Client Background:
The client was an Amazon private label seller who had one dead listing that was generating losses and severely limiting their potential to grow. They approached us to help revitalize their account and scale their business. The niche was industrial and scientific.
Challenge:
- Dead Listing: The only SKU in the client’s account was generating not enough sales i.e. 200 units per month.
- Stagnant Business: The client was consistently bearing loss due to ineffective listing optimization and PPC management.
- Low price item and PPC bids were high: The niche was super competitive and the low price of the product hampered our ability to spend on PPC
Solution Strategy:
We devised a three-step approach to turn the account around.
1. Sales Strategy – Expanding the SKU Portfolio
Before:
- Single SKU: Generating up to $2,000 in monthly losses.
After Optimization:
- 12 SKUs: We identified that the client and the competitors are leaving 20000-25000 Monthly on table just by not introducing new variants in the product. We identified the gap in the niche and each variant SKU was researched, optimized, and launched profitably. Each SKU was researched, optimized, and launched profitably. We turned the account from having one failing SKU into a portfolio of 12 profitable products.
- Revenue Growth: Monthly revenue grew from $5000 to $56000
2. Cash Flow and Profit Planning
Before:
- The account had improper cash flow, and all capital was tied up in inventory for the dead listing and client was unwilling to spend more without seeing the results
After Planning:
- Monthly Profit Growth: With a careful brand management strategy and calculated ad strategy we revived the sales of the existing SKU, the client after seeing the results was confident and put in more money into more variations. With time we got consistent sales of the existing SKU and managed to get a positive contribution into the business cash flow. After introducing new variants the profit grew up to 7000$ a month.
- Profit Margin: The average profit margin for the portfolio reached 14%, allowing sustained reinvestment into new SKUs without outside capital.
- Cash Flow Strategy: Revenue from the rejuvenated first listing funded the development and marketing of new SKUs. This allowed for the gradual consistent supply chain of existing products while maintaining healthy cash flow.
3. Supply Chain and Unit economics Optimization
Before:
- FBA Fee revision: When we checked the product dimensions in the 3rd party inspection report and the fba fee that was being charged was higher because amazon changed the size tier. So we asked Amazon to open a re-measurement request and therefore we were able to save clients 0.75$ per unit.
After Optimization:
- Packaging Design Optimization: When we analysed the current packaging we came to a conclusion that there was further room for optimization. We asked the supplier to pack in a different way, allowing us to further save 0.25$ in a unit. So it was a $1 saving per unit in a low price product.
- Freight Forwarding: By partnering with reliable freight forwarders, we reduced shipping costs by 15% and improved delivery times, preventing stockouts. Also due to our better terms with the forwarder the client was able to pay when the shipment came to port for clearance, earlier the client was paying before lifting the inventory from factory.
- Inventory Management: Due to high sales volume, we predicted that there would be frequent stockouts and our PPC performance would hurt. So we proposed the supplier to make a bulk production for us, and we will pick the inventory as per convenience after paying the remaining balance of that shipment. Though, we paid initial deposit of the bulk shipment. After this, there were no stockouts and our PPC cost was reduced by 3-4%.
Results:
- From $0 to $0.3M in Annual Revenue in first year and in second year it was $0.66M in annual revenue : YOY growth was 120% in annual revenue.
- 12-SKU Portfolio: We expanded the product range from 1 dead listing to 12 highly profitable SKUs.
- $72,000 Annual Profit: The brand turned a monthly loss into 6,000 in monthly profits, yielding a healthy $72,000 in yearly profit.
- Successful Exit: After scaling the business, the client successfully exited the brand, selling it for 30 x of monthly profit.
Through comprehensive product strategy, cash flow management, and supply chain optimization, our agency helped this Amazon seller transform from a loss into a thriving brand that achieved a successful exit.