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Five Tips to Increase Your Amazon FBA Profits

The eBay & Amazon Seller's News, February 2015 - Volume 16, Issue No. 3

Tips, Tools, News and Resources for eBay, Amazon and Online Sellers
by: Skip McGrath

In This Issue:

Musings from and about eBay, Amazon and The World Wide Web

  1. Five Tips to Increase Your Amazon FBA Profits
  2. eBay’s Woes Continue – Can They Ever Recover?
  3. eBay Niche of The Month – 35mm Film Camera Lenses
  4. Preventing Returns on eBay and Amazon
  5. New Wholesale Sources for eBay and Amazon Sellers

"Success is getting what you want, happiness is wanting what you get." ~ W.P. Kinsella


Musings

Time is running out and we are quickly filling up our Wholesale Sourcing Conference in Las Vegas Feb 28 to March 1st. Go to www.wholesalesourcingconference.com for information and registration.


Backing up your computer info, listings, inventory and product images is critical. All computers crash eventually. My favorite online backup service is iDrive. They contacted me this week with a special offer for my readers. If you use this link you can get a 75% discount for 1Terrabyte of cloud data and it covers unlimited devices including computers, iPads, Android phones, etc. all of your files are protected with military grade encryption and you can access and share your files from any device. So in addition to back up protection this is a great way to access all your files and data while travelling. This offer is limited to the month of February and will expire on Feb 28th.


Both PayPal and Amazon 1099s are available for download now. If you sold over $20,000 on either eBay or Amazon then both sites will generate a 1099 that shows how much they paid you during 2014. They send a copy of this to the IRS so it's important you download your copy and include it when you file your taxes. Remember you do not owe taxes on the full amount of your 1099. You only owe taxes on the profits you made after you deduct product cost, fees, shipping and your business expenses. If you are looking for a CPA to help you (which I strongly recommend), reach out to Diane Kennedy CPA at Tax Loopholes.com. She is very experienced at working with online businesses. These days Diane has become a very prolific author but she is tied in with a CPA firm Keystone CPA Firm who is very up to date and works with many eBay and Amazon sellers. (Note - I do not have an affiliate relationship with either Diane Kennedy or Keystone).


I have told you before about Jenni Hunt's Grocery and Health & Beauty private Facebook Group where you can get help from the pros if you sell in those categories. The group runs for 3 months and is limited to 100 participants. Here is the link to read about the program.


So let's get started with this month’s articles.

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1. Five Tips to Increase Your Amazon FBA Profits

  1. Go Small & lightweight - Shipping costs go up every year and can represent a huge portion of your income. Just as an exercise I kept a record of all my shipping costs last month (January 2015). I had a total of 24 inbound shipments and 36 shipments to Amazon. My total cost for inbound shipping was $317.28. The total to ship all my items to Amazon was $333.00. Add those together and you get $650.28. If I annualize that, it comes out to 7803.36 per year.

    If these numbers seem low to you that is because about 1/3rd of my product line is jewelry and other very small items.

    The other costs related to size if you use Amazon FBA are weight-based handling fees and storage costs. If you source smaller and lighter merchandise, you will reduce these costs too.

  2. Raise your Average Selling Price - Among the many fees Amazon charges for FBA are two fixed fees - Order handling and Pick & Pack that total 2.02 for standard size items.

    If you are selling something for $9.95 that $2.02 represents 20.3% of your selling price. But if you sell an item for $39.95 then the $2.02 is only 5% of your selling price. That makes quite an impact on your profit margin.

    There are several ways to do this. One simple way is to source and sell higher priced items. Another good way if you have lots of low cost goods is to create multi-paks. For example, I sell a line of gourmet spice rubs that sell for $12.95 each. So I sell them in a multi-pak of 3 for $37.95. The other way is to create bundles of complimentary items. I am covering bundles next so will explain that below.

  3. Create Product Bundles - A product bundle is when you create a unique listing by adding complimentary products together. An example of this would be adding a knife sharpener to a set of kitchen knives, or selling a camera with a case and tripod.

