MI095: Building a Business on Amazon w/ Stephen Somers
Robert Leonard (00:02): On today's show, I chat with Stephen Somers about how to build a successful online business. Stephen is now a serial entrepreneur, CEO, and co-founder of Marketplace Superheroes. If you've been wondering how to build an online business selling products, specifically on Amazon, this is going to be a fantastic resource for you. I hope you guys enjoy it.
Robert Leonard (01:30): Hey everyone. Welcome back to the Millennial Investing Podcast. As always, I'm your host, Robert Leonard.
Welcome to the show, Stephen. Stephen Somers (01:40): Thank you so much. I'm so happy to be here and I can't wait to have a chat and see if we can rock it out today. Robert Leonard (01:46): Tell us a bit about yourself. Tell us how you got to where you are today.
Stephen Somers (01:50): Sure. This might take a second, all right? So I'll try to keep it as short as possible. Just for some context, I'm almost 34 years old. I'm 33 therefore at the moment. I started in this whole business about 11 years ago, and like a lot of people in their early 20s, I was trying to figure out what I wanted to do with my life. I was actually trying to make it in the music industry.
As you can tell, it did not work out. I'm okay about it. I've gotten over it by now. I was in a band, thought I was going to make it, didn't work out. I was working at a job as a data processor at the time, which is the most boring job in the world for those of you who don't know, and whenever the band ended, I was like, "Am I going to be stuck here working in this job for the rest of my life? Or what am I going to do?" Stephen Somers (02:31): So I tried going to college, or school, as you guys would call it.
I did three years of college and then I actually decided not to do my last year. I was studying business. The reason I didn't want to go back was because I wanted to learn practically how to run a business.
I felt like in college, I was really just learning how to be kind of an employee, mid-management level in a marketing firm or something like that. That just didn't really suit me. I got the old 4-Hour Workweek book as well, which I'm sure a lot of people did too back then, which is ironic because I do not work four hours a week anymore, but we'll get to that. Stephen Somers (03:02): So anyway, I decided, "Okay, I'm going to try and figure out how to do my own business." So I started Googling online, "How to make money online."
And if any of you have ever done that before, you will know that's the most dangerous thing to Google because you're going to find a lot of stuff that's not so good. And I bought lots of different programs, affiliate marketing stuff, this, that, and the other stuff, and I didn't really do anything with any of the material. So I thought, "Look, this is not going to work for me. I've wasted a couple years of my life here." And I decided, what's a business I can get into where I don't have to be an expert, where I can feel good about it, it's not some weird opportunity I'm trying to sell to my friends and family? And for me, I settled on selling physical products.
That was my thing. Stephen Somers (03:47): I went down the dropshipping route initially, which a lot of people do ... which for anyone who doesn't know what that means, it means that I was trying to set up my own website, find suppliers who had stuff in stock. I would sell the products and I would get, say, 40 bucks for my product and I would go to a supplier and I would give them $20 shipped to a customer, and I would make $20 then. I thought it was the way to go because it was "low risk" and whatnot, but I tried it, it didn't work for me, and I started asking people, "I need help. I'm never going to do this on my own."
Luckily for me, my aunt in Northern Ireland, which is like three hours away from me, she heard I wanted to get into business and she said, "This guy Robert, he's selling products on Amazon and on eBay. He's got his own warehouse, he's got his own staff, everything. You got to meet this guy."
Stephen Somers (04:32): So I meet this fella. He's like 6-foot-2, Northern Irish dude, big beard, loves drinking beer, and I was like, "Is this the guy who's going to be my mentor? Okay." So I went to his warehouse and immediately fell in love, even though it was freezing cold. I quit my job and I moved in with my aunt in her spare room and just said, "I'm going to learn everything I can from this guy." And so I did.
For nine months, I worked for free. I made some money selling some of Robert's products on eBay on the side. I started teaching myself how to write copy and how to do eBay listings correctly and whatnot.
Stephen Somers (05:04): Long story short, after nine months of working together, we just said, "We love working together. We want to do a new business," and we wanted to take all the lessons Robert had learned, all the lesson I had learned, and do something new and more interesting and more in line with The 4-Hour Workweek. And so Amazon FBA, which means Fulfillment by Amazon ... which for anyone who doesn't
know what that means, it just means you can send some of your inventory to Amazon's warehouses, they'll hold it in stock, and every time you make a sale on Amazon, they'll ship it out on your behalf. And so we decided to basically get rid of all the warehouses, get rid of all the products that Robert used to sell, go completely from scratch, get a whole brand new range of products, our own brand of products ... and we'll get into that ... and sell them globally on Amazon, not just in the UK.
