Nuts and Bolts of Your Amazon Business
We’re talking about the nuts and bolts of your Amazon business in this episode of the Amazon Seller Podcast! We’re getting into the nitty-gritty nuts and bolts of your business. Some of the processes you need to put in place to avoid unnecessary costs leaking into your business and ruining what you are starting to build.
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Nathan: My name is Nathan Slamans joined today by Andy Slamans. And today we’re talking about the nuts and bolts of your Amazon business. Last week we talked about prioritizing getting your products produced. So we were talking about, you know, a lot of concepts. And the things that you need to think about when you’re talking to suppliers and what to get right.
Well, today we’re getting into the nitty-gritty nuts and bolts of your business.
Some of the dirty work. Some of the words that Andy likes to use whenever he’s describing working in his warehouse. And that’s what we’re going to be talking about today. The supply chain, operational efficiencies and just some of the things that you need to make sure that you’re getting right when you’re going through that process.
And if you don’t get them right, it can really start to leak your profits. Right? A product that looked like it was profitable, initially. If you don’t get the nuts and bolts correct. If you start leaking out profits here, it can really have a big impact on your business.
So Andy, why don’t you start us off talking about operational efficiency. Some of those things that you make sure to get right with your products before you even import them over to you personally. What are you doing to get right to make sure that the nuts and bolts of your business are running smoothly?
Andy: Sure. So this is not like a super sexy topic. It’s one probably a lot of people don’t think about when they think about an e-commerce business. It’s one, I personally get excited about. I come from a blue-collar background. My father worked for Burlington Northern railroad for 45 years. He was a farmer, came from a family of farmers and so, you know, they dug in the dirt, right to live.
And when we’re talking about the nuts and bolts of your Amazon business, this is blue collar type work. It definitely requires you, and maybe you don’t do it yourself. But you need to be able to create SOPs and have systems in place if you’re using other third-party services that are going to do this type of work for you.
And so the first one you just mentioned is operational efficiency.
This is something that a lot of folks that just get into private labeling fail at. Primarily just because they’re ignorant. I was ignorant of this when I first started. One of the first things that we often talk and teach people in our course.
You want to try to have your supplier in China do as much as possible when they’re producing your product. And when their packaging your product.
It’s going to cost you significantly more money if you try to do that here in the US. So one of the things we often point out. When you’re getting that product produced and you’re getting the packaging made, you want to have that supplier label that packaging so that it’s ready to go into the Amazon FBA warehouse.
You don’t want to have to have your third party warehouse store your product. Or charge you to put labels on a box.
Because they’re probably going to charge you thirty cents, forty cents a label. When you can get it done at your manufacturer for usually a penny or two cents a label. So that’s one of the first things that we often say is definitely makes sure that your supplier is doing all the required labeling right there at the, at the manufacturing plant.
Nathan: And so to be able to do that. if this is your first time with the product, you either need to have a UPC code right that’s attached to that product. Officially you should probably have a GS-1 barcode right? That’s what I had for our last product, a GS-1, barcodes so that the supplier could then just put it right on the box.
Or alternatively, you could have an FNSKU. You would need to have your listing created, enabled to in order to get that FNSKU. But you could give either one of those to your supplier that they could then put onto the box. It requires a little bit of a work ahead of time or a little bit of a planning process. And I think this is why a lot of sellers first time through do not have their supplier do this for them. Because it does take a little bit of thought beforehand. And that’s why if you’re listening to this and you’re thinking about your next product or if you’re in the process of making it. This is something you need to be thinking about.
Because you know, if it’s already being produced and it’s time to ship out. And then you realize, oh wait, I need, you know, some kind of labeling on this. You don’t want to delay that process any longer or just not know what you’re doing there. So definitely something to look into if you want to have them label that ahead of time.
Nathan: You mentioned too, Andy, about the box size. And knowing if that’s going to be efficient or not.
Can you explain a little bit more what you mean by the box size? And how a seller can be smart with this and making sure they’re doing their due diligence, uh, analyzing all that information?
Andy: Yeah, sure. Super important. You want to be able to know the fees that Amazon is going to charge you to store your product at their warehouse. And those fees are based on the dimensional size of your product as, as well as the weight.