    I mentioned spices above. In addition to creating multi-paks, you can create bundles. An example is sourcing the four most common spices used in Middle Eastern cooking and selling them as a Middle Eastern Spice Set.

    The key is that the items must somehow complement each other. You can also bundle books or DVDs with a related product. (Example - Rachael Ray Cookware with one of her cookbooks). Let's say you were selling fly rods. You could bundle that with an instructional DVD that shows how to fly cast, or a book on fly-fishing. (Note: When you do this you must list in the category of the product -not the book. And, Amazon does not permit bundling any media products together).

    Bundling has two main advantages: You raise your selling price, which as you learned above earns you better margins and since you have created a unique product you are guaranteed to win the buy box every time. When you create a bundle you rarely have any competition, so you don't have to discount your prices.

  4. Save on Shipping Supplies - Shipping supplies, boxes, bubble pak, tape and so on can really add up. Anything you can do to reduce your costs will put dollars on your bottom line. One thing we always try and do is re-using the boxes our products arrive in when sending them into Amazon.

    The other thing we do is visit local merchants and ask them for their boxes. Stores such as kitchen stores, Radio Shack, Gift stores, office supply stores and so on, get lots of boxes and packing material that they have to pay to have recycled. So they are happy to give them away. Just get in the habit of visiting these stores once a week or so and collecting boxes and bubblepak. Just remember to forget the Styrofoam peanuts because Amazon does not allow that to be used in shipments to FBA.

  5. Learn how to import directly from overseas - One of my biggest product lines is gun holsters that I import from several countries. I used to buy them from distributors here in the US and I found I could only double the price on Amazon if I wanted to be competitive. But now I import them directly and I can mark them up as much as 4X.

    Here is an example. I had one holster that I bought for $9.50 plus shipping that I sold for $21.95. I sent a sample of the holster to my agent in Hong Kong. He sourced it for me and sent me a sample. The quality was just as good as the one I was buying.

    So I came up with a private label and sent him the artwork. He puts my card in the package; poly bags it with warning labels and ships them to be. I had to buy 500 at a time, but even with shipping, my landed cost is now only $4.85 instead of $9.50. Since this particular holster sells 5 or 6 a day, ordering 500 was no problem.

    But before you decide to do this -make sure you have a product that is already selling or you are 100% sure will sell, as you don't want to get stuck with 500 pieces of unsellable merchandise.

There are, of course, many other ways to reduce your costs and increase your profits -but I think these 5 represent some of the most important and easiest to implement.

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2. eBay’s Woes Continue – Can They Ever Recover?

eBay came out with their quarterly financial results last week and they were really dismal. At a time when Amazon grew more than 15% in the fourth quarter year over year - eBay marketplace sales were only up 2% in the same period. And this week, eBay and PayPal announced that they would cut 2,400 hundred workers, which represents 7% of their workforce. That does not bode well for sellers as I expect that many of the cuts will be in the seller support area. Although it also looks like eBay India will take one of the largest cuts -they are expected to lose 1000 workers.

eBay's decline started with the leaving of Meg Whitman and John Donohoe taking over the reins of CEO. Since Donohoe joined the company it has just been one disaster after another. His first and probably most critical mistake was to destroy the eBay community and try and transform the site into something that looked like Amazon while doing everything he could to change the culture of the marketplace.

Of course it didn't help that we were hit with a major recession shortly after he took over -but that affected everyone -and although other sites recovered -it seems eBay never really did. Yes, their stock price has done OK -but that is mostly due to the success and rapid expansion of PayPal.

And now eBay will spin off PayPal - so I am not sure where future profits will come from. EBay said they would split its marketplace division from PayPal in the second half of this year. PayPal will be a standalone publicly traded company, which some analysts' estimate could be worth about $40 billion.

EBay is also exploring either a sale or initial public offering of its enterprise division. The Enterprise division helps retailers beef up their online presence. A company spokesperson said the unit did not fit neatly with PayPal or the marketplace division.

