How Much Should I Invest in My Online Business?
The eBay & Amazon Seller's News ~ January 2017 ~ Volume 18, Issue No. 1
Tips, Tools, News and Resources for eBay, Amazon and Independent Online Sellers
Well 2016 Christmas Selling Season is Behind us. Your sales were probably huge for the past two months -but don't despair, January and February are usually pretty good months also. See our third article to learn why and how you can take advantage of this scenario.
In my last newsletter, I suggested you use January and February to get rid of non-performing inventory and to tune up your listings. The one thing I forgot to mention in that article is that, I use most of the first quarter to find new products and wholesale sources.
It just so turns out that, the 1st quarter of every year is one of the busiest times of the year for wholesale trade shows. These trade shows are my number one source of new suppliers and new merchandise to sell. This week I am attending the Seattle Gift Show, and in March, I will be attending the ASD Wholesale trade show in Las Vegas. See the next item for some upcoming gift shows around the country.
Wholesale Gift Shows coming up in January - March. Just Google the name of the show for information and registration website. If this is your first wholesale trade show, see my article on how to gain admission to trade shows in the last issue of this newsletter.
Mother's Day this year is May 14th, 2017. If you are using Amazon fulfillment, now is the time to order merchandise and get it off to FBA so it arrives in time. Mother's Day shopping typically starts in early March. If you are merchant fulfilling or selling on eBay then you can wait a couple weeks to order goods (assuming, your supplier can deliver in 4 weeks). If you are ordering from China, everything is closed until Feb 2 nd for Chinese New Years. So if you plan to get goods in time for Mother's Day -you will have to bring them in by DHL or FedEx Air.
How did Christmas season sales work out last year (2016)? Online sales were greater than Brick and Mortar sales for the first time ever for non-grocery items.
Several research firms estimated that online sales from midnight, Thanksgiving day through Midnight the following Monday, were between $3.2 Billion and $3.6 Billion. (That covers Black Friday and Cyber Monday).
However -Not all was Rosy. Total retail sales (Online + Brick & Mortar) actually fell 4% overall for November and December combined.
Look back in your email on December 27 or 28 for an email from Amazon Selling Coach that lists items that customers have added to their wish lists and did not get for Christmas. (See screenshot below).
These are items people want, but did not get for gifts, and therefore, are likely to buy for themselves.
Check out the sales rank for each item -if it's in the top 10% of the category - try and find a wholesale source and add to your inventory.
Wow - Amazon hit some great numbers.
I just got a news release from Amazon that said: "Fulfillment by Amazon Delivered More than 2 Billion Items for Sellers Worldwide in 2016." Some other facts:
My webmaster, WordPress expert, and co-author of my blogging book, Marsha Perry, has just released her own book about using WordPress - WordPress Website Owner's Manual: The Illustrated User's Guide for WordPress Websites and Blogs
Here is an interesting article from Entrepreneur Magazine about Amazon and eBay Sellers
My Fulfillment Team - Amazon FBA Fulfillment center was closed to new accounts before Christmas because they were swamped with new business, They have just started accepting new accounts. You can email them here.
Jungle Scout has developed a great product checklist for private label products. Click here to download the PDF.
Lets get started with this monthís articles:
Whether you want to sell on eBay or Amazon, this seems like a very simple question, but the answers are very complex. Why? Because it depends on so many different factors -most of them, unique to you.
One of the most important things that will control the amount you can (and should) invest, is the amount of free cash, or free cash flow, you have on hand. If all the spare money you have on hand is $500 (without borrowing), then you should invest $500 in your business.
Or, if you have $5000 in cash available -I would use $2,000 to invest immediately in inventory to sell, and use the balance for more inventory and other expenses, over the next three or four months as you build your business.
Notice in the paragraph above I said: ". If all the spare money you have on hand is $500 (without borrowing) …" The words without borrowing are the key.
When you are just starting out - no matter how much training you have -or how many books you read -I guarantee, you will make mistakes. Building up a few thousand dollars (pounds, Euros, Yen, etc.) on a credit card and depending on income from your business to pay it back, is a really bad business strategy.
Another important point: One of the things you must NOT do, is invest all your money at once in inventory to resell. I have said many times that the more inventory you have available to sell -the more money you will make. That is generally true. But, it depends on having the right inventory -that is, inventory that will sell, and not just sit in stock. Take your time researching and building up your inventory.
So what should you spend your money on?
The first thing you should do is buy some training. My courses, The Complete eBay Marketing System and/or The Complete Amazon Marketing System are a good place to start. But don't stop there. Look for other books and courses and invest in them also (up to a point - you don't want to buy so much it overwhelms you).
NOTE: Do not buy both the Amazon and eBay Marketing system because there is a lot of duplication in both courses. (This also applies to The Wholesale Buying System, because that is already included in both the eBay and Amazon Systems).
If you plan to sell new merchandise, I would start with Amazon, as they far outsell eBay on new products.