So we expanded to the US and all over the world. Stephen Somers (05:50): And again, long story short, we grew that into a multimillion dollar business, ran that for a number of years, then people started asking us, "How the hell did you guys do this? You're two weird Irish guys. You don't seem to be working in the job.
What's going on?" And so we started teaching people how we did what we did, and I suppose, fast forward to today, we've helped over 8,000 people now learn how to build a business on Amazon globally selling their own branded products. We run a freight company called Superhero Freight. We've got freight warehouses all over the world now where we basically slash the cost of importing products for our members and make it super easy to import. And we also run a services and software company for our Amazon sellers as well, and we're an eight-figure yearly company doing that.
And obviously, we still sell on Amazon. We've had number of different partners now who we've invested in as well, and we actually document a lot of their results on our YouTube channel. Robert Leonard (06:40): In today's episode, I want to cover a lot of what you just talked about, and mainly selling on Amazon, from the very beginning to the end. I've read and I heard a lot of different things about this business model, so I want to clear up some of the misconceptions that might exist around being an Amazon seller.
But before we get into the actual business model itself, who is selling on Amazon good for, and who might it not be so good for? Stephen Somers (07:05): Yeah, it's good for people who, I would say, are beginners who don't want to learn how to do Facebook ads, YouTube ads, all that complexity and building their own website and whatnot. Because that is complex, and if you're wanting to be successful with your own website, you must learn how to do those things. Whereas when you're selling on Amazon, it simplifies the process massively because Amazon have millions of customers ready to go.
Your job is to figure out what people are already buying, they're low in competition products, and the supply is just not all that great on the platform. So you come in, better versions of those products, a better offer, better listing, et cetera, et cetera, and you sell that in multiple countries. Stephen Somers (07:45): I suppose also it's not good for people who are looking to start a business for like $100 or something and they don't want to invest in a business. Private label selling where you're bringing in your own products, you do want to invest anywhere from $800 to about $3,000 maximum to bring in a product.
So absolutely, if you're ready to actually build a real business and invest properly, it's a great way to go. Stephen Somers (08:09): Also, I'd say it's great for people who are already making a decent income and they've got some money, but they know they're not doing what they want to do in their career. They're looking to put their money into something that's sensible. Obviously, you guys talk a lot about investing on your various shows and some amazing stuff there, which I tune into personally.
But for a lot of people, in order to get to a place of financial independence, having your own income and being able to multiply money with your own business is a great way to go. So it's definitely for somebody like that as well. Stephen Somers (08:40): Who it's not for also, as I mentioned, if you don't want to invest in a business, definitely not for you. If you really want to build your own website, a big brand, and you want to just be in one tight niche ... like, "I only want to sell yoga products" ... the way we do Amazon wouldn't be for most people because we sell all different kinds of products in our stores. Just it wouldn't follow that we are just in one niche.
So we very much treat Amazon almost like a stock market where we're looking at what's out there, say what's under priced ... in other words, where is the demand? Demand is there, but the supply is just not there. That's how we view Amazon. We're very much leveraging the platform globally to make sales in multiple countries at the one time. Stephen Somers (09:18): Just to give a quick framework on that, just for anybody who wants to kind of think about, "Well, how much could I make doing that?" or, "What would that look like?" There's something called the rule of five. If you've got five products, you sell them in five Amazon markets at the same time ... so
not just amazon.com, which is simple to do. You can still use FBA, as I mentioned, where you can send your stock to Amazon's warehouses. Our freight company helps with all that, of course. So you've got five products you sell in five countries, make five sales per day per product per country, average net profit of each product of $5, that's $18,750 net profit with five items over a 30-day average month. And it's just because you're multiplying the markets up with a small number of products making a small number of sales. So that's kind of how we run the business, and that's who it's good for.
