From Zero to $10 Million Selling on Amazon with Sam Cohen of Amazon Consulting Experts
Sam, you have achieved the dream of financial freedom, which for many of us is about being your own boss, and you've achieved a level of success that many only dream about – building a multi-million dollar eCommerce empire. But you sell primarily on Amazon, is that correct?
Yes, we are hundred percent on Amazon. We just launched a couple of websites that we're going to be selling on. We've also opened the retail store that we're going to be selling through. But, eCommerce-wise, all of our businesses are run through Amazon.
Can you tell us what initially led you to start selling on Amazon's marketplace and why you've chosen to focus your core business there?
Back in 2009 when the economy shifted, I was at a six-figure job in the electronics industry. The parent company decided that whoever was making a nice salary was either going to get a tremendous pay cut or was going to be laid off. At that time I decided to leave the company because things were getting bad, and I started to do other things.
I started to sell at flea markets and street fairs and I was doing a lot of wholesale where I was buying from manufacturers and selling to retailers. I was like the middleman doing whatever it took to make money. I was making money but it wasn't really anything I could build on.
At that point, I didn't even know you could sell on Amazon as a third-party seller. I started researching how to sell on Amazon. There wasn't really a lot of public information on how to sell on Amazon. But I sat at the computer trying to figure out how to open my account, and how to set up an LLC. By March 2011, I started selling on Amazon and I started with DVDs. At the time, DVDs were a great business. There were some DVDs that I was getting on consignment that wouldn't sell in a retail store for five dollars, but they were selling on Amazon for $50.
There are some DVDs that are hard-to-find and there's not a whole lot of places to buy DVDs at retail anymore. So there was definitely a void in the market, and we used that obviously to our advantage by selling on Amazon. And we were doing DVDs for a long time. It took me about six months to figure out how to do FBA, how to print the labels and create the shipments and do all the fun stuff that we get to do on a daily basis.
Once I was able to figure that out, it was like the perfect storm. I got my wife to leave her very high-paying job to come work with me. It was Q4 in October 2011. So, those three things simultaneously propelled us to where we did $100,000 a month in October 2011. And now we're doing about $1 million a month five years later.
Yeah, but that was in 2011 and here we are in 2016. Why have you still chosen to focus your core business on Amazon?
As we started this business, we had used our wedding money to buy inventory. My wife is very conservative, and I'm more of a gambler. She kept saying: “Well, why don't we save some money for a rainy day?” And I was saying: “We're buying DVDs for $2 and selling them for $10. Amazon is taking $4 and we are getting back $6. So we are tripling our money every time we buy something.” So, it wouldn't make sense for me to keep money in a bank.
We were able to buy more inventory, and we just kept reinvesting, and reinvesting, and reinvesting. We probably didn't take money out of the business for the first two years and that snowballed our bankroll and allowed us to grow it at much faster pace.
Well, how were you able to do that when you were relying on Amazon exclusively? You didn't have another job. Your wife had left her high-paying job. How were you able to keep reinvesting all of your money and not taking out any for your own salary?
We took the bare minimum, whatever we needed to cover our bills, which is probably $2000 a month. We lived very frugally. We didn't spend money. We saw the value of buying inventory. Rather going out for $100 dinner, we would rather buy inventory. It was just a mindset: we got to build this up, we got to build this up. And we saw money turning into more money so we did whatever we had to do to buy more inventory. We got better at buying and we got smarter, and then people started coming to us offering us money.
I have a brother-in-law, who is an attorney, and he's like: “Look, I got money sitting in the bank. I have no intention of buying a house anytime soon. The money doesn't really help me in my business as an attorney. Let me give it to you now in August or September. You can start paying me in January. He wanted 8% interest. And so we took a loan from him of $30,000 and we were very happy and he was very happy. It helped us grow the business faster.
How do you describe your current business model? Where do you source the majority of the inventory now? I know you are not exclusively in DVDs anymore.