And so, you know, if you can potentially go down a tier. Maybe you’re looking at your product and it’s small oversize. However, if you pick out different types of packaging, you might be able to get that reduced from small, oversize. You want to know the exact measurements of that box. And then you want to work with your manufacturer to make it as safe as possible. But also as small as possible to come in under those size requirements, the size tiers that Amazon has.
Nathan: And I think the biggest risk here is if you’re right on the line of it. I always forget exactly what the measurements are for each tier, but if you’re right on the line. And let’s say you decided to double box it or whatever, and it just made it a little bit thicker, whatever.
I think the biggest risk is usually for people that are going to just barely go over that, um, you know, large standard to small oversize. But the fee difference from large standard to small oversize is huge and you don’t want to be surprised by that reduction in margin. So yeah, definitely important there.
But another thing that we’ve talked about, I think we mentioned it last week, you know, the importance of packaging. We recently talked about it in our inner circle group. Getting your packaging right and having the right boxes in China for you. Or having them shipped to you can be really efficient as well.
I know for one of our products we’re looking at, even if we don’t necessarily have the product to put into a second brown kind of protective box, we might just have them ship it to us because it’s gonna be a lot more, a lot cheaper or more efficient for them to get those products. Those boxes just shipped right from China. So another, another thing you want to look at.
What about testing your product? Andy? I know you talked about this a lot, the importance of quality testing, testing your product. You even mentioned that one of the reasons you like having your warehouses because for some of your products, you know, you like to test them once you get here. However, how can you be most efficient when it comes to a quality control and testing?
Andy: Sure. So, you know, obviously, whenever the production run is done, you’re going to have an inspection company come in. And they’ll look at a certain percent of the units. Usually, they’ll randomly take eight to 10 percent. And go through them in a very detailed fashion.
So that’s the first step you know, that you want to do. And what we often recommend is that you do use a third-party warehouse. And depending on your relationship with that warehouse, when that product shows up to them, they might be willing as well, uh, you know, to test some units for you. Or you know, when it does show up there, have them ship you a few units. And again, this is post-production so that you can look at them carefully. As well, uh, you know, before they potentially send them into Amazon. And so, uh, you know, those are two ways that you could do it.
Yeah. And I know for some of my products it seems like it’s a lot easier to get people who will test your products over in China. I mean you can hire someone over there, not necessarily an inspection company to make sure that the factory did well. But in actual tester that would come in and on top of your factory go in and test units.
It might be a sourcing agent, you know, it might be someone that they hire. But a lot of times it’s going to be more cost advantageous to have them do it over there before you ship it over here and kind of do your own small percentage testing. So all that fits into being more efficient and trying to save costs.
Nathan: And I think the last thing, this is something you talk about a lot. One of the biggest reasons that you wanted to acquire your own warehouse space was drip feeding your products into Amazon and being efficient when it comes to storing inventory. So maybe you can talk to us a little bit about how do you plan this the best? When it comes to saving money on storage costs, especially for sellers. You know, at the time of us recording this October, November, December, the storage fees go up so much for FBA with Amazon.
What’s kind of your strategy when it comes to this and what are some of the things people have to consider when they’re trying to be efficient with this part of their operations?
Absolutely. Again, we’re talking about the nuts and bolts right on of your Amazon business. And these are ways that you can really squeeze better margin and more net profit out of your business. Instead of just being a gunslinger and throwing everything into Amazon. And I have to confess that’s what I was doing until about 10 months ago when I got my warehouse.
I would store consistently four to six months worth of inventory at Amazon. And the reason I did that is I never wanted to run out of stock.
When you stock out, you lose revenue, but even more importantly, a lot of times you’ll lose rank. And sometimes it’s hard to get ranked back up on that first page. My philosophy is once you have a winning private label product, you want to have four to six months of inventory on USA soil.
And the reason is there’s always delays. So there may be delays in production. There may be delays with your freight forwarder, a, there may be delays at costumes. I just had a product that was shipped and it was delayed at customs for three weeks. Yes, three weeks it sat at customs. I wasn’t planning on that but had I not had enough inventory here, on USA soil, I would have stocked out.
