458: The Ugly Truth About Selling On Amazon And The Hidden Fees With Vladi Gordon

00:00
You’re listening to the My Wife Quarter job podcast, the place where I bring on successful bootstrap business owners and dig deep into what strategies they use to grow their businesses. Now, have you ever wondered how profitable the average Amazon seller is and how much margin does the average Amazon seller make? Well, in today’s episode, my guests, Vladdy, Gordon and I break down all of Amazon’s hidden fees. Vladdy is a veteran Amazon seller and the founder of Sellerboard, which is software that helps you track profit and loss on Amazon. Enjoy the episode. But before we begin,

00:29
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01:54
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02:21
Welcome to the My Wife Could Her Job podcast. Today I’m thrilled to have Vladi Gordon on the show. Now, Vladi is the founder of Sellerboard, which is software that helps you track profit and loss when selling on Amazon FBA. And having sold on Amazon for seven years now, there are a ton of hidden fees and ways to lose money on the platform without even realizing it. Now, if you look on the internet with all these internet gurus showing off their seven and eight figure Amazon revenue numbers, what most people don’t realize are that these numbers are way inflated.

02:50
Amazon ups your revenue number whenever money comes in, but doesn’t deduct from that number your fees and other hidden costs, which we are gonna talk about today. And I can almost guarantee you that by the end of this episode, you’re wanna look back and reanalyze your sales numbers. Now before we get started, all I had to say is that if you don’t have some sort of Amazon profit tool installed, it’s gonna take a wizard to figure out your true profit or loss because Amazon obfuscates everything.

03:19
And with that, welcome to show. Wladi, how are you doing today? Hi, Steve. Thanks for having me. How are you? Yeah, it’s great to have you. Wladi, I always have to ask this question. know, tracking profit and loss on Amazon and running a business doing that, it’s not the sexiest business, right? So how did you get into this? Yeah, you’re right. It’s actually kind of a nerdy job in order to work on the numbers and crunch in data and

03:48
you know, search for errors. So yeah, my background is actually IT. I’m a software guy and I was doing this kind of things all my life. I worked as a software engineer at IBM and some other larger companies and then as a product manager. And it was all about the backend. So none of my like products were apps or you know, the next big thing, was all like the boring data backend.

04:18
But yeah, I think it’s kind of my world or my focus and something I’m good at. So I’m okay with that. I believe somebody has to do that job as well. You were an Amazon seller as well. Are you still selling or? No, so I’m not selling anymore, but you’re right. I was a seller myself. started, I think it was 2014, so like nine years ago. Oh, that’s like prime Amazon.

04:48
Yeah, those are the good old days. Yes, that’s right. So yeah, I live in Germany and I started this basically as a side hustle. And back then I was listening to different podcasts and to yours as well. And I thought, okay, maybe I could do something like this in Germany. Cause I wasn’t even aware that you could sell on Amazon from everywhere. It doesn’t matter in which country you’re.

05:16
based in, I could have also started to sell in the US, but I thought since I live in Germany, there’s Amazon in Germany, so maybe this model will work as well. And back then, was the time when virtual reality was a hype. I mean, it’s kind of still a thing or hype and we have metaverse and stuff, but back then, these were really the first days of virtual reality. And I found a product,

05:44
Basically, it was a piece of cardboard which you could fold and it had two lenses and you could put your phone inside and look at on your phone through those lenses. yes, okay. It was called Google Cardboard. I remember that. So you were one of the big sellers for that. I remember, okay. Yeah, so basically what happened was back then Oculus Rift, I think was acquired by…

06:10
Facebook and everybody was talking about virtual reality and Google thought, okay, they need to do something. So they developed this cardboard VR device for your phone and they open sourced its design so anybody could produce it. And basically that’s what I did. I bought some on AliExpress and then I registered an account in Germany as a seller and I uploaded the pictures and back then I only needed

06:39
basically just a couple of PPC ads with a little budget and it started selling. And yeah, this exploded. This was like, this was crazy. Cause I kind of caught the wave. was the only FBA seller selling these products for maybe like a year. There were some other sellers who were shipping from China. And yeah, I was basically developing this product and adding some features, mostly

07:08
They were about design and maybe some, you know, padding. And this was great. And then I thought, okay, I need to quit my job and replicate the success. I can do it like 20 times and there’s absolutely no point doing anything else. I’m doing software. Why do I care about software? No, it’s like, it was an absolute gold rush. And by the way, in the U.S., I believe the market was already more crowded.

