Where Did Q1 Go?
Holy smokes! I haven’t been posting a lot lately, but believe me, quiet does not mean dead. In this post I’ll catch you up on how 2016 panned out, share seven lessons I’ve learned along the way and reveal my 2017 goals.
While my progress isn’t off the charts like some you read about, I continue to listen to my inner winner and move forward. Every test, whether it hits the mark or not, is simply a building block to my long-term success. The proof is in the results.
First, here’s an update on my progress.
I’m On Track to Grow my Amazon Revenue by 67% This Year
As 2017 unfolds I have mixed emotions. On one hand, my My Beer Cozy brand on Amazon is suffering. More and more people are jumping on the can cooler bandwagon and driving prices down. I suspect I may have caused part of this problem by being so transparent about my brand and products.
This means I share shopper eyeballs with competitors offering a similar product/design at a lower price. That has forced me to drop my price. When comparing quarter-to-quarter results, Q1 2017 underperformed Q1 2016 by 28%. Ouch. Nonetheless, I still managed to do $39,082.26 in My Beer Cozy sales.
Here’s what saved me…
I launched a new brand back in April 2016, which I refer to online as Niche Site #1. It took a while for me to nail down a profitable product line but still ended up at year end with $6,445.95 in Amazon sales.
So far this year, the combined Q1 2017 Amazon sales for my two brands exceeds last year’s Q1 Amazon sales by 67%. 2016 combined sales as reported by Amazon totaled $45,528.21. If I maintain my current momentum, I should do at least $76,032 in Amazon sales in 2017.
While that may seem like a big disappointment to some, it’s fantastic to me. I do not carry debt to build my business and so my pace is slower than sellers with a higher risk tolerance.
No one succeeds without learning some hard lessons and I’ve had my fair share!
Seven Lessons Learned
Last year was an overall success as I grew my revenue, brands and product lineup, but along the way I’ve learned some valuable lessons. I’ll share a few with you here.
1. Overbuying Inventory
I’ve fallen into this quicksand more times than I care to admit. It generally happens when I’m purchasing inventory for the first time. Here are two examples to help bring the point home:
- I create a new set of cozy designs (I do 4-packs) and purchase a quantity of 500 in each design to get the best price without having to buy thousands of each. If they don’t sell well, I’ve lost all benefit of buying at a higher quantity because my storage costs go up. I’ve found that it’s best to buy just 100 of each design until the product proves out. I may just break even to do the test but I’ll be able to kill a bad product faster and for lower initial outlay.
- Last year, when at the ASD trade show in Las Vegas, I met this amazing woman who creates beautiful handmade jewelry that “spoke” to me. I let my enthusiasm get the better of me and bought over $4k in inventory from her. I’ve sold very few of the pieces because while I was ungated in the fashion jewelry category on Amazon, THEY WON’T LET ME ADVERTISE! Yeah, you heard that right…so I put up a few listings and can’t advertise. Advertising off Amazon (like on Facebook or Google ads) can have a steep and costly learning curve. So for now, I’m just grumpy about it and working to list the product on my brand websites (you’ll see some of the pieces show up here on PrivateLabelPreneur!)
So a word of caution: Buying in greater quantities to get a price break can be risky for new, untested products. And, don’t let your emotion drive your buying decisions.
2. Breakable Means Breakable
Last year, also while at the ASD trade show, I found a Chinese manufacturer of magnets. They were beautiful and magnets work well with my model of creating art-based products. However, if you’ve read my post titled My Easy 3-Step Private Label Products Evaluation Test you know that I recommend avoiding breakable products.
But I was enamored with the product and the packaging looked secure. So I ordered 200 sets for Niche Site #1. The manufacturer was great to work with and sent me photos of the product proofs and the packaged product prior to shipping. Everything looked fine.
When the boxes arrived and I started to inspect the units, I saw that some of the magnets were broken and some of the boxes were torn or crushed in the corners. ACK!
Overall I lost 15% of the units to breakage and had to spend my time carefully inspecting each unit and repackaging some of them to make complete sets. Given the reduced profit margin after all the breakage, I think I’ll stick to my “avoid breakable products” advice in the future!
