As an Amazon seller, I look for products that have a profit margin of 100% or better. I basically run the cost-of-goods-sold (COGS) calculations in my head and if I’m not doubling my money, I let the product idea go. The reason for this clear line is that I take into consideration how much personal time it will take to prep and send. I’ve reached the limits of my personal productivity and I’m becoming the essential bottleneck of my whole operation. When calculating the cost of outsourcing parts of the job like labeling and shipping, that 100% profit margin can cut in half or more very quickly. In order to run a decently profitable business, a carefully calculated acceptable profit margin is a necessity in order to automate and expand my catalog. You also need an occasional “home run” where the profit margin of one item makes up for lack in others. Some items I sell for a 500-600% profit margin but only because I have few competitors for a niche item. Profit margins allows me to decide if something is worth the time and effort. But let’s say I remove the bottleneck and develop sophisticated automation systems, code my own programs and marketplace, and buy my own logistics and distribution network? Sounds a lot like Amazon.
Amazon is my best friend and my worst enemy. I want to work with Amazon, not against them. Amazon makes a zillion dollars an hour. They can afford to sell things for a smaller profit margin because they have systems in place that can reproduce that small margin infinitely and that makes them a zillion dollars squared. I’m limited by what I can personally find and afford. Yes, I can find ways to save a few bucks like having my kids help label things, or buy boxes in bulk, but I’m the little guy. A recent word I discovered is “micro-entity” which is pretty emasculating. The problem is when I find a hot-selling item and start reselling it for a decent profit by purchasing it at the lowest possible advertised wholesale price. Then suddenly Amazon comes along and sells it at the wholesale price I bought it for. How did they…? The fact is, they got deep pockets. I can buy maybe 250 items from a supplier for $5 a unit. Amazon can come in and say we’ll buy 25,000 for $2 a unit and then list their product right next to mine. Then I’m forced to liquidate my stock at a loss and they still take 30% of everything I sold in seller fees. They win no matter what. The only way out is to create your own brand.
Creating your own product is a lot easier said than done. If it was easy, then everybody would be in on it. The factor I found to be the most limiting is actually my own self-confidence. I know things are a good idea, but somewhere along the way, the voices that tell me I’m not good enough start play in my head. “Nobody will buy it. Everyone will see how stupid your idea is when you’re broke. You just lost all your money.” Well it’s these voices that cause people to flock to the “safe” choices to sell or resell. They can only rely on inconsistent “deals” or arrangements to purchase a good at an extreme discount in order to remain competitive with all the other sellers looking to sell the same thing. It’s best to stop competing and start creating, innovating, and focusing on quality. Get into a league of your own and there is always a market for the best. Do it better than anyone and if I don’t know how to sell something, I find someone who does. It’s time to monopolize your market.