07:38
although it’s a much larger market as well. And in Germany, like, FBA was only starting, basically. Yeah, so basically, in the end, I had maybe 20 different products, and that didn’t work so great, because I found out that it’s actually a business, and it’s not like extracting diamonds from Amazon or gold.

08:08
it became a real business. And if you have 20 products, not all of them are success and you cannot replicate such a success every time. there’s competition in every niche and some products are not trendy. And it’s kind of hard to scale this model, to basically define those. Yeah. Could you develop Sellerboard?

08:35
because of your own products? Actually, yes, because when I was having huge margins with my first product, I didn’t really care about the numbers. I just was watching the money on my bank account and I knew if I’m buying for $2.50 and I’m selling for 18 euro, there’s no way I could make a loss, right? Right. So there’s this huge profit margin.

09:05
But when I added more products and when the market for my main product became crowded, so basically, eventually everybody figured out that it’s a very easy product to replicate and there were hundreds of sellers for this one. So then I needed to drop prices and invest more in ads and it wasn’t obvious at all anymore if I’m profitable or not.

09:33
And I started to look for a tool or actually for a way to assess if I’m profitable or not. And I didn’t find a tool that I liked 100%. And I also didn’t want to pay too much money because I was feeling like my margin is getting thin. So yeah, that’s when I thought, okay, maybe we can develop a tool. I partnered with my friend and we built Sellerboard. And after the launch, I…

10:02
basically sold my business. So in the end, like I had a lot of products that were not successful anymore. And just one that was really successful, these were not the VR glasses anymore. But another one, actually these were drink coasters. probably also have really standard product. Right, so most of the that you sold were just kind of as is from like Alibaba or Aliexpress.

10:32
Exactly. Like, you know, as a software engineer, I’m not really a marketing guy. So I didn’t know how to write great texts and make nice pictures. I mean, you kind of understand it if you look at other listings, but this wasn’t really my thing. And, or I didn’t also find a product that I was super passionate about. So what I did was basically I was looking for products just analytically.

11:00
more or less like an arbitrage model. So it was no private label, but I was just looking for a product which is small. Probably everybody knows these rules, right? It should be small, it shouldn’t have any electronics. And the competition shouldn’t be too high. And in this day and age, I that model just, I mean, I guess you can probably pull it off, but someone will knock you off unless you actually turn it into a real business and marketing and develop a brand. Would you agree with that?

11:29
Absolutely. that’s actually what happened. So I was kind of buying random products. had like ties, for example, I thought like a tie is a very light product. You can ship it by air and it’s, you know, doesn’t have electronics. So let’s make ties. And then I thought, okay, phone tripods, why not? You know, they are small. So all criteria are fulfilled. So what then happened was in

11:56
every one of those niches, there were players that were focused on their brands in that specific niche and they were winning because they had better products. They would invest more energy and more love into their listings and reviews and ads. And yeah, in the end, you know, I didn’t have any USPs for most of my products. Yep. Yep. Yep. All right. Well, let’s shift gears because that

12:24
Like I’m on YouTube and Facebook all the time and I always see like all these people posting their Amazon revenue numbers. And I just want to talk about how those numbers are really inflated. And for people who are actually selling on there, who actually aren’t tracking their profits right now, what would you say is one of like the main culprits that can affect your profitability that most people do not even think about or consider?

12:53
So I would say that the single most underestimated profit killer are returns. So first of all, as you said, lot of sellers, and this was my experience as well, don’t track profit at all, especially in the beginning, maybe, you know, in the beginning you want to invest and you know you’re building a business and it’s not that important. So you have an approximate view.