The upshot of all of this is the unstated fact that eBay is now for sale. So who would future buyers be? It could be an overseas company that needs a foothold in the US like Alibaba or maybe even someone like Google or Yahoo could be interested.

Depending on who buys eBay it could be good or bad for sellers -there is just no way to know.

Some other changes to eBay are also worrisome. Carl Ichan won his battle to put more board members on the eBay Board of Directory and give investors a greater say in the company. And the best news of all is that John Donohoe stepped down and will be replaced by Devin Wenig, president of eBay Marketplaces. He will become the new CEO after the breakup. Again - that could be good or bad. We won't know what kind of a CEO he will be.

If you are a regular and longtime reader of this newsletter then you know that I used to be pretty eBay-centric. But I am sure you have noticed that over the last year of so I am now covering Amazon with more regularity. In my case, I started selling on eBay in 1999 and started this newsletter in 2000. In 2006 I started multi-channel selling by expanding to Amazon but until 2009 it was a small part of my business. eBay was still my main channel. Now that has changed. Although I sell many of the same products on eBay as I do on Amazon, I typically sell anywhere from 6 to 8 of those items on Amazon for each one that sells on eBay.

I am still going to cover eBay for my readers who still sell there -and I do not advocate that my readers leave eBay, but I am a strong advocate of multi-channel selling. It just makes sense to expand your business to Amazon, Rakuten or Sears.com so you don't have all your proverbial eggs in one basket.

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3. eBay Niche of The Month – 35mm Film Camera Lenses

If you are like me you probably made the switch to digital cameras a few years ago, yet millions of people around the world still prefer film cameras. And there are also millions of collectors who collect cameras and lenses.

There is also a market for the cameras, but personally I stay away from those as a camera may look like it works fine, but there could be something wrong with the electronics or something internal you can't see and the only way to test them is to take some photos and get the film developed which is something I just don't want to mess with. But the market for lenses is excellent, so there is plenty of money to be made there.

One thing I like about lenses is it's pretty easy to see any damage. (if you do -walk away). There is no market for scratched or damaged lenses and it's easy enough to find good ones that you don't want to take the risk.

In the real estate world they say that pricing is based on three things; location, location and location. With camera lens its condition, condition and condition. Here are some things to look for when evaluating film camera lenses:

  • Overall look and feel - the lens should look good with no scratches on the body or the lens. Hold it up to your ear and shake it gently. You should not hear anything.

  • Smooth operation - There are two adjustments on a lens: focus and aperture. If it is a zoom lens then there is also a zoom feature. Turn the focus ring - it should move smoothly. Turn the aperture ring (that's the one with little numbers on it called F-stops).

    As you move from number to number it should click into place. If the lens is a zoom lens, move the zoom back and forth. It should move smoothly and easily -but not too easy. There should be a slight resistance. Pull the zoom all the way in then hold the lens upright with the large end of the lens pointed toward the floor. The zoom should not move or if it does it should move very slowly on its own.

  • Lens Caps - there are two lens caps on a lens. One covers the front and one covers the back, where the lens connects to the camera. Having both lens caps is a good sign. This means the person who owned the lens probably took good care of it. If a lens cap is missing, you can buy them at a camera store, which is a good idea because it will add to the value when you sell it.

Other factors to look for:

  • Stick with the better known brand names - Nikon, Cannon, Bronica, Hasselblad, Pentax and most of all Lieca. (Note Bronica and Hasselblad are not 35 mm, they are usually from a camera that shoots larger film but these are still very desirable lenses.

  • Older is more desirable . By older I mean pre-Mid 1980s. In the late 80s even some of the better camera makers were using less metal and more polycarbonate and they sometimes used plastic lens components. These are less desirable and will bring less money. Heavy is good. If a lens feels too light it's probably a later lens with plastic or polycarbonate components.

