$10,000,000 Challenge - December 2021: Sales and End of The Year Key Learning
By Nate Slamans – January 15, 2022
Why we're doing the 10,000,000 challenge:
For the last 2 years, we have been all-in focused on growing our brand. We had to break down everything we thought we knew about creating a 7-figure Amazon brand… because we realized that what works for building a 7-figure brand does NOT work for getting to 8-figures.
From account management to PPC to hiring and managing team members: we discovered what systems and principles worked. We have successfully hit the 8-figure mark, but not without its challenges. Some of our main products have gone through product life cycles (increased competition, increasing ad costs, etc.). So despite those challenges, we still are aiming to hit $10,000,000+ in sales in 2022. But this year, we want to take you along for the journey to see how we’re doing it.
So in 2022, we’ll be breaking down our monthly sales, PPC costs, systems, key hiring decisions, tools we are developing, and month-to-month updates on our $10,000,000 challenge. Are you joining us for the challenge? Whether you are trying to get to 7-figures or 8-figures and beyond, what we cover will help you.
Let’s get into it!
DECEMBER 2021 STATS:
- Ended the month at $468,462
- Up 2.5% vs November 2021
- Overall Conversion Across All150 ASINs: 12.51% vs 12.96% Last Month
- Session Value: $9.74/Session vs $8.69/Session Last Month
- ACoS: Down 23.27% vs 25.84% Last Month
- TACoS at 13.04% vs 15.27% Last Month
Unlike most sellers who see a huge boost in sales during the 1st and 4th quarter of the year, we generally see a decline during this time. This was especially true for us in 2021. This mostly due to the seasonality of our particular products. We also ran into some supply chain/shipping challenges at the end of 2021. Plus, we know how Amazon can suddenly take your listings down, we had a few of our best-selling ASINs down for a week in December.
Since we saw the decline in sales and demand for our products this year compared to last year, we knew that our profits would be on the thinner side too (plus FBA Storage Fees are triple during November and December and our shipping costs had been going up all year). With this, we decided to keep a very close eye on our profits and margins and tried to CONSCIOUSLY get our spend (PPC) down.
In our case, we realized that our products weren’t probably going to sell much during this last quarter. We saw two months of sales drop which always hurts. That being said, we were seeing that our BSRs for our core products (our ‘Hero skus’) were already within the Top 3 of its niches constantly (indicating the entire niche is down). So, we reconfigured our goals and instead focused on PROFITABLE SALES. We had adjusted the KPIs that we were monitoring closely to the following:
- TACoS (total advertising cost of sales)– gives you a good idea of how well you’re using your spend
- % Bleeders – this is the PPC spend that did not convert to any sales at all
- True Breakeven Margin – consider returns. Helps to see if we need to reduce any product related costs and see if price increases are needed. Most of the time we calculate breakeven margins WITHOUT considering returns/refunds which can end in a lower than expected margin.
- Individual ASIN Profit – self explanatory. We plan to release some of the tools we use to make tracking this easier.
These were the biggest metrics that you need to monitor if you want to actively get higher profits. Again, we decided to do this during our off-peak months since we know this is the highest sales velocity we can get (from our BSR already at its lowest) during this time.
We keep track of our profits on the ASIN level so we have a better understanding of where the increases in spend are happening and we can tailor our strategy to getting those down. This is a tool that we are releasing in a few weeks to help you monitor your profit better. Be on the lookout for this super useful tool.
Our strategy on reducing low quality spend (I.e spend that didn’t convert well, and spend bleeders) seemed to work out well and we were able to reduce our ACoS and TACoS by almost 2% compared to the previous month.
TIP 1: USE BULK OPERATIONS! We use bulk operations to check for bleeders AT LEAST twice a week. This will help you see a quick overview of your PPC plus it’s so much easier to see all your bleeders in one file.
KEY EVENT LAST YEAR
We launched 50+ ASINs
In the second to third quarter of 2021, we launched over 50 ASINs to expand our current product line. The goal of this was to expand our customer base by releasing products that were complimentary to our existing products at that time.
Many of these ASINs were variations (which we tend to track in variation “Families” for profitability tracking). Overall, this was a huge success as it added a much needed revenue boost to our 2nd and 3rd quarter for the year. More importantly, we think that 80% of these ASINs will be profitable winners in 2022.
More most of these ASINs, we discovered them by seeing Amazon’s “Frequently bought together” below each listing similar to this:
Upselling and Cross-selling are not new concepts for most sellers but for new sellers it’s basically a strategy wherein you increase sales by strategically recommending certain products to be bought with the original item.
Upselling and Cross-selling are two especially important strategies when your goal is to increase revenue and overall brand reach. They are incredibly cost-effective when done properly. As a comparison, imagine a brand selling 10,000 a month. They wanted to grow and increase revenue, so, they planned to expand their PPC to acquire new customers and managed to increase by 10% – that is an additional $1000 a month. Now, imagine, instead, they cross-sell/up-sell/bundle a $5 dollar product with their $10 product. The strategy would translate to a maximum revenue increase of about $5000. This is a lot more without the need to increase ad spend.
Moreover, cross-selling and upselling can increase your customer lifetime value if you are selling a replenishable product. This is a great opportunity to introduce already existing customers to new products, thereby increasing customer lifetime value.
By selling products that were in line with what we were already selling, we were able to lock in our existing customers, making them spend more and become more invested in our brand.
