No one likes throwing money away, and without the right Amazon advertising strategy, that’s exactly what happens to so many sellers. After all, the old saying “spend money to make money” is only true if you spend money in the right place. That is why we partnered with our friends at Payoneer to bring you this webinar on how to successfully spend on Amazon to maximize every cent.
In this webinar you’ll learn:
- Effectively manage Ad Spend based on product’s lifecycle
- Expand your brand to new markets
- Scale your winning SKUs
- And more!
Watch the replay:
Don’t miss the full transcript here:
Well let’s go ahead and kick things off here. Sound good to you T.J.?
Absolutely. Let’s jump in.
Yeah, yeah. So, this is Jason Magee from Teikametrics, I’m with T.J. Hyland. We’ll do a proper into here in a second. But just to make sure you all have landed in the right place, today is May 7th. T.J. is my special guest here. We’re going to be covering why cash is king, learn when, where and how to successfully spend on Amazon to maximize every cent.
So, give you a quick background. Again, Jason Magee here. T.J., I’ve been really excited to do this with you, man. For those who don’t know, probably nobody knows, but T.J. and I worked together for, was it five years at World First? Is that right, T.J.?
That’s right. Best five years of my life.
You’re welcome. You’re 100% welcome for that. No. Yeah T.J., now you’re obviously as Payoneer. Feel free to go ahead and give the audience a little background about yourself, T.J.
Yeah, so as Jason mentioned, we worked together at World First. When I was there, I did a variety of roles. I was on our sales team, to head up our sales team, our account management team, and then headed up our partnership’s team towards the end.
So, having worked with all sides of businesses in the US and abroad, I’ve actually also sold on Amazon myself. So, I’m super familiar with the nuances and the ins and outs. To be honest with you, I’m familiar with the struggles and how hard it is. Everyone seems to think it’s pretty easy, but I’m sure you can all attest, it’s not.
Absolutely. Look, we’ve seen the evolution. I mean, I remember when you and I first got started in learning Amazon and that side. That was all resellers. Now, you’ve seen this massively shift towards brands, that’s private label brands that folks are starting as well as the largest brands are starting to sell on Amazon directly. So, it’s sort of come full circle hasn’t it, T.J.?
Absolutely. I mean, that’s the real way to create a business. I think Amazon has leveraged their capabilities and given this power to these entrepreneurs, a lot of whom are with us today.
Yeah, exactly. And again, folks, thanks everybody for attending. Let’s sort of jump right in and talk about the meat of what we’re going to cover today.
T.J., before we go through the topics, do you just want to introduce Payoneer and who you guys are and what you do? That way, they have a context.
Yeah, absolutely. So, Payoneer, we are a cross-border payments company at the core. That’s kind of how we started, helping people around the world send and receive money. Our mission is basically to empower entrepreneurs to grow their businesses globally. We help with Amazon sellers and Marketplace sellers when repatriating their overseas earnings, when they sell their products in one country and live in another, with the foreign exchange.
We can also help with the payments that you need to make, whether that’s to a supplier or a VAT authority or even to a freelancer overseas. Then, finally, the kind of what we’re going to be talking a little bit more about today is our working capital solution. It’s something that we created, where we saw a gap in the market. There was a need for a product to help Amazon and Marketplace sellers with funding. It’s a real issue, these entrepreneurs have a great opportunity ahead of them but are sometimes a little strapped with cash flow.
I think there’s no company that doesn’t have some sort of issue related when it comes to money, operating cash flow. But yeah, we’ll definitely get into that.
So, what we’re going to talk about today is we’re going to talk about leveraging your capital in each of these phases. When you’re launching new products, what are indicators you’re in this stage and where should you be spending it? When you’re entering new markets, when you’re trying to scale your company or product line or brand aggressively, when you have winning SKUs, you know we’re just crushing it. Talk about reinvesting back in your business. Then, T.J., we’re going to round it out with you guys talking about the new solution you guys are coming out with as well.
Fun fact, if you guys sell on Walmart today, that you actually need a Payoneer account to get set up because they process all the payments. A lot of you all are probably inadvertently working with Payoneer already, which is great.
You are in the right place if you already have at least one successful SKU on Amazon and you’re doing at 10K a month in revenue. You have numerous SKUs and you’re looking to launch more or move into new markets or if you’re running a successfully e-commerce business and you have a lot of SKUs and you’re in numerous markets. We’re going to cover content really related to number two and three today. Obviously, if you’re in the first bucket, you’re going to get a lot out of this. We’re going to go diving deep into some of the challenges that folks face when they’re actually trying to scale and run a larger business.
So, I’m actually going to run a quick poll here. It’s a good time for the audience sort of get involved here. The question is do you take outside capital to run your Amazon business? Let me go ahead and launch this poll here. T.J., I don’t think you’ve ever been a part of one of these polls, have you?
I haven’t. This is fun.
Man, it’s bringing everything new into your world, T.J. So, we have …
21st century technology over here.
Yeah. Absolutely, man. T.J., do you already see some of the results coming in? I’m going to share them here in a second. I don’t know if you can see them yet.
Yeah, I can. It seems like a lot of people, a majority have not taken it yet.
Yeah. Let me jump in real quick and then let me share the results with everybody. So, looking here. Surprisingly, the overwhelming majority haven’t actually taken money from outside sales, and we have a few folks, the second biggest, that use Amazon Lending or service like Payability. Yeah, so pretty interesting break, then.
T.J., anything you want to highlight here, just from the results here? What was your thinking initially when we are going to launch this?
Yeah. I mean, I think the results basically reflect what I thought was going to be the case. I’ll touch on a little bit later but one of the big reasons why we had created this product is because of the sort of lack of knowledge in the outside world about Amazon businesses. So, there’s not usually an ability to take advantage of funding from a bank because the bank won’t really understand your Amazon business, so I think it’s really telling. I think a good majority of this group here will understand and really dive deeper into what we’re touching here.
Absolutely. And so, this quote I wanted to share right now is, “Look, revenue is vanity, profit is sanity, but cash is king.” The story that I want to tell here is Alasdair McLean-Foreman, our CEO, he was one of the very first third-party sellers on Amazon. He was in his Harvard dorm room running a multimillion dollar revenue business. He had no idea whether he’s even making money or not. He’ll tell you, so, obviously, I’m not spilling the beans on something he wouldn’t want to share but yeah. I mean, he sold his company. When they were looking to acquire it, they really hammered him on profitability. He goes, “Wait a second. I don’t even look at profit. Am I even profitable?” Then, the other thing, too, is the cash flow. The only real inhibitor to him growing was the cash position as well.
So, just to set the stage here, I actually talk about this a lot. When I’m training employees internally, with new hires, or even doing a webinar like this, look, T.J., you and I have both sold. I mean, I had a brand I ran on Amazon. You sold on Amazon. What does it take to really be a successful seller?
So, you have all these things that are sort of chronological order, one through six, and then you have these two things at the top, compliance and accounting and finance that correlate to all of it. The core thing here is, in order to start the flywheel, so to speak, the ante to play the game is money. You need to have access to capital. So, we’re really going to dive in deep on this as well but I’m happy to even share this with the audience. I saw somebody ask if we’d be doing that. So, yeah, absolutely. Folks, if you guys have any more questions, by all means, just chat them in the box. We’re on site here obviously to be picking those up as well.
So, let’s kick off our first topic here, T.J.
Cool. So, the first thing I think we are going to talk about is launching a new product. So, this is people that are either transitioning from reselling to private label or just really getting started on Amazon, or even you have a successful product and you are looking to make a new one or create a new one.
So, some of the indicators that you’d be in this stage of your business are that you have a limited number of SKUs but they’re doing well. So, you are wanting to capitalize on your success. You think you know what you’re doing. You got a handle of what you got. So, maybe take your business model to the next level and how you do that is maybe launching a new product.
Yup, absolutely. Then, next one here, your sales are still increasing but they’re not growing as fast.
Right, so it’s a really good time to regroup, reflect, see what you did right, how you got to this point, as a next point, you’re sort of reaching a plateau. You’re not necessarily growing at the rate that you used to but to get to that point, you’ve had to have some success. You’ve had to have done a couple of things right.
Yeah. It’s actually a good pro tip I want to throw in. So, a lot of folks track their revenue, like, “Is my revenue growing?” They don’t track the percentage of which their revenue is growing or not. So, you can have a business that’s doing very well and you’re adding revenue but if you start seeing the percentage growth actually go down, this is a leading early warning sign that you need to start considering adding more SKUs or yeah, taking the next step.
So, I definitely encourage … I mean, T.J., we used this when were at World First and you probably do this at Payoneer, too, but funds in. If you see funds are coming in but it’s going down or they’re not growing as much, that’s probably a success metric you use in Payoneer’s business to understand how client’s growing, right?
Absolutely. So, if a client’s doing 20, 30,000 a month, and then next month, they’re down to 10, down to five, something’s going on. So, whether they’ve reached that sales plateau, that’s typically the case.
The last indicator that you’re at this stage is you have your winning SKU and maybe it’s time to expand and launch new product for a good reason. You want to launch a complimentary product to what you got. So, if you sell kitchenware and you sell a nice pot and maybe you want to expand and try and launch a frying pan to match or a skillet or something like that to build your brand and that’s really what you’re doing. You’re building your brand by adding a complimentary product there.