  • Size Matters - the most desirable and therefore expensive lenses are telephoto lenses and wide-angle lenses. If you look at the front of the lens you will see the size in millimeters. Anything over 55 is a telephoto lens and anything under 50 is a wide-angle lens. With telephotos the higher the number the better. A 300 mm telephoto is much more valuable than a 135 mm. On wide-angle lenses the lower the number the better. For example a 28mm if much more expensive than a 35mm. Most cameras come with what is known as a "normal' lens and these are usually 55 mm.

  • Clean your lens - Clean the lens itself with lens cloth and lens cleaner bought from a camera store. Do not use any other products to clean a lens. It's also a good idea to clean the outside of the lens barrel. One of the products I have found that works well for this are the Clorox cleaning cloths that come in a pop-up plastic tub. But do not use them on the lens glass whatever you do.

  • Before selling your lens read up on it - Just go online and Google the model of your lens and you will get plenty of results. Read about your lens and learn as much as you can so you can write a good knowledgeable description.

  • Write an honest description - Be sure and describe the lens condition in detail. This is a situation where the more you say the better. Do not try and write a short description. Include as much information as you can.

  • Take good photos - Photograph the lens from all sides and angles front and back and take a good clear photo of the front glass and the rear opening.

So how much are they worth? Last year I sold a Nikon 300 mm telephoto lens for over $900 and I got over $600 for a Cannon 105 mm (that one still had the box, directions and both lens caps). I paid $250 for the 300mm and $200 for the Cannon

But my best score was a Leica 28 mm f2.5 wide-angle I bought in a thrift shop for $22 that I sold for over $800.

How and where to find lenses

They turn up in thrift shops fairly often but they usually sell within an hour or two of being put out, so you have to visit often - usually first thing when the shop opens.

Garage sales are also good. The thing is people often don't put them out, so what I always do when I go to a garage sale is ask - "Do you have any old film cameras or lenses for sale. If they do they will usually bring out a camera bag. Most people will insist on you taking everything including the camera, but if the price is right and there are some good lenses in the bag you can do that.

The last way is to advertise. Take out a classified ad that says I buy 35mm camera lenses for cash and give your phone number. The thing to remember about classified ads is to keep running them. They often don't work until people see the ad 3 or 4 times.

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4. Preventing Returns on eBay and Amazon

Returns happen - there is no way to prevent 100% of returns except by not taking them, but if you sell on Amazon or eBay-that is no longer an option.

We have had a no-questions-asked return policy in our eBay listings for the last ten years -yet we get very few returns. When I looked back over the last couple of years, our returns on eBay averaged about 1 out of every 350 sales. It's quite a bit higher on Amazon, about 1 out of every 105 sales, but that is due to Amazon's even more liberal return policy and is more a function of Amazon's customer base. Nevertheless there are things you can do to reduce returns on both platforms.

Here are my tips for reducing returns:

  • Item Description - A poor item description is the number one reason for returns. It is critical that you write item descriptions that are complete - accurate - and provide full details and specifications about the item. The complete details include things like exact weight and measurements of the item, an accurate condition description that reveals any flaws, marks, stains, chips or damage of any kind.

    Most people think or assume that shorter descriptions are better than long ones and they are incorrect. I have tested this extensively and long descriptions result in more sales and fewer returns.

  • Photos - Take good photos and plenty of them. You can't have too many photos. I like to take a photo of the item from all angles. If I have a professional photo from the manufacturer, I will use it, but I also include photos of the actual item I am selling.

  • Communication - Quick, polite and complete communications are essential to setting expectations in buyer's minds. A buyer whom you have been communicating with now sees you as a person - not a platform they are dealing with. For that reason they are far less likely to leave you a bad feedback or star rating if something is wrong -and they are more likely to communicate with you and give you a chance to fix the issue.

    My wife, Karen, handles all of our customer communication. She always tries to personalize messaging between us and eBay or Amazon customers. For example, if we send an email telling someone in Tennessee we have shipped their item, Karen might add something like "We drove through Tennessee on our Way to the Outer Banks and it is a really beautiful place, so we stopped and looked around and had a great time there."