13:22
But at a certain point you need to start really tracking those numbers and understanding and you need some sort of a profit and loss tool, which gives you like profit or you can also do it by hand in Excel, but that’s a bit complicated and costs a lot of time. But you need to understand your profit by unit per unit, including all the fees. And you need to have some sort of a cashflow management tool.

13:48
which is basically your bank account, you need to track the money coming in and going out. And we need to have some sort of balance sheet. these three things, and balance sheet basically describes all the assets in a business. And for an Amazon seller, the main asset is their inventory. So you need to understand these three things. But now back to your question. Yeah, so let me just preface this for the audience real quick. you go on.

14:16
I’m not sure if you guys listening realize this, but when you make a sale on Amazon, the number goes into your revenue number that you see on your dashboard. But when you get a return, that number is not deducted from your revenue number. So you always think that you’re making more than you are just right off the bat. I’ll turn it over to you, buddy. That’s correct. yeah, so for example, let’s say you sold just one item.

14:44
and you go to your seller central business reports and we’ll say one item sold and your revenue is $20. And if the item is returned, it will still say $20 and one item sold. And most sellers think, well, what’s the big deal? I’ll just sell this item again, right? So this is not a huge problem, but actually it is because if you’re not tracking your profit properly,

15:14
Often what happens is you take the number of units sold from the seller central and multiply it by your average profit per unit, which you kind of calculate on a napkin or an Excel when you are researching for product. So you know the cost of goods, you know approximately what the shipping from your supplier to Amazon costs.

15:42
And you know, the fees like 15 % for the referral fee, for example, and then maybe, I don’t know, to 30 for the FBA fee. Most sellers come up with an approximate profit per unit. And then if you look at your seller central every day and you see like, I sold 100 units. And if your profit per unit is $3, then it’s $300 profit. And this looks nice, right? So she multiplied by 30 days. It’s nice business.

16:10
But the truth is, the returns, since your revenue isn’t decreased in the seller central and the number of units sold are not decreased when there’s a refund, sellers tend to ignore the refunds or they don’t even notice it. And what happens in reality is the moment there’s a return, basically you need to write off your sale that you previously made.

16:39
For example, if you sold a product for, let’s say, $20, and then one week later, it’s returned. So what happens then is you should book like a minus $20 position in your books, right? Because you’re paying $20 back to your customer. So there are actually multiple ways to account for returns in the bookkeeping.

17:08
And we are really focused on management accounting, so accounting for the business owner, which helps them make decisions. And here you could do two things. You should either reduce your revenue on the day when there was a return or on the day when the item was sold. But this one is not a very good idea because this way you would reduce your revenue retrospectively and you don’t even notice it, right? So if an item is returned, which was bought like two months ago,

17:37
you know, you don’t look at your revenue from two months ago every day, right? Or you need to reduce your profit. And this is actually the way we chose in seller board. So what you do is you return $20 back to your client and at this moment it’s your loss. And if your profit is for example, $6 per unit and you reimbursed 20, then it kind of kills or cancels

18:06
three items that were sold. But fortunately, it’s not that bad. And I’ll explain you why. But it’s still very bad. So well, let’s talk about the fees actually, that you don’t get back when someone makes a return. So first of all, there’s a refund fee. It doesn’t apply to all categories. But oftentimes, Amazon just charges you for a refund.

18:35
So it’s, well, it might be like something like 15 % of 15%. So for a $20 unit, so basically it’s a referral fee on the referral fee, right? So for a $20 unit, it’s somewhere near like 50 cent. And this money, you don’t get back. It’s just, basically Amazon charges you because they need to send the money back to the customer’s credit card. And this is another transaction. This costs them money.