We still sell DVD's because it's still very profitable. Obviously, the velocity of sales is not what it used to be. But neither is the competition so there's still money to be made. We sell about a thousand DVD's a day now. But we migrated to other categories – toys, and we did grocery for a while. Now we are focused on apparel and footwear and will pretty much sell anything we can make money on. We do all different methods of sourcing. We do Retail Arbitrage. We do Online Arbitrage. We do Wholesale. We do Closeout and Liquidation. We do Private Label. So we pretty much run the gamut of the five main sourcing options for Amazon.
We kind of pivoted. When we were doing mostly toys and DVDs, our average selling price was about $14. Now that we're more focused on higher ticket items, our average selling prices are closer to $40. So, we are able to ship less units and do more volume.
How are you able to do all this volume? How are your business operations set up?
We moved four times in the last 5 years, much to everyone's dismay. But we really didn't want to spend too much money on a warehouse because, at the end of the day, we're just a staging area for Amazon FBA. We don't merchant fulfill. We don't want to be in the business of shipping stuff to consumers, so we ship everything by truck on pallets to Amazon. They receive it and when the end-user consumer buys it, I could be on a boat in Florida. Amazon will ship it out to them, and we'll get paid for the sale. So that's the power of leveraging FBA. They'll handle all the customer service. They'll handle all the shipping. And we ship to customers all over the world.
It's a remarkable business model, for sure. So what does your average day look like for you? What are your top business priorities?
I try to work on the business now, rather than in the business. We have a full staff here that handles all the various tasks that I've handled myself for many years. And I work on high-level strategies, financing, managing bank accounts, credit cards and the cash flow, repricing strategies, managing inventory, managing pricing, managing all the sourcers – the buyers that we have – a lot of “how do we get to the next level” type of thinking.
I've really devoted myself to ACE, which is Amazon Consulting Experts. That's my baby. That's my passion project. It's really something that I enjoy a lot more than my own Amazon business. With the quality of people we have here now, I'm not going to say it's on autopilot, but it doesn't require 10-12 hrs. a day of my time anymore to get us to the next level. So, we're very focused on ACE. In the first year, we had 100 clients, which is what we capped it at. Just wanted to make sure everyone got custom tailored help.
This year we're close to 200 clients. We have clients here today that we're training on how to make money on Amazon. So we could train you on all the different things that we do, from the many different sourcing methods, to all the different software that we use, to all the different tricks that we know about selling on Amazon. At the end of the day, we help you make more money selling on Amazon. That's really what our program is about.
But why did you start ACE and what type of seller is it best suited for?
This was born out of me being very active in the Facebook groups that catered to Amazon third-party sellers. For about a year before we started ACE, I was freely answering questions all day, every day, on the Facebook groups. And then I realized that it was taking so much of my time. I was featured in the Wall Street Journal in April 2015. We came up with this idea, “What if we worked with a select group of people?” Because we didn't want to be one of those programs where it's all pre-recorded videos and we sell it for a couple hundred bucks and a couple of thousand people buy it and it has a 1% success ratio. We wanted to work with a very select group of people and we wanted to give them custom tailored one-on-one help and we found that we had about 98% success rate in the first year, which was phenomenal.
Most people don't follow through, but we wanted to work with people that take action. We wanted to work with people that wanted to grow their businesses. What we found was a lot of people just don't know what they don't know.
So I always tell people “It won't work if you don't work.” You do have to put in the work, but if you do you'll very easily make a lot of money by doing this business.
What we found was that there's a lot of people that really want to make this business full-time. Some people want to do it part-time. Some people want to do it for the money aspect. Some people want to do it for the lifestyle aspect – to have more time, to have more options. So we have a lot of different people.
We have clients that did their first FBA shipment with us, and now they're doing a $50,000 a month. We have clients at $20-30,000 a month, now they are doing $200-300,000 a month. And then we have clients that are doing a several million in sales. So, we really run the full gamut of newbie to very successful seller.
We help different people in different ways. One seller may need help sourcing products. One seller may need help from A to Z. And one seller may need help in certain areas of the business. So we really work with everyone one-on-one to find out how we could best help them.
What would you say are the top one or two strategies a seller can implement to grow their business to the six or seven-figure level?
