Get Started Selling on Amazon: The Complete Step-by-Step Guide (Part 6 of 12)
Read time: About 5 minutes!
Part 6: Testing the Market Before Making the Big Purchase
In Part 5, we talked about Listing Your First Product on Amazon.
In this part, we will walk through a brief (optional) experiment of validating if your product has enough demand to justify spending your hard-earned cash on a huge inventory investment.
Over time, I have come to learn that every cent that I invest is precious. So, I make sure I eliminate as much risk as possible. The purpose of this part of the series is to help you take the product decided to sell through one final validation test to make sure there is enough demand in the marketplace before spending a lot of money on it.
I’d like to warn you beforehand that there’s a level of risk involved with this approach but I personally think that it’s fairly low compared to the what you stand to gain should you end up investing in a product that turns out to to have less demand that you initially anticipated.
The idea is to essentially “semi-dropshipping” your first few sales before stocking up. This approach is by no means new, but it’s something I personally thought of and have done before in other online ventures that I have tried in the past.
How it works;
- Identify your winning product as shown in part 2 of this series.
- Figure out how much other retailers (online or offline) are selling it for (ideally you want to look for someone that’s selling it for less that what it’s selling for on Amazon)
- List it on Amazon.com and make sure your listing goes live.
- Make a few sales & pause listing
- Buy items from retailer identified on #2 above and ship to customers
- Proceed with your big order
Here’s a true story…
I listed my first item on Amazon.com on July 19th – I obviously didn’t have any items in stock. To my pleasant surprise, in less than 24hrs, I had already received my first order.
2 days later, I received 7 more orders.
I quickly rushed to the nearest local store and bought the item- and quickly shipped it to my first customer.
However, I made one HUGE mistake! I forgot #5 (to pause my listing)- I ended up selling 40 more items the next day.
This was good & bad.
It was good because I the product had passed my validation test.
It was bad because the items at my local store after tax cost almost $10 more that what they were going for on Amazon.com. So now, I was over -$400 (if I decided to buy them locally and ship to my new customers).
So I did what any person would do.
After placing my first order with my overseas supplier (knowing the items would take another 10-14 days to reach me plus another 3-5 days to reach my customer after I shipped them myself, I contacted each customer via email explaining the situation…
Only I rephrased it this way…(screenshot of actual email sent)
I knew many customers would cancel and a few would maybe wait the extra days. To my surprise, only ONE cancelled!
The rest were patient and I ended up receiving my first shipment sooner than expected.
However, Amazon gives you (depending on the type of item you sell) 1-2 days to ship out an item that’s been sold. Well, with the little trick I was pulling, I ended up being late on almost all my shipments which put a huge dent on my seller ratings.
It took me about a month or more of shipping products on time to regain good ratings.
Don’t forget to pause your listing after the first few sales roll in, and also to always know where you will purchase your items from after they sell (or maybe even purchase them before hand just in case.
Most stores will allow you to return unopened merchandise (assuming your product fails the validation test)- that way you’re safe!
I hope this helps you avoid costly mistakes.
So for those of you bold enough, go out there and validate your product before making the huge purchase- but do it with caution so that the customer in the receiving line is not affected by your experiment 🙂
I’d love to hear your thoughts on my approach- and (if any) suggestions of better methods to achieve the same results.
As always, if you have any questions or get stuck and need help completing any of the steps outlined here, leave me a comment below or email me and I’ll be happy to help.
Up Next, Part 7: Purchasing Stock to Sell on Amazon
This post is a part of the ongoing Get Started Selling on Amazon: The Complete Step-by-Step Guide series, follow the links below to read them: