Hope everyone’s 2015 is off to a good start. I am getting back into the swing of things after taking it a little easy the first half of this month. I often share the positive aspects of the business through my monthly financial results posts, but this isn’t the full picture, so I am going to do a post today that shares a few of the bumps in the road. If you are new to selling on Amazon, hopefully seeing some of the mistakes I made can save you from similar mistakes in the future.
We’ll get into some specific examples soon, but to get this started I ran a report in InventoryLab to find out how many items I sold at a loss during the 4th quarter of 2014. In total there were 287 items that I sold for a loss during this time period, and the total amount lost on these sales before factoring in any prep or inbound shipping costs was $1,572.88. In addition to these items, I sold 127 items that ended up making $1 or less in profit, so after accounting for prep and inbound shipping costs, most of these are break even at best.
The biggest loss I took on a single item was on the My Size Elsa Doll that was a Target exclusive, and the regular price was $59.99. In early November I was only able to find 4 and sold each of them for right around $180, here’s a screenshot of one of the sales:
So, the first ones that sold did quite well. The problem arose when trying to find more. I had called and personally been to many of the Target stores in my area looking for more of this item in late November and was unable to locate any, and checks to other stores in the area came up empty as well. I spoke to managers and associates at several different stores and they indicated that all signs pointed to them getting very few more in before Christmas. Based on this information, I predicted the price would rise on amazon as Christmas grew closer. I based this on anticipating low supply, and increasing demand. So based on that, I made this purchase for 7 more of the dolls on November 25th: So I paid about $133 a piece for these after the shipping charges. I requested the Target receipt from the ebay seller to ensure I had proof of authenticity in the event of a customer claiming counterfeit issues. At the time I purchased them the low FBA price was right around $170, and I calculated that my break even point was at $172 after inbound shipping. I only needed a slight rise in prices close to Christmas to see a small profit, and I thought a significant price increase was possible. Seeing as I had already sold 4 of the dolls for $180, I felt that this was a reasonable play. So after I made the purchase here’s what happened to the price:
Things didn’t go quite according to plan. I set the minimum price on my repricer a bit above $200, and waited for the price to spike back up, but it never happened. The chart above shows quite clearly that the price fell significantly throughout December. Due to not monitoring my repricing closely enough I didn’t even get these 7 out the door until January. I sold them all between $80.16 and $91.99 a piece. Selling at $80.16 results in a payout of $59.77, so before factoring in inbound shipping, the biggest loss on one of these 7 dolls was about $73. So in total on these 7 I lost about $450.
This was quite a speculative play, and success wasn’t guaranteed as the result obviously shows. I am going to use this as a learning experience and exercise more caution before making a similar purchase again. The other piece that I will keep in mind is that if I see the price starting to trend downward I will consider quickly cutting ties with the item before it bottoms out. I would have had the opportunity to sell for $110-$130 in the week prior to Christmas, which still would have been a loss, but it would have recovered significantly more cash.
This leads into another mistake that I made quite a few times in December, and that was simply being too greedy on items. There were many instances in which I could have locked in profits by pricing to sell in early to mid December, but I held out until the last week, and my items never sold at the prices I was listed at. This resulted in me continuing to hold the items and wind up selling for a significantly lower price as opposed to locking in a modest profit in early December. This will show up to some extent in the January results post, as I did sell off some losers over the past few weeks. The moral of this story is that sometimes you need to lock in modest profits, and not be greedy and go for massive profits. When doing the latter, you will sometimes have to deal with the consequences of selling at a significantly lower price than you could have.
Another item that I would consider a mistake during December was not focusing on repricing enough. Prices change dramatically in Q4, and being on top of repricing can make a big difference. As with the item above I definitely left some money on the table, and there were quite a few others like this. Next Q4, I will be dedicating more time to repricing strategies to ensure I lock in profits on the highest percentage of items possible.
The last mistake that I will be sharing for today is that I was charged several credit card late fees as a result of missing some payment due dates during December. There were 3 different cards that I missed the due date on and was charged a late fee. In total the fees and interest were over $300. I was able to call each company and get most of the fees and interest waived, but it took a good amount of time to contact each one. The issue wasn’t that I didn’t have the money available to pay the bill, I simply didn’t realize the due date had come and gone. This might seem ridiculous and irresponsible to allow this to happen, and it probably is, but in the midst of the Q4 rush it can happen.
The main takeaway for me on this last issue is to have systems/reminders in place to ensure that important details, such as credit card payments, are handled. This is especially important during Q4, as at least for me, many nonessential items get neglected. I am now in the process of getting all of my credit card due dates changed to the same day, and I have put a recurring reminder in my phone each month to make sure I pay them off on time.
Those are just a few of the mistakes I made in Q4 2014 that I was able to come up with after thinking for a few minutes. I am sure there are many more mistakes that I have failed to include. I am not afraid of making mistakes as when I do I gain experience, and experience is one of the greatest teachers. I will learn from each of the above that I have shared to avoid similar pitfalls in the future.
Hopefully seeing these mistakes I made will save you from a similar one in the future. If you made any mistakes that you are willing to share, post them in the comments below!