There are many different ways. There are many different variables. Many different factors.
The one thing I could tell people is you have to think big. Because there's a lot of people that ask: “How do I grow my business?” and I say: “The first thing you want to do is you want to outsource anything that can be outsourced.”
So, let's take prepping and shipping to Amazon. You can literally hire someone for $10 an hour to do that for you and obviously you have to train them on the rules and the protocols and everything, but you'll get a lot of people saying: “Well, why would I pay someone $10 an hour when I could do it myself for free?” And what they don't understand is that it's not free if you're doing it yourself. It's actually costing you a lot more than $10 an hour. Because your time can be better used for sourcing products or working on financing, or managing the pricing, or managing inventory or working on relationships with suppliers.
I can tell you once I started outsourcing different parts of my business is really when I got to the next level of my business. If you can hire someone to do certain parts of the business that take 10-20 hrs. of your week, and it costs you $100 or $200 to hire someone for 10-20 hrs. for $10/hour, but it allows you to do things that will make you hundred dollars an hour or $500 an hour, then it's definitely worth it because you are no longer trading time for money. You're leveraging someone else's time for a very small amount of money.
What's the biggest mistake you regularly see other sellers make in this business?
There are many mistakes that I see and there are many mistakes that I've made. So I hope to be able to help people learn from mistakes that I've made and mistakes that I see from speaking to hundreds of sellers a month. That was one of them: when they are not willing to pay someone to do part of the business so they can focus on the parts that make them money. That's a big one.
The other one is a lot of people are so afraid to make a mistake that they have no chance to succeed. A lot of people second-guess themselves. A lot of people question whether they are buying the right items. A lot of people question whether they could do this is as a business. And the people who succeed are the people that just jump right in and they follow directions. They do what they are told. They live, they learn, they make mistakes and they grow.
Because if you're not making mistakes, then you are not making enough decisions. You always have to be careful. You don't want to have analysis-paralysis because then you will never succeed.
And we all know the one thing that's finite in all our lives is time. You can always make more money, you can't make more time.
I see people trying to figure out to the penny how much they made on each individual sale. It's definitely important to know your numbers and know your fees and know your profits and know your cost of goods. But if it's going to get to the point when that's all you're fixated on for the entire year, you are going to wake up at the end of the year and realize you haven't really made a lot of money. So we don't sweat the small stuff. We don't micromanage every penny in our business.
I'd rather buy the wrong product and lose a couple dollars than not buy any product at all. When you make mistakes you're learning, and you're improving for the future and you're getting valuable data you can monetize going forward. So a lot of people think differently. I think that's one of my strongest attributes – that I think outside the box and I don't conform to society. And I think that definitely helps me in this type of business.
Sam, there's a lot of people that think that selling on Amazon is an easy way to make money. Do you agree with this?
It's definitely not easy and it's definitely not hard. It's hard work But it's not hard if you have the right direction and the right knowledge and the right information. But it's definitely not easy. Money is not going to fall from the sky. It's not a get rich quick scheme. It's a get rich slow.
If you do the right things and you make good decisions, with good information, and good intentions, you are going to make a lot. You are going to be right a lot more than you are wrong and you are going to come out ahead at the end of the year, and you are going to make a profit. You can grow your business and it can be whatever you want it to be.
You have people that want to work 20 hours a week, and they are aware of the results that it's going to get them. And then there are people that work 80 hours a week or 100 hours a week. It can be whatever you want it to be. It's not like having a retail store where you have to wait for customers to walk in and hope to be able to sell them something. You can be very proactive in this business. In sourcing, and researching, and experimenting with new categories, and new ideas. You can be very, very proactive.
It's infinite how much success you can have on Amazon. I speak to sellers that are a lot bigger than me and they are doing $100 million a year on Amazon. We are trying to get to that level. Obviously, there's a lot of factors that go into that. But it's definitely possible.
I speak to sellers that are a lot bigger than me and they are doing $100 million a year on Amazon. We are trying to get to that level. Obviously, there's a lot of factors that go into that. But it's definitely possible.
Based on what you know now, what would you have done differently as a new seller, if you knew then what you know now?