Look. The thing that I look at is, look, you can’t just throw the old school private label is. “Whatever it is sells well, I’m going to sell one of those in a different variety.” We need to start thinking, is this either something that can be used, like if I sell sleeping bags. Do I also want to sell a tent? Or is it overall play into my brand of story at the exact same time?
So, T.J., let’s talk about where capital should be allocated at this juncture.
Right. You’re going to take your success that you’ve had, the one like you’ve experienced and it’s time to reinvest. When you’re going to reinvest, there’s a couple things you should do before you even place an order, so what you want to do is you’re going to test new products and make sure that the order that you’re going to submit is of a certain quality.
So, the first thing that we’re going to touch on here is keyword research. One of the main points in that and one of the super useful tools is the reverse ACIN lookup. So, if you found a product that looks super attractive to you, you think that it’ll sort of fit in your brand and your product catalog, you can use the reverse ACIN lookup to see what keywords those other competitors are using on that.
Couple other things to consider are packaging and design. So, it kind of still goes back to building your brand, so is the logo and everything that you’ve had in the past working for you or is it maybe time to really revamp that and create something that’s scalable?
The third thing on there is before you even receive your first order, you want to ensure that you are ordering products, even if it’s from the same supplier, but you want to ensure that you’re ordering products of the quality in which you want to be judged on.
Yeah. The one thing I want to say, too, is I’ve learned, we used to work with a lot of non-US based sellers as well, right?
Things I’ve found is the goal here is you don’t have to have the most perfect packaging. You’re just trying to get a really good product and just iterate. You don’t need to fall in love with every single component of it. You just need to make sure that it serves the right need. We’ll talk about product market fit here soon but yeah. I mean, look, it’s the balance between getting a product you know that they want but also realize you’re testing it so you don’t want to put so much effort in that it’s prohibitive should that product not work out.
Absolutely. So, then the next place were you’d use these funds are your initial order. So, you’re going to place that order typically, you have to put anywhere from 20 to 30% down, depending on your supplier. Then, you have to get your goods back to your home country. So, wherever that is, even wherever your supplier is. I think, Jason, you wanted to touch on importing your goods?
Yeah. I think the thing about this is another pro tip that … Look, when you’re ordering a product, your whole point here is how quickly can I just skip to testing it?
So, even though it’s a lot more expensive, you should air freight your initial order or testing products or your first order or batch. That way, you can get it as soon as possible. Then, if you go and put it on a boat, that’s going to take forever.
So, again, you’re going to lose a little bit. It’s going to be a little expensive, but at the same time, too, it’s actually is just really about getting it as quickly as possible and testing it.
Then, the last thing that we’ll touch on here is advertising as well. But before we get that, I think it’s really important we talk about product market fit. So if anybody doesn’t know Marc Andreessen, when it comes to, you name it. Physical products, running a SaaS company, everybody talks about product market fit. The definition means that you have a product and a good market and that product satisfies that market.
Then, one other thing about it, so look. Congrats. You have a really cool product but does the market actually want it? Does it solve a need or better? Is it better than the alternative? One example that I was just watching Shark Tank the other night. There is a product called … T.J., I was telling you about this. This is Saucemoto, which is essentially dipping sauce that you clip onto your A.C. vents in your car, so if you get fast food, you actually can have a dipping sauce there that you can dip.
So, if you think about it, man, we’ve had cars for 100 years, so essentially, there was a need for it as soon as a car was built but really, the market really wasn’t ready until we started developing cars. You could have came out with an awesome product back in the day but it really doesn’t make sense until we live life on the run as much as we do, on the go.
So, yeah. T.J., I don’t know if you want to add anything to that.
No, just super important that you have the right fit because you could have a great product but it not be right for the market. You can put a pretty significant investment in and it flop because of your initial research not being up to the level of what it needs to be.
Yeah, yeah. Touch on this, now, man. On investing and initial inventory purchase.
Yeah, absolutely. So, this is super important. I think anybody that orders from an overseas supplier specifically from China’s probably going to follow some sort of flow like this. So, on the left access there, you place your order but you have to have time from when you place your order to the time you receive your goods. Then, from the time you receive your goods to when you start your sales. So, that’s kind of that blue region there.
As Jason mentioned, when you do the air freight, you potentially cut that blue portion down significantly. If you’re doing a sea shipment, that could be anywhere from six to eight weeks but what you have to remember is that that entire time, your investment is not reaping any benefits yet. So, until you get your items back to you, your breakeven point is pushed further out.
Yeah. So, you need capital to carry you through this initial process. It’s obviously very good if you can float it with the capital that you have coming in from sales but it’s also about do you need more? Could you scale your business faster doing this?
