How I Failed Miserably with my Amazon FBA Business

Thirteen months ago I embarked on an entrepreneurial journey  to start a private label Amazon FBA Business.   A business in which I would purchase bulk items manufactured in China  and sell them on Amazon using the fulfillment channel they offer.   The idea behind my little side hustle was to earn extra income to help me purchase more rental properties.   You see  I have a dream to be financially free one day and am confident I can achieve this goal by building a portfolio of rental properties.  The passive income derived from these rentals will allow my wife and I to have financial freedom.   My real estate investment portfolio is actually performing great right now by the way.   You can read all my latest updates in my monthly net worth posts if interested however that is not the reason I am writing this today.    Today I want to let the world know how I failed miserably with my Amazon FBA Business.   As of last week, I sold my last unit and am now coming to a close on my Private Label Amazon Experiment.

If you are ever planning or are even remotely interested in starting to sell products on Amazon, the story of my journey will help you and even inspire to you to achieve where I went wrong.   I know exactly where I went wrong and will share all the nitty-gritty details with you so you can learn from my mistakes.  I will show you all the actual numbers and timeline of how I began this business all the way up to selling my final item and revealing if there was any income even made from this.

 

Early Stages – The Excitement of Starting an Amazon FBA Business

You will undoubtedly become very eager and excited at starting an Amazon selling business.  There is a lot of good info out there that can help you start it, help you pick a product and even guide you through any pitfalls you may encounter.  But the biggest excitement is when you find out how much money some others are making out there doing this same business.  The potential is limitless and having access to millions and millions of amazon buyers is mind-blowing!

When I first started, I wrote about how I would accomplish my new side hustle with this detailed plan of the steps needed to start an amazon FBA business.   I spent countless hours researching and reading all about how to be successful at this.  I was ready and felt very confident in the product I chose and the numbers I had calculated.

One of the most important pieces of this puzzle is to pick the right product.  A product that will be better than all the others currently for sale on amazon.  I used a software program called  Jungle Scout to help me pick my product and used the knowledge from all my researching to try to enhance the product.  It took me 3 months of testing samples and communicating with the Chinese manufacturers before I even placed my first order.

 

Patience is a Virtue – The Waiting Game

Once I chose my private label product and placed my order, I waited 3 whole months for the items to be produced.  I ordered 1000 items in total and spent a lot of money doing so.   You will see a complete break down of the costs involved below so just keep reading.   I then had to wait an additional 3 months after that before my product was even in the United States.    Overall, it literally took 9 months before my chosen product was first listed for sale on Amazon and from when I embarked on this journey.

For a complete timeline break down (month to month) on the steps I took and went though you can check my Amazon FBA Business Update I wrote awhile back.   It was no easy feat to finally have a private label product selling on Amazon Prime.

 

Let the Sales Begin!! (9 months later)

The joy and excitement you will get from selling your first product is amazing.  It feels really good knowing all your hard work put in finally leads to an organic sale.   I began by giving away about 20 products in exchange for honest reviews.  This at the time was the recommended way to launch your product and get some feedback/rates/stars so that your listing can get some traction.   This led to my first few sales and it was very satisfying seeing positive reviews being left for my product.   Sales started off very slow and I was only averaging a few sales per day but it slowly picked up in the coming months.   Lucky for me, I began selling in September and was only a few months away from the holiday rush which I had read so much about.

I revealed my sales data and income for my first 2 months of sales if you want to look back to see how I did.  It was very promising and I was very excited.  At this point I was averaging about 5 sales per day and had mostly good reviews.

Now after moving into November and early December, sales really picked up.  At one point I was selling over 20 units a day but this is also when everything began falling apart for me.

Amazon FBA failure

Let The Troubles Begin – One Bad Thing After Another

About 3 months in when sales really started taking off is when bad things started happening.   As mentioned above, at this point, I was selling anywhere from 20 to 25 units a day which is amazing!    This was in late November and early December and the beginning of the holiday rush.   Here are the troubles I started experiencing from Amazon.

1) My Good Reviews From My Product Launch Give Away Were Deleted.

I had a bunch of good reviews to start when I launched but it was about this time that Amazon deleted all those from the free giveaway I did.    So now I was working with only actual real reviews good and bad and it wasn’t very many  reviews in my opinion.

