This week’s post is a bit of this and a bit of that. The picture is in honor of my mother-in-law who was an extraordinary quilter among other creative talents.
Like you, I’m going nuts getting inventory up to Amazon before Thanksgiving weekend. To be safe, you want your inventory to reach the warehouse by November 22nd. Despite all the extra help they hire around this time of year, Amazon’s warehouses get backed up. In my case, that means I want as much as possible shipped out by Monday the 18th. I have 15 big boxes going out today and I still have inventory to process. Yikes! (But it is a happy yikes!).
Where can I find inventory?
I get this one from new sellers often during this time of year. They go to a couple of stores and wonder how everyone else is finding inventory when they can’t find much. Because they are new, they don’t have the confidence yet that they are scouting right. Here are some points to help out. While I’ve said some of this before, it bears repeating:
- Scan A LOT – People think they are scanning a lot but in reality they are cherry-picking and they aren’t scanning very quickly. At the end of their shopping trip they have only scanned 50 items (perhaps) and they need to scan a hundreds. As a newcomer, you have to scan much more than an experienced seller. They have an advantage that they’ve scanned these stores before. They have already eliminated many items from their range of possibility in previous sessions. You have to work harder in the beginning.
- Check everything – We are often unconsciously directed by our own tastes and preferences while scouting. This means we may overlook a great item just because we would never buy it or we think it is stupid (like my highly popular “Frankie Fish” that sings – still makes me laugh). The longer I’m in the business, the more inventory I find simply because my horizons have been considerably broadened by experience.
- Have the tools – Many people wait to buy their Bluetooth scanner because it is expensive. They are scanning using their phone camera instead. This slows you down a lot. When I scan a store, I can go through so much more inventory in the same time, you wouldn’t believe it. If the Bluetooth scanner is out of the question right now, just realize you are going to have to spend more time because you don’t have the tools yet.
- Focus on items with potential – Buying designer rubber bands for 3 cents and selling them for $4 may be good margin, but there’s not a lot of potential there for big income. My friend Lynn has a great eye for potential in the toy world. She can look down an aisle and tell you which toys “look like” they could sell for $30/$40 or more. If you can get them for $8-$10 then you have a winner. I bought a bunch of remote-control toys this week for $10 each that were originally $40 – and they look it. They are slick. I priced them all at $35 (the new Amazon minimum for free shipping).
- Look for exclusives – Stores like Toys R Us, Target, Wal-mart and others negotiate exclusives with the toy companies for what they believe will be the hottest toys. This means that you will not be undersold by Amazon on that item and it keeps the prices higher. Everything I bought this week was a Toys R Us exclusive. I had to buy them on sale in order to make my margin which is why it pays to keep an eye on those endless emails. If a popular toy is not an exclusive, there is a much greater chance that Amazon is selling it for a rock bottom price. You’ll learn pretty quickly which items these are and can skip them in future stores. I rarely scan Fisher-Price baby toys, for example. FP has a store on Amazon and even deep discounters can’t beat Amazon’s prices on infant toys. I will look at FP toys for older kids (action figures, etc.) if they are inexpensive. Sometimes they work out.
- Be a joiner – Get on everyone’s email list. Many stores are having one-day sales and specials just for their reward members and those who’ve signed up for their relentless marketing. This week I took advantage of Toys R Us’ one-day sale on Wednesday and got some great inventory that would have otherwise not been at a good margin point for me. I not only got good prices, I got several $10 gift cards for future shopping trips.
- Pre-plan – The good thing about all the emails is you can check out the sales items before you go to the store. If you are a ScanPower customer, you can use their “WebScout” product that comes with ScanPower List. Type in the UPC code or the name of the item, and the program will pull up the offers just like your other ScanPower products. That way you save time at the store. I was at Toys R Us the minute it opened ready to run to the right section. Ironically, there was no one else there and I cleaned them out by 9:05. By the time I was at the second store, there was more competition, but I still got nearly as many units as the first store.
- Don’t automatically price at the bottom – Another reason newcomers don’t buy potentially good inventory is they are afraid to price higher than the bottom. They see a price on their screen, the margins are all wrong and they put the item down. My approach is to decide for how much the product could/should sell. I’m rarely the lowest price when I’m sending in my merchandise, but I sell my stuff all the same. If the majority of the prices are higher than the lowest seller and/or the merchant sellers are selling it higher, consider that maybe there are a couple of low-ballers whose prices are wrong. Their items will sell out and then you can get your price. My caveat about this is to keep an eye on the rank. If this is a fast-selling toy, then you know it will be very popular and sell a lot of units at Christmas. If this is a high rank (above 75,000 in toys for the purposes of this discussion), and there are a lot of low-ballers, then you probably should put the toy back down. I bought a doll set this week that was ranked at 888. I’m pricing my dolls about $15 higher than the lowest price and I’m confident I’ll get it. You won’t completely get it until you go through a holiday season with Amazon, but they sell hundreds of millions (with an M!) of gift items this time of year. You will be lifted by the rising tide.
