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7 Reasons You Should Be Selling on Amazon

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As you can guess from our site (and the title of this article), we couldn’t be more excited about the opportunity that selling on Amazon offers.  We started our business in 2011 with a $600 credit card, and high hopes for eventually making enough money as a side hustle that we could pay for things like vacation. In just five short years, our business has done more than $13m in sales on Amazon and has grown to a full-time business which allows us to employ several people.

That’s kind of like the ‘American Dream!’ Thanks a boatload, Amazon!

Here’s the cool part: this opportunity is available to anyone who is willing to put the work in and get started. Amazon has grown a ton over the past few years, and the opportunity has just gotten bigger for those willing to reach out and grab it.

If you don’t already sell on Amazon, this is why you should start today:

1) It’s a low-barrier-to-entry business with a big upside!

Look at what I wrote above. We got started with a $600 credit card and a dream. We turned that into over $13M in sales. Honestly, this is the CHEAPEST business to start in the world. You can start with almost nothing and if you are willing to put the hustle in, and focus on building your business – you can grow it as big as you want!

What other business can you start for $600, and truly hit the ground running? Not many. This business allows you to really grow as your capital grows. There isn’t a required amount of stuff to buy, and Amazon provides you with all of the tools you need to get started. You don’t need tons of equipment and other stuff. You just need a computer, a printer and an internet connection. If you have that, you could have a business overnight.

2) FBA makes this REALLY easy!

So, what is this magical FBA? It is a program operated by Amazon themselves, appropriately named “Fulfillment by Amazon”.

This is a program created by Amazon where you can send your products to their Fulfillment Center, and they will ship your orders to customers and handle any customer-service-related issues to the fulfillment of the product as well as necessary returns.

Let’s think about this; they store your product, pack and ship your individual orders to customers, and handle your customer service. This means your interaction with this process is simply sending the product to Amazon!

This truly levels the playing field and takes much of the size and experience side out of the equation. Instead of having to compete against bigger and more experienced sellers, you are able to use the best fulfillment network in the world, have access to partnered rates, and have a built-in infrastructure that will allow you to scale without adding additional manpower.

If you want to learn more about FBA, check out this link:

https://services.amazon.com/fulfillment-by-amazon/benefits.htm

3) Amazon is the world’s largest online marketplace!

And shows no signs of slowing down!

As our world becomes more digital and mobile, Amazon will only grow. Amazon did $107B in sales in 2015, up from $88B in 2014.

* from statista.com

As you can see, Amazon is consistently growing year over year, and that provides a huge opportunity for third-party sellers to sell to Amazon’s growing customer base.

A little-known fact is Amazon is the largest online retailer, and actually does more sales than the next five competitors combined. Hopefully, this gives you an idea about how big Amazon’s customer base is, and the type of growth you can be a part of.

4) Your business can be run from the comfort of your home.

With the rise of Amazon and the popularity of the third-party marketplace, many third-party solutions have developed to help facilitate selling products via FBA. One of the major boons has been the rise of prep centers. Prep centers are companies that receive your inventory, inspect it, and ship it to Amazon in compliance with Amazon’s shipping regulations.

This helps as you no longer have to receive inventory at your home, or even physically touch the inventory. You can start your business, purchase products, have them shipped to a prep center while never having to see or touch the products you are selling.

That means that you can reduce your interaction further, to the point that you are only looking for great products to sell and establishing relationships with those brands.

5) Selling Physical Products is Incredibly Low-Risk.

There were two concerns in opening a traditional business:

1) Driving traffic to your products.

2) What if I buy something that doesn’t sell?

Creating a traditional business has always had lots of risk. You were selling products and services to an undefined audience. How will people respond to your service/products? If the reception went poorly then your business would struggle. You had to create foot traffic and start to go through the process of establishing your brand and creating a customer base. Amazon allows us to completely sidestep this, as they have a massive customer base of millions of buyers just waiting to buy our goods. You don’t have to commit the time or develop the expertise required to truly build your brand.

In relation to the second concern, the great thing about this business is you are purchasing products that have tangible value. Unlike businesses where you are selling ideas, you are purchasing products with a defined and expected value. These are physical products that you can hold in your hand. In fact, under an ideal set of circumstances, you are purchasing products with a clear demand.

