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I think selling on Amazon is a great opportunity, but I'm not sure if everyone realizes the high cost of inventory.

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I think selling on Amazon is a great opportunity, but I’m not sure if everyone realizes the high cost of inventory. Here are some hypothetical examples I worked out that I think are close to reality:

Product #1
Cost per unit to get delivered to amazon: $12
Revenue after all amazon fees: $17
Unit profit: $5

Product #2
Cost per unit to get delivered to amazon: $20
Revenue after all amazon fees: $28
Unit Profit: $8

Let’s say I sell 10 per day of each product and I want 3 months inventory with each order (manufacturing, sea freight, port pickup, inspection, ups shipping all take time).

1000 units of each product means I need to be holding $12,000 in inventory of product #1, and $20,000 in inventory of product #2.
= $32,000 initial inventory cost.

Meanwhile, hypothetical monthly earnings before taxes and operational costs are:
$5 x 10 x 30 days for product 1
$8 x 10 x 30 days for product 2
$1500 + $2400 = $3,900

Scaling to 10 or 20 products could require $250-$500k in inventory. Do people get bank loans for this?

 

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(1) Sea freight, port pickup, and inspections are for chumps. This is a speed (conversion) game. Don’t think that you’re keeping costs down just because you save a few hundred in shipping through sea. (2) Your hypothetical products have terrible margins for beginners (which is likely the result from you incorporating those needless expenses as I’ve pointed out above. (3) Your low-bar baseline for 30-day sales is ‘safe’, but likely not realistic. Assuming you’re capable of using the proper available resources, your conversions should grow and not remain stagnant. Hence time is a key variable here that you are grossly undervaluing.

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It’s only for chumps if you do it at the expense of stock outs. Once you have inventory stable you should absolutely be shipping by sea unless your item is super small and light. I’ve added an extra 15k net profit to my bottom line per month on one of my products because I lowered my landed cost by $4 per unit by shipping by sea.

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Sure everyone shoots for at least 100%. Some manage to do it for some products. Are you selling multiple products with 100% profit after shipping and amazon fees.

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No. I have 3 sku’s. 1 is around 30%, 2 is around 80% and 3 costs about $2.50 to get to amazon and makes $8.00 gross profit every sale.

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