I have a problem. Well its more of a luxury problem. Don’t get me wrong, I am not complaining 🙂
I have sold 1008 pieces of my French Coffee Press and am out of stock after only 7 weeks.
How did this happen?
If you re-call my last blog post (http://importdojo.com/case-study-how-i-went-from-zero-to-7000us-in-10-days-in-one-of-the-most-competitive-amazon-niches/) I was doing about 8-12 pieces organically after my initial launch.
After about 5 weeks I was doing around 20-25 pieces a day
and in the last 2 weeks I was doing between 35 to nearly 50 pieces a day!!!
I contribute this to the following factors:
- My listing and photos are better than the competition
- My product is superior to the competition
- Great copywriting does matter
- 79 reviews within 5 weeks
- Launch tactic and tools used
So now I’ve been out of stock for nearly a week already and my ranking has obviously dropped significantly. The good news is I have 1 shipment (208 pieces) that will be arriving this Friday. Unfortunately it is only 208 pieces that the supplier had in stock for me.
As soon as I saw that I am heading towards 30 pieces a day I ordered another 2500 pieces that are being produced right now but I have to send it in via Sea otherwise it gets too expensive. Also I will not do any give-aways or PPC until my 2500 pieces nearly arrive, otherwise I am running out of stock again. Luxury problems like I said 🙂
Alright, numbers:
Start of the project: 17th of November 2015 (Chinese New Year added nearly two months to my production)
End of the project (launch): 12th of April
Length of the project: ~5 months. It can be done in less time (2-3months) especially if you don’t forget to place orders before the Chinese New Year
Total order value of product: 4500$ (1000 pieces at 4.5$)
Total cost of inspection, photography, layout and packaging: 949$
Total cost of shipping: 2650$ (~900KG by Air – thats 2.94$ / per kilogram)
Total cost: 8099$
Update numbers after 7 weeks:
Units sold: 1008 pieces
Returns, units broken: 12 pieces (1% return quote)
Profit made after PPC, give aways & others: ~8400$
My estimate profit when I started was around 12,000$. So I am short about 4,000$ but I am not not complaining.
I’ve taken these 8400$ and re-invested them in my 2nd (208 pieces) & 3rd (2500 pieces) re-order.
Meaning that the following orders are pure profit because I covered my initial investment (8099$) and nearly covered my 2 & 3rd re-order.
Conclusion of this case study
It’s been 6 months since I started this project and I thought its time to give you a recap of what has happened, what went well what didn’t and where I can improve.
The fact that the Chinese New Year (CNY) was in between and that I have not worked full time on this project has delayed my project.
If I would have focused on this project from the start and work more than the 1 hour per day I could have shipped out before CNY and would have had a total of 3 months from the start until launch of the product. Since I am aware of most things that need to be done for this project it is easy for me but if you are a beginner I estimate that from finding a product until shipment/launch you can do this in 4 months.
Now onto the things that went well and some that didn’t work well.
One thing that caused a long delay was my mistake in paying the wrong beneficiary for the sample payment. That delayed my project for nearly 2 weeks.
So make sure that you check all banking details when you make a payment. I also lacked the motivation in the beginning because I had so many other things and other products going on. That delayed my product for 2 months. Why? Because I won’t ship out before CNY. So make sure of the timelines when you want to launch a new product and be aware of Chinese holidays. But I will explain in a little bit why this actually doesn’t bother me so much. Another thing that didn’t go so well was the misunderstanding on the extra filters that I wanted.
Apparently I didn’t make myself very clear to the supplier on this point. Also the fact that I wasn’t able to get a price reduction bothers me a little bit but I can’t complain too much because every other modification that I wanted was accepted from the supplier even though I have a small order quantity.
One thing that bothers me a bit are the high shipment costs of Air shipment. Reason being that the quantity is low and forwarders charge high premiums for small shipments. With my re-orders I will order a larger quantity and go by SEA and that should bring shipping down to 20% at least. Which will improve my margin in the end. Also the fact that the supplier messed up on the product dimensions and weights and that I was paying 270$ more than planned is not ideal but it is what it is.
Another thing that I didn’t plan well for was the re-order. I am now out of stock for another week and I have to get my ranking going again. Once that ranking is up again I should receive my large re-order by Sea. I should have projected my sales velocity at an earlier stage and simple send in a large re-order right away after seeing first results.
What went well was definitely the communication with the supplier and the quality of his work and attitude towards working with my small quantity. I attribute that for meeting the supplier in person at the canton fair and my clear instructions when I first made contact with him. Subsequently I also promised him more business in the future ,which definitely makes him more eager to work with me. The initial sourcing results were also pretty good, all suppliers had good prices and decent MOQs. But the fact that my actual supplier had exactly what I needed and the fact that I met him in person made my decision easy.
I am also happy with the artwork and photos. I admit I paid a premium price for the packaging and photos but I want quality work. So often I read from people in the FB groups that they hire someone on Fiver or Freelancer.com and the results are either bad or mediocre. Or the seller of the service disappears completely or doesn’t keep deadlines which can be crucial for your launch. Think about it, a great listing and photos will set up your product for the long term even if the initial investment is bigger. I could also book a cheaper inspection now but that’s not the way I do it. I want this product to be of high quality and I don’t want unhappy customers or give my competitors the chance to give me a bad review.