19:05
They need to process the return in their warehouse. It all costs work, so they charge the seller. So then think about the FBA fee. When a customer buys a product, you pay the FBA fee, you pay the shipping from Amazon to the customer. Not that you don’t get back. And depending on the category, you also pay the shipping back from the customer to Amazon. So sometimes it’s free, especially if it’s a…

19:34
Prime customer that it’s free for the customer and also free for the seller but sometimes Amazon charges this shipping from the customer to the warehouse to the FBA warehouse like in the fashion category for example because there are a lot of returns there so you lose that

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21:21
Now back to the show.

21:24
Can we attach some percentages to this? So typical FBA fees like maybe 10 to 15 % of revenue, right? If something’s small. much is? I think it depends on this. Of course it depends on the size of the product. Of course, of course. than the this amount. But I think that’s a fair estimate if you say like 15%. So, then this return fee is what percent you said 15 % of 15%, right? Let’s assume it’s around about five.

21:55
6%. Okay, 5 or 6%. What about the return shipping also that’s sometimes charged on apparel? What percentage would you say that is? I think in general, a good estimate for it is the FBA fee. Oh really? Yeah, because it’s more or less the same package, right? In the same distance.

22:19
Yeah, you play somewhere between one FBA, you lose between one FBA fee and two FBA fees. So it’s like 15 to 30 % maybe. Okay. That’s crazy. Okay. Then there’s there’s good news as well. So you’re paying the referral fee when you’re selling like 15%, but when an item is returned, Amazon returns the referral fee back to the seller. So this one.

22:47
actually reduces your loss and it’s a goodness. And if you’re in Europe, you’re also paying VAT. Okay, VAT is, well, it’s kind of, actually it’s a tax basically, but yeah, if an item gets returned, then your VAT that you paid is also offset. So you don’t need to pay it anymore. So this also reduces your loss. Right. And then ultimately,

23:17
There’s the question where, whether the item is resellable or no. So when the item arrives in the warehouse, Amazon checks it and they either book it as a sellable item or they say it’s damaged. And if it’s damaged, then you also lose your cost of goods sold. So here, of course, it depends on the item. If you’re selling like iPhones, probably you wouldn’t lose the complete amount.

23:46
just because the packaging is damaged or because the item is already opened. So you would be able to sell it again. But if it’s a cheap product, like in my case, this cardboard VR glasses, it doesn’t make sense to repair them or to resell them if they were already open. Actually, my packaging was…

24:12
built in a way that you cannot even close it if she wants opened it, because you have to tear it apart. basically here, depending on the status of return product, you lose your cost of goods. So if it’s like maybe 20 % of your, let’s say 30 % of your selling price, then you lose another 30%. And if it’s sellable, then again,

24:40
we need to offset your loss. So cost of goods sold at the moment the item is returned becomes a positive position in your basically in your profit and loss statement because you can really sell it again.

24:54
So is that all trackable through the Amazon API? Like if something comes back as resellable, that can be tracked? Yes, basically you see it all in the reports. You can download the transaction report or like in the FBA reports, there are actually multiple reports that give you information about the inventory adjustments. So for example, there you see every return.

25:22
which arrived in an FBA warehouse and whether it was booked as a sellable item or no. You see all these transactions and transaction report. the charges and reimbursements of referral fees and stuff like this. Yeah, but it’s kind of hard to put it all together, I would say. So yeah, I would- Right, because they’re asynchronous, right? You might’ve made a sale like,

25:52
30 days ago and then someone makes a return. So it all needs to be correlated at some point, right? Yeah. Right. And the return can be in the next month and typically sellers think in terms of months. So like if you had a good month, don’t want to like change your bookkeeping retrospectively, right? So you want to close it or it can be even like in another year, right? So for example, if you’re selling before Christmas,

26:22
Chances are that the returns will arrive in January. Do you happen to know what the average refund rate is for particular categories off the top of your head? It’s very category specific. So I know from the fashion industry that there it might be up to 50%. And there are some items that are in the like

26:51
some other categories or some products that are in the very low, like maybe single digit area, especially if the products are cheap. So for example, you should buy like a battery or something that it’s almost never returned, right? Yeah. Or a pair of batteries. So yeah, anything between basically zero or like 2 % at 40 % is…

27:17
I think I read somewhere that the average refund rate is 10 % overall and then electronics is pretty high. I heard it’s like 15 to 20 and you’re right apparel is really high. What I’m trying to get at is like when you see someone’s income report and you’re thinking about profit, what adjustment would you make just in your head without software? yeah. I think

27:47
What would really help is if you do this exercise once with the software or without, just take a look at the transaction report, find one return, check out how many, oh, by the way, one thing I forgot. If damaged items are returned, then they are put back in stock until you basically dispose them. And they also generate storage fees, because they take place in the warehouse.

