Word Count: 2960 | Time To Read: 16 mins | Seller Category: Intermediate / Advanced
To an Amazon seller, the fourth quarter is like a championship game. The pressure is on. The hard work you’ve put in all season has led up to this point. It’s go-time! Are you ready to crush the competition on Black Friday and Cyber Monday?
We asked our customers: What are the critical tasks for a successful Q4 Sales Performance?
In Sellers Funding, we work with hard data from the Amazon Marketplace and strive to see the financial angle of the business and all the decisions involved in it. That way we can present you with valuable information that you can use to advance your business.
If you're an Amazon seller, you know roughly 30% of sales occur in the last quarter of the year, where thanksgiving, black friday, cyber monday and christmas all occur in a very short period. Our estimation is that this year's total sales for Amazon Sellers will be $120 billion, out of which $34.6 billion will occur in Q4.
With this in mind, we turned to our top 150 customers and asked them what they thought were the critical tasks for successfully navigate the last quarter of the year, and this is what we got:
In this post, we'll cover each one of these responses in detail:
#1 Critical Task: IN-PORTFOLIO PRODUCT PURCHASE
At the top of the answers was "In-portfolio Products Purchase" with 83% of respondents saying it was the most critical task.
What can you do to increase your chances of a successful Q4 regarding In-Portfolio Product Purchase?
- The obvious one: be aware of your suppliers lead time, specially if you're importing from overseas.
- Check your cash flow projections. Are you going to have enough money to buy new inventory? We wrote an article about why you should have thought about getting an Amazon Loan a long time ago.
- Are the new imports tariffs increasing your costs? Careful! Maybe your new purchase will be at a cost that will make them unprofitable for Amazon. Call your customs broker, they should be able to tell you.
- Are your sales trends upward or downward this year? Sales are hardly steady. Consider a 3-Month trend, then compare the same period to last year so you can have an idea if your sales are moving upward or downward.
- Are there any new, more attractive replacement alternatives for your products? For example, if you sell gadgets, keep in mind that technology updates quickly and every year the "top hot gadget" label changes hands.
- How many days is your inventory turnover and how it compares to previous years? That's another indicator of trends, and this year, with the changes to FBA inventory fees, the inventory turnover may surprise you with a bunch of costs you didn't have in 2017, or even last month.
No matter what you sell, trends change. Keeping an eye on sales volumes, inventory turnover and new products will help you conquer your Q4 goals.
By the way... Have you defined Q4 SMART goals? The only way to hit a goal is having one, and the SMART goals are the right way to do them.
A few words about goals...
We know "goals" can be a word you may not want to deal with. Or maybe you goal is to "make as much money as possible". But the truth is that unless you have a clearly defined goal, there's no way you'll be as effective as you can in your business. Why? Because in business moving forward without aim means wasting time, and in most cases money, just jumping around trying to catch the next golden opportunity.
Goals are important for a non-obvious reason most business coaches won't tell you. You see, goals allow you to avoid working on stuff that aren't a priority or going into Shiny Object Syndrome.
Having a goal doesn't mean you have to lose opportunities, but it certainly means you have to choose the opportunities you're working on now.
So, how do you define a SMART goal? SMART is an acronym for Specific, Measurable, Attainable, Relevant and Time-bound.
Here's an example of a SMART goal: To increase sales by 10% in Q4, by using Amazon Ads and switching to FBA in order to increase the chances to win the Buy Box.
Now, let's break this goal down into its parts:
- Specific: Increase sales by 10% in Q4, by using Amazon Adas (shows what, when and how)
- Measurable: 10% in a defined period
- Attainable: Is a 10% increase realistic? most businesses can do this kind of increases, unless you're at the top of your market.
- Relevant: Is it relevant? You're here because you're an Amazon Seller, and we're talking about FBA and Amazon Ads. Yes it's relevant. A non-relevant objective would be, for example, to have a seller-profile interview featured in the Amazon Employee's Internal Bulletin. Would it be nice to have? Yes, does it do any good to your business? NO!
- Time-Bound: Before the end of Q4 this results must be achieved.
You see how this is a perfectly defined goal? It doesn't leave room for interpretation. You don't need to wake up every day thinking "what should I do today?". You know what to do (and we insist in what not to do) every day, and you just get to work on it.
Now, we don't want you to think that goals are a thing of making it (pass) or missing it (fail) and that the world will end if you don't make it. No, the idea isn't to use goals as tools to make your life miserable, rather, to give you clarity on where to put your efforts. The best thing about goals is that once you conquer one, you'll see its power and you will become unstoppable.
#2 Critical Task: CASH FLOW
69% of respondents said it's a critical task for Q4 success.
