Proven Bundling Course - Amazon S3

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Proven Bundling Course

With Robyn Johnson

Determining Profitability

00:01 Robin Johnson: Hi, this is Robyn Johnson from the Proven Bundling Course and today we're gonna talk about determining profitability on your Amazon bundle because before you go to the effort of putting everything together and making sure everything is right, we wanna make sure that you can actually make money on this bundle. So, determining profitability should be the first step after ideas. So, before even you research in keywords and things like that, so, I have an idea for a bundle I wonder if I could put these things together. The next thought should be how much is it gonna cost and how much can I profit off of these things?

00:37 RJ: Now, a lot of times when people think of cost, they just think of the COG, the Cost Of Goods, and they miss some of the other things that can sometimes change the cost of the item and especially, if you're somebody who runs on thin margins. Now, there are a lot of people who run, who do bundles who take significantly smaller margins in the name of being able to sell more. So, even though I'm only making $3 off my $10 cost then, I'm selling 300 of them so, I'm making all this money so, that's okay. Now, I'm not saying that that's wrong, it's a valid business model. But if that is your business model, you need to pay extra attention right here because you wanna make sure that things like the prep materials, the labor, and the inbound and outbound shipping aren't killing your costs so that 30% you thought you were making, you're really only making five. So, you wanna include the cost of goods. So, if something costs you $2 and $2 and $2, that's $6. So, then, the prep materials. Okay and now, I need a 20 cent poly bag, or now I need a 30 cent box, and I need a this is a set sticker, and these kind of things. So, whatever prep materials is gonna cost. So, with everything, how you are bundling the item together. So, if you're including a basket, the cost of the basket and the cost of the shrink wrap that goes over the basket.

02:12 RJ: So, the other thing you wanna do is prep labor. So, if I'm paying somebody $10 an hour to do this, then, how much is it costing me per item. If they can do this many items per hour, $10 an hour is about 16, 17 cents per minute. So, if they can do one a minute, then okay, that adds 20 cents to my cost about. And then, the shipping inbound, if it's something really heavy or if it's something with a dimensional weight, it's very big. So, maybe it's something light, but it's the size of a computer monitor, that dimensional shipping is gonna kill you. So, you wanna look at shipping inbound and outbound. So, that's what we're gonna do to determine our cost. All those four bullet points, we're gonna put that together and that's our cost. So, maybe $6 for cost of goods, and 50 cents for the bag, and 20 cents for the labor, and maybe another 70 cents to ship the item to Amazon. And if you're buying wholesale, you need to include the shipping cost from the wholesaler to you as well. So, we're gonna put all of those things together and that's gonna determine our cost.

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03:18 RJ: Now, I'm gonna take one of the items, preferably the biggest or the heaviest item, our primary item that we're going to be using, and I'm gonna put that in the FBA revenue calculator and then I'm gonna adjust the cost to be what I would set the cost to for the entire bundle. Now, it won't be exactly right because the weight based fees will be a little different, but it's gonna be in the same category. So, the category referral fee will be the same. If you're going from a small item to an oversize item, then that will change a little bit, but in general, if you're staying in items around the same size, if you're picking the biggest size item and kind of working with that, it should give you a pretty close estimate to what your calculation should be for your profit.

04:04 RJ: So, you're just gonna adjust the price. Again, take into consideration dimensional weights. If you don't know what dimensional weight is, you really need to Google that, figure that out because that can really impact your business. So, get on the MySilentTeam forum. Get 'em on the MySilentTeam Facebook group. Find out what dimensional weight is if you don't understand it already.

04:28 RJ: So, with determining profitability, some people will be like, "Oh, well, I could charge $50 for this." Well, you can charge whatever you want. However, if I'm a customer and I see I can buy X and Y separately for $30, why would I buy them together for $50 unless somehow that $50 one is coming up way ahead of the other ones in search and has a better listing. Maybe, at some point, [04:53] ____ by you're having really solid listing, you might be able to charge slightly more than the items individually so that the customer can have the convenience of getting them all in one package especially, if it's a gift, they might spend a little bit more. But assume that you're gonna start with a price that's lower. So, if I could get the one item for $10 and one item for $12, then, I wanna start at $21.99 or $19.99 and then move my price slowly up and see where that market threshold is where my sales slow down. You're gonna watch for dimensioning, consider the cost of prep, and then if you're buying these items wholesale, you need to find out whether they are... Especially, if you're bundling all things from one line. So, if you're not wholesaling, this doesn't make any sense. Don't worry.

05:41 RJ: So, if you're bundling things all from one wholesaler line and they have a MAP policy, you need to know if they have an aggregate MAP pricing policy. Aggregate MAP pricing says that you can't bundle two things together and have them be above the MAP price for one, but not the other. So, if you have a MAP item that's $12, and another map item of $12, then the aggregate map price would have to be at least $24. So, you can't put it at $16, 'cause the aggregate map means the map applies to each item put together. So, if you have questions on that, get on the Facebook group or on the MySilentTeam Facebook, team question, or email me and I can explain that a little further.

06:28 RJ: So, with bundle profitability, you wanna start with your primary item. I just picked this because I was searching for bundles and toys and this came up first. This is not my bundle. I don't know who [06:42] ____ is. I'm just using your listing as an example. So, let's say I saw these dive sticks. And maybe I could get them... They were on clearance and they had 200 of them at WalMart. I got them each for only three bucks. Let's say I got them for three bucks. So, they're pretty good, but there's a lot of other sellers on here. There's 30 new sellers. Maybe I don't want the competition, maybe the price has been on its way down, maybe there were 15 and now they've been sinking down. So maybe I wanna look at creating a bundle with these.