I may go with a cheaper inspection for re-orders which are less complicated. There are services I work with that charge 100$.
The fact that my shipment was delayed for more than 2 months because of the CNY actually doesn’t bother me at all because this course should be for beginners on importing from China who are launching their first product. So you actually should take your time for all the different steps. Don’t hurry the process just to ship as fast as possible. I had two months to prepare my launch, perfect my listing and think about different strategies. Also I think many of you are just starting out or doing this on the side. The one thing I suggest you is that you take you time, do the research and know the process when dealing with factories in China. Don’t just quit your job because you heard of FBA and do this full time. Have a capital on the side, maybe do this besides your full time job and once you have a couple of SKU’s running you can think about quitting your job. If you can’t invest 5-6000$ for your first product try ordering a smaller MOQ.
However I personally think 5000$ is the minimum budget one should have and I am not saying it can’t be done with a budget of 3000$ but you will likely be in a much more competitive field when choosing a product because a lot of people look for the same products because of their limited budget. Save that money you would spend on a weekend out with friends and put it into your budget.
Now don’t get me wrong, I have spent quite a lot of money on photography, inspection and logistics. It can be done for less, that is for sure. I could get an inspection for 100$ instead of 309$. I could get photos for 100$ instead of 650$. And maybe that would work also ok and in time I can improve photos and other things. But I don’t see it as that. I see the initial investment important because it will set up my listing for good. Now obviously a lot of people will see this case study and might copy me so I will have a lot of competition, but that is not my point.
I normally wouldn’t disclose my product and therefore (if I don’t disclose my product) the steps that I have taken will make sure I have a high quality product, great photos and a money maker for the coming years. If I were to cut costs everywhere maybe because of budget reasons I would have to cut into quality of the product, leave out the inspection, poor product photography and more.
That puts my Amazon account, Best Seller Ranking and everything else in danger. I want to have a reputation of a quality product and satisfied customers, because in the long run that is what you need to grow your business. If I were to try this as a one time thing I might make some money quickly when cutting costs and then what? I have to start all over again with a new product because someone copied me and made a better product.
See the initial investments as a road to success and don’t think about the number too much. I am not saying you should pour money into suppliers and inspection companies or photography, these have to be reasonable and negotiated but don’t be too stingy with investments either.
I think the saying “want cheap? Then you get cheap!” plays a big role when buying in China and selling on Amazon. Do your research on services that you need for your product, don’t pay too much but not too less either just to save 100$ that will hurt your product’s performance in the long run.
I am a bit off on my initial calculations and profit projections (about 4000$ off) but I’ve added a couple of things and looked for the best so that decreased my profit. However I as I said I nearly covered both of my re-orders only with my profit. And I have no more photography or give away costs and that will certainly improve my margin. Keep in mind that your first product will not make you a lot of profit but the re-orders when launched successfully will.
Ok, so I am wrapping up here. I hope that this case study helps you to figure out the process in China and how you can apply my techniques to your own product. I have also learned that two of my students will launch the same product in Europe’s Amazon markets and in a few weeks I can give you some more results on the European market with this product
Looking back at this project I would call it a success. Here’s why:
- I have a product online that has quite some reviews already (mostly 5 star)
- No future investment needed (except re-order inventory)
- The product makes me 3,000$ a month minimum, possibly more.
Now onto YOU my loyal reader. Let’s assume you are still considering moving into FBA on Amazon. Imagine this was YOUR first project on Amazon and you are still employed. If you would have started this while working a full time job you could possibly quit your job now and have a guaranteed income of 3,000$ per month. If not, here’s a few scenarios what you could do with those 3,000$ extra:
- Escape the rat race and quit your job? Maybe not the safest decision but add one or 2 more products and you are good to go.
- Want to add additional income and keep your job? You’ve just added 3000$ to your monthly income.
- Want to go to tropical beaches on a holiday and not having to stay at budget hotels?
- Want to send your kids to an expensive school? There you go.
- Need more money to support your family?
What I am trying to get to you today is:
“Focus on building a brand from the beginning. Keep this in the back of your head with everything you do. The majority of you just starting out has limited capital and can therefore not play around. So build better products from the beginning, have A+ photos and listings, great customer service and don’t be afraid to invest your money into higher priced and better quality products, be unique in what you do.
Look at this business not as a get-rich-quick scheme but rather see your investment as an opportunity to build your brand and in turn make more money in the long run (Do this as opposed to release and launching a product every week). Build it slowly and keep quality and focus in the back of your head.”
One last thing. If you are just starting out do not take your first profit and spend it on a Vegas weekend 🙂
I hope that this case study has somehow inspired you to start your own business.
Be it on Amazon or other eCommerce (or offline channels)
If you are interested in the step by step video lessons (over 50+ video tutorials) and the other great parts of my course have a look at my Masterclass:
http://importdojo.com/importdojo-masterclass/
All the best and happy sourcing,
Manuel
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