Amazon Business Update Part I

So I've decided to blog regularly on my successes and failures as someone trying to start a business as a seller on Amazon.  Maybe this will help inspire others who are on the fence about selling on Amazon, and maybe help you avoid some of the pitfalls I've encountered.

I stated that my goal was to make over $600 this month, and I didn't quite reach that goal.  Amazon will make deposits into your account around the 15th and the last day of each month.   As you can see from the attached picture, I had a payment for $257 sent to my bank on the 15th, and tomorrow they should be depositing $218.   While I didn't reach my goal of $600, I would've come close to reaching that goal if it weren't for all of the Amazon fees:

So from Sept 16th until today, I had over $400 in orders, but all the Amazon fees are killing me.   To be a professional seller on Amazon, they charge you $39.99 each month, which is included in the fees pictured.   I also set up some advertising for my products, and I'd estimate that about $60 was spent on advertising.   You'll also see that I offered some discounts on my products (Promo rebates for $51.34) in order to attract more buyers.

I also had to purchase more items to ship to Amazon, so the shipping fees are also included in the Amazon fees.  Using Amazon's UPS ground shipping service does save you a little bit of money, but it's still money that comes out of your profit margin.   

I think I'm going to eliminate advertising for this next pay cycle to see if I can increase my profit margin.  For you new sellers out there, I would recommend not selling any item below $10.99.  If you use Amazon FBA, the fees are usually going to be at least $4 for an item.  Right now I have an item in my inventory selling for $10.99, and Amazon is going to charge me a fee of $4.54 for processing and shipping the order to a customer.   That leaves a profit of $6.45, and then of course I have to subtract the $2.60 I paid for the item, leaving me a profit of $3.85 for each item.

 I also have another item I sell for $23.99, and Amazon deducts $6.27 leaving me $17.72.  Subtract out the $8 I paid and that leaves a profit of $9.72.   So as you can see, you can do much better the higher you price your items.

My goal in the next coming month is to bank enough profit so I can buy bigger quantities of each product so I can be in a better position to negotiate pricing with my suppliers.  The bigger your order, the more suppliers are willing to negotiate.   I also need to think about expanding into other products with higher profit margins.