2) Bad Organic Reviews Began Coming In

Now that my product was selling like hot cakes, I started getting an influx in bad reviews.  The bad reviews came from just a few issues.    A piece of the item which I will call (bowl) was arriving broken and another item which I will call (brush) was not lasting very long and the piece was dissembling after a month of use.   Now grant it, this particular issue only happened on a small percentage of all my items but the bad reviews were not helping my cause.

3) I Started Seeing Many Returns On Sold Items

Due to the issues I had with some of the items noted just above, I started seeing many returns to amazon.  The customers were getting refunded and I was losing money because of this!   Not good!  I had not ever anticipated this many returns.  You will see the complete costs of the refunds as you keep reading.

3) My Product Was Temporarily Suspended by Amazon for being Fraudulent

This was the dagger amazon put in me.  In early December, amazon sent me an email indicating my listing was being temporarily suspended for concerns about the authenticity of the items.   I have no idea how or why this ever happened but I was selling a private label product that no one else had and from what I can tell, there were no copyright or infringement type laws I was breaking.   It was a nightmare dealing with this.  I was never able to actually speak to anyone from Amazon and had to go back and forth in emails with multiple amazon support reps.   At the end of the day, they wanted to see my manufacturing invoices of my items with all the important info like quantity, manufacturer, etc….    After submitting my actual invoices multiple times and being rejected over and over again for no apparent reason, I had to modify invoices to give them what they need.  To this day I still don’t really understand why they accepted my final invoices I modified and sent to them.  They basically had the exact same info that my original ones did.   It literally made no sense to me at all.    All this took about 5 weeks to resolve.   A total nightmare!  So I missed the prime time slot during the holidays.   I was suspended in super early December and was not actively listed again until about mid January.

Grow your net worth today with your FREE Personal Capital account.

4) Competitor Price Drops

Now that my product was listed again in January after going through that HELL!  The sales were horrendous.   My product did not have very much competition because I bundled 3 items into 1 package however the very little competition I did have seemed to all have lowered their prices during the holidays.   My sales ranking tanked, I had some recent bad reviews and I was back to selling like one or two per day which was very worrisome.

5) I Had To Lower The Price On My Product

I had no choice but to lower my price on my product because my sales were stagnant.   From the original price of $38 and after multiple price drops, my product finally started selling again in good quantity when I dropped the price all the way down to $24.99.    This was a big blow and would pretty much eat most of my potential income to be made.   Also by this time, I was worried I would be stuck with inventory and really just wanted to sell out.

6)  I Greatly Underestimated The Cost of PPC Advertising

During the course of my product being listed, even from Day 1, I had always been running PPC campaigns through amazon which are basically sponsored ads.   My ad would show up when somebody looked at a similar item or it would show at the top of the list when doing searches on certain keywords.  I could never really gauge exactly how much I would be spending on this but never thought it be would for the amount I did end up spending on it.  As you will find below in my income statement,  I ended up spending almost $5,000 just in these ppc costs.   That is a ton of money and really ate into my profits.

 

It was a combination of all these things that eventually led to my product failure in my opinion.   Now some may argue that based on the numbers that you will see below in my income statement, that this business venture wasn’t a miserable failure as I think it is.   I will touch base below my income statement on why I feel I was a big fat failure in my amazon business experiment.

 

What Could I Have Done Differently To Succeed

In hindsight, I could have prevented some of these issue and have been more prepared but I just didn’t know what to do and how to thoroughly get everything to be perfect.    If I would have changed the items below, this probably would have been a HUGE Winner!

  1. Product Packaging – I would have had thicker product packaging I could have prevented the one fragile item (the bowl)  in my product that was arriving broken.  This would have prevented many bad reviews and really helped sell more at a higher cost.
  2. More Testing Of Product – If I would have tested the item which I am calling “Brush” back when I was sampling these things, maybe I would have seen the brush fall apart and had this problem prevented.   This also would have prevented many bad reviews and really helped sell more at a higher cost.

Everything else in my opinion was pretty much out of my control.   You are at Amazon’s mercy  when it comes to a lot of this stuff.

 

My Product is Completed Sold Out – I Am Out Of Stock

As of last week, I have completely sold out of inventory and no longer have items selling on Amazon.   I have decided that I will not pursue this business venture and will continue working on my real estate portfolio growth.   Below you see the actual business income statement I have made which gives the overall summary of my income and expenses.



