Well, it is close to the end of the year 2016 and this post will be a short summary of my different endeavors for this year.
1) Stock portfolio
I am pretty much hands-off for my portfolio in recent months. The portfolio has been performing ok so far. Excluding those stocks which have been delisted, so far, for the overall value of the portfolio, I have an overall unrealised profit of 7%.
I have recently added a stock (Fu Yuan Shou) to my portfolio. It is a deathcare company based in China and I have initiated a small position in it.
2) P2P loans and Invoice financing
I have withdrawn most of the cash amount from the platforms in this portfolio. However, I did continue to make some small investment in invoice financing loans. So far with the automated financing features in some of these platforms, I can be pretty hands-off. In addition, the amount invested in each loan is relatively small.
Yup, I did continue to make some small investment in invoice financing loans infrequently. I do prefer these secured loans over the unsecured P2P loans (which the platforms stopped issuing due to MAS regulations).
Invoice financing loans as compared to P2P loans typically have shorter tenure (1 to 2 months) and lower interest.
So far, my experience with invoice financing loans is alright so far. Other than the occasional late repayment (whereby I still get the late repayment interest) – most of the loans are successfully closed.
So far with the automated financing features in some of these platforms, I can be pretty hands-off. In addition, the amount invested in each loan are also pretty low (few hundreds) – I will probably get a few dollars from these after each month.
The overall portfolio for the year has registered a low 4 figure profit. This disappointing result is attributed to 2 loans that have defaulted – the overall interest collected might have been much much higher if not for these defaults. Figure wise from an investment vs return point of view, I probably would have earned more passive income via dividend stocks for the amount I have invested in these loans. Indeed, it is not exactly profitable as compared to the more stable dividend stocks (however then again, stocks have their own risks).
Nevertheless, it has always been a learning process for me, and I consider myself lucky to receive some profits.
3) Amazon FBA Private Label
As a rookie trying out, I don’t really consider this an investment – more like an experiment.
As I can’t ship any inventory to Amazon prior to 19 Dec 2016, so far, financially it has been one way only – which is out. I have been only spending.
I intend to list 3 products (eg. 3 nos. of FNSKU). I did spend a lot of time (and/or money) on 5 other products.
Yup, other than these 3 products, there is actually a 4th product that I invested a lot of time and money. I did the design for the package, even did an ebook, spent money on samples and design etc. However, after doing all these, I started revisiting my thought process on why I chose this product in the first place. I also did a review on the competition in Amazon. I realized that the selling price of these products on Amazon are not really high.
Yes, there are a lot of sellers doing really well every month eg. selling 100 to 600++ items per month, but there are also a lot of sellers selling less than 5 items per month. And base on the amount I need to spend to buy in bulk, and ship to the USA, and also after factoring the processing/shipment fee from Amazon – there is hardly any profit left. Oh yeah, I did notice that the selling price of some these products dropped recently (yes selling price fluctuates). I guess some sellers are just offloading their inventory or there is just no demand for these items.
In addition, as a new seller, I would probably need to spend money on PPC (Pay per click) campaigns in Amazon to bring my product nearer to the shoppers (most shoppers won’t browse to the last page to look at my product), and I probably had to give out a number of these products for free or at a heavily discounted price in the hope that I can get some reviews. Of course with the recent October regulation from Amazon, the customers receiving these heavily discounted items are not obligated to leave any reviews – so yes, I would probably get fewer reviews for every X no. of products I give out.
And on top of that, if I end up being one of those that sell less than 5 units per month, I would have to factor in storage fee from Amazon, which will exponentially increase after the 6th month. The fee is also dependent on the volume of my inventory.
Yup – I am like this worst case scenario guy. And yes, the money loss might not be just the amount you spent initially.
So back to that 4th product. Yes although I did spend a decent amount of money (in USD terms) and time on it, however, I think it is best not to be too emotionally attached to it. And view the situation rationally and not to proceed with it.
Opportunities will always come another time.
As for the 3 products I have chosen, I did follow the classic metrics (see below) recommended by many sellers online:
- Items within the USD 10 to 75 selling price (These are considered ‘impulse buying’ items whereby shoppers typically don’t spend much time thinking or researching prior to buying. However, beyond that range eg. USD 75 or more… they will probably research more before making a commitment. For items lower than USD 10, after factoring the shipment cost and Amazon fee, the profit margins are typically too low to be worth the effort).
- Non-breakable or perishable items. Glass, porcelain items etc that can break are not advisable. There is a chance that the customers would receive a broken item and leave a negative review on your listing. In the case of perishable items (eg. food)- for beginners who are unfamiliar, it is best to stay out of this.
- Items that are simple. Not electronics items and not consisting of many parts. The more parts you have, the more potential issues you have. And for someone like me who is not familiar with tech gadgets – it is best to stay out of them.
- Items that are below 2 pounds in weight. If I remember correctly, I think Amazon has a policy of imposing a higher fee for items beyond that weight and it would be advisable to avoid this. Also as a beginner, it would also be advisable to start with Express Air shipment as compared to shipping via sea (which is more complicated and takes a longer time to ship). For lower weight item, it would typically make more financial sense to ship via air.
- Items that are a commodity and not branded. I do not want to get into any copyright infringement issues as I am not an authorized distributor of any brands.
