– So Dan, I got these two products.
They’re in the same product niche.
The criteria is excellent, andthe differentiation on them, the opportunity to differentiatethem, to make them better, is really, really good.
– But how do I determinewhich product to go with? Like, how do I choose? – Yeah, with these, what I would say is differentiation is obviously key.
But the key in choosing between stalemated differentiation products, like you’ve come to astalemate or a brick wall on them being the same, or having the samedifferentiation potential.
– Then what I would dois look at the nature of that differentiation because we’re in a very visual realm.
– So when you go tolike, an offline store, you use taste, and smell, and touch and you’re able to goin the physical store.
– Right, I can experience it personally.
But in the online realm, what do you use? What senses? – Just my eyes.
I can look at it.
– So, visuals are super important.
So when you’re lookingat between this product and this product, whatI would be asking is, how does that differentiation lend itself to visual representation? Like, is that gonnajump off the front page and show its value, the value we’ve added? – So you mean there’s some differentiation that is not as visual on a picture like the featured photo as others? – Exactly.
– Even though it’s a reallygood differentiation, that would mean a lot to them.
– So, you’re looking at spy cameras.
– And, like, for example: if we took the standard spycamera, which is on like, most of the results, andwe just improved the app let’s say, on those hiddencameras, the spy camera, we might add, like, greatfeatures to the app, but think about on the mainimage, when we go to see that.
– It’s hard to see that.
– And, whereas this one, if we went and found a brand new typeof spy camera, a new version, and we perhaps had a, I don’tknow, a docking station, or some accessory, four hidden cameras, that is very visuallyappealing and representable on our main image.
It’s gonna be really, in an instant, people are gonna see how ourproduct is so much better.
– So you mean I just haveto glance at that photo, and I can tell immediatelythere’s something better.
That’s so interesting! ‘Cause, like, here I am focusing on, man, this is gonna be so much better! But if people can’t see it, then it’s going to affect their desire to buy it.
– Exactly, and especially as it gets more and more competitive, that’s what I’d be looking at.
– This is very good.
– I mean, that’s theproduct I would choose here, because, when looking at the other, it’s not as visually representable.
You can differentiateit, but not in the way that’s gonna be as visuallyexpressive and impactful as this other one.
– So I gotta differentiate, not just realistically, but visually.
– Yeah, yeah.
– And it has to be adifferentiation that people can quickly see with their eye.
– It’s super obvious.
– And, that’s gonna helpyou choose between those.
So for that reason, I’d choose the one where we can visually differentiate most.
– Gotcha, okay.
– So, another big thing Iwould like to say with that is when you have thatimpact on the main image, you’re drawing so much attention, you’re up in click-through rate.
So you’re getting more clicks.
More of those, just peoplegenerally browsing for let’s say, spy cameras, are actually on your listing.
And also, because you’vegot this new value, this real visual differentiation, which is coming across powerfully, you have high conversion rate as well.
– So when you say click-through rate, do you mean if I search a key word, and I get that firstpage of search results? – Yes, all the spy cameras.
– If I click on one of those, that affects my click-through rate? And the more clicks you’re getting, the higher your click-through rate.
So, if a 100 people type in spy cameras, and they see all the spycameras on the front page, and 10 of them click on your spy camera, because you visuallyexpressed or chosen one you’ve differentiatedin a very visual way, then, you have 10% click-through rate.
– And you can buildthat higher and higher.
– With the more impact youhave in that main image.
But, it does come down to product choice and product building.
– Dan, I am 100, 1, 000% committed to making this work for me and my family.
Like, I really want to makeit work, and I will do it.
But, one thing that makes menervous is the competition.
So, what are you doing tominimize the competition, like, what can I do because there’sso many people joining Amazon? – Yeah, this year, I thinkthe biggest thing you can do to minimize competition is work on pricing and price strategy.
So, there are other methods.
You could do things like brand registry, which only 2.
6% of sellers actually do.
– But I really think youneed to focus on pricing and building a strategy there.
So to emphasize why I believeso much in higher prices, let me ask you a couple questions.
– Number one, what pricerange do new sellers often get told to sell at? What price or product shouldyou sell as a new seller? – Most of the YouTube videos out there are telling me between$15 and $25, which I like because it probably means it won’t be very expensive for me to buy.
– Yeah, and they also promote this because it’s a impulse buy range, right? – Yeah.
– That’s what consumers buy often.
– Right, like, oh, it’snot that much money, so I’ll buy it quickly andwon’t evaluate it too much.
– Okay, so $15 to $25.