And so, you know, that’s my main goal, I never want to stock out. And so, you know, we highly suggest that you have a third party warehouse. You find a good one, you know, that makes sense financially and you’re going to save money by using a third party warehouse like that over just shipping everything straight into Amazon.
Nathan: Andy in the case of that delay. Um, I know I’ve had delays where if I was doing a less than container load. Which I don’t do very often anymore. But when I was first private labeling, um, you know, you’re basically sharing a container with other people’s products. And if customs comes in and decides they want to check on a product. Or make sure nothing suspicious is going on, they can then delay the entire container.
I don’t think you do very many if any less than container load. So in this case, were you getting your products checked out? Was it just a backup with customs where they couldn’t get to it. Or what was the situation there?
So this actually was a product that was less than container load. And I was in China at the time. So it hit USA soil, like right when I left for my China trip. Unfortunately, I wasn’t checking in with my freight forwarder when I arrived back from China. Which was almost three weeks later.
Then I emailed then they emailed and it was a mistake. At least that’s what customs said. So customs said, you know, we’re not sure why we held it. They didn’t charge me any fees, no storage fees, but they said it was a mistake. So I didn’t dig in any deeper than that. Just left it at that and was happy that it showed up to my warehouse the next day.
Nathan: That’s funny. And on that note, if you do, usually that’s good to know. They didn’t charge you any storage. Because usually, I’ve had a product before where there was a mess up with the shipping. The trucking company that was supposed to pick up the product. There was, I can’t remember, this was a couple of years ago. There was a mistake, they didn’t get it.
And then that storage yard, wherever it’s being held, will start charging these massive fees every single day that it’s sitting there. These fees are crazy. Right? So that’s definitely something that you want to avoid if you can. And you want to be efficient when it comes to your freight forwarder. Right. And your customs broker and being in communication. Obviously, if you’re away in China, it makes it a little bit more difficult. But that’s another part of your process that you definitely want to be efficient in when it comes to your business.
Nathan: You got into inventory planning here, Andy, you talked about, uh, you know, delays and managing your inventory.
What about lead time? If you can talk just a little bit about how that fits into kind of the nuts and bolts.
You mentioned that you used to just throw in four to six months of inventory to Amazon. Which by the way I think is one of the biggest fees that newer sellers or experienced sellers run into that just killed her margins that they’re not planning for. Right. When you’re, when you’re looking at a product and you’re like, yeah, this is going to have 30, 40 percent margins. If you don’t factor in any storage costs, if you’re just sending it right to Amazon, it could surprise you if your products don’t sell as fast as you thought they were going to.
If you’re sending in six months worth of inventory, they don’t sell as much as fast as you were hoping. All of a sudden you’re getting hit with long-term storage fees. Those are the things that can really hurt. Which is another reason for drip feeding? But what about your lead time? Now that you’re down to, you know, having a little bit more of a process, how do you figure what your lead time is?
And how does a new seller with a brand new product figuring out what their lead time is going to be for their next order?
Andy: Sure. It is a little bit challenging when you’re bringing in a new product and you’re not really sure of the sales velocity. You don’t have a sales history so you can’t look into your Amazon account and see how much you sold the last Q4. You know, as your business though, builds and as you start to create a sales history for that product. Or for that ASIN then you can generally get a good idea.
So I know now for some of my top selling products by looking back at last year’s Q4. And the previous year to that’s Q4. So I can kind of judge based on past sales what my sales are going to be this year. So that makes it a little easier, you know, the only other way that you can do it. Then as you’re really just projecting by looking at tools like Viral Launch or Jungle Scout. And trying to get an idea of how many units you’re competitors are selling right a month. And what spot they are in search.
And so that’s your goal, right? To get to that number one, two, three or four spot. So that’ll kind of give you an idea.
As well as then you need to add in, you know, like are you doing giveaways? If this is your first launch, how many of you are going to give away? How many that going to leave you then, you know, selling at your normal price. Uh, so it is a little more challenging. I personally like to order a little more than what I think, again, just because going out of stock is something you really want to try to avoid at all possible.