If you're not on top of your cash flow there may be a moment in which all the money in your bank plus the payment collections you're expecting to receive, will not be enough to pay your obligations and keep your business running. This is called the solvency index in financial indicator analysis.
Cash flow is not about profit, it's about availability of funds. If cash flow is "negative" (more payments to make than available funds) your business could grind to a halt, and it usually triggers a chain of events with mostly predictable bad outcomes, like running out of stock, losing good rankings, delay of new products launch and more.
What else could happen? You may lose the Buy Box.
Does it sound familiar? So, what to do to prevent all this?
You must have a daily money-in, money-out schedule. Very simple, nothing sophisticated. You can even use any Excel spreadsheet template available within Microsoft Office.
Here's an example we pulled from a Google Search. We did this way to show you how simple is the idea of monitoring cash flow.
On the top, money coming in. In the bottom, money going out. Day by day. That's it.
The only thing you must keep in mind is to put the ins and outs on the day your best guess tells you it'll occur.
A lot of business owners think this is an accounting issue and leave it to the bookkeeper for monthly statements. They're wrong, it's a core business daily control process.
When money-out is more than money-in, you have "negative cash flow". That's a bad thing.
How to protect yourself from "negative cash flow"?
The best way to protect yourself is to have readily available financing options: it can be money saved for this times, but also counting on other sources of funding, like loans and Revenue Advances. You can call your vendors and ask for time extensions, but trust us, that's not a sign of trustworthiness.
So, here are some options for you:
1) Funding through companies that know your business environment (Best Option): Sellers Funding is a clear option for this. We provide term loans and cash advances for Amazon sellers and we understand the requirements for operations like yours, so we can analyze and get back to you quickly.
2) Credit Cards (Expensive and Risky): If you have good personal credit you may use your cards to finance yourself for a short period. Keep in mind this is not the intended use of cards and it could become a major problem if used incorrectly. Also, if you keep your balances high, you will spend a lot of money.
3) Borrow from family and friends (Inexpensive, but can be tricky to get): If you have family and friends that you could borrow from, that is usually a good and inexpensive option.
#3 Critical Task: AMAZON ADVERTISING
Amazon is quietly becoming an advertising giant that competes with Google and Facebook. And why not? If they account for 50% of all online shopping and they are the biggest online ads buyers in the world themselves.
People are being pulled in all directions by ads. It means that unless you have a customer base of raving fans, you'll likely need to enter the PPC game in Amazon sooner than later if you want to grow.
There are still a large number of people skeptic of ads, and they will purposely go past them and browse for products, but trends show (again) that advertisers are winning the battle and people are clicking more on sponsored products.
Image: Jungle Scout
Here are the basics of Amazon Ads:
- There are two types of ads: Search Bar (Branding) and Sponsored Product (Sales). We recommend competing in Sponsored Product until you have built a followers base inside and outside of Amazon. The rest of this post deals with Sponsored Products.
- You compete on keywords or search terms, not products (e.g.: Collagen Peptides).
- You set a "bid" for the ad. That is, you establish how much you're willing to pay Amazon to have your product displayed when shoppers search for the keyword.
- If someone else bids more than you, their ad will show up first, until they ran out of daily budget.
- Each time shoppers click on the ad Amazon bills you the bid amount, up to the amount of your daily budget. Daily budget is how much you're willing to spend on ads on any given day.
2 Keys to Success on Amazon Ads:
- Your products have to be eligible for the Buy Box in order to be a Sponsored Product. So, start working on making your products Buy Box qualified.
- NEGATIVE KEYWORDS: one of the reasons people spend too much on Pay Per Click is that they don't make use of the negative keywords. A negative keyword is a way to filter search terms to avoid showing your ads to people who are not the right buyer for your product. For example, if you sell Collagen Peptides, your PPC campaign could be to bid on "Collagen Peptides" and use "Collagen Peptides Recipe Book" as negative keyword, because you want people searching for products, and not people searching for books.
Now, the best way to learn is to test. Grab a few dollars, set your daily budget limit and test the platform. There are free resources available, but testing will give you results relevant to your store.
#4 Critical Task: EXPANDING YOUR PORTFOLIO
There are different reasons why you may want to look into expanding your portfolio:
1) Seasonality: some products sell during certain months (think christmas ornaments) and then sales volume drops. This is not good for your bottom line, but also, it makes your store more risky for third-party funding. Expanding to products with different seasonality than what you sell today will help you have consistent sales volume and become more attractive to lenders.
2) Profit Maximization/Bundling: do you sell shoes? Sell shoe laces or special insoles. Do you sell printers? Sell ink and paper. You get the idea. Pretty much what Amazon does with the "frequently bought together" offers, but with your own products. Bundling gives the perception of increased value for the money and people shift focus to the actual products in the bundle instead of the price.