And second question would be, what MOQ, what order quantityare new sellers told to order on their first order generally? – Usually like a 1, 000.
Like a 1, 000 units, sometimes 500, but usually like arounda 1, 000 to make sure you get the price per unit low enough.
– Yeah, I would agree, 500 to 1, 000.
– And then, how much capitalwould you say a new seller on average has in orderto place that first order.
– Probably $3000? – 3000?- For most people.
So, when you think about that, if all these new sellers, of which there are many, weactually have 3000 sellers join Amazon every single day and there’s about a 60%retention rate a year later.
So if we just averageit out, we’ve got like 2000 new sellers, real newsellers joining per day.
So, if you think aboutthat, if they all follow either common sell priceinstruction of $15 to $25, like you said, then they’reselling products at $15 to $25.
But, also, if theyleave that on the table, and they follow common MOQ guidelines, and they only have $3, 000to spend, think about that.
If they’re spending $3, 000 on 1, 000 units that’s a landed cost of $3per unit which is super cheap.
If they, even spend $3, 000 on 500 units, it’s a landed cost of $6 per unit.
– Unit, right.
– It’s still very, very low.
And that could be manufacturingof $5 and shipping of $1.
– So, that cost ofproduct’s not going to sell for more than $25.
It’s a cheaper product.
– So, in both scenarios, you have the majority of these new sellers all selling$20 products or thereabout.
So your biggest opportunitythis year is to break that mold, start thinking dynamically, start thinking differently, start, you know, approachingyour business differently and selling for a higher price.
Stop following this herdwho are all gonna be selling the same price product.
So you’re basically sayingI need to move myself out of where everyone else is selling.
So I’m not really justdifferentiating my product, like you said, and how theproduct appears in the main image like you said, but I’mdifferentiating my strategy.
– So it’s almost likeI’m taking my business and I’m putting myself amongsta smaller group of sellers.
Because most people are thinking, I’m gonna go in at a really low price.
– Man, this makes so much sense.
But, there’s still a problem because higher price products sell less.
– Well, they don’t.
In short, we actually average the top five best sellingitems on the entire platform.
– And, take a guess, whatnumber we came up with.
– $30? – In fact, it was $62.
– Seriously? – The average of the topfive selling products on Amazon is $62.
– [Seth] Oh my goodness.
– And that brings up a really good point.
What we originally thoughtto be that impulse range, that impulsive buying range, is actually much higher than $20, $25.
– That’s so interesting.
Maybe because more and morepeople are buying on Amazon so they’re more used to itnow, and they’re not as nervous about buying online, whereback then it was more novel.
So what you’re saying isI’m not only am I decreasing my competition by increasingor selling something that sells at a higher cost, not only am I taking advantage of the fact that there’s fixed costs that don’t go up when my price, my product is more expensive, but I’m also still in theimpulse range at a higher price, which means I’m gonna make more money, have less competition.
That makes total sense.
– But, the cost is still too high, if I’m purchasing a 1, 000 units.
So if I’m selling a product at $60, let’s just say the product itself to manufacture costs $15, or $10 instead of $5 or $8, that’sreally, really expensive.
– It would be, and thatto most is a barrier.
They don’t look at that because of that.
So, when they think aboutcommon order quantities they have to order, let’s say, they have to order a 1, 000 units, then, it makes it unattainableto perhaps do a product that has a landed cost of $20.
‘Cause first order of$20, 000 is a lot of money.
– But you do not have to do 1, 000 units.
– Really? – You don’t have to do 500 units.
You can do as many units as you see fit.
This is your business.
You can make this work any possible way.
– So you think the suppliers, if it’s a higher cost item, then the MOQ, that minimum order quantity actually goes down.
– Oh, oh yes.
– So maybe I can do 200, 250, but then I might run out of my inventory because it’s gonna sell fast.
Then what do I do? Now my business is kind of stopped.
– That’s a really good point.
And, you’re 100% right.
They will offer lower MOQs.
But here’s the thing, every day of the week, I will take the situation ofmy product selling so well that it runs out, I run outof stock, and be out of stock for two, three weeks on an item.
I would much rather havethat scenario than be stuck for six, seven monthswith hundreds of units because I sold at the same price level as all of these other sellers.
So in short, I would much ratherdo a lower order quantity, run out of stock if that’sthe case, and then reorder.
And start managing that inventory better.
But, I would start withlower order quantities.
In a way, reducing your risk, and there are so many other benefits to higher price as well.
