Why you should never launch with more than 500 units
If you’re in any kind of Amazon selling facebook group, you’ve probably seen a few impressive screenshots that run along the lines of: My first month and I’ve already make 10k!!
While not as common these days as a year ago and while still possible, there’s one question that needs to be asked:
How much did you sink into product to hit that number?
Sure, other costs like PPC, margins, giveaways are also part of the wild success screenshot, but I’m specifically interested in that product spend figure is because: to make 10k in one month, in most cases, you will have to sell a lot of units which means you had to invest heavily in that first, untested inventory load.
But here’s the thing: getting in any more than 300-500 units on your first product is a terrible idea!
I don’t care if you’re a millionaire, it’s still a bad idea
Because the risk and reward don’t match!
I was reading the excellent Fooled by Randomness recently and so much of the content can be applied to the Amazon business model (and lots of others).
You see the basic point of my argument here is that, in any case, the risk and potential downside of starting with a 500+ units vastly outweighs the upside.
Here’s some possible outcomes of a new launch (and the same applies to ANY new product launch).
You launch 1000 units:
The launch is a success, you are selling 10+ units per day – you are baller
The product flops and you barely sell 1 per day – you wipe away the tears while listing to hello Darkness my old Friend on repeat
The product sells well, but you find out that the ppc is 3 dollars per click, you have a horrible acos and you start dealing with hijackers
Random setbacks: you accidentally violate a trademark, your product gets flagged as hazmat, some other nasty surprise etc
This means that, if your product is anything less than a total success (however you define that), you will face issues with slow moving inventory, tied up capital and low morale. Even if you have a lot of money, why deal with all of that shit when it can all be avoided?
If your product IS a success out the gate, you just need to reorder in a much larger quantity, having to delay gratification a little tiny bit. You are now spending big money on a tested product.
And this isn’t just me being negative
All those points have happened to me, apart from C as I only had a mild hijacker and Amazon EU ppc is a lot more manageable than .com generally.
But I got off lucky.
My worst result to date is a product that probably sells a few units a week, but I knew it was a risk and the cost was cheap, so my loss is maybe a couple hundred dollars – which is nothing. The potential reward and risk were in line.
Other sellers have dealt with much worse - go find someone who got stung with a spiral slicer (there are lots) , someone who got their account suspended because of high return rates on electronics or one of the many sellers that got Black Swan’d with their hover boards.
Why I like 200-500 units
Why I am drawn to this number like a conspiracy theorist to the Youtube comment section is because it is enough to really give you a proper test run and ‘feel’ for the product.
You have enough units to do a ‘reasonable’ giveaway, run PPC and, if something goes south, who cares, you only have a couple hundred units and, with some price wiggling, you can usually sell off most items on Amazon at break even pretty fast.
Once you sell off those units, you’ll really know if you want to continue with that particular item. There is never a real downside to starting with 200 units.
What if you have a great looking product but the supplier won’t accept a low MOQ?
This can be a tricky one as most suppliers will only customize past a certain order quantity, usually 500+.
In this case, I would try getting a local sourcing agent to help find another supplier at a better price. Getting a sourcing agent was probably the best Amazon business thing I’ve done in forever.
If you absolutely cannot make a unit amount / price work, I would try something similar or non-customised or, put the product on the backburner.
If you have a lot to invest and you really think you have a great customised / special item (not just a logo change or bundle), then I would maybe roll the dice on it but only if I could really take the financial hit with ease and jump right back into a new product.
Better yet, if you have a good bankroll, launch 5 products at once!
And one last thing on screenshots
When you see the juicy success screen shot, you have to remember that it is very much survivor bias in play.
Too many success screenshot paint a false picture that makes people think that private labelling is super easy and doesn’t come with risks - but you’re not seeing the sellers who are have failed, moved on or are fighting a battle.
We all tend to think that, ‘sure, they filed because they didn’t do X, I’m smarter, it won’t happen to me!’ But, don't kid yourself.
Don’t let a ‘feeling’ about a product or a Jungle Scout screenshot override your common sense.
Just do the work, don’t rush, validate and test and don’t get attached to your products and if you fail then review and try again!
It’s the world’s least sexy formula for anything, but it works