Solid Sales but Huge Increase in Costs
March sales on Amazon came in at a little over $21k. I normally have around a 20-30% profit margin but this month I saw a huge increase in competition on one of my new items I launched. This forced me to drop my price from $25 to $15 and my competitors are driving up my advertising costs. I spent over $3,000 this month on advertising which was a direct hit to the bottom line. Here’s what my March advertising looked like:
Advertising accounted for just under half of my sales and it also has the side effect of increasing your keyword rankings so I can’t just stop advertising completely or my ranks in the search results will suffer as well. Unfortunately I think I just have to suck it up and face the fact that my new products I launched aren’t going to take off like I had hoped and I’ll have to wait for my current shipment which is on its way from China right now before I’ll see any real growth.
In the meantime I have cut back the budget on all of the campaigns that are above 40% ACoS (Average cost of sale). My net profit for the month was around $2,000 which means I could double my profits if I can just reduce my advertising spend, but that’s much easier said than done.
Diversify or Die
One thing I’ve done right is reinvesting in the business to launch new products. Over time, hot selling items attract competition and that leads to lower profit margins. The best thing to do is to reinvest in new product lines so you can continue to grow. If I hadn’t done this, my sales would have been a measly $5,000 last month. Here’s a good breakdown showing the diversity of my sales and how each category I sell in contributes to the total so if one takes a hit, the others can pick up the slack.
I’ve blocked out the category names just because some of them are a little specific and I’d rather not bring in more competition 🙂
I’ve got 2 new products and 1 existing one that is out of stock currently being shipped in from China. This shipment cost me just over $10,000 to manufacture and $1,300 to ship from Flexport (love them!). It’s 4,100 units with an average sales price of $22 per unit which is about $90,000 in sales! Looking forward to getting these new products launched and getting one of my top selling items back in stock. I’m hopeful that I can get back up to the $30k-$40k per month range then hopefully list my business for sale and finally cash out. Stay tuned for more updates as my new products arrive and I go through the sales process in the next 3-6 months.