– That begins to make sense in my mind, because I remember someonetalking about movement is life, and you want your inventory moving, and something about storagefees going up after six months? – Yes.
– Like, what is the pointof 2000 units sitting in Amazon’s fulfillmentcenter, and it’s sitting there, and that money is frozenand I can’t use it? So, this is beginning to make sense.
– That’s a really good pointtoo, on the storage fees.
‘Cause you’re reducingyour risk of that too.
Because you know, you’reprobably gonna move through 200, 300 units muchquicker than 1, 000 units.
So, let me ask you this, Dan.
You see here, I have my market.
But, I’m still not convincedon the higher price strategy.
So, could you just explain a little more why a higher priced itemis really profitable? – Sure.
So, I think the best way toexplain this is if you imagine having a price point of say, $50.
Let’s say we sold spy cameras.
Or, hidden cameras.
– Or nanny cameras, as they’re also known.
And let’s say, they’reexactly the same size, they’re packaged in the same exact box, they’re the same weight, butthey have different features, and one is a $50 option, and one over here is a $20 option.
– Got it.
– Now, there are certaincosts in our business model which are in fact fixed.
– They do not correlate withthat actual price level.
– So imagine this, $50, $20.
And now, if we take off the logistics cost of getting that from say China to the US, or China to the UK.
– They’re the same size! So, let’s say, it’s $2coming off each price.
– So the shipping, it’s still the same.
– The international shipping.
– I always assume higher cost product is gonna cost more to ship.
– But that doesn’t make sense.
– ‘Cause if it’s the same size and weight, it’s gonna be the same shipping cost.
– Yeah, so we take $2 off each price.
Then, you’ve also got, for example, Amazon FBA fulfillment fees.
– Now FBA fulfillment fees, again, are based on size, not price.
So they are all gonnacome off the product.
And this might be, forexample, $6 per product.
FBA fees, coming off that price.
And lastly, remember, we’re doing spy cameras.
So these, whether it’sa $50 or $20 product, they’re aiming to converton the same keywords.
And so they’re gonna bid, they’re gonna advertise on the same exact keywords.
Meaning, the cost per click is probably still thesame for them, right? If they’re both bidding on nanny cams– – Yeah, ’cause the keyword has nothing to do with the price of the product, it just has to do with how competitive, or how many people aretrying to bid on it.
So let’s say, a $1 cost perclick comes off that as well.
Now remember we had a$50 and $20 price point.
– And we’re deducting $9of fixed cost from each.
– And you can see, instantly, on our $20 lower priced item, which would also be more competitive, on that one, those fixedcosts represent almost 50% of our total revenue, our total sell price.
– On the $50 option, that represents a fifth, 20% of entire sell price and revenue.
The same fixed costs.
So, you can see how– – So the margins are so much fatter.
– That’s so interesting.
– You’d never even think about it.
You never hear people talking about this.
But, that makes total sense.
Over here, you’re left with $11.
– And over here, you’re left with $41.
I like this, but here’s the thing.
I’m down to these two products.
Both match all the criteriafor potential product, both have the samedifferentiation potential, and the same profit potential, but I feel like I’m hittinga brick wall, like I’m, okay, so they’re so even, how do I know what to? Do you ever feel like yourbrain becomes constipated, and you’re just like, howdo I even make a decision? – So, this is common, to get stuck.
If everything feelsequal, which is unlikely, but if you still, you’vegone through everything we’ve spoken about to thispoint and you’re still stuck, another thing I would considerlooking at these products when you’re comparing, I can see here you’re comparinga tourniquet, also called, like, a Tourniquet, like a medical device.
And also, a spy camera.
Our nanny camera.
– So, in terms of this, another thing I would look at which stands out to me hereis customer search terms.
– So, the tourniquet, this keyword, or this product, has very, very limited keywords.
How many ways would you be ableto search for a tourniquet? Let’s say, you needed a tourniquet today, what keywords would yougo type into Amazon? – Handy tourniquet?- You wouldn’t.
– End tourniquet? (laughs)- You wouldn’t type that.
– I’m being really creative here.
– So, yeah.
So, you can see it’s very, very limited.
Maybe tourniquet, or tourniquets, or, you know, a brandon in tourniquets, but– – There’s like, very very few options.
Even though you askedme, I’m sitting here, I’m scraping what would I— Yeah! – What else would I search.
– Yeah, yeah.
Very, very limited.
And, on the nanny cam side, I’ve even used multiplewords to describe it today.
– Yeah, without even thinkingabout it, you did it, yeah.
– But you have nanny cam, hidden camera, spy camera.