That's the million-dollar question. I would have focused on selling higher-priced items. I would have focused on doing things that most people won't, or most people can't. So there's a lot of gated categories where you need approval for selling on Amazon like clothing and shoes, and now health and personal care, beauty, grocery, automotive, sexual wellness. A lot of these categories are gated. You need approval from Amazon to sell them. So I would have started with those because there's a lot less competition and saturation. It's a higher barrier to entry.
I would have focused on a higher average selling price so you don't have to sell 360,000 units at $15 a piece to do $5 million. You could sell hundred 150,000 units at $70 a piece and do $10 million. So those are things I would do – the things that most people won't do or can't do. One of those examples is selling things with a $50 buy cost. Most people either don't have the resources or don't have the guts to buy something that costs $50 wholesale – that they hope to sell for a $100 and Amazon takes $20 and you make $30.
We have a warehouse. We have loading docks. We have a forklift. We have guys who know how to pallet wrap and make pallets and load things onto trucks. We do a lot of oversized stuff which most people don't do. We do a lot of discontinued stuff. If Mattel has 2000 of the toy left, we'll buy all 2000. And then when nobody else has them, we could pretty much dictate the market on those. So there's a lot of things we do that typical sellers won't do, or can't do, and I think that's a huge a point of differentiation for our business.
What's your “Why”? Why do you do this business and what inspires you, in particular, around ACE?
There are a couple of reasons. When I started, there was really nobody out there, with the exception of Rob Anderson who was doing Dollar Moves on YouTube. And I used to watch his videos over and over again in the hopes that I would pick up some new information about how to sell on Amazon each time I watched it. And they were really short, superficial videos. They weren't very detailed. God bless Rob, I wouldn't be where I am without him, but there was no training. There were no tutorials. There were no courses. Amazon didn't even have Seller University like they have now.
This year we decided we are going to help people with all the fun stuff of the Amazon business. The returns, and the refunds, and the reimbursements, and the shipment reconciliations, and the stranded inventory, and the unfulfillable inventory and the suppressed inventory. And a lot of the back office stuff that most people usually either outsource or they don't do it at all. That alone would pay for ACE for most people.
We also developed a system to train our employees on how to do Online Arbitrage and Retail Arbitrage and we share that with our clients. We have a group where we share all those deals with our clients. We also share with our clients what we buy on a daily basis so they can know where we are buying stuff, what we're paying, what kind of sales ranks, what kind of ROIs, what kind of brands, what kind of styles, what kind of sizes, what kind of colors. That's been a tremendous asset to our clients as well.
We don't hold anything back. There's enough business for all of us, and we still wouldn't make a dent in the Amazon ecosystem. Like Jeff Bezos likes to say: “We are still in the first inning of eCommerce.” A lot of people were worried if we were going to cannibalize our own business by doing the consulting. We actually doubled in size last year and are on pace to do more than that this year.
That's so inspiring Sam. What are your own aspirations for your business?
We want to do $100 million. We want to do more and, what's more important than how much we do in gross sales, we want to profit more. We work with very healthy profit margins, and we don't do business for the sake of doing business. We do business for the sake of making money. So, I think that's an important distinction that a lot of people don't distinguish between the two. But there are plenty of times we'll buy something for $50 that we'll sell for $150. Do that enough times of the day and you're in good shape.
I know everyone asks about profits. A typical Amazon seller nets about 20% profit if they are doing business the right way, after all of the expenses.
I know people don't like to hear gross sales numbers without hearing profit numbers but the rule of thumb is about 20% after everything.
What would be the best way if someone who is interested in learning more about you or learning more about ACE to connect with you?
We just revamped our entire website. It's AmazonConsultingExperts.com and it has all the videos and the value proposition, and all the information. I'm also available via email firstname.lastname@example.org. I'm available through Facebook and available via phone for free consultations if anyone wants to talk. And we love helping people. Obviously, it's got to be worth our time, but we love helping people.
And you know, when someone tells me: “I'm taking my six kids to Disney World and I have you to thank.” For me, that's worth more than all the money in the world.
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