My Amazon FBA Story
By Adam Chudy
I don’t know who or how I came across Amazon FBA. I think it might have been Pat Flynn over at SPI and a few of his great podcasts with Ryan Moran, Jessica & Cliff Larrew, and Ryan & Daniel. Since then I’ve seen and heard it in a dozen places. It’s probably the darling of the internet business space right now and hopefully isn’t getting to crowded.
I’ve done a lot of FBA lessons so far (see below) but I haven’t really talked about my own story.
After getting excited about Amazon FBA, I decided not to wait and take action. The first thing I did, I would not recommend to anybody. I paid way too much money to take a course, that in the end I didn’t find much value in. I won’t name names, but I’d bet most of them are roughly equivalent.
Every single bit of information you could want is covered for free in amazing places like The Amazing Seller (and if you want a course, take Scott’s). If you are at all a self-starter and know how to search google, reddit, and a few facebook groups, every single bit of knowledge you could want exists for free.
Much like my description in “What and Why” I spent dozens of hours making lists in excel. I wrote down every single thing I use in my daily life, as well as all the things related to any hobby I could come up with. Caitlin did the same. I also used some various sub-cultures I was familiar with and worked my way through their popular websites looking for ideas. We had some promising items but nothing I was super excited with. Maybe I’ll revisit them in the future.
The first great idea we had came from Caitlin. While thinking about things like makeup she had a friend mention Z-Pallets. If you haven’t heard of a Z-Pallet, it’s a makeup case that’s empty and magnetic. As a guy I didn’t fully get it without a demonstration, but basically it lets you pop out all the original makeup containers you have in dozens of half empty cases and consolidate them in to a z-pallet since it’s magnetic. It’s a clever idea if you can picture it. Check out their amazon listing for a better idea.
We decided THIS was the BIG IDEA. When we examined our competition, there was only a single seller – Z-Pallets (this should have been a big red flag) and they were doing A LOT of business based on their BSR and some other metrics.
Mistake #1
Literally days before we were going to make a multi-thousand dollar order, I was doing some additional googling on the company. I wasn’t looking for anything in particular, just doing some reading. By complete accident I discovered that the product was patented. MAC cosmetics (a multi-million dollar cosmetic line), owned by Estee Lauder, was sued by little ole’ Z-Pallets for patent infringement and they won!
It turns out the reason NOBODY but Z-Pallets were selling these little magnetic make-up carriers, is they had managed to corner the market. Obviously the Chinese supplier could care less these items were patented. They simply removed any logos and were happy to sell them to any bidder. I was on the verge of owning several thousand make up pallets that I couldn’t legal sell anywhere. We dodged that bullet, mainly by luck.
LESSON #1:
Alwasy be suspicious of any item being sold by 1 or only a handful of companies. There’s very likey a good reason for that. It’s probably either a patented product or there’s no real demand. Be sure, because your overseas suppliers have no problem selling products to you that are patented in the US.
Back to the drawing board
I doubled down on my efforts of my list. I had about 3-4 tabs and hundreds of items. This was before JungleScout, so I was tracking everything in my spreadsheet. I had BSR, number of reviews, page rank, price, and more.
All that effort, yet I found my product by luck. I was at an “event” with friends and I noticed my product. It was something I knew existed, but was unaware it was becoming popular again. I made a mental note to write down the idea in my phone and after we made it back home I punched it up in Amazon. It met most bit of the criteria I’d been looking for (check out the criteria in this post).
Next Steps
Once I checked all the stats (like we discussed here) and saw this made sense, I jumped to finding a supplier. After dozens of emails, we landed on our favorite. They happened to have 2 versions of the product I liked that didn’t take any real modification and they were prompt in their responses with good English.
We ordered samples and we thought they were great! Next thing we sent a test order for 500 each. The day our first set of boxes arrived, I couldn’t have been more excited. A local photographer handled our photos (and did a great job), I wrote the copy for our pages, and started sending.
Launch Day
We launched with the friends and family approach and quickly racked up 20-30 reviews. Because we picked a good niche, we pretty quickly were bouncing between page 1 and 2 and at one point were all the way up to top 5. Unfortunately, things were not all well. We were in St. Louis visiting friends and I woke up to a fantastic surprise. Over night we had 100 sales when typically we were running 10-15 per day.