Yeah. Perfect, T.J. Let me just touch on the marketing here. So what should my marketing strategy be at this stage? This is all about proving a sustainable demand for your product.
So, what this means is it’s not about profitability or how much you’re making on a product. No. You’re in the launch phase, so you should actually be setting very aggressive ACoS or max advertising cost of sale targets because you’re actually paying to play. You’re actually generating interest. You’re proving to Amazon that there’s a fit for your product and you need to spend aggressively within reason to be efficient as you can but the goal here isn’t to necessarily be profitable. It’s really just so you garner as many sales as you can get.
The next thing we’re going to touch on is entering new markets. So, in reality, or in the ideal situation, you’ve completely dominated your home market or Amazon US and now it’s time to tackle the world.
So, we’re going to touch on a couple of indicators that tell you you’re in the position to expand into a new market. The first one would be is that your sales are declining in your home country, so that’s not necessarily a bad thing but it could be what we talked about before about reaching that plateau. Maybe your product has run its course and it’s time to expand and to see if a new market would be as attracted to your product as your home market once was.
Yeah. Real quick, T.J. Angela, you had some good questions here. I’m sorry to backtrack here but Angela asked, “How do you calculate the percentage?” The easiest thing to do is just keep an Excel file or a Google Sheet and just track your monthly sales. Then, put in another column that’s percentage compared to last month. So, that’s the easiest way just to monitor it in real time. I mean, Amazon doesn’t produce a report like that, so you just have to do it yourself.
The key performance indicators, we’ll talk about those coming, and if we don’t feel free to send another note. And of course, we’ll be sending the slides as well. Awesome.
Thanks, Josie. Josie said that she can’t take notes fast enough so hopefully this is helpful. I’m giving it back to you, buddy.
Cool. So, the next thing that we’re going to touch on, an indicator that you’re in the stage to enter a new market is you have a lot of excess inventory and it kind of goes hand in hand with our first point there but there’s no reason to sit there while your sales decrease to one or two a day when you are easily turning out 10 to 20 before that. So, find a market that’s similar to your home market or similar to the market that you’re selling in and see if you can push out your inventory there, get set up and reap the same benefits that you once were.
The next point is touching a little bit more on resellers, but far too often, a brand will make an agreement with a specific reseller that they are the only ones available to sell their certain items.
So, I had a seller who sold cameras for his whole business. He sold this specific Nikon brand in the US. Then, Nikon then went and made an agreement that they can only be sold by this one distributor, so what he did is he went and started listing his products in Canada, the UK, Germany, France, Italy, Spain. He was able to at least get rid of the inventory that he had and didn’t purchase any more and at least broke even there.
Awesome. That’s such a cool tip, too. It’s like, look, a lot of people … I know that’s a lot of unauthorized resellers. There’s a way that you should absolutely do this. It should be all within terms of service. You should have permission but don’t be afraid to go and ask a brand if you can actually sell it in another country. A lot of folks, “Oh, I can’t sell in the US. I can’t do it abroad.” That’s a really, really cool tip. Man. Then, yeah.
So, I think seeing similar products selling in another country is a great sign for you. That means there’s at least some demand for your product. Obviously, there’s going to be demand in the key categories in kitchen and home and Judy as well, but what you need to do is ensure that there’s going to be demand before you make any investment there. It kind of circles back to the product market fit that Jason was talking about before.
Yeah. Successful product in one country. You should just always make a point every month to go check and see if similar sales gets similar SKUs are doing as well.
Next one is if you own the brand you’re selling, you don’t have to follow the brand owner’s rules because you are the owner. So, you’re not as restricted as where you can sell it from the brand perspective, as long as you’re registered with brand registry.
Last thing is if you have a seasonal product. So, if you have a product that sells super well in the summer, it’s sometimes you forget that the Southern Hemisphere or vice versa, if you’re down there, the seasons are opposite. So, you have a whole nother six months that you may not have been able to capitalize on. You now can …
You could sell that in the US. Why don’t you sell that in Australia during the off season in the US because it’s summer there. Or sell in Canada or sell in Europe. You’re selling something in the winter because they have a longer winter, then ski goggles for instance. This is an untapped, massive potential here.
The other thing, too, is just if you want to extend the life cycle of products like thinners were cool in the US but then Europe sort of caught the wave after that. So, when nobody else bought them in the US, you still could have gotten another few months of sales out of Europe. Just be mindful of that because the product, the where you are in your lifecycle, that product is different based on where you are in the world. So, cool.
Now, onto capital.
So, we recognize that you are in this position to be expanding to a new market. There’s a bunch of things that you need to consider and Jason, we’re going to jump right in. The first one here is VAT registration.