    A sentence like that changes the tempo of the entire message from a business-like sounding automated email to something personal, and entirely changes how the buyer sees you.

  • Shipping - After poor descriptions, shipping issues probably cause more returns than any other. These include overcharging for shipping, poor packing, waiting too long to ship and shipping in old over-used boxes. So use good shipping and packing materials, ship quickly, tell the customer when you shipped and how, and don't overcharge for shipping. Note - eBay and Amazon both encourage entering tracking info into the system.
     

  • Policies - We offer a 14-Day return policy and offer exchange or refund - customer choice. And, we pay for the return shipping. Will this occasionally cost you money - yes, but you will also make more money in the long run from increased sales and because you will enjoy a higher feedback and star rating.

So try these strategies and see how they affect your business. While I was working on this article, Karen got an email from a customer who bought a firepit from us 9 months ago and he said the firepit cover had deteriorated and had tears in it. This is the first time that has happened, so I figured he must have gotten a defective one. My solution is to send him a new cover at no cost. A few minutes later we got the following message back through eBay:

"Thank you so much Skip! What can I say, now? That's customer service the old fashion way! You remind me of a company that I do a lot of purchases with because of their impeccable customer service and incredible guaranty; L. L. Bean.

God bless and have a great day! You made my day, which wasn't too good today, but now a whole lot better!"

No matter what platform you sell on -there is just no substitute for excellent customer service and believe me despite the occasional expense -it will pay dividends in terms of more profits over time.

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5. New Wholesale Sources for eBay and Amazon Sellers

Ohio Wholesale sells a large line of small home décor items like decorations, signs, candle holders and other decorative items.

The Sydney Candle Company sells a complete line of Soy candles

Crossroads is another supplier of a wide range of candles.

Nashville Wraps is a supplier of all types of gift boxes, bags and gift-wraps.

Otto Step Inc. is the developer of the Otto Step Pet step...portable plastic platform that simply inserts into a 2" standard trailer hitch receiver. They are a family owned business with product made in the USA.

Lifeforce Glass sells Inexpensive Gifts with Meaning, Socially and Environmentally Responsible, Made in USA from Lifeforce Glass. They are the manufacturer. Imprinted glass stones, granite blocks, and seabeans are just a few of their products and custom work available. Register for wholesale right on their website.

EcoSmart Designs, Inc. is a U.S.-based manufacturer of jewelry and gift products offering a variety of designs, thousands of parts, and a custom production division.

Art And Craftsmen, Inc. is a manufacturer of fine wood products. Their primary goal is to provide the consumer with quality, competitively priced products made in the USA. Art and Craftsmen serves the market through distribution. Contact them on their website to find the distributor nearest you.

Ice Cubes, Inc. sell Ice Trays Created Especially for Those That Serve and Protect! ARMY - FIREFIGHTERS - MARINES - DON'T TREAD ON ME - EMT - NAVY - PARAMEDIC - POLICE - AIR FORCE - COAST GUARD.

MiniMe USA sells the line of MiniMe 3D personalized dolls, iPhone Cases, Samsung Cases.

Fun Express carries wholesale toys, wholesale novelties, wholesale party favors and wholesale decorations and is a leading wholesale supplier to party retail stores, family entertainment centers, amusement parks, restaurants and promotional agencies.

Regal Art & Gift is a designer and wholesaler of gift and garden décor.

Tori Tako Wind Designs , sells wholesale wind chimes products. Located in Salt Lake City, Utah, they also offer decorative flags and assorted wind accessories at a competitive price.

E Silk Flower Depot wholesales Silk Flowers, Artificial Flowers and Fake Flowers

PrimeTimeVideo is a source for VHS movies at the low wholesale prices.

Mingzhou Oriental is an importer and wholesaler in the US specializing in oriental furniture, home decor, gifts, antiques, arts and collectibles.

That’s it for now. See you again in a couple of weeks.

Skip McGrath
The eBay & Amazon Seller's News

P.S. If you missed the last issue, click here to read it.






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