Open Blog - Selling on Amazon - 2016 April

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April 2016 Summary

  • Orders                          246
  • Orders per Day              8.20
  • Revenue                       $4,652 (£3,276, €4,297)
  • Gross Profit                  $3,024 (£2,772, €3,636)
  • Average Order Value      $19.22 (£13.54, €17.76)
  • Hours Spent                  15

We run as a fulfilled by merchant (FBM), which means we ship ourselves. We do some fulfilled by Amazon (FBA) orders but it’s rare for us. By shipping yourself, you must know how to ship on Amazon and do it well. If not, being an FBA seller may be a better choice as FBM does require more operational tasks like answering customer service emails, refunds, return authorizations and more. As a third party seller, we chose FBM as we want to maximize profits and the fulfillment work and operational actions are minimal. At this time, FBA inventory is only to increase our Amazon buy box percentage. The more Amazon services you use, the more valuable merchant you are and your buy box eligibility and buy box rotation will increase. So even if you don’t make any more sales off of the Amazon seller services like sponsored products, you should consider how you can “use” the service to boost your Amazon buy box algorithm score.

Financial Summary

This month there were 246 orders with 3 refunds and 1 A-to-Z Guarantee refund averaging 8.20 orders per day. Month on month (MoM) revenue growth was 37.5% equaling $4,652 (£3,276, €4,297). We’re really happy with this month’s results. But we’re seeing some clouds on the horizon as we saw a slowdown of orders in the last days of the month. Revenue should have been higher if our average orders per day had kept on track with the first three week’s average of 9.42. But for the last week and a half of April, we saw a decrease in orders at 7.12 orders per day. Last month we had 187 orders with 2 refunds averaging 6.03 orders per day for a revenue total of $2,990 (£2,105; €2,757)

This month’s average order value (AOV) was $19.22 (£13.54, €17.76) with 8.20 orders per day compared to last month of $18.28 (£12.87; €16.86) and 6.03 orders per day. Again AOV increased greatly because of shipping. Shipping AOV contribution was $2.75 (£1.94; €2.54) while last month’s was $2.12 (£1.49; €1.96).

Expedited shipping revenue again contributed a significant amount. Out of the 246 orders we had 12 expedited orders totalling $665 (£469; €615) in revenue. This means that 4.9% of orders made made 14.3% of revenues, compared to last month 11.6%. We can only reiterate that expedited shipping revenues should be considered in your Amazon selling strategy. We increased our expedited shipping fees and there seems to have been no sensitivity to the price increase. We believe this gives further evidence that when a customer chooses expedited shipping they will pay nearly anything to get the item there. All of our expedited services are a next day service in the UK and EU. Expedited shipping costs were $169 (£119; €156).

Amazon fees were $716 (£504; €661) sitting at about 15.4% of revenues. Cost of goods sold (COGS) were $911 (£642; €842) equaling 19.6% of revenues. The largest component of COGS was shipping at $683 (£481; €631), 14.7% of revenue. Shipping cost grew 34% due to the expedited shipping costs and was 25.3% of total shipping costs.

Finally, gross profit was $3,024 (£2,772, €3,636) leaving us with 65% of revenues.

April Amazon revenue
April Amazon AOV

This Month

We received an email asking us to join Amazon Vendor Central. We declined as we’re not interested in becoming a Vendor Central merchant as it is more aligned to the old school wholesale model. Vendor Central is simply where you, the merchant, sell your private label goods to Amazon at most likely half the retail price you are already selling at. So for us, why would we cannabalize our own sales by selling to Amazon at half the retail price, when we already sell on Amazon directly to the consumer at our controlled price.

Other issues with Vendor Central accounts are much less business intelligence and seller reports, no control of product price other than setting minimum advertised price (MAP), not great support from your Vendor manager, irregular purchase orders, 30 to 60+ days payment terms and finally if Amazon don’t like your product, they can just send it back to you. But know there are no set rules in Vendor Central and some of these cons could be made into pros by negotiating harder.

The pros of Vendor Central account is access to A+enhanced marketing content (A+ EMC) and Amazon marketing services (AMS). A+ EMC allows you to add more than basic html into your product description. Most A+ EMC product pages use videos, more product pictures and further persuades the customer to buy. AMS has more impactful ads than Amazon sponsored products ads. You have three choices of Amazon sponsored products, headline search, and product display ads.

We played around with a few Amazon selling tools specifically to increase product and merchant feedback. We don’t focus much on product feedback as our private label products are heavily commoditized. Most customers seem to be happy purchasing our products without any social proof. Hopefully our luck will continue as we know most private label third party sellers have to front load their product expenses. By giving away product via discounts to gain Amazon product reviews, sellers willingly trade inventory for Best Sellers Rank (BSR) increase in Amazon. The BSR number has an effect on the Amazon buy box and should be tracked closely. We’ll let you know what we settle on in the next month for now we’re experimenting for a few in parallel.

Next Month

We mentioned a sales slowdown but we’re hoping it is an end of the month blip. We’ll be comparing our internal Amazon financial dashboard against some other services. Also we’ll be sending more FBA products  to see if we can influence our Amazon buy box percentage a bit more. Let us know if you have any questions by asking in the comments. Thanks and see you next month.

Thank you!

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