My Final Business Income Statement – Actual Numbers From Beginning to End

 

actual amazon FBA income stats

The Final Numbers of my Amazon FBA Business

 

So as you can see in my income statement, I actually did make $1000 which at the end of the day is good considering but as far as I am concerned, I failed miserably because I did not even come close to the profit and returns I had initially calculated.    In my initial amazon FBA private label assessment, I had originally calculated that I would profit over $9k with over 50% returns!     All the time and energy I put into this only to walk away with a measly one thousand dollars is hurtful to me.     Now grant it, I did learn a lot about e-commerce and other facets of online retail which may or may not help me in the future so that is another plus side of this experiment.   What do you think?  How bad was this failure?

 

And now for the moment many of you have been waiting for!!!!   PRODUCT REVEAL!!!!

Many of you have been curious and have even sent me personal messages asking me to reveal my product.   In this amazon selling business, it is crucial that you NEVER reveal your product because it’s a cutthroat dog eat dog world out there in the Amazon jungle!  Pun intended 🙂     So because now I am officially done with this business and will no longer be selling this item, I am willing to reveal it to you once and for all.

Here is my product:  Enjoy!

My Private Label Amazon Product



Please show some love by sharing this article.

Cash Flow Diaries

41 Comments

  1. Thanks for writing up your experience Alexander. No risk, no reward. I’m glad you were able to get out of this with a positive cash balance and not a real loss. It just goes to show that Amazon has all the power in the relationship. Sure, it’s their platform, but they can cut you off for any reason and then you’re stuck with 1000 bowls!
    Biglaw Investor recently posted…The 4% Safe Withdrawal Rate is FineMy Profile

    • No risk, no reward indeed! I like to take risks for sure. Im really happy that I didnt lose any money either but I did lose a lot of time in all the effort I put into it. Amazon will rule the world one day! 🙂

  2. I can see how competing on Amazon can be tough. So much our of your control, and so much competition.

    It’s tempting to continue with a new product to make the most of your time and effort you put into your first product with the assumption the more you do it, the easier it becomes and the higher your profit. Beware the sunk cost fallacy and make sure you’ve changed something significant of you want to continue. You might be more profitable trying something new, like selling an FBA course or ebook.
    Jack recently posted…Dividend Income Update Q4 2016My Profile

    • It doesnt help that there are sites out there like the amazing seller just touting everyone to start up with this business. I think this business could be very profitable if you can find something to manufacture on your own and not something out of a box where anyone can do the same thing.

      I have thought about doing an ebook before but just never really got around to it. Its a great idea though.

  3. I’m sorry to hear that you “failed” (got less profit than expected), but this article has some extremely useful information. You can find tons of sites there about how to be successful and how great business it is, but not much honest stories about what can go wrong. Thank you for sharing this!
    Roadrunner recently posted…What to Do With Unexpected Money?My Profile

    • Thanks RR! It was a long post and I tried to make it as informative as I could so that anyone looking to get into this will find this useful.

  4. Thank you so much for sharing your experience! Nothing ventured nothing gained though it is a bummer to invest so much time and not have it pay off. I’ve been interested in the this strategy too, though like you I think I’ll just stick to my real estate investing which allows me more control 🙂
    Jennifer recently posted…Playing Real Life MonopolyMy Profile

    • Hi Jennifer! You are doing great with real estate and there is nothing wrong with sticking with what you know. I feel I need to up my game now for real estate. I want to think of newer and more creative ways to invest. Head is churning!

  5. We’ve successfully scaled our amazon business well into the 6 figures with healthy margins and it keeps growing. It can definitely be done if you are a good operator. You’ve learned 99% of what you need to do it successfully if you take the right lessons from your failure. I’d suggestion giving it another shot.

    My observations:
    Your main issue is your manufacturer sent you a cheap, junky product and you didn’t test it well enough. There’s no getting past quality issues on amazon. We’ve had them ourselves and switched manufacturers over the issue. A high quality product will eliminate 99% of your potential issues with amazon.

    The more bad reviews and returns you have the quicker amazon will suspend you. You build up “goodwill” in the algorithm over time. Your account is new, the reviews are really bad, so someone returned your product, marking it as “they don’t think it’s genuine” and that would have caused the suspension.

    You can help mitigate a lot of that by using follow-up email sequences to head off bad reviews and returns.
    Adam recently posted…The AC Interview Series with Nate from Investment ZenMy Profile

    • That is awesome Adam. You really took it up and above to be really successful at it and I applaud that. I think you are spot on with your assessment and if I wanted to stay in the Amazon selling biz, I think I would do way better the 2nd time around. The problem is I am just more motivated in building a real estate empire. Thanks for the awesome info.

