Gary Leland Show Episode 14
This week I interview Chris Green of ScanPower.com – Produced By Gary Leland
We talk about selling on Amazon. http://scanpower.com
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Gary: Chris, thanks for joining me today. This is a topic that I am really interested in and I think everyone should be really interested in. First please tell us about yourself.
Chris: Thanks for having me, Gary! Talking a little about myself is tough because I have become a little Internet famous for different things. The quick version of it is that I graduated from Texas A&M, worked for Bosh Power Tools for 5 years, got big into EBay and built up a couple of accounts that has over 30,000 in feedback, then I got big into Amazon. Amazon then started the FBA program which stands for “fulfillment by Amazon”, which basically means they warehouse all of your stuff and are eligible for all of their shipping programs. Essentially you are outsourcing your fulfillment, which is incredible in the time that we live in that we can let Amazon handle our products no matter how small. There were no software solutions, so I partnered with a guy I met online and we founded a company called FBA Power, which helps FBA sellers optimize that platform. We then renamed it Scan Power and we are a one stop provider for anything to do with Amazon FBA, scanning products, making money online, optimizing price, and evaluating lists, all of that stuff. We openly market our products with education. I write books, do webinars, YouTube videos, and chats, anything people will need to be good at selling products. If they succeed at selling online then they might want to use our software. The Internet allows us to help people at scale. Take this podcast for example. We record it once but I can help thousands of people down the road when they listen to it. I am happy to help thousands of people! If they decide to buy the software, great, but I am truly happy to help people regardless.
Gary: Now your company website scanpower.com has a lot of information and tools on here. Are all of the tools meant for FBA or can anyone benefit from them?
Chris: They can help anyone, but they are optimized for helping FBA sellers. The first product we put out was our listing product, so you could get a product, scan it with a USB scanner, and list the condition and put notes up about your product. There was nothing like that when FBA first started out.
Gary: I have been doing Amazon for 22 days and I have been using a tool called the Amazon Seller App. Is that similar to your software?
Chris: Well that is a mobile app. Our first program was web based and you had to use the computer to list. Then we came out with our mobile app for Android first and then the iPhone. What you are using is from Amazon themselves and you have to have an Amazon Seller account to use the app. It’s a great program, it’s free, easy to use. You scan a barcode, it will identify the product, show you what it is selling for, show you the fees if you sold it and what you are going to get so you can calculate your profit.
Gary: That is exactly what it does. It shows me the lowest price it is being sold for, what they will charge me to sell the item, what the recommended freight is, and information like that. When I see all of that information and do the math I am able to see if I should even bother selling that item. I have scanned products that show that I would make $1 of profit so I didn’t bother putting that item on my Amazon page because it wasn’t worth selling there. There are other things with the opposite effect.
Chris: The Amazon Marketplace is inefficient as a whole. There are plenty of items on Amazon that people are paying a premium for and a lot of it relates to the Amazon Prime program where people have gotten used to getting free 2 day shipping and sometimes even overnight depending on how close they live to the distribution center. The Amazon Prime customers will choose Amazon over going to a store because it is quick and free shipping. I am a typical Prime customer because basically won’t buy from you if you are not Amazon Prime eligible and my time is very valuable. I do not want to drive 25 minutes to Target to save a dollar because then I have to make that same 25-minute drive home and I have to pay tax. It’s not a better deal for me to go to Target over buying from Amazon with free expedited shipping.
Gary: Let’s say that I have a widget and a competitor has a widget and mine is $2 higher than the other guy. Wouldn’t people go with the other guy over me?
Chris: If you are both FBA, probably, but if he is merchant fulfilled and yours is FBA it’s not the same thing. Yours will be shipped today because Amazon does that, and other guy lives clear across the country from the buyer so it will take longer to get there, plus there is no guarantee the item will go out today. Now there are some people who will wait 3 months for an item just to save $2, but that’s not typical.
Gary: I have 2 questions for you. First, what is different about the Scan Power mobile app compared to the free Amazon app?
Chris: The Scan Power mobile app is designed for sellers. It’s $40 a month so its not free, but what you see in this app are all of the prices: the new offers, used offers, collectible offers, and the payouts for all of those offers. It will also show Amazon as a seller with the picture, the title, the category, the sales rank, the weight, the dimensions, and all of that stuff so you can make an informed decision. You have to price strategically.
Gary: So we are talking about FBA now, which I have not gotten into yet. I do have this one item that I have been selling like crazy and it’s something that I import from China. I am making great money off of it right now. Because I have hundreds of this item, I should be sending say 50 of them to Amazon?