Nathan: Help me out trying to explain this. Because I think as a newer seller sending products right from China to Amazon, sound sexy. We were talking about this just a just a minute ago, you know, it sounds really sexy. Sounds so much more exciting. You’re not touching the product at all. Sounds so easy. Right?
But if you know, you were talking about projecting those sales. Your first product, the first time you’re bringing this product and you’re kind of just projecting. Which is another, a nicer way to say, kind of estimating or guessing? Right? What those sales are going to be. And I know for myself, if I’m bringing in a brand new product, I think it’s going to sell, you know. I bring over a thousand units, I think they’re going to sell in six months.
So what would be your suggestion to people bringing in the first time because if they don’t already have a third party warehouse? Or if they, if it’s not possible for them to send it to themselves. What’s the best practice for them in that scenario?
Yeah, the best practice is you need to find a third party warehouse or you need to clean out your garage. You and I, when we first started, we bootstrapped and our garage really became our warehouse in our office. Really for the first two and a half, three years of my business, I was moving a lot of product out of my basement. Out of my garage and if that’s your situation financially, you know, then that’s what you can do.
But now there are a plethora of third-party warehouses that you can contact and you could find that that will do everything and understand Amazon FBA. So if you don’t want to touch it, you don’t have to and absolutely you know, it makes sense to not send all of your product, especially if it’s a new product into Amazon.
And actually, if you’re a brand new seller, Amazon is now putting limits on the amount of product that you can send into the warehouse. I was just talking to a student in our course who’s encountering this situation. So he’s brand new to selling on Amazon.
And Amazon is telling him he can only send it in a certain amount of cubic feet of product. So it’s not a choice for him. He has to use a third-party warehouse.
Because he can only send in a certain amount until you can prove to Amazon that his sales velocity and his turnover, um, is what they’re looking for.
Nathan: Going back to what you were saying before. I got married in 2015 and I think the first two winters of being married my garage was completely full. So our car was in the garage and just ask my wife how that was right for living in Michigan. And having our car out in the winter.
But like you said, I bootstrapped. I was still kind of new green to this process now. Now I promised her I would never have that happen again. But for a lot of people listening, that might be the most efficient way to make this work. Right. Especially when you first bring your products in a nicer. If you definitely plan ahead.
It’s smarter if you plan ahead and use a third-party warehouse. But sometimes even then you might need to get some of those products sent to you. So that’s the nuts and bolts of it. This is Kinda like we send the beginning real nitty gritty, just the hands-on stuff of your business and definitely something that you need to be looking into.
Andy: I just want to add again, why do we do this episode on the nuts and bolts? Because it’s absolutely important for you to have success in your Amazon business.
You know we can, we can talk a lot about how powerful the Amazon sales channel is. How sexy it is, right to launch your product and you know, um, a lot of the stuff that we talk about that sounds exciting. However, what we see is the private label sellers and the brand builders that are really winning are the ones that understand the nuts and bolts. And the nitty gritty details that we’re talking about today.
And I’ll give you a perfect example of a company that understands this. If you look around your area. In my area, there used to be a number of sporting goods stores. There was Modell’s, and there were a few others. I can’t even think of their names anymore and they were really huge brick and mortar stores in my area.
Now there’s only one sporting goods store, it’s called Dick’s sporting goods. And I’ve researched this and found out the reason why. One of the reasons why they’re the last ones left dealing with sporting goods is because they have a smooth running supply chain. And their operational efficiency is better than any other brick and mortar store out there. And so they understand how important it is. The nuts and bolts, the underpinning of your business. If you get this wrong, it could mess up everything.
Nathan: Yeah, that makes perfect sense and I think the same thing can apply to private label sellers are the ones who will last. The ones who will be successful are the ones that will get this right. And to all of our listeners, we know that there’s a lot of different podcasts out there. A lot of different people that are promoting Amazon selling on Amazon.
And most of the time it seems like from what I, from what I hear, they’re like you just mentioned any. They’re talking about the fun, exciting part of it. Hopefully, our listeners will enjoy continuing to hear about the nitty-gritty. As we talk both about the success you can have and the details that you need to get into it. The nuts and bolts.