Excitement went to a bit of worry. Did our coupon code get out? Had our page been hacked? I checked our promotions and everything else I could think of and it all looked normal. I called my partner and he saw the same thing, so I decided to enjoy my day and have fun on vacation.
Mistake #2
When creating a promotion, under “Step 3: Additional Options”you have to know to click “Customize Messaging” which then shows more settings. Under those settings is a very innocent looking box that says “Detail Page Display Text”. For God knows why, that box comes pre-clicked.
YOU MUST UNCLICK THIS BOX!
By leaving it clicked, whatever promotional code you create will displayed on your amazon listing. Think about that. You’ve now created a giveaway that makes your product $1.00 (or whatever amount) and now the entire world can see that. Now if Amazon gave even the slightest shit about user interface for sellers, this box would clearly labeled something like “Would you like to display this advertisement on your amazon page?” – Yes or No. It would probably then force you to confirm that again. Instead it’s prechecked and isn’t even shown automatically. Rant over, back to the story.
We did not unclick the box. For several days it sat on our listing with a code to make our product $1.00. Eventually some enterprising person noticed this and the next thing we knew over 130 of our items had been ordered in a few hours all by people with exceptionally Asian names living in New Jersey.
We might have figured this out a big quicker, but at the time we didn’t understand that sales show up in roughly real time, but promotional codes show up on a lag. Again, I don’t understand at all why this would be the case, but it took another day for all those sales to suddenly go from profit to huge losses as negative $19.99’s began to hit our account in mass.
LESSON 2:
We learned 2 incredibly important lessons. The first many Amazon sellers have learned the hardway. When you do a giveaway BE CAREFUL! The Amazon user interface for sellers is shit and it’s promotional interface is the worst of all. You MUST make sure your promotion is not displaying on your page. (Side note: showing it on the page can be useful as well. We have a 20% off code if you buy more than 1 of our items, which is displayed all the time.)
The second lesson is to really understand how your dashboards work and when numbers are going to hit. You can’t assume it’s all real time and if you have spikes in sales with no clear reason (change in page rank, external sales drivers), you need to very quickly figure out what is going on. If we’d understood that we may have managed to cancel that promotion earlier.
Rolling On
Now losing those 130-140 products on an order of only 1,000 hurt. There was a silver lining though, it boosted our rankings quite a bit and seemed to have a lasting affect. We kept up our solid sales of 10-15 a day and were feeling quite good about ourselves. Expansion was already in mind. Our product and category makes it pretty easy to roll out variations that are damn near limitless. We had recouped most of our upfront capital and were ready to move forward. That’s when we learned we had screwed up.
Mistake #3
We had been so excited to get started and get selling that we did not test our products thoroughly enough. The item I’m selling isn’t something I personally use, so I didn’t have much personal experience. The samples to me looked good and seemed good quality. I had assumed that was enough and it really, really wasn’t.
Turns out, the products were very cheaply made. After using them for a few hours to a few days (or a bit longer), a large percentage (probably over 20%) were breaking! Shit shit shit! What to do?
First of all, I don’t want to sell a bad product. I’m not interested in screwing anybody. I want to sell the best product possible at the price point we’re targeting. I believe that happy customers and good reviews are the key to a good amazon business. But I hadn’t done my due diligence and now I was going to pay for it.
I use an automated email system to send follow-ups to buyers, and request a product review and to let me know if they had any problems we would take care of it. A LOT of negative emails started to roll in, and we didn’t have the track record or enough good reviews to easily sustain it. Every complaint that occurred, I did my best to resolve. We were giving full refunds (so total loss there), a code for an additional free product (another loss), apologizing profusely, and telling them to keep the one they had. So we paid amazon fees twice and lost 2 products. The loss per bad item were wracking up.
I could live with the losses. The real worry was 2 fold – bad reviews would completely tank our sales long-term and that Amazon would potentially bad our product or account over reviews/returns. Amazon doesn’t want you selling junk and if they see a return rate they consider too high or too many bad reviews, they’ll ban you. They’re also known for having an appeals process that can take months and is maddeningly opaque and hard to work with. There are horror stories of some faceless drone in a cube, unfairly costing sellers hundreds of thousands of dollars over misunderstandings or bans for no real reason.