Robert Leonard (10:01): Does someone have to have business experience before they do this? Do they have to have run a successful business already before they get into selling on Amazon? Stephen Somers (10:09): Definitely not. I would say it's the inverse. We love when people come to us with no experience whatsoever and they want to learn a pre-proven process that'll actually work for them, and that's ideal. People come to us who, "Oh, I have lots of business experience. I know what I'm doing." Usually, they don't really listen to what we have to say because they think they know everything, and so we love when people are just starting out but they're open minded and they're prepared to invest in their business.
That said though, we do have a lot of people in our community who are professionals, dentists and lawyers and stuff like that, and they do have business experience, but just not necessarily E-commerce business experience, and they've been phenomenal students simply because they were prepared to put real money into a business. Stephen Somers (10:53): I'd actually like to talk about this, because when it comes to, say, millennial investing, which is obviously this show, sometimes millennials can ... I suppose I am still a millennial. I'm getting away from it almost now. It's like we do try to look for shortcuts a lot of the time because of how we've been brought up. Technology's been amazing for us, but sometimes we think we can just get these massive results overnight. But really, any business takes time, and there surely are outliers who are able to grow a business to $100 grand a month very quickly, but typically, there's always a process behind that.
You should always look at the process. Stephen Somers (11:23): But just to finish out that point anyway, I like to talk about something called the coffee shop reality. No matter where you live ... I live in a little town called Wexford ... it doesn't matter where you live in the world, it's going to cost you probably anywhere from $50 grand minimum to 100,000-plus dollars, euro, whatever currency you're in, to start a coffee shop, as I always say.
So when you think about that, those people would go to a bank and get a loan and everything else just to start that, let's say, traditional business. Whereas when we get into an online business, all of a sudden, typically people are trying to, "What's the least amount I can invest to start my business? How can I just invest nothing whatsoever and get paid loads of money really quickly?" And when it comes to selling your own brand of products on Amazon, that's just not going to be realistic. Stephen Somers (12:08): So as I mentioned earlier, you're going to want to be prepared to invest $800 to $3,000 in a product to get it live. But when you really think about it, if you can launch a global business for well under $5,000, $10,000, that was never possible in the history of mankind. But it's because we're tapping into a distribution channel with hundreds of millions of customers. That's why we can do it.
So we're very much standing on the shoulders of giants, Amazon being those giants, and we're just taking advantage of these different facilities that Amazon have to offer us and it's amazing. We get access to their clients, we get access to their logistics, we get access to their SEO, we get access to their social advertising that they're putting out, we get access to their other advertising that they're putting out. And as long as we understand the game we're playing, which is leveraging Amazon's platform, researching products correctly, we can build a business successfully.
Robert Leonard (13:02): If we're looking for products to potentially sell on Amazon, which exact types of products should we avoid at all costs? Stephen Somers (13:10): The first type of product are trendy products. It's my belief trendy products are not good. Good example was the old fidget spinner back in the day. If you go to Google Trends and you look back over the last five years and you search "fidget spinner," you can see it went up and it went down pretty much overnight.
So these are the items we want to keep away from. Also, there's a lot of different content creators in this space will tell you hot selling products, and we always want to avoid things that are described as hot selling simply because they're going to be way too competitive. Stephen Somers (13:41): I mentioned the rule of five earlier on, five products, five countries, five sales a day, blah, blah, blah. And when you look at that model, we're saying we want to have multiple products, not just one, we want to make a small number of sales but in a number of countries at the same time. Whereas if you're going after these more hot selling products, you're trying to sell 100 units a day, 1,000 units a day of one item and you're kind of chasing this home run, whereas if you can just get a lot of first base hits, that's how you're going to be a lot more successful. Stephen Somers (14:11): So I would call them more long-tail products.
That's what we're going for. A really good example, I would say, would be a seed box. It's a little box you can put seeds into. You're like, "What? Do people actually buy this thing?" They absolutely do.
Whereas a bento box is an example of something you don't want to do, whereas there's so many different types of bento boxes, so many different colors, so many different potential uses, it's really hard for a customer to know what they're looking for and it's very subjective. Now, do they make hundreds of thousands of sales a day of bento boxes on Amazon? Yes. But it's going to be very hard to compete, whereas a seed box ... I'm not saying you
should sell those. I'm just saying it's a lot easier to rank for that key term. It's a lot easier to get in front of customers.
There's a lot less options for something like that. Stephen Somers (14:57): Also, you want to be careful of selling products that are potentially hazardous, so they got hazardous chemicals in them or something like that. You've got to be careful of products that are easily breakable, products that are sharp.