This was a hit, since the start of our consecutive launches, we were able to sell over 36,000 units of these new ASINs which resulted to an additional $921,000 in sales for the year. (not bad for year 1 of selling)
What We Did Wrong
1. Too much inventory
During the 2nd and 3rd quarter of the year our sales just kept going and going up from these new ASINs we’ve launched so we kept sending in more to try to keep at least 5 weeks’ worth of inventory into FBA. Since this was a new product line for us, we didn’t have data from last year to properly forecast and assess our FBA inventory. One week we were selling 500 units, the next we were at 200 and then the next, 50. We ended up having at around 6 months of worth inventory for a lot of our new ASINs in FBA.
This hurt us big time in the fourth quarter. Not only were storage costs triple in November and December, but since we weren’t in demand, our ACoS was way higher. The most difficult thing we were trying to figure out was how to properly balance selling these products fast enough that we weren’t accumulating too much storage expenses but not spending too much on ads that we were losing money.
For 2022 we will have a much better idea of the selling period for these particular products and we don’t plan to repeat the same mistake.
What We Did Right
1. Better KPI Tracking
Earlier this year, we set up trackers to monitor our conversions, ad spend, ACoS, TACoS and a lot of other important metrics. It was a hassle to setup trackers for over 100 ASINs but it’s all just in the start. Furthermore, we were CONSISTENT, each week we were diligent with updating these trackers.
It isn’t enough to set goals, proper tracking is essential to visualize where you are in and how far you are from your goals. I CANNOT EMPHASIZE THIS ENOUGH BUT A TRACKER WILL HELP MAKE YOUR GOALS MORE TANGIBLE.
Some of the important trackers we developed were:
- A comprehensive conversion tracker – showing us sessions, conversions, acos, tacos, profits and breakeven margins
- ‘Trouble Products’ tracker – this is a tracker that we update weekly for ASINs that were losing profit and tracking its daily spend, sales, and profit. The values get updated daily but the list of products for monitoring is updated weekly.
- A Forecast and Sales Tracker – an essential that we’ve had for a long time but improved last year to be as comprehensive as possible. This is updated and discussed weekly to assess where we are with our monthly sales goals.
TIP 2: Set up a PPC Calendar.
When you are handling over 100 ASINs, some of your product will get more traffic than others – therefore spend more too. It can get kind of hectic not knowing which ones to prioritize. At one point we decided to test out a PPC Optimiziation Calendar where we assign certain timeslots of the day for certain products.
Here are some things to consider:
- More traffic, optimize more – high spenders will require more attention
- ‘Add all PPC related items – including checking for bleeders, updating trackers, bulk operations.
- Make it a checklist – make an interactive checklist that reoccurs weekly, it helps make the schedule easier to follow and there’s a small sense of accomplishment each time an item is checked off the list.
TIP 3: Proper Cross-Selling and Upselling Strategies
It’s no secret that acquiring new customers is a lot more expensive than increasing the spend of your current customers. With the new 50 ASINs launched, not only we were able to pair them with our existing products, but we were also able to pair them with each other.
It is incredibly important that you’re able to properly execute these strategies. From one of our brands, we were selling a product that was popular, but we knew we still had room to grow our revenue from that product. We often use Amazon’s frequently bought together shown at the listing page. We saw that people were buying our product together with a supplementary product from another brand. So, we decided to sell a similar item and make all sorts of bundles and promos around these two items.
Here are our results for the first month of this new supplementary product:
|Number of Promo Purchases||225|
|Absolute Revenue Increase||$4176|
In Addition to this, 85% of the total purchases came from cross-sells and upsells. But what makes this even better is we only spent $215 on ads during this time for a revenue of $4888, a 4% TACoS which is a really good TACoS for a product that costs $15. THAT’S A BIG DEAL.
During the second to the third quarter, we had over 2000 redemptions of promotions with nothing above a 10% off. We were basically selling these products at a 10% ACoS, probably a little higher considering a little bit of ad spend.
HOW WE’RE STARTING 2022
Profit, Inflation and Higher Fees:
It’s not news to sellers that Amazon is increasing its fees due to inflation over the past couple of months. This affects FBA fees, storage costs, and even disposal fees are at its highest.
We are planning to start the year strong. Given the announced pricing, recalibrate and analyze the margins of your current product lineup and see if there’s anything that needs to be adjusted.
Let’s face it, we have to roll with the punches and 2022 is going to be a challenging year, it’s best to keep that in mind from the get-go.
Re-strategize and re-assess your goals. I know a lot of sellers out there were pretty shocked by thinning margins, aggravated by decrease in sales during the last quarter of the year. It’s time to take a look at your forecasts and see if they are still making sense.
It’s time to focus on Profitable Sales – which may mean sacrificing some revenue growth to make sure margins are healthy.
Amazon Seller vs Amazon Brand:
From what I’ve been seeing the past year, customer behavior has changed A LOT. While deals and prices are still important, it’s time to shift to being an Amazon Seller, one that focuses on selling more, to an Amazon brand, one that prioritizes increasing brand loyalty and maximizing post-purchase experiences to justify higher prices.
Just in the past year, Amazon released and improved so many brand registry features like the Store, Amazon Brand Ads. Amazon is much more customizable than ever before. Use it to improve the experience to build a business that lasts longer.
Join us for the journey in 2022
We recently released a podcast where we talk about selling $30,000,000 on our brand. Give it a listen here and see why we had to go all-in on our focus once things started to take off:
Every month in 2022 we will be releasing these updates and hope to get more detailed and better in our explanations through the year.
Will you join us?
Subscribe to the $10M Challenge to be notified when a new progress update is available
Will you do me a big favor? Forward this to a friend who is looking to grow their Amazon business this year.
Key article insights from our employee and Amazon Brand manager Ken M. You rock Ken!