28:17
And if you choose to send them to your home or to your warehouse, then this will also cost money, of course. Is that like the equivalent of an FBA fee? To have it shipped back to you? No, that’s much cheaper. Actually, this is more like the inbound shipping. So inbound shipping is like, you pay, I don’t know, $3 something for 100 units.

28:46
But yeah, depends on how many items you have, of course, that are damaged. I don’t think I’ve ever had stuff shipped back. I always just destroy them. Yes. think that’s, well, it depends on the products. If you’re selling TV sets, then of course, of course, that’s not the wisest thing to do. By the way, I don’t think you have an option to destroy them. It’s actually called dispose. Sure. Yes. decides what to do with them in this case. So they also might decide to sell them.

29:15
and then they will kind of piggyback on your listing and will sell them, sell your items as used. I know for a moment. Oh, under your own listing. Okay, I didn’t think about that actually. Yeah, and sometimes this also might happen if they lose items and find them again after they already reimbursed you. So they just sell them. Well, okay, so let’s summarize refunds before we move on. So refunds anywhere between, you know, single digits to 40, 50%.

29:45
and you lose your FBA fee, you potentially could be paying two FBA fees for return shipping. And then there’s also a refund fee. And then there’s also your cost of goods if it’s not resellable. Correct. And if you want to get a feeling for the order of magnitude, then I would suggest you take a look at one transaction and at the percentage of damaged items.

30:13
and then you can kind of calculate it. Maybe it’s 20 % of your net profit that you should allocate for refunds. And by the way, there are some things that, or some like easy things that you could do to reduce the return costs. Okay. So for example, sometimes if you’re lucky, the reason for returns are bad pictures. So this is, or maybe inaccurate data in your listing.

30:41
And this is something that you could really fix very fast. So, I mean, if it’s a problem with your product, then okay, you need to work on your quality. But there’s a report in the seller central. It’s under reports, FBA, customer concessions, and it shows you all FBA returns. And there’s a column there with a return reason. So when a customer initiates a return, it was an ask some what’s the reason for the return.

31:10
And you can say, for example, product is not as expected, right? And they can also enter a comment there and sometimes they write something like, it’s bigger than I thought, or it’s smaller than I thought, or the color doesn’t match the picture. And if that’s the case, then this is something you can really fix. with respect to size, for example, you can add some pictures where the size is visible, either as a number,

31:40
or maybe you put something similar near your product, like a coin or something, so that the customer understands how large it is. And yeah, the color, you can just tune the colors in the pictures and sometimes it’s this easy fix, which can help you reduce returns. And if you reduce your return rate like by 1%, so if it’s five and you reduce it by 1%,

32:07
It’s going to have a huge impact on your profit. So it’s much more than 1%. It’s going to be like maybe 20.

32:15
Yeah, I mean, usually what happens is if you scoot up on your listing, usually you get suspended, right? Usually a flood of returns comes in. At least in my That’s right, but sometimes it’s not that big of a difference. Especially in fashion, it’s very easy. If a customer has a different light, and customers 100 % have different lighting conditions at home.

32:45
if the lighting is a bit different than your studio, then the color will be different. just make sure it’s realistic or you have multiple pictures so that you get a feel of the color. I think Amazon in general is just very clever because if you’re trying to do all this stuff by hand, I know because my wife does the finances, you have to download multiple different reports and then compile everything together.