- Items that typically have a few sellers selling and is not dominated by a particular brand. For instance, if I go through the listing, and I realized that the top 3 sellers are taking in the majority of the sales (1000+++) because of their premium brand while the rest are struggling to make less than 5 sales a month – it would be advisable to stay out. Well, to be frank, in retrospect, I haven’t been that diligent in this aspect — as I noticed some of the products I am listing are dominated by major established brands.
- The top three sellers have less than 300 reviews. The remaining sellers in the first page have less than 50 reviews. The lower the number of good reviews your competitors have, the more chance you get (in inching up the ranks). You probably have a higher chance of getting more reviews than them. Nevertheless, it was stated by Amazon that the optimum number of reviews one should try to get is 16. Beyond that, according to them, it makes no difference. Eg. a shopper is equally likely to buy a product from a listing with 16 reviews as compared to a product on a listing with 300 reviews. Well – quantity is one thing, the major factor here is also the quality of the reviews (good and well-detailed reviews with videos are a blessing).
- Items that are a commodity but are not easily found in your neighborhood malls, supermarts or provision shops. I guess in the United States, for some areas, it makes more sense to buy things online and get people to deliver them to you, as compared to making a trip down to the nearest Walmart (which could mean a few miles away) – it is just not worth the time and effort. Also for some products, it is hard to find in your typical hypermarts. They could be bespoke items that only a few small specialty shops sell. On the flipside, I would avoid common items like mugs, water bottles, clothes…. which is found everywhere.
I think there are more points – but this is what I can remember so far. Other than these, the long tail keywords, descriptions, title, and images in the listing all play a big part as well.
To be frank I spend a lot of time fiddling with the images – photoshopping and using Fotofuze to make the images nicer. Lifestyle images or action images are great (but I did not want to spend on them yet). I like to play with the images. Tweaking the descriptions a bit here and there…
Actually being the nerd that I am, and the contrarian investor that I can sometimes be… there is a flip side to these guidelines.
1) I have often heard about going for higher price items … the best price range is USD 30. Why so. Firstly, your profit margin will be bigger, and with that, you can spend more on PPC campaigns/advertising. Note: the cost of these would probably be the same for a lower price item. But for lower price items the actual profit margin amount is relatively low. So you can’t spend as much.
So in a way, it gives you more flexibility to scale.
Also, you could potentially avoid a lot of competitions. Most people like to start out with lower price items (and yours truly is one of them). Why so? Because we don’t want to risk much. Typically the higher the selling price, the higher the purchase price (and shipment cost – as these higher price items are typically bigger and heavier although it is not a given and there are exceptions. However, I have yet to find one).
Of course, you are taking a bigger risk. I sense that typically the purchase price + shipment cost could be within 20% to 40% of the actual selling price. So let’s say, the selling price is USD 30 so you could be spending USD 10 per product initially just to ship it to Amazon. And if you consider the MOQ (Min order quantity) dictated by the manufacturer which could be 1,000.. you could potentially be spending USD10,000 on just one product. And that is just your initial investment (not counting the advertising / Amazon fees yet). Well having said that I do find that the higher the purchase price, generally you can ask for lower MOQ from the manufacturers.
2) There are people who advocate going for heavier items. Because again, these would eliminate most of the competitors who typically go for lower weight items. Shipping via sea would then make more economical sense. Here the EIN is critical. And getting a good freight forwarder cum Custom agent familiar with shipping to USA Amazon Fulfillment Centres is important.
So far for all the 3 products, I am intending to sell, I have a profit margin of around 30%. Eg. Profit / Selling price
Profit = Selling price – Cost of product from manufacturer – Cost of shipment to the USA – Amazon fees (shipping + processing + storage)
However, they are not in the USD 30 selling price range and above. So for actual profit figure wise – it isn’t much per item.
Yes, I am reluctant to take a bigger risk. Which is perhaps a mistake? Yeah, rookie here.
Then again, there is like this imaginary psychological line I made in my mind. I want a ‘passive’ income stream and yes I will put in the effort as much as I can afford. But I do not want it to dictate my life and consume my time totally.
Yes, I will set aside time as much as I can (during my spare time) to do this, but I am not full time into it. There are people out there who do this full time (and earning big bucks), and I am just not one of them. I have a full-time job and I have my family.
If you listen to some of the online podcasts or read the articles online by some of these sellers – they will tell you that if you think that you can succeed with minimum effort with e-commerce (like sipping from a tall glass of chilled cocktail and lying on the beach with a laptop), you are wrong. And they are right. A lot of effort is required for this. Everyone can do it, but not everyone wants to do it.
Even if your product turns out to be hot selling at the beginning – it might not stay that way in the future as there could be new competitors etc. It just doesn’t stop after you shipped the product.
Oh yes, I did mention that I am a worst case scenario kind of guy… So in the event that I can’t sell any of these products at all (despite all my efforts and my investments in PPC campaigns/promotions or giving out heavily discounted items) and is left with a huge inventory in Amazon warehouse which is costing me a bomb every month on storage fee -> I would probably have to sell these off at a heavily discounted price (at a huge loss) or give these away for free.
For any product listed on Amazon, I find very contrasting performance for the different individual sellers.
There are people who make 600 to 1000++ sales per month while other barely make less than 5 sales per month (even on the first page).
Then there are sellers with less than 10 items available while others have 1000++ items stored in Amazon fulfillment centers.
For some items, it really is like a ‘winner takes all’ situation.