Yup. Real quick. There’s a question about-
On no, no, no. I’m sorry. I was just trying to read a question. It’s a very, very good one, which is, “If you’re selling your own private brand, obviously you can see an immediate increase in sales. You’re later doing increase in advertising, but does it make sense to finance an ad campaign or is it too risky?” I mean, there is a lot of risk in that. Obviously, I mean, you have to know that you’re going to get the return.
I think one of the things that we talk a lot about here is TACoS, which is total advertising cost of sale, which means if you’re spending heavily on ads, maybe you’re not seeing a return on the ad revenue as much, you have a high ACoS, but what if it actually is moving the needle on your total revenue? Like the spending the money on ads is actually producing an increased velocity of organic sales. Then, it actually could be justified.
So, I mean, obviously with folks, we take a hands-on approach with our clients, so we actually want to talk about things like this but yeah. You’d only do it if you knew for sure you can pay it back because you know you need to.
Yeah. So, I’ll jump into these and when expanding overseas, this is kind of my expertise. I’ve helped people that were selling and brands expand overseas, specifically to the UK and Europe from the US but also to Canada, Japan, Australia. So, one of the real key things, the number one thing that you need to do is be compliant. So, a lot of the governments around the world are now cracking down on Amazon in terms of having their sellers pay VAT, GST, HST, some sort of tax requirement.
Free shipping. Pearl, if you’re listening, I know you do great work, so they help with this kind of shipping internationally for Amazon FBA, but they also help get your VAT set up. They have other companies they recommend for the countries at which you’re selling into. So, they can handle a lot of this for you as well. Pearl’s a good friend of both T.J. and I, so she deserves a shout out.
Yeah, so Pearl, on First Choice, they can help with the logistics. I think another thing to consider is how are you going to fulfill your products whether that’s FBA or FBM, whatever makes more sense for your business. Then, if you’re selling in Europe, whether you’re going to do the pan-European model or the European Fulfillment Network. We can spend a whole hour talking just about that. So, if you have any questions on that, feel free to reach out and we can help, but depending on how you set up, that’s sort of how you’re going to need to file and remain compliant.
So, just a hop over to marketing strategy should be at this stage. One, I think it was Simon had a question about social media or other ads. “Do they help rank?” I mean, Amazon loves, loves traffic coming from Google. So, if you can redirect traffic from Google to Facebook to Amazon, I mean, you’ll be rewarded for it. I mean, it’s harder to measure the actual conversion because there are two different data sets on performance but yeah, for sure. I think it absolutely should be a part of the play, especially if you’re a brand.
In this stage, there from a marketing perspective, buyers don’t give a darn that your product does well in your home country. You have to treat it as a brand new product launch. So, it’s very similar to the same. You’re essentially launching a new product in a different country as well.
Number three, let’s talk about high growth mode, T.J.
Right. So, we’re going to jump in on some of the indicators that you’re in high-growth mode. The main one is going to be right there that you are having double-digit sales or you’re growing by double digits month over month. The second point is you’re constantly running out of inventory. You can’t keep enough stock in place to fulfill your orders and every month is kind of hit or miss on whether you’re going to have enough stock. Then, the last point that being that your ad spend’s up but your revenue’s actually climbing faster.
So, what we’re going to do is touch on when you’re at this point, where should you spend your funds. It’s obviously on inventory. If you’re seeing this double digit growth, that means the demand’s there. If you’re not able to stay up with the orders and you’re running out of stock, you constantly need to have more inventory. Whether you have the capital to do that just from your existing sales, maybe, hopefully. If not, that’s what product like ours is there to get you over that hump, to …
Yeah. Things like this, man. You have a bike and you have training wheels. Then, you pull the training wheels off. You’re a little wobbly. You need to keep your speed up in order to keep the bike going straight. That’s what we’re talking about here. Seeing if you have the right inventory. What matters here is that now, you’re seeing your organic sales growth. That means you’re to align with Amazon’s algorithm that you’re relevant.
Let’s just talk as you see this specific example of why accelerating your inventory turns faster makes a huge difference. An example is that, say you’re selling 1,000 SKUs a month on a retail price of $25. Let’s say you turn an inventory every four weeks. Now, if you’re able to turn that same inventory over three weeks, you have one extra week of sales. A lot of the reasons why you’re able to do this is if you’re investing in advertising, you’re making sure that you’re investing back and you have the inventory.
What does this actually mean? So, in this case, you would sell an extra 4,333 units a year or another 100,000 in GMV, which is a 33% increase in your revenue as a company. That is massive. So, it’s great that you’re selling and clear your inventory out in a month but if you can do these things to expedite that turn how quickly you’re turning inventory, it’s a huge benefit.
