AS 11: The Amazon Inventory Gamble – AIG
01 Feb 2016
Today’s podcast is the big Amazon Dilemma, and a cool trick, that could get you in a hotspot, or ahead of your competition.
Today’s podcast is called The Amazon inventory Gamble, and I’ll abbreviate it as “AIG”.
If your starting to see some sales, and I mean good sales, you’ll be presented with the Amazon inventory gamble. This is a high stakes game folks, and for some of you listening out there, I’m sure you probably have done what I’m about to say, so hold onto your chair tight, grab that coffee out, and let’s explain.
I dub it the Amazon Inventory Gamble/AIG, because you will get to the point where you are selling well, around 50 units a day. With those 50 units a day, lets say you earn 16 dollars per unit per day. That turns out to be revenue of $800/day going back into your bank account. Now in order to support your business, and also be a crazy, near death entrepreneur, you need to be willing to take calculated risks. At an average of $600/day, that an average of $8400/two weeks, and $16,800 every month.
In order to plan for the future, I ordered 3000 units of variant 1, 1000, units of variant 2, 1000 units of variant 3, and 2000 units of a new product. In total, my costs and shipping will be around $45,000. With my money tied up in various businesses, I didn’t have 30,000 in liquid cash just laying around to pay for the inventory. And that’s when the Amazon Inventory Gamble comes into play. No matter where you are at in your business you’ll hit this point, whether its 30,000, or 150,000, or 1 million dollars.
Most suppliers will accept a 30% payment up front, and 70% payment upon completion and shipment of goods. I had 30% of the payment ready, or about $14,000 to pay my supplier and so I did. The other 70% I didn’t have, and I would need to earn 30,000 from Amazon, within a month and a half. Yes this is risky, and yes I don’t recommend every entrepreneur do this, specially if they aren’t good with numbers or a tolerance for risk.
So currently on track to earn $30,000 in revenue from my existing sales within a month and half, yet I continually have this nervousness that, I hope all goes well, my sales stay relatively consistent, and that my manufacturer won’t get pissed at me if the worst situation happens.
This is a situation I am sure others have faced. Where you have so much money tied up in inventory, but you also want to expand, and expand as fast as possible. You have this situation where, if you run out of units you lose money, if you don’t have variations properly set up, you lose money from lack of choices, if you don’t expand to other units, you can get overrun by competitors. These thoughts are normal for the typical entrepreneur, don’t you worry.
However, I will admit, I’ve never encountered a period in my life where I was forced to figure out a way to come up with $30,000 dollars within a short month and half. Is that even normal. Sounds like its from some gangster criminal movie, where the bad guy borrowed cash from a king ping, and somehow is drug deal went bad.
On the bright side, if my AIG goes all according to plan, where that the timing of The Chineese New Year finishes, my manufacturer comes back and finally finishes my product, AND I have successfully earned a ridiculous 30k in the 1.5 months, then, I will have a very strong position going into the summer months ahead, and be able to realign and re-purchase for 4th quarter.
So will this 30k come into fruition? And if it doesn’t do I have a backup plan to pay the manufacturer. Of course I do. Business is about taking calculated risks. Its’ about planning for all possible scenarios.
As an entrprenuer, when you get put in these tough scenarios, YOU always find a solution, and by taking the AIG, I foresaw that I would figure it out, no matter what happened. I always have. If you saw my start into my journey in episode 1, I denied a 50k salary in a safe job, and I jumped into the unknown. 4 years later, and I’m making crazy decisions that if you asked me 4 years ago, my mouth would have dropped.
As I said before, 4th quarter on Amazon is nuts. Its when no matter what price your set, your inventory flies off the shelves. Its’ just a very perplexing time for any human being in-touch with reality and a normal understand of physics.
All of these things you need to be thinking of. Valentine’s Day is coming…could that be good for your product. Then comes Prime Day on the 15TH of July. Then Thanksgiving/Black Friday/and Christmas. Before you know it, 4th quarter will be here, and all these AIG gambles will have come to fruition.
ALL THE meanwhile, you are ensuring your amazon is in very good health, meaning 5 star ratings galore, happy customers, low returns and cancelations etc. Its’ a crazy WAR going on out there, and we fight through this every single day. When preparation meets opportunity, we reap the rewards of our hard earned work!
As the quote goes…“Tomorrow is often the busiest day of the week.”
That’s all for this podcast guys, hope you loved it, and if you did, it would help tremendously, if you could go into iTunes and give me a quick rating of the podcast.
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