6) Amazon Actually Tells Us What to Sell!

The point of being low risk is further reduced here. Keep in mind that Amazon is a huge database with billions upon billions of data points, and they recognize the products that their customers want and are purchasing regularly. Amazon wants more of those products to be made available to their customers, and actually tells us what products they need based on the sales rank.

Here is what that looks like:

As you can see, this product is ranked 15094 in Health and Personal Care. That means that the product is actually the 15,084th best seller in that top-level category.  Now, as I had mentioned in another point, you can use a third-party (free) solution like Jungle Scout’s estimator tool to get an idea of how many times that product is actually selling per month.

You can find the Jungle Scout estimator here:  www.junglescout.com/estimator

Jungle Scout’s estimate is that this product is selling around 246 times each month. In our experience, Jungle Scout has provided an incredibly reliable tool with very close estimates (and we use those estimates in our business).

So, as you can see, this product sells very well and would be something that you could count on being able to move as it is a demand-driven product. Our entire business is created around these principles. We locate products that people are purchasing and have existing demand, we find those products and we sell them on Amazon utilizing Amazon’s amazing fulfillment network.

7) You can build a family-run business.

You can build this business to incorporate your family and truly run it as a family project. We recently worked with a charity that teaches kids how to grow and operate eCommerce businesses. This was one of the most fulfilling projects we have been a part of, as seeing these kids actually learn how to sell on Amazon was beyond impressive. The entire atmosphere was incredible, as the parents were working side-by-side with their children to help them grow and create long-term sustainable businesses.

Honestly, what is better than teaching your children how to run their OWN business, and being able to work alongside them to help it grow?

You can learn more about this organization at www.ecommercekids.com

Here is another awesome fact…

These kids weren’t just learning to sell. Some of them had thriving businesses doing more than $50K per month in revenue! Obviously, these kids are super intelligent and driven, but I believe that speaks volumes about how easy Amazon has actually made this process.

The bottom line is: Amazon provides a HUGE opportunity. This opportunity can be built to scale to ANY size that you want.

Maybe you want to make a few extra hundred dollars per month to help with rent?

Maybe you want to make a few extra thousand dollars per year to take a vacation?

Or, just maybe you want to create a long-term sustainable business that will be your sole source of income?

Honestly, it is truly an unlimited opportunity. You can grow as big as you want, or keep your business small, as Amazon’s FBA program is fully adaptable to your needs. I implore you to give this a chance. It has been a life-changing thing for us, here at The Wholesale Formula, and for MANY others around the world.

Replenishment-Based Wholesale Primer

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The single thing I find most intriguing about Amazon businesses, or entrepreneurial-style businesses in general, is there are so many ways to do the same thing. The question that we are asked most often is “how do I find wholesalers?” The problem with this question is it does not take into context the different types of wholesale businesses that can exist. In this article, I will describe the different types of wholesale, and describe the model that we subscribe to.

There are four primary types of wholesale: Closeout, Liquidation, Distribution, and Direct.


Closeout

This is a type of wholesale that is done with an “end of life cycle” product. The primary benefit to operating in the closeout space is the product is at the end of life cycle, so there is a finite supply of what is and will be available. This means, ultimately if you purchase the entire available allotment, you could sell this product without competition as competition ran out. There is a level of solace in being in sole control of a branded and demand-driven product.

The primary problems with operating in the closeout space are:

  1. Products aren’t replenish-able. If you find a product that works for you there is an “end” to the amount of sales that you can do with it.
  2. Purchasing the entire runs of products can be prohibitively expensive, and if you don’t purchase all of the product, you are leaving yourself open to the possibility of facing competition and not being able to maximize your profits.
  3. It makes poor use of your cash flow. Purchasing heavy on the front end simply ties your cash up for long periods of time and doesn’t allow you to maximize your purchasing power over time.

Liquidation

This is a type of wholesale where companies liquidate their holdings of given products. This can be done for a variety of reasons like clearing shelf space, getting rid of shelf pulls, or moving product that someone didn’t purchase. The primary benefit to liquidation is that the cost per unit is VERY low, and leaves you with a lot of room for profitability.

