I wanted to share with you guys one biggest mistakes that I have made to date and it was when I first started out on Amazon. More specifically in the product selection phase. Greed took a hold of me. Don't let this happen. You are in this for the long term, not short term gains. I'm sharing this so that others don't make the same mistakes that I made. We were lucky, but it could have gotten messy and could have been extremely costly.
So here's what happened...
There was this cool new product that was doing the rounds on
videos on Facebook and was getting a lot of attention on social media (this should have been red flag number 1). It was literally a brand new product. I immediately searched on Alibaba and
BAM! There is was. I presumed that if it were on Alibaba, then it was fair game
and obviously something that could be private labelled. WRONG! Don't for one minute believe that everything you see on Alibaba is private label-able (I know that's not a word).
I ran all the routine tests on it to make sure it was a viable
product with regards to its size and weight, etc. And I checked depth of demand by checking how many people were searching for similar products.
The competition was so low on Amazon too, there was
literally just a handful of sellers and they all
appeared to be shipping directly from China too with really lengthy delivery times. I had dollar signs in my eyes. I just knew that if we could be the first sellers on the platform and people saw that it was prime eligible, we'd have the monopoly.
The margins were fantastic. I guess
because it was such a hot new product and because there was so little
competition, that the first sellers on there, it came with a premium price tag.
And the best thing was… it was selling like hotcakes.
This product ticked all the boxes.
I did some to-ing and fro-ing with various suppliers and
ordered my samples. I chose the best quality one and placed what was a larger than average quantity for a first order and to say I hadn’t really tested out the market and more importantly, the
market hadn’t tested out the product.
The order I placed was for 1200 units. A pretty hefty order,
for which I had to borrow some money to place. I just saw the numbers of how
many the current sellers were selling per month and knew that we’d sell out
instantly, so I wanted to be prepared.
This is where it started to go awry.
By the time we came to launch the product, there were dozens
of sellers. Competition had gotten fierce. But we were offering something that
none of the other sellers were as an added extra and a bit of insurance for the
user to give them confidence in purchasing from us.
It started off quite well. After
our initial giveaway, which caused us to rank near the top of page 1, we were
selling like crazy. It was a seasonal product and we were now in the height of
Summer and we were selling on average around 40 per day. Some days it crept up
to nearer 70. It was at this point that we realized we were going to go out of
stock and so we placed another order with our supplier for 600 more units.
This was back before Amazon changed its Terms of Service
about incentivized reviews and we managed to get about 60 on our page in a
short space of time. But what we quickly learned was that because this was a brand
new product, that the public were only just finding out about, there was a
distinct lack of education around the product and people weren’t sure how to
use it correctly. So in a short space of time, we accumulated a significant number of negative reviews, mainly saying that the product didn’t work correctly.
Customers were really reviewing their ability to use the
product rather than the quality of the product itself, which was very
frustrating for us. We needed a video to demonstrate how to use it and what to
expect from it. So we created a ‘How to’ video and attached it to the first
follow up email.
This did nothing to stop the influx of negative reviews. We
were continually giving away products in exchange for a review and just hoping
that the review that these people left would be positive. Sometimes it wasn’t.
It wasn’t just us that this was happening to, it was our
competitors too. However, we seemed to be more badly hit by this than the
others and we sank from a prime position of 3rd on page 1 to the middle of page 3
and we went from selling around 40 per day to around 4 per day.
It was bad. It was depressing. And I couldn’t even bear to
look at the product. Still can’t.
Then, we received some bad news. The original designer of the
product had a patent on it and had licensed this patent to a US company who
were making these and had already got into a legal battle with two other
companies… and won. They were ordering people to cease and desist selling the
item.
So we did what anyone else would do in this situation. We
panicked.
We sent an email to our supplier ordering him to cease
production (luckily he hadn’t started). We had already paid the deposit on the
second order of units. Fortunately, he agreed to let us put this deposit
towards another one of his products. However, we never found a suitable one and
he still has our money to this day.
We had to sell the product as fast as we could and at this
point we weren’t interested in making any profit, we just needed our money out
of it and not to be incarcerated (jokes). So we reduced our price as low as we could
afford to go and slowly but surely ran out of stock. In the end, we ended up
paying just under a dollar to sell each one of our products.
The strange thing is, is that there are hundreds of
sellers still listing this product today and I really don't know how and wonder why the license holder has not reported IP infringement to Amazon.
So the moral of the story is, do your research. If you think
a product may have a patent on it, or even a patent pending, avoid it. If it
has a patent pending, you never know when the patent will be granted and you’ll
end up in hot water. If someone has a patent on something and you’re found to
be selling it, they are within their rights to have you ship the goods to them
so that they can destroy them, and YOU have to pay for that.
We were lucky, but you may not be.
By Kay Herdsman
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