33:15
and I’m sure they do that, so it’s hard for you to figure out your profit. Like they could have made it a lot easier for you to figure out your profit, right? That’s right. I mean, there are a lot of things that are hidden in the Excel reports and while you can download them and basically explore those fees and track them, it’s kind of hard to do and it needs manual work, so sellers tend to ignore this work.

33:45
Yep. Okay, so we’ve covered refunds and returns. What are some other areas that people often overlook? Yeah, so I would say one important area are like all kinds of different fees and sometimes sellers, especially new sellers tend to skip some fees and some costs. So, you know, when you’re researching for a product, you kind of see

34:15
the cost of goods sold and you see your selling price on Amazon and you kind of estimate the referral fee, maybe the FBA fee and shipping from your supplier to Amazon. But there are so many other fees. so we basically, download all the fees for every customer and try to break them down by product. And in my experience, there are more than

34:43
100 different small fees that Amazon charges you. So storage fees are, for example, something that everybody knows, but it’s kind of not very transparent. So it’s hard to say which item generated how much in storage fees in which month, right? But there are also some others that are not so obvious, like inbound transportation. It looks cheap, but if you are selling a lot, you know, and you’re paying maybe

35:13
It used to be three euro something, euro 60 or something per box in Germany when I was selling. And if you’re selling like 100 boxes per month, then it’s already a considerable amount. Then you have fees that they Sorry, you’re talking about shipping to Amazon’s warehouse, is that correct? Correct. Okay, right. Correct. Yeah, lot of people don’t take that in count.

35:41
Exactly, because it’s a small number, yeah, as I said, especially if you’re selling a lot and they all kind of add up, right? So you need to at least have some buffer. So if you don’t know them exactly, then plan some buffer, like I don’t know, maybe 10 % of your revenue for some unexpected fees. There are some other things like if a shipment is damaged, an inbound shipment to Amazon is damaged, then they can either charge you for…

36:10
a fee called the FBA inbound defect fee. So basically they have more work with opening it and fixing it and that costs time so they can charge you for that. Or even worse, you can lose some of your items if they’re damaged, right? So they become damaged, unsellable items, then you need to dispose them which costs money again. Then you have things like lighting deals fee.

36:35
You have the subscription, it’s $39 a month. You have a fee for coupon redemption. have like removal and disposal fees, fees for sales tax collection, labeling, bubble wrap, polybegging. So yeah, there are more than 100 fees. And I think, yeah, as I said, sellers just should be aware that there is such a thing and you should have enough profit margin to compensate for all these expenses.

37:03
Can we talk about the inbound damage fee? Like if they damage it, that’s their liability, but who’s to enforce that? Do you know what I’m saying? Like if it comes in and it’s damaged and they have to charge you a fee to look through it, what’s preventing them from just, when they screw up, charging you for that fee? So, okay, I mean, I think at this point it’s just trust.

37:32
Right, so if Amazon, so if they damage your product, basically they book it as damaged in their warehouse and then they are accountable for or liable for this. But of course if they don’t do that, then it’s, I mean, I don’t think that Amazon does this on purpose. I mean, I’m actually very sure that they don’t do it on purpose.

38:01
But of course it can happen and they can also lose products and damage products and not reimburse the seller. We see this pretty often as well. Actually, I have a fee that I’ve hit that’s kind of hidden that people don’t consider is, you know, usually around the holiday season when the volumes are much higher, Amazon tends to lose our inventory more and then we’ll get reimbursed for that inventory.

38:31
But then like in January, they miraculously find it. And then they take all that money back. But meanwhile, lost out on the holiday season’s worth of sales for that particular item. Is that accounted for? So in the software, like if that happens, that’s all accounted for on the month that it happens, right? Right. So whenever you get reimbursed, basically we show all your profits and all your income and all your

39:01
Uh-uh.

39:04
all your charges, right? So if you get reimbursed, we will show you a reimbursement the day that you get it. And sometimes it’s attached to a product and sometimes it’s not really clear what you are getting reimbursed for. But then in this case, we’ll just show it as a number on the overall account level. Yeah, but you’re right. Of course, they will reimburse you. So if Amazon loses your inventory, they will reimburse you for the inventory.