These are all what we call item specifics to avoid, which obviously we cover in our training and on our YouTube channel we cover that as well pretty often. But just in general, trendy, hot products, keep away from them and focus on these items that are boring, that are sustainable, will sell for a long time, have sold for a long time. I mean, another example I love to give to give another feel for this is the things that cover the feet of a washing machine to stop it from scratching the floor. That's as boring as you can possibly get, but it's a good example.
Robert Leonard (15:40): How do we actually find these perfect products? What is your unique strategy for finding high-profit, low-competition, hidden gem products? Stephen Somers (15:51): We have a number of different methods that we teach. I think a simple one, just to get it into people's minds as to how it might work, is we've got a hobby strategy, is one of them. So what you can do is you can go to Wikipedia and you can search hobbies, and you'll get indoor hobbies, outdoor hobbies, everything in between. I always like to look at it and say ... A good example is drawing, so you're drawing
with pencil or whatever. Go to Amazon and you can search "drawing accessories." That's going to give you lots of different product ideas basically there, because you're searching accessories, not the main thing, which is another little thing. We typically sell accessories with Marketplace Superheroes. Stephen Somers (16:26): So when you search that, that what you want to do is you want to start putting those different products in new tabs, so all these different items that you're seeing, and then what you want to do is you want to analyze each item.
So let's say we get a drawing mannequin. What a drawing mannequin is is this weird little stick figure you can buy and you can put into all different poses and you can draw those different poses. Yes, people buy these and they're very popular, actually, and they're not very competitive. So that's a good example of something you might come across.
Stephen Somers (16:52): How would you determine whether or not drawing mannequins are something you should even consider selling? Couple of things we do. First thing is, we look at when I type in "drawing mannequin," how many search results come back from Amazon. So let's say it says, "1 of 242."
That's less than 1,000, and that's the bar we like to shoot for first. If it's less than 1,000 search results, it's a good start, but it doesn't mean, "That's it. We can't do it.
It's gone." It just means that that keyword is not in that many listings. Stephen Somers (17:26): Second, what we would do when we search "drawing mannequin," we'd look on that page and we would see bestseller rank, or the different drawing mannequins on that page, and that's going to help us identify how big the market is. So we use this little tool called DS Amazon Quick View.
We install that into Chrome, and you'll see all these little bestseller ranks. So a bestseller rank is it'll be like, "5,000 bestseller rank in home and kitchen." So it's the 5,000th bestselling product in that category.
What we want to do is gauge the size of the market by seeing what BSRs are all these different drawing mannequins? So 50,000 is our upper limit. We don't want to go beyond 50,000. Below that, we want to be playing in there.
Stephen Somers (18:07): But for example, what would happen if we saw a few different drawing mannequins and they were all like 40,000, 42,000, they're at the upper levels? We would say the market is small, and then we can look at that. We can analyze, well, if for example, one was 2,000 and one was 4,000, one was 10,000, and the rest of them were 40,000, 50,000, we would say it's more of a medium-sized market. Whereas if all the drawing mannequins were like 100, 90, 22, and 900, we would say that's a really big market. And we want to really be going for medium to smaller-size markets, so that's kind of a balancing game that we have to play. But ultimately, the bestseller rank will tell us kind of how big the market is for these items.
Stephen Somers (18:49): There's no exact answer to exactly how many results you need to see there, but you just get a feel for the market. You can kind of see, "Could I get in there?" And a good example of this you can look at is another product, and it's called a thread rack, so wooden thread rack. I don't give this specific, but it's just good in case people want to search this. So a wooden thread rack does what it says on the tin. You put little bits of thread on these little wooden spool things and that's it. I'm not into sewing, but that's what people buy.
So then if you search that, you would see there's so many wooden thread racks. But then, I see this metal thread rack and there's like two of them on all of Amazon and they're like 1,600 bestseller rank. Stephen Somers (19:28): So what I would say there is that's an example of what we call a market within a market, where, "Wow, that's a big market, but the metal ones are kicking ass. I should do the metal thread rack."