Chris: Are you the only seller on it?
Gary: No, there are other people who have them; they must be importing them as well. They are pricing them high enough that they are making a pretty good margin on them.
Chris: If you have a product you are making a good margin on and you are merchant fulfilling right now, you are going to get FBA boost. You will get more people who buy your product because you are FBA eligible. This number comes straight from Amazon: 50% of all Amazon buyers will not buy from someone who is not FBA. They either buy from Amazon direct or from FBA sellers. They want their free 2-day shipping.
Gary: You’re saying that anyone who is getting into Amazon should seriously consider going with FBA instead of merchant fulfillment on everything they have. If I have for example 1 glove left, then yes I will use merchant fulfillment because I just want to get rid of it; but if it is a regularly inventoried item I should just ship it to Amazon.
Chris: It’s kind of a no brainer. I hate to make blanket statements because there will be items that are not eligible for FBA export, meaning Amazon will not ship it internationally, so you would want to list that clearly so you don’t list those sales. As a general rule, you will sell more units and make more profit or net payout by using FBA on top of the fact that you will do less work. I have done fulfillment I know this happens. When you send your products to Amazon, make sure you put a new barcode over the existing one because Amazon will scan the product barcode and whatever it scans as is what the product is. You can print a new barcode with the information you want the item to have with Scan Power.
Gary: What happens if a product that you thought would sell well doesn’t and a year later they still have all 12 of your item in their fulfillment center?
Chris: Once you send stuff to Amazon, you have to stay on top of it. When you send them items, there is a very small storage fee. If you send them a book for example it is a penny per month to store. They have varying fees for items, so not everything costs a penny because they want to encourage you to send them stuff you can sell and profit from. There are some small, cheap items that they will charge more to keep so you don’t make any profit off of them and in turn will stop sending them. There used to be no limit, but now if your items are left after a year of being in the fulfillment center, they will hit you with a pretty hefty fee. These fees are something along the lines of $45 per square foot your items are taking up in their warehouse. Now they have changed it to 6 months as the time limit. They want you to manage and turn over your inventory. The good thing is that Amazon gives you a lot of tools to help you keep track of your inventory. To answer your original question, if you send them an item that does not sell, don’t wait around for it to sell and then get hit with these long term storage fees; ask for them to be returned to you. Return fees are so much lower than the long-term storage fees. They are only going to charge you 50 cents per unit to get them back to you.
Gary: So if you are at 11 months, you should be getting that stuff sent back to you right away!
Chris: You can do that or you can get more aggressive with your pricing of that item. It may even be a price that would make you take a small loss, but when you think about it that may be the smartest thing to do in some instances. If an item is struggling to sell at that price with Amazon, the story will be the same for you so if you have it returned to you then you have to figure out how to sell it on your own. They also have a disposal fee of 15 cents if you don’t want that item back and you don’t think it will sell. They will either destroy it or they will liquidate it. If you go to a flea market you may see a guy with a whole table of stuff with FBA labels on them because they bought a palate of liquidated items from Amazon. They have a whole part of the business that no one really sees or recognizes.
Gary: So if a person has an Amazon account to sell, do they have to qualify in some way to be FBA?
Chris: No actually you can open an Amazon account tonight and label it FBA and ship them product tonight. There are some restricted categories like shoes and videos because of the counterfeit potential and it’s hard to get approved but if you have enough stuff go ahead and get started.
Gary: What are some really good tips for the new person to Amazon? What things do they definitely need to know or get to help them get started?
Chris: There are two ways to look at this stuff. I love Amazon and believe that it is the best platform to get on and make money. The barriers to entry are really low and you can get in there and compete with the big guys today. You can outsource fulfillment and get Amazon shipping options attached to your items today. Because of that, it is almost bad that the barriers to entry are so low because anyone can get in there to do this and some are a little too quick to get in. Sometimes they don’t really study or know the rules, but at the same time Amazon is more of a do first and never ask questions. If you do break the rules, there is no ignorance of the rules or if your account gets suspended you can’t just make another one with another email without them catching you.
Gary: What is an example of a rule that could cause that to happen?