3) Risk Diversification: basic risk management principle, don't have all your eggs in the same basket. This concept overlaps a little with seasonality but it has more applications. For example, tech gadgets. These items tend to suffer from quick obsolescence. Another example, vaping paraphernalia. Think about this, what if what you're selling gets banned overnight?
The question is this "what money are you going to use to expand your portfolio?". As we mentioned in the first task, working capital cannot be taken away to start putting money into a new product/project because until you start monetizing that project a lot of time can pass and put you in a bad shape to deal with current suppliers and even simple fixed expenses.
The solution: you need a fresh money injection.
Where do you get a fresh money injection? Two sources. Capital and Loans. Did you get a chance to read the 6 Reasons Why You Should Have Thought About Getting A Small Business Loan For Your Amazon Business A Long Time Ago? if not, finish this post and go there, you will thank us.
#5 Critical Task: FBM vs FBA
It seems that FBA is the way to go no matter what. But why then it shows up as critical in our survey? We called some respondents to find out.
From their answers, we decided to focus this post on FBM because FBA is already popular and well-known. The great headache sellers face with FBA is the Sales Tax issue when your products ship from different Fulfilment Centers.
Contrary to popular belief, FBA is not a good idea for every product. Especially for low margin or low-priced products. We did additional research and there seems to be consensus that anything below $20 with less than stellar sales should be strongly considered for FBM.
The reason is that you may be able to save money on fulfillment costs, and storage fees, and still be Prime eligible.
This change should be analyzed on a per-product basis. Also, always consider if you're bundling products and make sure you don't publish a bundle with split fulfilling, or else your sales, fulfilment costs, and reviews can break havoc on your store performance.
Another indicator FBM might be a good idea is if you're product is really unique and there are very few or no competitors, because you'll get a bulk of the buy box anyway.
Some Advanced Analysis
If you have multiple items in your store with high sales, and one of them fits the description above to be considered for FBM, we recommend that before making any final decisions, to compare the whole business in two scenarios, one using 100% FBA vs one using an FBA/FBM mix model.
You may find that the savings are not worth the extra work, or that you can average a mix of FBA/FBM products that'll allow you to maximize profits without overloading yourself with manual labor.
#6 Critical Task: OTHERS
From our survey, we got a number of other responses that could have made the graph, but didn't get enough votes to have its own post. We wanted to show you those mentioned more often.
1) Following up on deliveries of products to Amazon Warehouses: Transit from suppliers to Amazon Warehouses is key to avoid stockouts and sales issues. Any serious vendor should be able to provide an exact ETA, tracking number, etc. Also, be aware of Amazon's changes to FBA rules regarding labeling, etc.
2) Keeping track of feedbacks and reviews: Reviews are the life of a product. Be honest in descriptions. Ensure a positive unwrapping experience, offer quick responses to customer inquiries, and try to take all refunds.
People will go out of their own way to post a negative review as a way to punish an unsatisfactory experience. Not so much with positive experiences.
3) Following up on competition prices: Use tools to track your competitor's products. Price is not always the leading factor when buyers make a decision, so don't necessarily make your product the cheapest option. Try bundling before dropping price.
4) Not having overstock for FBA Sellers: With recent changes to storage fees, specially long-term, sellers must be really aware of their sales cycles and consider one of two strategies: a) Reduce purchase volume and increase order frequency. In this case, you may want to negotiate an "open-order" price with your supplier. If you're confident enough about your sales, compromise to a purchase volume that allows you to negotiate even further. b) Include a stop in the supplier-to-Amazon route, where you storage items yourself and send to Amazon as needed.
5) Having a good customer service in place for FBM sellers: Highly related to #2, customer service is the ultimate source of positive and negative reviews. Don't cut corners on customer service, and remember, you can sell a bad product with good customer service, but bad customer service will kill the very best products.
6) Guarantee on-time delivery for FBM Sellers: This one is self-explanatory. FBM biggest disadvantage over FBA is Prime Shipping. You can get the buy box and into Prime if you have a strong shipping structure to guarantee timely delivery.
We hope you found value in this post, because we can clearly see that any Amazon Seller can take golden nuggets and apply them to their business.
[NOTE: In any case, there's a strong case for having funding options ready to pull the trigger when needed, and avoid having to apply in a hurry and get less-than-desirable conditions. The only remedy for that? Anticipation. We invite you to create a free, read-only account with Sellers Funding and get to know your pre-approved amount calculated by our own Visinger Score, without making an inquiry to your credit. After that, if you decide we're a good fit for you, you'll have the chance to apply, but only when you feel ready for it.]