The primary problems with liquidation are:

  1. Products aren’t replenishable.
  2. If you purchase shelf pulls there will be MANY problem products, like expiration date issues or damaged product that you cannot sell.
  3. For the most part, the Chain of Custody on these products is poor or doesn’t exist. This comes up in Amazon inauthentic claims or not-as-described claims. Without being able to prove the lineage of your products, Amazon assumes the worst and may suspend or ban your account.

 

Distribution

This type of wholesale is setting up accounts with companies who represent and distribute product for a variety of companies. The major benefit of distribution-based wholesale is you have access to a larger variety of products.

The primary problems with Distribution wholesale are:

  1. Finding products is like looking for a needle in a haystack. You can do it efficiently with a program like Price Checker, but still, you don’t know what you are looking for.
  2. Distributors tend to offer worse margins, as they have to make money as well.
  3. Competition is generally tighter on these products as distributors’ goals are to move high volumes of units and they don’t generally discriminate who they sell product to.

 

Direct Wholesale

This is the method that we utilize. We purchase products directly from the brand owner/manufacturer. The term manufacturer in the context that we use it means we purchase from the Brand Owner directly if possible. For example, if we were buying Nike shoes, our goal would be to purchase product directly from the Nike sales team. Going around this to the factory opens up a lot of liability and should be avoided.

In general, anytime you thwart the Chain of Custody on a product, you are engaging in counterfeiting which can cause you problems on the Amazon side as well as open you up to litigation. It is our suggestion that you do everything above board and purchase through the brand owner.
Direct Wholesale has a specific advantage. You are purchasing product at the highest point on the supply chain and are generally able to get the best possible pricing, as well as hopefully you work with manufacturers who care about protecting their brand and make it less restrictive to competition.

The primary problem with Direct Wholesale is:

It is harder to open accounts, as these companies don’t want to work with just anyone.

While this is the greatest problem, it is also the models’ greatest strength. You have to spend a lot of time on the front end to work with manufacturers and get them interested in working with you. However, when you are able to set-up those relationships you tend to have great products for longer periods of time.

I want to transition this into replenishment, as that is our true motivation for purchasing products via direct wholesale.


Replenishment

That simply means that the product is available for purchase over and over. Our goal is to identify products and companies, then establish relationships that allow us to take advantage of replenishment and consistently buy the same products many times.

The true strengths of the replenishment model are:

  1. Your business will become more consistent. Once you get a product – you are able to realize a true long-term-value from that product, as the products become nearly a passive income source. You simply reorder them as you need them.
  2. It has lower carrying costs. We generally only purchase 30 or 45-day supplies of the products that we carry and repurchase as needed. This allows us to stay incredibly liquid and constantly reinvest our money and profits into new products.
  3. You can create uniform processes that allow you to effectively scale. We have outsourced nearly every part of our business and simply manage the overarching strategy at this point. Anytime that you create a process – you can outsource that process to someone else. Your business will become process-based rather than talent-based and allow you to grow more quickly.
  4. Replenishment lends itself to better bookkeeping. This allows you to utilize growth models and projections in your business. For example, we purchase products to fit 30 to 45-day stock periods. In that period, we can reliably say how long it will take us to sell our products (as well as the amount of cash it will generate) with a high degree of accuracy.

Our business changed dynamically when we moved to the liquidity-based replenishment model. We were quickly able to scale our business by utilizing our cash better, as well as outsource processes to employees and contractors.

Look at what you do in your current business:

  • Do you source products?
  • Do you pack/ship your own products?

If you are sourcing via a method like RA, a lot of your process is based on intuition or feeling. However, in our model, we were able to base it on strict sets of criteria, allowing us to plug other people into that equation. With the replenishment model, we were then able to project the amounts of products that we would be processing and effectively plug-in processors as necessary to fill that role.

In terms of you and your business, look at the benefits of replenishment. The systems it allows you to create, the predictability you get from it, and ultimately the consistency it will add to your business. This model isn’t something that you can move to overnight, but something you should look to start introducing as it will allow you to scale more effectively and take you from the position of working for your business to working on your business.

Setting Up Amazon’s Two-Step Verification

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If you have been living under a rock for the past few weeks, you might have missed this. Otherwise, you realize this is the talk of the town. In this article, I will discuss why you should set this up, as well as how you can go about doing it.

Amazon has become a target, that much is clear. Hackers are working to break into sellers’ accounts because of the massive amounts of money that 3P sellers are generating. This makes a nice, juicy target for the hackers.