39:33
But they will not reimburse you for opportunity costs. So for the profit that you would have made, or if you’re listing loses like keyword ranks because you didn’t have sales, of course that also becomes your problem. But I think I really don’t want to be too negative at this point. There are a lot of fees and I think you just need to manage them.

40:03
that they exist and you need to have enough margin. And if you don’t have enough profit margin to account for unexpected fees, then probably you need to think about your product strategy. you either need like a cheaper product or you need to make the product cost of goods cheaper, right? Or you need to raise your prices or maybe add something to your product. Cause the last thing you want to do is of course work for nothing.

40:31
or even police So one thing I wanted to touch on actually was PPC, because I run a class of about 5,000 students, and oftentimes people are bidding without really understanding what their break-even point is. that’s actually one thing I liked about Sellerboard was that when you’re bidding, you kind of know what your profit point is. Can you just kind of talk a little bit about

41:00
common PPC errors that you see? So I think with PPC sellers

41:12
Basically, there are like a couple of reasons why you do PPC. So for example, if you’re doing a product launch, then the profitability doesn’t really matter because all you want is sales, right? Sure. Because you hope to launch the product and to get some organic sales and then you won’t need PPC anymore. And sometimes sellers say, okay, I want to run PPC ads just to support my organic sales because Amazon likes it when, you know,

41:42
when you advertise your product. And this also helps organic ranking, but when the product is already in a mature phase, it should earn money, right? So a lot of sellers say, okay, I don’t want to lose any money on PPC. It should just support my product, but I don’t want to lose any money. It should be neutral for the profit. And the last strategy would be just to

42:11
be profitable with PPC and that’s becoming harder and harder every year to be honest on Amazon. So, yeah, what’s important is the numbers that you see in the advertising console, like the PPC sales are four, have an attribution window of 14 days after the click. And typically Amazon shows you sales of all products, not just of the product that was advertised.

42:41
So if somebody, a client, a customer sees an ad and clicks on an ad and then buys a different product one day later, for example, a different color or a different variant, or even a totally different product from the same seller that will still count as a PPC revenue, right? So this product doesn’t need to be advertised. And this makes it a bit harder to…

43:10
basically to estimate the profitability of your PPC campaigns. Because if your strategy is, for example, to be profitable or break even on PPC, the question is then of course, how much can you afford to bid on specific keywords to be break even, right? And since the sales numbers are not necessarily…

43:37
corresponding to the products you’re advertising, it’s becoming a bit more like randomized or challenging to find out what your profitability point is. yeah, basically as a rule of thumb, you can take your profit margin for your like advertised product and maybe products if they are all similar from the same listing.

44:05
from the same category and take this as your target acres for the break even, point for the break even advertising strategy. But in Sellerboard, we try to do it more precisely. So we basically go ahead and take a look. So we get a little bit more data through the API than what is displayed in the advertising console. And we actually.

44:32
see how many sales are coming from the advertised products for every specific campaign, for every specific keyword, and what percentage of sales is coming from other products. And based on that, and based on all profitability calculation that we have, we estimate your profit per campaign, per ad group, and even per keyword. And if we have that profit, then we kind of automatically have the profit, the breakeven point.

45:02
Right. Yeah, which is very important. So like when I teach this in my class, I always tell people to start with the break even ACOS. But it’s hard to calculate that because you only have the, I guess the revenue, right? Which is what ACOS is. Calculating the true profit, taking into account all these other fees that we just talked about returns inbound is actually quite difficult to do. Right. And Amazon also doesn’t

45:31
tell us and it doesn’t tell the seller if an order was generated by an ad. So you see the sales per campaign and even per keyword, the PPC sales that are attributed to a campaign. But on the level of every specific order, we actually don’t know whether it’s coming from PPC or whether it’s an organic order. So it’s kind of hard to calculate.