07:23 RJ: Then I look for things that would go with that. So, if I have a princess they wants

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princess dive toys, she probably also wants a princess towel. The princess dive sticks were $12.81, and this towel is $19.99, and let's say that I can get... This on sale at a different big box store and I can get it for $6. What I would do is, I would look at... So, if you look at the FBA revenue calculator, you'd see that on the $12.81 price, I make $8.17, and on the $19.99, I make $13.30. Not bad margins for if you bought them at three and $6. They're good margins. So I wanna put them together in a bundle. I actually just found this already premade bundle. I'm just using this as an example. They put the dive sticks in with the towel and they charge $35, and I'm gonna tell you why I think that price is a little high. And if you find this bundle, at the time that I looked at it, it wasn't ranked super-well and I think this is why.

08:37 RJ: The price, $20 plus the $12.81 is a lot less than than $35. So, it'd be easier for me to just buy them individually, and this item didn't come up first when I looked for the listing. So, when I was looking for pool dive toys, this came on the third page after the dive toys came by themselves. So, what I did is I took the towel, and I adjusted the price up to $29.99. And so, if I got both of these for a total of $10.50 or less, including tax, if I wasn't able to use my resell license or what have you. It cost me a 20 cent poly bag and then inbound shipping, it's about a pound. So, I sent my inbound shipping at about 70 cents per pound. Now, ours is significantly less than that. However, that gives me a little more wiggle room in our margin, and also, it gives me a little more wiggle room if I failed to account for that dimensional weight correctly.

09:46 RJ: It's not gonna take very long, less than a minute, for Gabe to throw that into a poly bag, seal it, and put the label on it. That's not gonna be that much. Where I got that 20 cents is, if you take 10 and divide it by 60 you get $16.666667 is the cost per minute. You're gonna add together all the pieces of the bundle. You're gonna add the prep material. So that's boxes, poly bags, special tape, shrink wrap, baskets, whatever you're using to prep that material... Just to prep the materials. There's the cost of the inbound shipping, the labor to prep it that way, even if you're doing it yourself, because at some point you're not gonna wanna do it yourself. So you wanna grow your business, so as it gets to the right size, you're able to sustain. So, then you're going to run though th FBA calculator to make sure it meets your margin requirements and make sure that everything... All the numbers work before you start that process of putting together everything for a bundle.

10:50 RJ: Now, how much profit is enough? There are people who do volume selling, and you get an increased revenue, so they're selling at a much lower margin than maybe I do, but they sell a lot more of them. So they're saying, "Even though I'm only making 30%, I'm selling 1000 of these in a month, so even though it's a smaller amount, I'm still making a good profit all the way through." 40% of something is a lot better than 100% of nothing.

11:19 RJ: Margin selling, one of the things that I like about it is... 'Cause I always have a plethora of stuff to buy. I always find that there's way more things that I could buy than I could ever purchase on everything. I could never purchase everything, so I wanna use my capital wisely. So if I have a choice between a bundle that I can make 70% on and a bundle I can make 20% on, I wanna pick the 70%, especially if I can move it at about the same rate, or maybe I create three bundles, and those three bundles sell as many as the one 20% item sells through the same amount of baskets, but maybe it's spread over a couple different listings, you still have to focus on turn rate, so you wanna make sure that you're turning that inventory really within the first three months is really what you wanna do.

12:12 RJ: Buy shallow to start, if you're creating your bundle, I don't care how excited you are,

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don't buy 6000 of something especially if it's your first bundle. If you're really confident, then you can make a bigger buy but especially when you're starting, start out with small and then slowly build this... And if your first bundle doesn't work, that's okay, that doesn't mean you're bad, doesn't mean you're wrong, doesn't mean you failed. It just means it didn't work out this time. So the thing to do then is to look back and say, "What could I do differently? Where was my mistake? Was it in product selection? Was it in research? Was it in the listing? Well if it's in the listing, I can fix that."

12:51 RJ: So you're gonna look at all the different pieces and see where your bundle didn't go through and then start again. So that's how we feel about profit. Make sure you plan ahead, so if you're like get really excited about bundles, you're like, "I'm gonna make 6000 bundles." You wanna make sure you've thought ahead too, like "how long is it gonna take me to create these listings? I should really do one bundle at a time and not buy all of this stuff and then feel completely overwhelmed with all the work I have to do. How long is it gonna take you to package this item? If I put them in a bag and I get the sticker on and all of that things."

13:34 RJ: You're gonna need your own UPC in order to create a bundle. We just buy them off of eBay, find a good eBay vendor, just go to eBay, look up UPCs, find somebody with really solid reviews, eBay's all about the reviews, so look for somebody with good feedback score get some UPCs. They're very inexpensive, you don't need to go to the places where they're $10 or $20 UPC. And you don't have to just poly bag, you can also box something. So if you're gonna box something, make sure you put that "this is a set, do not open, ready to ship" sticker on it. Boxing is usually more expensive but if it's the right product, it can make a big difference to have it arrive safely. If you're doing a lot of... If you've got like a coffee mug or something like that, that takes a lot of... Maybe makes it look unattractive or things like that, you know this is specifically a gift item, then you wanna look at that as your packaging. So that's it on determining profitability and we'll see you in the next session.

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