3. Continually Refine Your Profitability Model
How to determine product profitability is complicated and “squishy” depending on your personal and business goals. I have yet to see anyone calculate profitability at the product level like I do. That’s because I include line items to cover salary at 10% and business operating costs at 10% among other expenses.
I only recently modified my product profitability model to include these line items and I did it to help ensure I wasn’t working for free. If I had built my model out like this earlier, I would have been able to pay myself more last year.
If I can’t get each product to cover all its own costs AND help to pay for me and the costs to run the business AND put some back in to grow the business, then it’s not a product I want to pursue.
4. Trademarking Can Save Your Business
Trademarking is a relatively simple process that you can do yourself. In fact, to keep things simple and low cost you can apply for a trademark with one classification and later add classifications as needed. But getting your application in early is important to avoid problems later. I mean potentially losing your brand and possibly having to dispose of branded product.
The USPTO (United StatesPatent and Trademark Office) has very detailed training videos that will walk you through the entire process.
Going forward, I will file a trademark application on any new brand I start as soon as I have a branded product listed. If you file yourself, it will cost around $225. It’s worth every penny from my vantage point.
5. Amazon’s Fees Are Steep and Continue to Rise
In February Amazon revised their fee structure. In doing so some of my profitable products turned into marginally profitable products. I knew that because after a particular product sold I would check the actual fee Amazon charged me and then update my profitability model for that product.
I didn’t go with what I assumed Amazon would charge, I looked at what they actually charged. Sometimes we think a product fits in a particular fee category but Amazon places it in a different category. For example, what you think is a small standard size may be rated as large standard size by Amazon.
I don’t plan to reorder certain products in certain sizes where the profitability appeared at risk due to the fee increase.
It pays to stay on top of Amazon’s fees and how they affect your overall business.
6. Selling at Local Fairs Isn’t for Me
Last year I tried selling at some local fairs for my Niche Site #1 brand. It is a HUGE amount of work to set up for these events, run them while you’re sweating your brains out and then tear down and put everything away when you get home.
Maybe I’m choosing the wrong venues or my products aren’t a good fit for the audience, but as far as I can tell this is a terrible model for making money!
7. Don’t Stick With Vendors Who Don’t Serve You
I have two examples to help illustrate my point.
Last year I was trying to bring a new product design to market for Niche Site #1. I was having difficulty finding a local sewing contractor who would work with the material I had selected at a reasonable price.
I ended up engaging with a contractor in Los Angeles who agreed to make a pattern for a set price. She required payment in full up front. That should have been my first warning.
The entire project was a long drawn out mess and I ended up cutting my losses and terminating the project with her. Sometimes these things happen and you just have to chalk it up to the cost of your business education.
I’ve been a long-time customer of Bluehost. When they were less bloated and I had fewer needs, the fit was fine. But as I wrote in a recent post, Bluehost sucks so I switched to WP Engine. I should have done it sooner and saved myself the frustration of dealing with them for this long, but better late than never!
That’s it for lessons learned so let’s move on to my goals for this year.
Pay myself 10% of revenue
As previously mentioned, I’ve refined my product profitability model to include a 10% salary line. Now when I do my product evaluation I know that my products will cover the following ASSUMING I achieve an annual revenue figure of at least $50k:
- The cost to purchase the product (or have it made)
- Amazon’s fees
- A salary for me, and
- The costs to run my business (like software, hosting, keyword research tools, etc.)
If I do less than $50k in sales or if my ad spend gets out of control, I’ll get paid less. If I do better, I’ll take my 10% and let the remainder go back into the business.
Keep Amazon ad spend to 10% ACOS (Advertising Cost of Sales)
I’ve learned that there is no such thing as “set it and forget it” when it comes to advertising. My overall goal will remain a 10% ACOS. This means that the more I sell, the more I can spend on advertising.
You really need to choose some target so you can bake your expected advertising spend into your product profitability model. Letting ad spend get out of control can tank your profitability. Let’s face it, we don’t want to work for free so keep an eye on your advertising spend!
As an example, here’s what my 2016 ACOS looked like.
Add more print-on-demand products
I’ve been dabbling with print-on-demand products. I currently sell on the following platforms:
- Merch by Amazon — This is Amazon’s attempt to interrupt the print-on-demand marketplace and compete with companies like Printful.com. Currently Merch by Amazon only supports t-shirts but I expect that they will broaden the product line as they work out the kinks in their fulfillment process. Right now I am at the 25 design threshold and all 25 slots are being used.
- Printful — This is a print-on-demand manufacturer. You can integrate with their platform via WooCommerce on your own branded website. I cover this in detail in this post. I’m still using Printful and plan to make more progress this year. What makes it even more interesting is that they recently announced integration with Amazon.
- Redbubble — This is a print-on-demand platform where artists (or people like me who hire for artwork) can create a free account and upload art for sale on the products Redbubble supports. There’s a wide array of products including t-shirts, sweatshirts, phone and laptop cases, pillows, duvet covers, leggings, posters, and more. I’ve made a few sales, but nothing yet to brag about!
- Sunfrog — I have just a few designs up on Sunfrog’s platform. They are similar to Redbubble but they don’t have as many products, mostly just t-shirts. The cool thing about Sunfrog is that you can create a business simply by curating other people’s listings and driving traffic to them. You get a 40% commission for sales. The artist who created the listing gets a measly 5.5% so for this platform, I plan to leverage other people’s work! To see an example of what I mean, you can look at this collection I quickly assembled of Entrepreneur Inspirational Gear.
Add new cozy designs to My Beer Cozy line
During my Entrepreneur Unveiled interview with Suzi Hixon I revealed that my My Beer Cozy brand may be at risk. This is due to a trademark application someone else filed for the word “cozy” not long after I started selling under this brand on Amazon.
Last year I put new products on hold while waiting for an opportunity to file a Petition to Cancel the other party’s mark. But I’ve decided to resume adding new designs in 2017. The artwork for the next set is complete and with the manufacturer as I type this post and I’m super excited about it!
Repurpose art work for multiple products
If you know me at all, you know that I believe art can be a great differentiator for branding common products. Since you can copyright the art, you can control a product listing on Amazon.
I’ve been using artwork successfully; the more complex the design the harder it is for someone else to copy you.
99Designs is one of my go-to sources for awesome artwork. You can read more about that here: 10 Tips for Running a Successful 99Designs Contest
Since I’m now dabbling in print-on-demand platforms, I’m repurposing art work I’ve already purchased for physical products. That means if it looks good on a beer cozy, it will also look good on a t-shirt, poster, acrylic block, pillow, etc. These are all products available via print-on-demand and help to leverage the cost of buying good art.
Continue expanding brands and products
Adding Niche Site #1 taught me some valuable lessons last year. Having a second brand and testing new products can do this:
- Offset a bad year for a low-performing product or brand
- Generate fresh new ideas for brands/products
It’s not expensive to add a new brand. While I have a separate seller account for Niche Site #1, many people use just one seller account and build out multiple brands.
Sell through low-profit inventory
I have some products that don’t sell through very well. I’m going to work to sell through that inventory this year so I can get rid of the carrying costs.
Write more consistently on PrivateLabelPreneur
I’ve been very inconsistent about sharing my experiences and interviewing other sellers here on PrivateLabelPreneur. But I want to change that and be more regular with posting. I’m making a commitment to publish a post a week. Please hold my feet to the fire on this one!
Offer consulting services
I have learned so much over the last few years as an Amazon seller. Many of the skills I’ve developed could be useful to others who are interested in selling online or who just hate doing certain tasks (like writing compelling product listings or researching profitable keywords).
Because of this I’m now offering á la carte consulting services for Amazon sellers. While I love helping people for free and have helped a lot of my readers who have reached out to me via email, I need to begin charging a nominal fee for these services as they take me away from building my own businesses.
If you’re interested, check out my Hire Me page. I look forward to working with you!
Call to Action
Well, that’s it. I’ve been super busy and made good progress. But enough about me, what are your top goals for 2017? Please share them in the comments or shoot me an email at Ree@PrivateLabelPreneur.com.
If you’re interested in setting up a free 30-minute coaching call to see if my paid services would be a good fit, you can block some time on my calendar using this handy scheduler.
Now back to work for me!
Want to follow along on my journey?
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