However, if you want to sell used or vintage items, then eBay is still the best place. You can start with either one, and learn the other one later, as almost all of the knowledge and techniques are transferrable between the two sites.
In addition to training, there are several free Facebook groups where eBay and Amazon sellers can ask questions. Just go to Facebook, open an account, and enter eBay and/or Amazon in the search box and several groups will come up. Go to their page and join. Then over the next week or so, see if the group is helpful -and if not -drop it and join another group. (Note - I will be starting my own Facebook group soon. It will be announced here in this newsletter when it launches).
The next thing you want to consider investing in, are various third-party services to help you run and automate your business. I am not going to recommend specific ones here, as that is a subject that is too long and would take its own article
As a side note - when you buy training courses, it can be tempting to keep studying forever until you are 100% ready and everything is perfect. If you are a perfectionist or a worry-wort, then you will never get started. One of my favorite sayings is: Perfection is the enemy of good. My second favorite saying is:If you want to start a business, you have to start your business.
So yes, get some training before you start -but once you have done that -Get started! All online businesses are such that, experience teaches you more than you can learn in any book. So, once you know the basics, get started so you can start getting some experience.
One of the things new sellers get hung up on is product research. (I know I mentioned the importance of product research before, but don't get hung up on it). These folks refuse to buy anything, unless it is a guaranteed sure seller. Well, as someone who has sold online for 17 years, I can tell you there is no such thing. Product research can lead you in the right direction, but sometimes you have trust your gut -and pull the trigger! (I do a lot of product selection by trial & error).
Another factor new sellers have to be aware of when deciding to invest, is learning which category you can sell in and which categories are restricted and need permission from Amazon (At this point, eBay does not have restricted categories -but its coming soon). As long as your Amazon account is in good standing, you can apply to sell in a restricted category. Here is what you need to do:
So there is some advice regarding how much you should invest in your business. As you can see, the answer to that question is quite subjective.
If you look at your customer returns report, you will be very surprised to see how many of your returns, have been put back into sellable inventory. Take a look at this screenshot from a recent returns report account.
This is for the last 30 days. As you can see, I only had 18 items returned during this period.
A few items stand out. Look at the 3rd item on the list from December 22nd. Under the Disposition column it says "Defective. And in the status column, the report says "Unit returned to inventory." You might think this is really bad -but it is not necessarily so. A lot of Amazon customers are pretty savvy and they know that if you say an item is defective, then Amazon will pay the return shipping (and charge the seller for it). So there nay not be anything wrong with the item -you hope.
The problem with Amazon returning items to sellable inventory is this:
I have had situations where the customer opened the retail box -and once inside, there was plastic wrap, or additional packaging that the customer tore open. When they decided they did not want the item, they stuffed it back into the retail box any way they could. When the product arrives back at the Amazon warehouse, the warehouse worker glances at the box and says "That looks OK to me," and he puts it back into sellable inventory.
Now, when the next customer buys the product and they are shipped the one that was returned to inventory, they complain to Amazon that the seller sent them a "used" item. This information gets sent to the Seller Performance Team and they send you a nasty gram threatening your account unless you provide a "plan" that describes the steps you are going to take to make sure you do not sell any used goods in the future.
If you answer with anything other than the plan they ask for (such as an explanation that you do not sell used merchandise), then at a minimum they will kill the listing for that product, and threaten to close your selling account if it happens again.
I wrote Amazon Seller Support about this two weeks ago and have still not received an accurate answer. At one point, they told me to submit a removal order. But the problem with that is that there is no way to remove a specific item without removing the entire item. The last time I had this issue occur, I had quite a few items in inventory of the concerned product -and would have to remove all of them to get the specific product back. Just today, I got an email from Amazon thanking me for my patience and saying they were still researching the issue.
One of the most obvious ways to raise capital for your online business is borrowing -but I am solidly against that. If you have some products that already sell quickly and profitably -then I am OK with borrowing money to finance that specific inventory -but I am strongly against borrowing money to start a business.
So, what are some of the ways you can raise money for your business without borrowing?
The first possible way that comes to mind is to seek Angel Financing from a local -but disinterested investor. The term Angel Investor refers to professional venture capitalists (investors) who put up small amounts of money -typically $250,000 or less, as opposed to full Venture Capitalists who tend to invest millions of dollars in new ventures.
OK, how do you find Venture Capitalists? In some of the larger cities, there are actually Angel Investor groups who meet regularly. You can find them by asking your local bankers, or checking with your local Chamber of Commerce. Many counties in the US have business development groups. These fellows are always tuned in, and in contact with, local Angel investors. If you live in a small town or rural area, your local banker (business banker) is probably your best bet.
How do investors work? An (Angel) venture investor typically gives you an amount of money in exchange for a percentage of the business. It is not a loan -if the business fails, the investor looses his, or her, money. There are some venture deals that involve venture debt (a loan) but, if that is offered -I would turn it down.