Chris: If you list a restricted product because you are responsible for your listings against everyone else’s listing. I have seen sellers just not take the time to know what they are doing and what they are allowed to sell or not allowed to sell. There are forums all over the place to ask questions so don’t be afraid to ask questions. You definitely do need to be sure to read the rules and policies and understand what categories you are allowed to sell in. If you are going to sell books, you need to read every word about books so you meet all of the guidelines Amazon has set up for you. Take the time to understand what “like new” or “used” actually means and what criteria it has to meet because what I may think looks “like new” may not meet Amazon’s standards. I could get in trouble for that. Be sure to keep your customers satisfied because if you start to get a lot of customer complaints your metrics will go down and they will pay attention to that. You have to run and treat your Amazon store like a business. It is not something that you can make mistakes and learn as you go. You want to avoid making mistakes on Amazon. Pay attention and read the boring pages of policies and rules they have available to you. If you agree to what is in there, you had better not make a mistake and do something that is against the rules because you will be responsible for that and you may not be able to recover from that.
Gary: So you can make a mistake that was an error and they can shut you down for that? Everything that you had going for you is now gone?
Chris: Absolutely. The worst offense you can make is to sell a counterfeit product. I’m not saying that everyone sells counterfeit product on purpose, but they do need to be able to verify their chain of supply. Just because something is wrapped when you buy it does not mean that it is genuinely that product, it very well could be counterfeit. You have to be able to prove where you get your product.
Gary: So they could ask you for a copy of the invoice from that vendor who makes and distributes those items.
Chris: Yes they can and they will. They pay more attention to high-risk products so if you are selling a bunch of items in one of those categories then they will pay more attention to you. They will slow you down a little to make sure you are selling genuine product. If you have issues or are unsure about what you are doing, join an online forum. Scan Power has a Facebook group where we discuss these things. You can find our group at facebook.com/groups/scanpower. There are both advanced and new sellers so no question is a dumb question, just ask. It’s better to ask than to get shut down for something you did.
Gary: Do you think that Amazon being as strong as they are, having so many shipping locations, having such a large product base and the way the continue to grow it, do you foresee where there is a time where online stores are going to have a hard time because people would rather buy from Amazon because I will get free shipping and will have my item tomorrow.
Chris: Yes and no. There are always going to be ways that stores can compete. So let’s say we have Joe’s Bats and they sell all kinds of equipment. Here is one thing people don’t know about Amazon; they have something called Multiple Channel Fulfillment (MCF) where I can still send my stuff to an Amazon and then use them as a pseudo drop shipping option. So my items are still purchased through my store and the payment is made to my store, but I go into my seller account and have the item sent from an Amazon distribution center. They will charge you for it, but it won’t be nearly as expensive as it is to do it on your own. You can ship a 4-pound box UPS second day air for around $11! I know I can’t get that price on my own UPS account, so it is worth doing in that way. On top of that, you don’t have to pay the commission fee to Amazon this way because Amazon isn’t selling it; they are just shipping it out for you. You can essentially use them as a warehouse and shipping agent.
Gary: Since this FBA seems to be a selling advantage to me, is there a way to tell if anyone else is selling a particular product FBA or if they are fulfilling it themselves?
Chris: That’s the big advantage of Scan Power is that we show you the new, used, and FBA on that product. It might show that no one is selling a particular product FBA. There are some sellers who look for products that are not available FBA and then find out where they can get them so they can be the only person who is selling them FBA. That is a huge advantage because of the 50% of customers who will not buy from non-FBA sellers because they want their free two-day shipping! Here is another tip: there is a tool called the FBA calculator. You input the item and what you want to sell it for and it will show you the pay out for that item, so there should be absolutely no surprises. There is no reason to find out after the fact that you lost money on a product. Use the calculator and figure out if it is worth selling or not.
Gary: Do FBA items have more of a chance of being an add on item that you see because they are already shipping something to a buyer?
Chris: That would be for a whole different show! In short, maybe because the items have to be FBA to be add on eligible so yes it’s possible for that to happen. Add ons are usually small, lightweight, low priced items that Amazon can’t afford to second day air. They would rather throw that small item in that same box because it is worth sending at that point.
Gary: Before we go, do you have any funny stories on your Amazon adventures?
Chris: 6 or 7 years ago when no one really knew what FBA was and I was one of the only sellers using this feature, I was sending in power tools like crazy. I wasn’t packaging the power tools was terrible, looking back now, but I just threw stuff in a box with exposed blades and every other bad way you could ship a power tool. The way I was doing it back then is laughable when you see what I do now. They do also have packing requirements especially with things like this where you have to bag things, cover exposed blades so they don’t hurt the warehouse guys. You want to prep the items so that it arrives to the customer how you think they would expect it to arrive. Be smart about it. Your items have to survive the inbound shipping, the warehouse, and the outbound shipping. They have to go through a lot of stuff so keep that in mind when you are sending your FBA items to Amazon.
Gary: I appreciate your time today, I have certainly learned a lot today.
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