45:59
because this information is missing, it’s kind of impossible actually to calculate the profit exactly, but we’re trying to do our best. And if you know your breakeven acres, then you can calculate your breakeven bid. right, since you know your conversion rate, you know, like for example, every fifth, or like let’s say every 10th click will result in a sale. And if you know your…

46:27
like break even point is, don’t know, maybe you have a target profit margin of $2 per unit, then you know that you can afford to pay 20 cents per click to stay profitable, right? And yeah, actually with PPC, it’s kind of interesting because this number also constantly changes. So the moment you figure it out, it’s already outdated and not just because

46:55
It’s actually not because of you as a seller, but because there are so many competitors that are constantly changing the bids and because of seasonality and different like days of week. So the market is highly dynamic in that regard. So yeah, but it’s a good start. you know your break-even acres and break-even bid for every keyword, then chances are you’re going to be.

47:25
pre-cubed. There’s one thing I also want to say here is that at least in my portfolio, there’s the I think the 80-20 rule applies like 20 % of your products are going to make 80 % of your profits and just seeing this in a real-time dashboard allows you to say hey this item did not make me money even though it generated a lot of sales maybe I should consider not selling that item going forward and focusing on this other item

47:51
that actually sells less in terms of volume but makes more profit in terms of raw dollars. I think a lot of people just sell in aggregate and as long as the overall profit is good, they don’t necessarily drill down to the individual item level and figure out what they need to stop selling or focus on. I think this is actually true for every business as long as you’re like total

48:21
that profit is positive, you’re like relaxed. yeah, if it, if if the times become hard, everybody starts analyzing. But actually my experience is, you know, it’s, it all, it’s always also about time, right? So you need a system which allows you, which enables you to track your profit.

48:50
and do your management accounting, which brings your data quickly and easily without you having to spend too much time on it. And then it becomes easy to optimize. Yeah. Vlad, where can people find more about what you do in your tool? Sure. So you can go to our website at sellerboard.com. And yeah, we have a…

49:17
a demo account there which you can actually start or try launch without any registration. So you just click the demo button and then it’s a live account with a fake product, but it’s read only, but you can still try the software and see through all the functionality. And there’s also a free trial and after the trial, the pricing starts at $15 a month. Yeah.

49:46
I was just going to say this.

49:50
For everyone out there, $15 a month, I want to say that Sellerboard is actually one of the least expensive tools out there. because everyone always comes to me with their tools and what attracted me to Sellerboard was the fact that it is so inexpensive, which actually makes it a no-brainer if you’re selling on Amazon, even in low quantities, because you have to know what your profit is. Amazon has gotten harder over the years and you really need to scrutinize and figure out what your true profit is.

50:20
and look at your winners and your losers if you want to be in the long game selling on Amazon.

50:29
Correct. This was actually our idea and vision and intention. We want to make it affordable, especially for new sellers, because when I was a new seller, I didn’t want to pay too much money for the software because you have so many expenses and have so many Amazon fees and you don’t want to pay too much for the software. So Vlad, thanks a lot for coming on and talking about some of these hidden fees.

50:52
And just a public service announcement, you whenever you see some guru advertising something and showing their numbers, just realize that, you know, revenue is kind of for vanity and profit is the important part in any business. Thanks so much, Steve. Yep. Thanks for coming on.

51:18
Hope you enjoy that episode. Now if you’re going to sell on Amazon, you absolutely have to use Amazon reporting software. Otherwise you’ll have no idea what your profits are and it’s really easy to lose money. Sellerboard is the least expensive solution that I’ve ever found. And once again, I want to thank Zipify apps. If you want to instantly boost your revenue with pre and post purchase upsells, go check it out at zipify.com. I also want to thank LinkWisper. If you want to take search engine optimization seriously with your blog,

51:46
then you absolutely need an internal linking tool like Link Whisper. Go check it out at linkwhisper.com. Now I talk about how I use these tools on my blog, and if you are interested in starting your own eCommerce store, head on over to mywifequitterjob.com and sign up for my free six day mini course. Just type in your email and I’ll send you the course right away. Thanks for listening.