- Think outside the toy – We talk about toys a lot this time of year but some of my fastest-selling items are baby, grocery, pets and household items. I personally love buying toys, there is something so fun about a designer doll…but what’s really important is buying fast-selling inventory at a good margin – regardless of the category.
- Buy more than one or two – If you find a good deal, you should buy all of them. I’m often surprised when people will only buy one or two. They may want to see if it will sell before making an investment or they may be afraid of competition and that they can’t unload a lot of units. If you wait until it is selling, all the units will be gone. If your rank and pricing are lining up but you are concerned about competition, buy them all but don’t send them all in. That way if they don’t sell or prices drop rapidly or if Amazon undercuts you, you can return them and use your money for something else. On the other hand, if they DO sell, then you have lots of units to send in and can dance all the way to the bank.
Can I sell toys this year?
I get this question every year because Amazon sends out emails stating that you have to have a certain amount of experience before you are allowed to sell toys during the holiday season. This notice – even though it goes to everyone – is for merchant sellers only. Those who are selling using FBA are automatically allowed to sell toys during the holidays. Why is this? Because Amazon will be fulfilling your orders. This rule of theirs is designed to make sure that customers have an excellent experience with fast shipping, etc. They trust themselves. Everyone else needs to prove themselves. This is yet another terrific benefit of being an FBA seller – you can sell toys all year.
How can I figure out my margin on the fly?
This is a confusing topic for most newcomers. They hear about the 3X Rule of Thumb or I might talk about doubling your money and they don’t quite understand what it all means. I’ll try to clarify it here. When I talk about “doubling your money” what I mean is if I spend $5, I want to make $5 when all is said and done. Here’s how it works while I’m out scouting:
- I pick up a $5 toy and scan it.
- Scanpower shows me that I can charge $14.99 for this product.
- After Amazon’s fees are removed, the net – which Scanpower also shows me – is $11.00 or so.
- I assume that it will cost me 25 to 50 cents to mail it to one of Amazon’s warehouses. I also allocate a few cents for tape, the box and packing materials.
- My final number is that I will clear around $10 after it sells. I buy it.
- I subtract my cost of buying the toy ($5). I’ve now taken $5 and doubled it to $10. My investment of $5 has created another $5 for me.
So what is the 3X Rule of Thumb? Well, coincidentally, the 3X rule often results in you doubling your money. Here’s how it works:
- I pick up a $5 toy and scan it.
- I see that I can sell the toy for $14.99 which is 3X the cost of $5
- I buy the item.
The 3X rule is simpler and it works for many items but not always. It is most accurate for cheaper items like that $5-$15 toy. If I’m spending $49 to buy a crockpot, it may not work the same. I mean, it would be great to get $150 for a crockpot, but most of the time I can get my margin without tripling the cost. Why is this? For everything you sell on Amazon, there are set fees and variable fees to store and fulfill that item. The more expensive your item, the more likely that you can make your margin with less than 3X. This is why I focus on doubling my money. Rules of Thumb like the 3X are very helpful when scanning fast and furiously because it tells me that the item in question is worth a closer look.
Why do you want to double your money?
When I talk to new sellers about doubling your money in my live shopping trips, I explain that doubling (or even better) your money is a goal. The reason you want a good margin like this is because there will be times when you won’t get it. Competition may come in and drive the price down. Amazon might drive the price down. You may sell an item and then have it returned in poor shape so you can’t resell it. Losses are a part of the business and the only way you can afford them is if your margins are fat on most of your goods. What about a higher margin? There are some people who won’t sell something if they can’t make at least $25 on it. They are very selective. They are also very experienced long-term sellers. Many of them are also selling wholesale. For people like us shopping in stores to resell, that may be too selective – at least in the beginning. I find that doubling my money is possible and I’m able to find plenty of inventory that allows me to do that. You may have different rules for yourself and that’s OK. What I suggest to new sellers is to first get a handle on how Amazon works and make some money. Then, experiment from there until you find that right mix for yourself.
What about selling on multiple channels?
I admire people who sell on eBay, Etsy and other platforms. They are maximizing their capabilities to sell inventory and they are opening themselves up to more inventory possibilities. So far I’ve not taken the time to learn how to use these other platforms, but I can see the benefits. Skip McGrath, Chris Green, Kat Simpson, Lisa Suttora and many other successful online sellers use multiple platforms and are great teachers. Check them out!
In addition, some sellers also focus on multiple lines of business — selling online, writing, speaking, creating their own products…the list goes on. There are many, many ways to diversify yourself.
My experience – learned the hard way – is that I never want to have my income controlled by any single channel ever again. That’s why I write books, sell on Amazon.com, teach classes, consult and speak. The bottom fell out of my previous industry twice in the past 12 years and I never want to go through that sweaty, broke desperation ever again.
Have a great week processing inventory!