Recently, one of our really good friends had his account hacked. During this event, his account was suspended and his payment was re-routed to another bank account. He lost $60,000 and several days’ worth of sales. While Amazon did work with him to get his account restored and reimbursed for the funds lost, it was a major setback for his business. As sellers, our goal is to sell products, not to be sidelined by problems like this.

There is some great news though!

Amazon is aware of what’s going on and has put a counter-measure in place to help prevent the issue.

Here are the steps for setting up two-step verification:

Step 1: Log on to your Seller Central account.

Step 2: Click on Settings in the upper right-hand corner of Seller Central and scroll down to “Login Settings”

Step 3: Once you are in Login Settings, you have to set up “Advanced Security Settings”.

Step 4: You can choose your suggested methods for setting this up.  Our suggestion is to use a 3P Authentication software e.g. Authenticator app (with iPhone), or Google Authenticator (with Android).

We chose to do text with our second verification and would suggest that as the second source.


Step 5: Double-check your bank information and notification email addresses.

It is very important that you check this information, as hackers may have already infiltrated your account and re-routed funds (by changing the notification email address). You can do that by going to:

Settings > Notification Preferences -then scroll down to “Account Notifications”

This will ensure that your notifications, which tell you about changes with your account, are headed to the correct email address. If this had been changed, you would not have received notifications, and should review all other aspects of your account, and alert Amazon immediately!

To review your banking information to make sure that it is going to the correct account, please do the following:

Settings > Account Info

Then, click on Deposit Methods and it will bring you to the following screen:

Click “View details”, then you should see your account information! If it does not match what you had, you should change it immediately and alert Amazon.

While it is very clear that two-step verification is a necessity in the new world, where Amazon and Amazon sellers are targets, we were very hesitant to set this up initially. Our initial concern was, where we have multiple employees who access our account on a daily basis, the process would be too annoying and worth the risk.

That could not be further from the truth.

Amazon has built flexibility into the system, and it isn’t an issue to have multiple Authenticators registered. Similarly, one of our mastermind members suggested that we create “User Permissions” accounts for each employee who had access to our account. This not only allows us to reduce the number of connections to our account and prevent possible input errors with the two-step verification but also makes the process much easier if we have to terminate an employee, as we can simply remove their access.

All in all, two-step verification is a must. I hope that reading this article not only teaches you how to do it (if you have not already) but also stresses the ease and importance of getting it done.

Protect yourselves and sell lots of amazing products!

5 Tips to Maximize Your Live Event Experience

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As a few of you may know, we hold TWF Live events. These events have turned out to be everything we hoped for and more. We truly do want to thank everyone who attend. It means a lot to us that people have taken time out of their busy schedules and lives to come hang out with us for a weekend.

The people who attended our events are all-stars. Present in mind and body, ready to learn, and participating. I am always in awe at how well these awesome folks immerse themselves into the atmosphere, as well as getting involved in networking with other attendees. It’s truly a sight to behold and honestly, we were honored to be a part of such great experiences!

I believe that live events can be life-changing, and what I keep witnessing, reinforces that. However, there are a few things that you can do to get the most out of ANY event you attend.

1) Be in attendance, and be PRESENT!

That kind of sounds ridiculous, but many people believe that by physically being there that they are setting themselves up for success. While that is certainly part of the equation, the other half is you have to pay attention and not let the outside world distract you and take away from your experience.

When you are attending, you have to completely immerse yourself in the spirit of the event. Share and network with others and leave the outside world at the door. In real life, there are a million things that try to get our attention or pull us away. At an event, you have to ignore those distractions — not only for yourself but for everyone in attendance.

Try to leave your phone in the hotel room! As Amazon sellers, we are addicted to the Amazon sales app, but you have to realize that ALL of it can wait for a few hours.

2) Network with fellow attendees

I can’t stress this one enough. Our entire business has been built around working with people who are better at something than we are and sharing with them to help them.

We used to be the world’s worst at this. We felt uncomfortable and didn’t like to approach people and share about our business. You have to realize that nothing is TRULY proprietary. If you can move beyond your comfort zone, you can make valuable friends who will hold you accountable, add invaluable insight, and generally will help you grow your business.