Now, whatever you do, do not stock out. So, Amazon’s latest algorithm, the A9 algorithm, it rewards consistent increasing sales velocity. So, anything you can be doing to do keep spinning that flywheel and staying relevant, you’re going to have a snowball effect. It’s going to punish products that come off the marketplace. So, when you actually come back in stock, you actually have lost all of that ground. You have to re-gain all that ground you lost, so you essentially wasted a lot of that marketing spend, the efforts there to get the flywheel going.
So, this is where I’m going to say again, it’s better for you to press gross margin a little bit if you’re low on inventory to get it faster, so whatever you do, do not stock out.
So, going onto marketing, you’re now in more of a growth mode, so you’re improving your conversion and you’re growing closer to your advertising targets being near your gross margin. So, one thing I would recommend, though, is if you are at risk of stocking out, do things like increase the price of your product to slow down the inventory a turn or don’t advertise quite as aggressively for that reason.
That’s a really good tip.
Yeah. So, you just got to be very careful about that. Sorry. I’m looking at a couple of questions here.
Yeah. I see the question there about German VAT. So, the German authorities have started to crack down. I know it’s probably not very fun to deal with, but it says that you’re still having clarity from Amazon EU. So, we are not VAT consultants, but we can absolutely connect you with the people that we work with, either at Amazon or one of the VAT authorities.
Amazon’s probably not going to give you a direct, clear stance. They’re pretty sort of high level when it comes to stuff like this. There are a lot of companies that actually specifically help with tax and compliance like AVASK, for instance, I know can help in Europe as well.
Cool. So, now, going to topic number four.
So, this is it. You’ve had your success but you want more. You’re building a brand. You’re building something special. These are some of the indicators that you’ll be at this stage. First point, being is that people are directly looking for your brand. They want you. You built this brand. You built a desirable product so people have come to Amazon or even come to Google looking for your product.
Yeah. I mean, look. Here’s a tip I just want to give, too, is if you only have one product in your brand, or one product or a couple of products. They don’t know your brand. Don’t waste valuable headline space putting your brand name in your listing. You’re not there at this stage yet. If it’s your first product, people aren’t going to go searching for it but at this stage now, you can start incorporating your brand and do your listing and your title, et cetera.
The next one I’ll touch on here is that now, at this scaled stage, your advertising sale, the sale you’re making on a particular SKU is profitable. So, your ACoS, it actually reflects a positive profit margin. And your goal is to maximize every profit from sales while maintaining the need to advertise to get the flywheel spinning. These are your cash cows, so yeah, I was so excited when I found this image, man. I love it.
I’ll have to put in a link to get the original source, so sorry about that.
So, seasonal products. One of the questions from C.R. was seasonal products. Number one thing is the immediate thing you want us to think about, if it’s a winter product, you mentioned downhill skis. You think if you’re selling that in the US, where is it going to stay colder longer? It’s going to stay colder longer in Canada, in Europe? So, those are areas that I’d sell it. Then, yeah. Then, obviously look at the other areas that are flipped seasons. Hopefully, that answers your question, C.R.
So, let’s talk about where your capital should be allocated when it comes to your cash cows.
Cool, so the number one thing is just to maintain your inventory levels. You never want to stock out. It might seem like a no-brainer but you’re basically able to capitalize on the demand and the want for your product because we know it’s most likely not going to last forever.
The next thing that we can touch on is some product enhancements, so you have a good product. You’ve grown it to this point. Now, let’s make it a great product.
Yeah. You should be using your reviews, too. So, if you’re getting reviews in the frequently asked question, you should change the messaging of your product to reflect that or add things onto your product.
The next one, T.J., you were talking about is adding freebies. If you sell a foam roller, why not just give a free workout with it or free stretches in a handoff and a little pamphlet with it, right?
Absolutely. And the last one there is you’ve done all this work. You’ve created your brand. You’ve got all the keywords and stuff like that. Now, you have to protect your brand. So, doing some defensive marketing strategies.
Exactly right. An example of this is people often think they don’t need to bid on their own brand name but that’s a fallacy. You absolutely need to be doing that because if I were your competitor, I would absolutely start investing on keywords related to your brand and taking that spot from you.
So, you need to be defensive and start to spend money on your own search terms. Then, which of my marketing strategies be at this stage? You’re in profit mode, my man. You are making sure that everything you’re doing is centered around profit and you’re spending this day relevant but obviously you’re setting your ACoS targets below your profit margin. So, if your profit margin’s 25%, maybe your ACoS target should be 15, 20% as an example.
Now, let’s talk about product attribute targeting or PAT campaigns as they’re called, because I think this is an incredible tip and strategy that everybody should be using. So, product attribute targeting is a new ad feature where you can actually target ads by ASIN, by category, by brand, price, or rating or combinations. You can now latch onto other products as soon as they go through the purchasing journey.
So, an example of what this looks like and I probably should have had an example, which is when you click on computer mouse, you’re going to see all the listings but you see all the listings but when you actually click on one of those products, this is where product attribute targeting, you actually can be showing up on these products.
So, I’ll use a specific example but I think the most important thing is this is effective at any product life cycle stage. So, what I mean by this is let’s say that you’ve actually rolled out a brand new pair of shoes and you’re trying to go after Allbirds, as an example. You actually are going to want to actually find the Allbirds ASIN and start running campaigns on it.
Now, there are two methodologies that I would use. One is called follow the strong. You find the biggest, baddest brand that’s killing it. You’re going to go after Nike. You’re going to go after Allbirds in this case. You know they’re going to do well so you want to latch on and be there for the ride and to start to get that exposure. So be warned. This is a high ACoS strategy. However, it will deliver much more exposure to your brand as well.
The second one is I’ll crush the weak strategy. So, what you’re actually doing here is you’re finding the most terrible products. They have the worst ratings. They’re overpriced. Their listings are terrible. Then, you just come in there with a properly-optimized listing and you just be the knight in shining armor and latch onto that product.
This will produce a much lower ACoS. However, these products don’t experience nearly as many clicks because they’re not the best and brightest but even those are still getting served.
You have to realize, too, let’s say you Amazon, I’ll turn into a verb now, you search and I search gaming. If they know that I’m a nerd and I love PlayStation games or computer games, they may serve up the gaming stuff related to video games. They may know T.J. has a love for cricket and serving up things related to the sports or something like that.
My point is, even though those product aren’t that good, they still are going to get served in some way for somebody, so it’s not going to have as much traffic or volume but it’s still there, you know what I mean?
Absolutely. So, up until now, everything we’ve spoke about is how to spend on Amazon or spend online but I think it’s important to also consider how some additional spend offline can in turn help your business online. So, these are some of the indicators that you’re there.
So, obviously, we’re always going to be reinvesting but the main point is you don’t have enough time in your day. There’s not enough room in your warehouse or your office, you’re sitting on each other’s desks. There’s wall to wall full of boxes. Then, finally, you’re just doing too much manual work, whether that’s physically moving boxes or managing ad campaigns yourself or trying to optimize your listings. It’s just too much for you to do.
So, where are we going to spend this capital? There’s a couple ways. So, one of the main points, I think, is growing your team, capitalizing on the virtual assistant market. There’s a lot of great companies that have vetted VAs overseas and even domestically in the US who know Amazon, who know your business and know how it works, that can handle things like optimizing listings and customer service and stuff like that.
The next thing is adding some more warehouse space and some additional office space, so if you hire some people in town, then you can help with that and then some additional management software.
So, I think it’s a perfect time to mention Teikametrics. Hopefully, everyone is using them but they have a pretty efficient software there. Jason?
Thanks for that. No, you’re right, man. It’s like you get to this point, you just need to find tools that make your life easier.
A couple questions here that came through. Leo asks, “Can you explain again how Amazon treats your rank when you stock out?” It used to be when you stocked out, everybody should know that there’s a BSR, a best seller rank that Amazon actually has. How good of a seller is that product in its category? The lower, the better. Used to be, if you sold out of a product, Amazon’s like, “Man, this is a good product. We’re going to … Once they restock, we’ll kind of give them their position back,” in a way.
Now, the algorithm is Amazon wants you to be consistently selling that product. So, if you were to stock out, you’re actually not going to come back with the same BSR. You’re going to have to fight and claw your way back up there. So, you just have to reinvest in the marketing. You may have to go back from … Let’s say you had a really good product and you were in the profitability stage, in terms of how you advertised. You set your ACoS targets below your margin. You’re milking it. All of a sudden, you stocked out. You’re not going to be able to set the ACoS targets or your max advertising costs targets the same and expect to have similar results. You may have to consider it a launch again or even more on the growth phase.
And Simon actually had wanted to share some good info with sellers coming to Canada. He had issues with Canada and Canadian sales tax. He met a company called Mainstreetcan.com/e-commerce. So, thanks, Simon for telling the world about that, man.
So, they’re actually a partner of ours as well. So, if anyone wants some personal introductions to them, they also go because Canadian Tax Compliance. If You want some introductions to them, we can help with that, too.
Awesome. Awesome. Cool.
Now, topic number six.
This is where we dive into Payoneer a little bit, but we understand how we got here. There’s some stats that I want to read off because I think they’re all pretty important but 29% of small businesses fail due to capital constraints. 26% of business owners had trouble accessing funds. Big banks only approved around 24% of small business loans and alternative lenders only approved about 58%. So, the biggest hurdle of scaling companies is getting access to this capital, whether it’s-
It’s trying to catch up to this, too. I mean, grand scheme of things, e-commerce is still in its infancy. Since you don’t have a brick and mortar store, it’s not as easy for a bank to be like, “Oh, you’re an Amazon seller? Okay. That sounds legit,” when, actuality, I mean, people out here are killing it but at the same time, too, finding way to actually have good access to capital, it’s a really important.