So ultimately, that's very quick overview, but that's what we're looking for. We do have software and whatnot where we have all these different questions we ask people about what they're seeing onscreen, and that enables you to calculate a score of how good an opportunity is. But at the very base level, those pointers will get you started. Robert Leonard (19:57): Why don't more people know about these different little opportunities that exist on Amazon? Why hasn't the market closed what seems to be almost an arbitrage opportunity that seems to exist? Stephen Somers (20:08): I think a lot of people, they use these different Amazon software research tools. I don't really want to mention any names because I don't want them to think I don't like them or something. But we don't use those tools because what happens is then, people typically end up just all selling the same kind of stuff when they use these tools, because they have a very narrow criteria for what they're looking for.
Whereas with our methodology, it typically takes a little bit longer to find your products, but they sell for years rather than just a couple of months or a few weeks. Stephen Somers (20:35): And again, kind of coming around, most people don't want to sell products that only make a small number of sales per day. We're all taught, "Oh, we want to be selling things that are making hundreds of sales per day," whereas it's kind of like in anything, if you have lots of littles, you can be very, very successful. So that's sort of how we look at Amazon really, where we don't want to be selling hyper-competitive items, and so that's why we're happy to live in these hidden gem zones where a lot of people don't want to live because they just don't sell enough units for them. Stephen Somers (21:05): So I think that's one of the big reasons our research process uncovers those products a lot more readily.
And also, as I mentioned, because we're happy to make less sales per day, we're able to sell lots more of these products. I would say that's most of the reason. And then finally, too ... and this is kind of the sad part ... if you have an educational
program or whatever like we do, as well as obviously all these other businesses, the trouble is that most people don't do anything with the material. They start, they get into it, then when it comes time to invest in something, they give up. That's a sad fact, and I wish that it were not that way, and it's always an 80/20. 20% go and do it and kick ass, 80% do very little. I wish that were not the way, but it is, and I think that's another reason why we don't have more people selling products, because most people never get beyond the starting line, you know? Robert Leonard (21:54): Yeah.
I was asked the other day what I think about paying for online courses, and I told the person, I said, "If you had asked me a year or two ago, I probably would have told you that I don't personally believe in buying online courses myself. I don't think they're worthwhile." Fast forward to today, I actually do think they're very worthwhile, partially because I'm biased now because I have my own or I'm working on my own, but more importantly, because I've learned what you just said is that people need to have skin in the game. If people are using free resources online and they don't have any money on the line, they're not going to actually do what they're learning, whereas if they pay $500 or $1,000 for a course, now they have skin in the game and they're more likely to actually take action on what they're learning.
So I do think it's worthwhile, even if it just motivates you to take action. That a lot of times is actually worth the money that you're paying for the course or the resource or whatever it is. Stephen Somers (22:43): Yeah. It's interesting you say that, too, because I hear you. I used to think the same way.
I used to try to be like a shepherd. I would try to get all this information together and try and figure it out. And we do see people who ... We call it building a Frankenstein system where you're taking
all these different resources and trying to piece together a model. But I just learned over time if something's really systemized ... The way we do our program is it's systemized within an inch of its life.
The reality is, most online courses are not systemized within an inch of their life. They're good ideas kind of put together extemporaneously so they're kind of made up as they go along, and yeah, they're decent. But the great programs out there ... of which there are a number, but not as many as there
should be ... they're a literal system where you do this first, do the exercises, now you've got a bit of result. Now let's go on to the next step.
And so what you're actually getting is you're getting an entire process and all you've got to do is execute the process. Stephen Somers (23:38): I actually think that's the biggest shortcut to success in anything. Get a bit of experience, kind of like leaning on somebody else's material that they've kind of figured it out, see if it works, but follow it to the letter of the law, and then you can start to innovate over time. I've found in our community now of nearly 8,000 students, our most successful students are the ones that said, "I don't know what I'm talking about. I'm going to put my ego to one side and I'm going to listen to what these weird guys have to say.
I'm going to do what they have to say, and then if it doesn't work out, at least I know it's a failure of the system." But there are successful students that just go and do everything we tell them. Stephen Somers (24:14): The students that don't succeed as much though are the ones who go through the process and are still jumping around trying to add different pieces of information to a system that's been figured out. I think that's a huge secret, actually, which I'm sure you've discovered as well.