I can honestly say that I am SUPER proud of the folks that attend our events. They network on breaks, organize lunches, dinners, and meet-ups outside of the event. We have heard from several attendees that they formed mastermind groups with the people they were working with onsite!

3) Take notes and participate in discussion

It’s important that you pay attention during the presentations. Now, most of you are thinking – yeah, Dan, I realize that and that is a perfectly logical response. However, sometimes presentations aren’t for your business and may only relate in minor ways. We are of the opinion that we can take one piece of information away from an event, and it be worth MORE than the cost of the event. It’s this mindset that allows us to extract and absorb information that others might miss.

Just make sure to pay attention, even when you don’t think it applies. There could be a gold nugget in there that pays huge dividends later.

4) Venture outside your comfort zone

This is incredibly important! You have to be willing to go outside of your comfort zone. When opportunity strikes, don’t let irrational fears stand in the way.

In business, success starts where your comfort zone ends. We all know this! However, when the time comes, many people allow themselves to be held back by irrational fears. In reality, by pushing through we automatically get invaluable experience AND have the ability to learn even more.

Whenever you run into a situation, think about it this way…

Does this have the potential to help my business? If the answer is yes, push forward at all costs!

5) Take Action on What You Learn

It is as important that you take action on what you learn, as going to learn it in the first place. You will learn lots of amazing things at an event, but to make it effective and see growth you have to take action!

A great practice for this is to take a day and reflect on what you learned. Review your notes, and put them into order for what needs to take priority in your business. Once you are clear on where you need to start, set dates that you will start each project and timelines for completion.

Remember, the difference between a plan and a dream is that the plan is on paper!

Hopefully, this article gives you a few ideas about how you can make the most out of your next event. I can say that we are truly blessed to have been able to work with such great people at our events, and truly believe that our attendees leave motivated and hungry to make changes in their businesses and lives. Until next time, go out make connections, and forge awesome relationships with amazing entrepreneurs!

Dan

Breaking Down Amazon’s “Best Sellers Rank”

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We talk to hundreds of entrepreneurs daily. Some are selling on Amazon, but many who haven’t started that leg of their personal journey yet. Most of those who aren’t yet selling on Amazon don’t realize Amazon will literally tell you what to sell.

Think of it from this perspective, if you can look at a product and know that it is selling well – all you have to do is go out and find that product cheaper. If you can do that, the distance between your buy price and sell price (minus applicable fees) is your profit. Amazon tells us what to hunt, all we have to do is find it cheaper and make money.

So, how does Amazon tell us what is selling?

They use a system called “Sales Rank”, or sometimes referred to as “Best Sellers Rank”, or BSR for short.

The Amazon BSR is an incredibly easy-to-understand system. It is a linear comparison for products in a given category, where the lowest sales rank (1) is the best-selling product.

Check this out:

A product ranked #1 in the Home and Kitchen Category is the best seller in that category. Whereas, a product ranked 4000 in Home and Kitchen is the 4000th best seller, so on and so forth.

That being said, it is important to note that a product ranked in Home and Kitchen does not compare or have any correlation to a product ranked in the Baby category. This ranking system strictly compares products from the SAME category, in a true ‘apples to apples’ comparison. The last thing you have to remember here (to get started), is products without a rank have not sold.

Sales rank is on the product page on Amazon. Go to the page, and scroll down until you see product details.

See for yourself in the example below:

Now that may appear to be a bit tricky, right? This product is ranked #2383 in Health and Household, but also shows #7 in Health & Household > Sports Nutrition > Endurance & Energy > Powders. This is absolutely CRITICAL. You only care about the top-level category rank, and should completely ignore sub-ranks.

So, for that product, the ONLY rank we care about is #2383 in Health & Household. Now, we have to determine what that means.

We use a site and app called Jungle Scout. They actually have a free tool that will provide you with an estimate of how many units that product sells each month through that listing on Amazon.

You can see the free tool here: www.junglescout.com/estimator

For the product mentioned above, that rank translates to approximately 1801 sales per month at the listed sales rank.

In our experience, this app and tool is incredibly accurate generally with around a 5-10% margin for error.

That being said, think about it; If you were selling that product, you could potentially sell 1800 units per month!

I will leave you with that for the day. Definitely go through and check out some products, use the free tool and imagine the possibilities!