    • I agree – he’s probably learned 99% of what he needs to. Most businesses fail the first time around.

      But I think the bigger issue here is that all his sales were through Amazon, so they had all the control. Do you sell via multiple platforms, or just Amazon? What will you do if/when Amazon changes their policies in a way that doesn’t favor your business?

      (As always, commentluv links to my husband’s blog instead of mine, as my blog is not finance related at all).
      Ashley recently posted…Structuring your finances for freelancingMy Profile

  6. I have a friend who is also doing the same thing and experiencing success so far! I couldn’t imagine juggling so much and keeping track of everything, on top of the negative reviews!

    • It is a lot to track and one thing I forgot to mention is doing trying to figure out the taxes is a nightmare! Going through all that now and its horrible. I feel like I was really close to being successful though and if I ever did a 2nd product, I dont see how it wouldn’t be successful based on everything I have learned.

      Hope your friend continues the success.

      • Yes, especially because since you did FBA, your product was stored in Amazon warehouses across multiple states, many of which require their own sales tax. This was a bummer for my husband as well! (As always, commentluv picks up his blog instead of mine since mine is not finance related)
        Ashley recently posted…Structuring your finances for freelancingMy Profile

  7. Great job, Alexander! You are an absolute Champ in my book! Going out there and building a new business from scratch! That’s definitely worth something to be proud of. I believe, that this experience is invaluable and will serve you in your future endeavors. Best of luck!

    • Thanks Ekaterina! I really appreciate the kind words and you are right! The experience will most likely serve me in the future.

  8. Wow, awesome post. It’s great to hear about your experience. I’ve been super curious about your product ever since you launched it.

    If it was profitable (even with a small amount) and you learned a lot, it seems like a huge success in my book.

    It seems like with a few iterations and fixing some of the issues with the product, you could have something successful.

    Thanks again for sharing.

    • Hey Greg! Indeed, lessons learned and im happy to have finally revealed the product as well to all you who really wanted to see it. 🙂

      I think that product definitely has the potential to do well if someone decides to piggy back on it and make it better based on where it went bad for me. I would probably stay away from it though especially now that the whole world has access to knowing what it was. 🙂

    • Haha, yeah it was not easy picking a product and no I had no idea that was even a thing until I found it and started researching it. Im really happy to have sold out also, I was super nervous about not being able to get rid of the rest when I was temporarily suspended.

      • Therein lies the problem. And the run lies the problem many people have because they base their product on numbers, often I’m a niche they don’t know. A wet shaver (I am one) would have very quickly been able to determine the quality of the brush was sub par.

        Theres a lot of cheap Chinese trash being sold on amazon to people who don’t even realize they’re selling trash.

        • Yep, in hindsight, it would have been a lot smarter of me to have a wet shaver test it out for a few weeks at least.

  9. I think you have done a phenomenal job with the FBA. Sure, the results are disappointing. Whenever you do something for the first time, it should be considered learning experience. With everything you have learned, I am sure you will hit it out of the park on your second try if you ever pursued it.

    Hey, your knowledge never goes waste. You could offer consulting services for anyone trying to start an FBA business – you sure would know a heck of a lot more than the one trying to start out.

    • Hi Michael! Thanks so much bud, that is a great thing to say. Considering it was my first time and I didnt lose any money, just a lot of time, that bodes pretty well I guess in my book.

      If I ever get into eCommerce again, I have a good feeling I will knock it out of the park for sure. I like your idea of offering consulting but I just wouldnt feel right about it since I was not a huge success.

  10. Like my dad says on every new business, it’s the knowledge you gain that is valuable. He compares it to a college education where your $1000 “failure” is waaay ahead of 4 year education and student loans and then a JOB paying 50k returning money for even more time. My and my dad’s book. This was huuuge success and even if not parlayed directly into a business will be invaluable to others and your RE empire. Than you for all your trainings! Awesome as always.

    • Your dad is a smart man for sure. I don’t see how this learning experience for me can be anything but positive especially for future business ideas I get into. Thanks for the kind words.

  11. Thank you for writing this. It’s perfectly normal to not succeed as hoping to on your first try, and because you know what you could do to improve this a second time around, I really think you should try again 🙂

    • Thanks so much Lynda! Im getting a lot of feedback that I should try again. I just feel my efforts at this point would lead to greater success if I put them toward building my RE empire. If one day I can ever figure out how to manufacture a product that is not easily reproduced through alibaba suppliers than I think I would pursue that.

