart and 15 beach towels. This marked my first successes in both retail and online arbitrage. A successful test.
July brought on my attempt to scale things. I sold the rest of my initial purchases, some sheets, a new toy and some kitchenware. I also crashed the price on my utility knife enough to sell it. I spent probably around $1500 as I looked to get in enough inventory to last me through August while I was in Brazil. I also got my first virtual assistant and trained her to source. In the end it hasn’t really worked out but it’s been a great learning experience.
I made a mistake along the way. I managed to buy something I couldn’t sell. I hadn’t gotten in the habit yet of checking and double-checking my restrictions to see what I can and can’t sell. I have not made the mistake since (Edit: that’s not true, I did once).
August brought along a lot of new challenges. I had to source from Brazil from my phone after I fried my laptop and I got my first cease and desist order. There were bright spots too. I was able to jump on the Pokemon Go bandwagon for a little while and sold a ton of stuff. This was when I finally started selling some clothing. It was not very successful as I still have some of the items that I bought then just raking in inventory fees.
In September I got back from Brazil and had a pretty depleted inventory. I slacked a bit from having to catch up on everything and just wanting to rest. I probably spent another $1500 on new inventory.
In October I slacked even more. I also made the decision to try out a couple of new things. One was sourcing an oversize product which went well. The other was glass and ceramic objects. This one did not work out so well.
On arrival to the warehouse they found all of my Pokemon Ceramic…things were broken. At the time when I had bought them I didn’t realize they were breakable. I also bought some shot glasses of which 4 of the 12 arrived broken. I am terrified of selling them so I have not reduced the price yet on them to get them in the buy box.
November was great, the real start to Q4 with Black Friday and Cyber Monday. I sourced over $1000 of product on Cyber Monday alone which is a lot for me. This was also my first real dive into sourcing shoes which has turned out pretty well so far.
December was pretty much the same as November. I sourced a ton of products to try to get them in before Christmas. They got there but my warehouse also stopped me from sending any more in. They were overwhelmed with Q4 and were in the process of moving to a new warehouse.
Well, that’s pretty much it for the year. Overall, happy to have started but think I could have done a lot better. To finish things up I am going to take a look at some of my wins and losses, what I’ve learned and my goals for January and this year.
Wins and losses
I’ve had a lot of wins and losses over my first 6 months selling on Amazon. Here are some of them:
- Win – ungated in grocery
- Loss – not ungated in health & beauty or health & wellness
- Win – Sold an Oversize item
- Loss – Some glass items broke on delivery
- Loss – Had to destroy items I couldn’t sell
- Win – Managed to sell across a wide variety of categories
- Loss – Have only sourced from 3 different sites
- Win – learned the ups and downs of working with a virtual assistant
- Loss – did not get the results out of my VA and spent a lot of money
- Loss – Did not make a profit
What I’ve learned
I’ve learned a lot of things over the course of the past 6-7 months. Here are a few of them:
- Don’t buy too many of one item. I would often source based on hitting a discount or in $100 increments. This has led me to have over 20 XL Yoda t-shirts that don’t sell.
- Be careful with the salesrank of clothes. Salesrank of clothes is tricky. It’s largely based off of variations and even then you have to watch out for a recent spike.
- Speaking of variations. Keep in mind that they are very important when considering the significance of the Sales Rank (BSR) for sourcing. This goes for any category.
- Make sure you are doing enough volume to cover your expenses. Don’t take on additional personal to help scale before you have the money. Just work harder. Profit comes before time at the beginning.
- Don’t buy cheap Brazilian electrical socket converters. They will fry your laptop :/
Goals for this year
I have a lot of goals for this year and for January as well. Starting now I will begin monthly updates as well as new goals at the end of each month.
- Spend $5k in January on inventory, stretch for $10k
- Get up and running with a repricer
- pick out private label item in January, have on shelves by march
- Get set up on Ebay and try out Joelister
- list stupid Red Sox lamp (probably on Craigslist)
- begin sourcing grocery
- Get ungated in health and beauty, health and wellness
- $120k revenue ($200k stretch) with 25% (30% stretch) margin by end of year. This will go hand in hand with my new financial goal to live on 25k a year
- Get incorporated in February, open business bank account, completely separate personal and business finances w/business credit cards and accounting system.
- Don’t forget business Insurance!
- Get an accountant and a business lawyer
- Build private label brand website and social presence in February while products are manufactured.
- Sell out of first 400 units of private label item.
- Hire specific warehouse for private label inspection
- Reorder a new batch of units before end of March
- Have 5 variations of wallet by end of year
- Sell 3 other products by end of year. Stretch goal of 8 with several variations of each.
Well that’s all I got for now. I will be back with my results at the end of the month!
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