Luckily good customer service can go a long way and we prevented a good chunk of bad reviews and got other people to change theirs to average based on the quality of our customer service. We ate a lot of product and refunds, but it was well worth it.
Lesson 3:
You must understand your audience, particularly if you aren’t your own target market:
- Who is going to use it?
- How are they going to use it?
- Is it built for their needs?
Quality, Quality, Quality. The #1 rule is quality. This will not only save you a lot of headache and prevent losses, it’s also just the right thing to do. You should be proud of your company and your products.
You need to make sure that the product is built as well as it can possibly be built for your price range. Test the thing. Beat it up. Twist it. Drop it. Pull on it. Use it every day for a week as many times as your audience might in a month. Make sure it holds up. Have other people use it and see if you missed anything. Be willing to pay a bit more for your product and don’t nickel and dime your supplier to the point they’re incentivized to cut corners.
Starting Over
Let’s not forget, while these problems are my fault for weak due diligence, they originate with our manufacturer selling us crap. While we dealt with returns we were also dealing with the manufacturer. I sent some nicely worded emails, explaining the problem, along with a lot of photos of defective product. My questions and requests were simple.
- Why are we having so many quality problems? Why were these products so shoddily constructed?
- What are you willing to do to correct the issue? We would like full refunds on every defective product
- We would like a discount on the next order to compensate for all the losses we’ve taken
Essentially they told us to go pound sand. They gave us samples. If we didn’t like the quality that was our own fault.
Clearly those weren’t acceptable answers, so we had to go back to Step 2 and find a new manufacturer. The first thing we did was take our products to someone with a lot more expertise than us and explain why they were breaking and how they should have been built.
Armed with that new knowledge we sent out another 20-30 requests to new manufacturers. We used the same detailed but general questions from before, along with much more product specific requests. We quickly narrowed it down to 10ish suppliers and asked for pricing. They varied more widely than I would have imagined and we cut it to 5. There was also some negotiation around sample costs and order costs and got all 5 within a reasonable distance of each other.
Once the samples arrived there was no contest. One of the the manufacturers had managed to make exact replicas of our existing 2 products (which was crucial to prevent being setback to zero) and the quality of the products was exceptional in comparison to the other 4 (and the other 4 were way better than our originals). A bit more negotiation and we were off to the races. We didn’t just re-order our existing products, we expanded to 2 more, so that we’d have 4 variations rolling. Ultimately we are paying more per item with the new manufacturer, but it will save us from countless returns, refunds, bad reviews, and headache. It’s good business to pay a bit more for a much better product.
Waiting
Because it took so long to find a new manufacturer, our top seller sold out. It’s a good problem to have but was a real bummer. We missed all of November and December. Out of our 10-15 sales a day, it was constituting about 70%, so that was a blow. We were excited for the new order though, but it did require a big jump in capital. We were going from 1,000 units ordered to 4,000 so we kicked in some more cash and waited. The entire process and shipping took about 40 days and actually just arrived the week of Christmas. The new units should be on their way to Amazon as we speak and our company should be back on track.
Looking Forward
Along with that order came another sample variation and about a lot of additional variation examples for us to look through. I full expect we’ll be up to 6 variations by March with a goal of selling a minimum of 5/day and a stretch goal of 10. At that rate it will be full steam ahead, the company should be self-funding (cash flow positive) and the momentum can build! We’ve got ideas for at least another 5-6 variants as well as some unrelated product lines we’re excited to test.
Afterword
It’s pretty clear we’ve made a lot of mistakes. I’ve screwed up choosing a manufacturer, blew our first promotion costing us a ton of product, didn’t understand the lag in the dashboards costing us more units. We had a lot of returns and bad reviews. I’ve pretty much blown it almost every way you can in this game, with the saving grace being we picked a decent niche to work in.
The key is that I didn’t quit. Nobody gave up or panicked. We took each screw up, learned a lesson, and did better moving forward and are positioned to have (I believe) a 6 figure 2016. I’ll keep side hustling and so should you.
Did you get a lot out these 2 posts on our journey? Do you have any Amazon FBA questions? Do you have an FBA side hustle or are you considering getting in the game? I’d love to hear from you in the comments. Putting together what I’ve learned in to an e-book or course is on my mind and I’d love to know what you think.
- What a journey to success! Do you have a similar story? Don't forget to comment!
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