  12. I’m so grateful that you wrote this very honest piece. Many blogs and websites say that it’s so easy, but no one talks about the risks. Thank you very much.

  13. Thanks for the honest review! Do you think your FBA experience would have been different had customers enjoyed the product more? It sounds like it was a manufacturing issue that started the headaches. I’ve considered FBA, but I honestly don’t have the time or energy to deal with it! I’ve sold a few eBooks on Amazon and it’s actually been really great. The profits are small since it’s an eBook, but it’ll pay for lunch every now and then. 🙂
    Mrs. Picky Pincher recently posted…What’s for Dinner?My Profile

    • Ultimately yes I do also believe it all started with a manufacturing issue. I think if I would have had a better quality item to start, it would not have led to the bad reviews, which would probably have prevented the suspension during christmas, which would have led to not having to lower the price which would have led to HUGE SUCCESS! All of that was my original goal and if it would have played out like that then I would have ordered a 2nd batch for sure and possibly even start a 2nd product.

  14. Definitely not the kind of product I was expecting hehe!
    Thank you for such an honest wrap-up, and who knows maybe your next try will be completely different.

  15. Thanks for sharing this Alex and as they say you either win or learn and I feel like you’ve done plenty of learning here bud!
    I know that any venture you’ll put your all into and that it’s a matter of time before we see you back bigger and stronger or with more rentals 😉

    Keep up and all the best man!
    Nice product too 😛 haha

  16. Sorry it didn’t go as planned…wasn’t hoping to do something similar as I kept hearing that it could produce good income. Obviously things aren’t as easy as it appears. You did learn a lot from the experience right? So you don’t think you might try again?

  17. Loved the read. Not because you saw it as a fail (that was a bummer) but just because of the reminder that things rarely turn out as you plan because of unexpected circumstances along the way. That’s a tough one to remember sometimes, and any reminder is a good takeaway, not just for you but for all of us readers.

    And as much as you ‘lost’ potential profits, at least you came out in the black. I was fully expecting to see you having taken a loss. So it could have been worse, right?

  18. Man that sucks. I’ve run an e-commerce site selling sports gear I imported from Thailand. It was authentic, quality gear and I had a good business. I parallel imported it and one of my biggest channels for sales was an online marketplace. I too had the same problem as you where my account was suspended under allegations of fake products. I had to go through the rigmarole of proving it wasn’t fake by supplying invoices and import documentation. It took about two week, and was damaging. I was fortunate that I controlled my own destiny by having multiple channels. I had a mailing list of customers, a Facebook page, my own website to take orders and sold on other (smaller) marketplaces. I found out that it was one of my competitors (the “official distributor” of one of my brands in my country – he was running a monopoly on the brand and charging an excessive premium because he knew consumers would pay more ordering out of the country on top of shipping and import taxes). As soon as you mentioned the problem in your post I thought, it’s a competitor, you then go on to say other competitors started selling similar products. I imagine that’s where your bad reviews came from also!

    Commerce can get ugly. My best advice, if you dare to trade physical products online again. Control your own destiny and make sure you sell through channels where you can connect with and have a relationship with a customer. I can’t tell you how many times I’ve turned an unhappy customer into my best advocate by picking up the phone, replacing a product and throwing in a little something free just as an apology. That often leads to that customer recommending you. With Amazon, you just can’t do that. They control the coal face.

    You might be wise to search for a product that has a good margin and set up a site on Shopify. I hope this hasn’t put you off trying something again, get back on the horse, when it works, it’s worth it!

    PS it’s only a failure if you didn’t learn something from it!
    Lloyd recently posted…February 2017 Online Income & Traffic ReportMy Profile

  19. Sorry for the second comment. I just checked out your financial (and your product). That’s not a bad product to have built a quality website around and charged more of a premium. With some content marketing and a line of side products you probably could have built up a nice loyal customer base. That aside, based on my original comment about my experiences, the large portion of your costs are going into Amazon’s pocket. That would have been my first indicator to think about opening up to other channels. Yes, there’s a lure that Amazon has that massive customer base but you don’t control the customer or the customer experience.

    One final thought, or question really. Did you repackage/rebrand the product? Selling through Amazon, that may be a good way to drive traffic/future sales back to your website.
    Does Amazon let you have customer contact details or do they control it that much that you don’t see any of those and have to communicate with customers through their platform?
    Lloyd recently posted…February 2017 Online Income & Traffic ReportMy Profile

Leave a Reply

Your email address will not be published. Required fields are marked *

CommentLuv badge