Absolutely. So, that’s kind of where we jumped in because we saw there was a need to leverage all the data that Amazon and Walmart and a lot of these marketplaces provide along with the payment information that we already had to provide some sort of funding directly for these marketplace sellers.
So, the Payoneer capital advance product is a working capital solution designed specifically for online sellers. So, how it works is within your Payoneer account, based on your previous sales, you’d receive an offer every time you get paid by Amazon or Walmart. If you take it, great, perfect. Those funds will be automatically deposited into your Payoneer account, which you can then either use to pay out to whomever you’d like or withdraw back to your own back account to use for, say, some of those things we talked about earlier.
In terms of the repayment model, it’s a gradual repayment model so it’s meant to allow you to continue operating your business and not be, again, financially constrained by repayments. So, what we do is we take 35% of each deposit from Amazon or Walmart so it turns out to be approximately three months. That being said, it could be a little longer. It could be a little shorter. There is no penalty if it goes longer. It’s just we’ll take the funds until the whole advance has been repaid.
So, if we just jump to the next slide, we are running a promotion right now, so it’s 2% per capital advance. So, no matter the amount that you’re taking, it’s 2% off the notional amount. So, if you’re taking 100,000, that means the fee would be $2,000 but that’s quite a bit of money that you can reinvest into your business.
So, I’m not sure, Jason, if they have the ability to click that link but if they do, everyone can work with that and/or …
Oh, you can’t? Okay. Well, my emails there. So, that’s my direct email’s firstname.lastname@example.org.
I’m also sending these slides as well. Yeah, so great.
Also, just covered the takeaways here. Cash flow is the life blood of any business. Thanks, Captain Obvious. I think we know that now.
Next one. Where your products and overall business are in their lifecycle will dictate how you should allocate funds and spend. In regards to advertising, your targets should be based on both your margin as well as where the product is in its life cycle. Then, product ad retargeting can be very effective in any stage. We are running a 30-day trial for individual sellers who want to come in and test out our product. You could obviously go directly to our home page there as well. Thank you.
I know we had a couple questions, T.J. First off, Leann from Australia said she loves cricket, too, T.J.
I’m actually more of an NRL fan but cricket will do as well.
Weird but I like it.
“So, what should my strategy be if Amazon launched a private label brand in my category?” You would go after them. Use product ad retargeting. Go after that product. The thing is treat Amazon as another competitor. They are. That’s exactly what they are in this case. I mean, obviously, everybody deals with this. You’ve seen Amazon back off their own products recently but still. You need to treat that as a competitor, use it to leverage product ad retargeting effectively there as well.
“When working with Amazon as a vendor, do they pay in advance for the inventory?” No, actually their terms are … Look, every trade agreement you have with Amazon is going to be different but often times its net 60 or 90 day terms. So, you’re not actually getting installments every month or two. So, it’s not necessarily a benefit in that case from a cash flow perspective.
Josie cannot click the link but we’ll make sure to … Actually, let me go back and share your email again. It’s email@example.com.
Yes. It’s the first two letters of my last name, as well as my first name. Usually, it’s a little longer but not everyone has such a cool first name like me.
Right. There you go. Well, that’s actually interesting. I’ve never seen that email convention. Awesome.
T.J., any other highlights for you as well?
No. I think it’s really important to know that companies like Payoneer and Teikametrics and a lot of them are here to help you grow. So, we are here to enable global commerce and enable you to build the best, biggest brand that you can. So, whether you have questions about anything we talked about today, whether you have questions about something totally unrelated, send us a note. Jason and I have been both in this industry and met a lot of people across a lot of the countries. And I’m sorry. Countries yes but companies as well, so we can help you or connect you with the right person or get your questions answered and we’ll be happy to do so.
And T.J., a lot of my day and your day is spent just connecting folks with others, right? I mean, yeah.
Yes. You have questions, just ask. If we don’t know, we don’t do it ourselves, you probably know somebody who can or at least get you pointed directionally in the right way. T.J., always a pleasure my man. Thanks so much for making the time and helping with the content as well.
Folks, thank you most importantly for attending here as well. We look forward to interacting with you guys. My email is firstname.lastname@example.org. Now, it’s in the chat. Awesome. Great. Thanks to my marketing team as well who helped with that. Folks, thank you so much. Really appreciate it and hopefully, we’ll be hearing from you guys soon. Thanks, Teej.