The next way to finance a business is to get an investment from a family member. I strongly advise against this. If you take an investment from a family member, I guarantee they will want to give you constant business advice. But, unless they are experienced online sellers - most of their advice will be wrong. And, it won't just be business advice on major matters -they will constantly be giving you advice on every minor detail of running your business. This is a formula for having a nervous breakdown.
Another way to find an investor is to find either a silent partner -or a working partner. I am generally against partnerships, for the same reason I avoid investments from family members. Most partners want to help you run the business, but they don't have the skills, or experience, to do so. However, a silent partner is someone with whom you have no prior relationship and can be completely dispassionate and disinterested in your business. All they require is quarterly profit and loss statements.
A working partner is a completely different animal. A working partner would be someone who, A) is an experienced online seller, and B) wants to work actively with you in the business. This can be a great solution as long as you work out the responsibly of each party before you start. For example -one way is to split up the duties is by category (you sell jewelry and accessories, and your partner sells clothing and shoes).
The real key to the success of this arrangement is, the agreement you come to before the partnership begins. If there is any ambiguity, a partnership could turn in to a real nightmare.
First of all, I am not recommending you finance your business operations with credit cards. We use our credit cards to purchase merchandise for resale, and to pay for business meals and other expenses when on business travel, but we pay off the entire balance each month, so there is no interest cost. Financing your business with credit (of any kind) is highly risky until you have been in business a few years and know 100% that what you buy --will sell.
Select and use your credit cards wisely. A lot of credit cards today, including most airline cards, offer a sign up bonus of up to 50,000 points to get started. Plus, many of the airline cards offer a free domestic companion trip where two fly for the price of one when flying together.
If you like to travel overseas, The American Express Platinum card offers a free overseas companion ticket in Business or First class once a year, plus free membership to about a dozen airline clubs both in the US and overseas. (Just walk in, flash your platinum card, and you are in). Plus, you can use Amex points on any airline, hotel chain or rent-a-car company.
Now the bad news: The Platinum card costs $400 a year, but that is actually a bargain for folks who travel overseas at least once a year. If you don't travel overseas, the regular green Amex card and the Amex Gold card are a lot cheaper, and, even with those cards, you can use Amex points on any airline, hotel chain or rent-a-car company. So that makes them pretty flexible. (I have heard Citibank has a similar program which is a lot cheaper annual fee than Amex, but I don't know the details).
Most credit cards (including airline cards) offer points when you buy something. So, what we do when we set up wholesale accounts, is tell them we prefer to use credit cards instead of opening a credit account. Almost all wholesale vendors prefer this, and this way we earn points on every purchase.
Last year we bought over $600,000 in merchandise to resell on eBay and Amazon, so that earned us 600,000 points we could use for travel (or with some cards to purchase merchandise).
One of my cards (a Wells Fargo Visa card) offers gift cards to hotel chains like Hilton, Marriot and others in exchange for points. The gift cards are typically in amounts such as $250 or $500 each. You can use those to pay for business or personal travel.
A few tips:
Some cards offer double points when you buy merchandise. So, shop around and find the best deals you can find. I would list my favorites here -but the last time I did that, I got over a hundred emails from readers telling me about better deals. I have a policy of answering all email from readers and customers, so sorry, but I don't want to deal with that again. Please do your own research.
Ditz Designs carries a nice line of decorative animals. These are great sellers.
Air Venturi sells a wide range of BB guns and Airsoft guns. (These are allowed to sell on eBay and Amazon). Use the Contact Us form to get wholesale information.
Santorini Design sells a wide range of fashion jewelry and accessories.
Bulk is a liquidation dealer that has many lots in the $200 to $500 range. I have mentioned them before but right after Christmas is a good time to buy closeouts.
Pine Creek, Ltd. Sells a wide range of decorative items from Primitives to Nautical and Coastal designs.
Orchids America is a wholesaler of luxury home textiles and accessories. Their collection consists of fine rugs, decorative pillows, contemporary duvet sets, leather products and accessories for the home.
Wild & Wolf is an innovative creator, manufacturer and distributor of designer gift products
Classy designs and makes a unique line of state "Home" t-shirts. They carry a selection of state vinyl decals and tote bags. A portion of the proceeds are donated to The Wounded Warrior Project.
The Kalamazoo Candle Company makes and soy candles with a natural scent that will fill a room without over powering it. Their candles are available in a variety of sizes in 25 fragrances. Use the Contact Us form to ask for wholesale information.
Annalee sells a wide range of unusual dolls that feature character and whimsy, but the thread that binds them together as an "Annalee" is that each and every one of them celebrates some aspect of life
Celibri Ducks collectible celebrity rubber ducks of the greatest icons of film, music, athletics, and history. They are made in the USA and PVC free.
Margaret Elena's Cottage Greenhouse sells a wide range of bath and beauty lotions and scrubs
Thatís it for now. See you again in a couple of weeks.
P.S. If you missed the last issue, click here to read it.
© 1999- Harry McGrath, Inc., DBA Skip McGrath, Auction Seller's Resource and Vision-One Marketing. All Rights Reserved.
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