When you really execute something that's already been thought out, you get the result that's being promised then and that's a huge advantage. Robert Leonard (24:38): I almost exclusively buy all of my books from thrift stores. Not completely, but very close to it. Almost every time I'm in my local thrift store, I see at least one person with a scanner going quickly through all of the books and looking at what the app is telling them that their profit would be by reselling this book on Amazon.
And I think books is just one example. I know people do this with a bunch of different types of items, too. How do you view this strategy? Do sellers need to only sell brand new products like you and I are talking about, or is there an opportunity to sell used products as well? Stephen Somers (25:13): Yeah, there absolutely is an opportunity, and there's pros and cons to every model.
You're describing their arbitrage, which is what you just described. You find something in the store or even online and you see on Amazon you can sell it for more than you're buying it for. So yeah, it's something a lot of people do. I have a lot of friends that are successful at that, but they would all tell you the same thing, which is it's great as long as you have a ready supply of different products that are arbitrage-able.
I don't think that's a word, but let's just go with it. It's a word now. And also, wholesaling is a similar strategy where you buy things in bulk from a wholesaler, preexisting brands, preexisting products, and you sell them on Amazon for a smaller margin. Stephen Somers (25:51): There's nothing wrong with those strategies, and as a matter of fact, they got a lot of people their start. They're just not very reliable in the long term, whereas with private label, you're purchasing something.
Okay, you might say there's a bigger "risk," but the reality is, anything, any type of investing, when you do your due diligence at the start and you understand what you're looking for, you're mitigating risk at every single step. Even with us, like the little process we discussed ... and it goes deeper than that ... that's mitigating risk all the time because you're using known analysis to break down whether a product is a good opportunity or not. That's the first one.
Stephen Somers (26:28): Even when you go and speak to a supplier, before you place an order, you're getting samples of the products, your checking out the quality, you're making sure it's good, you're making sure it's right. From that then, you're negotiating what we call a trial order with a supplier. So you're not ordering their minimum order quantity straight away, you're ordering less than that. If they want you to order 200 units, you're trying to order 60% of that, 6-0 percent of that.
So then that's another mitigation of risk. Then you're selling in multiple markets at the same time. That's mitigating the risk again. Stephen Somers (26:56): So that's the important thing to understand. But I have no problem with those other business models you described, arbitrage or wholesale. I think it's really just about saying, "What do I want to achieve here? Do I want to achieve a really passive business, as passive as it can be, or do I want a more active business?" And certainly with wholesale and arbitrage, retail arbitrage, as you described, you're very active.
You're constantly going to thrift stores, or if you're doing online arbitrage or wholesale, you're constantly online looking for different stuff. Yes, you can outsource it to a virtual assistant, absolutely. But you're always hunting, and you kill what you eat, and if you don't find anything, you kind of go hungry, you know? Robert Leonard (27:34): Yeah.
And it doesn't really seem super scalable. Stephen Somers (27:37): It's not. No. Robert Leonard (27:38): Once you've identified the products that you do want to sell, without any manufacturing or supply chain experience, how does someone actually source these products? Stephen Somers (27:49): Great question.
I mean, we use Alibaba for pretty much all of our products ... I mean, everything. It's either Alibaba or our sourcing agent. A lot of people when starting out would not have access to a sourcing agent. Obviously, it's another benefit of working with ourselves. You get access to that. But anyway, if you didn't have any of that, you would go to Alibaba and you'd be searching your keywords, looking for a supplier.
We like suppliers who are there for more than two years minimum. If they are gold rated, that's great. If they've had a factory inspection, that's great. You're looking for as many of those factors as you possibly can have to see, "These guys legit? What are these guys about?" et cetera, et cetera. Stephen Somers (28:25): So that's the first thing. Then it's about communicating with a supplier.
A lot of times, it can be difficult to get pricing from suppliers and whatnot because you have no experience and maybe they're like, "Ah, these people are just tire kickers. They're not going to order." So I always recommend trying to find a really good script that focuses on building a long-term relationship. "We're not looking to do this short term. We're going to work with you long term." You want to mention things like you have distribution in multiple markets.
You don't want to just say, "I'm in my bedroom and I want to sell some stuff on Amazon." It's never going to go very well. Stephen Somers (28:59): So on from that then, understanding then when you start communicating in this manner, you let them know you want to do a long-term relationship, you've got distribution in multiple markets, you typically sell mostly online, then you're looking to get a pricing from your supplier. What a lot of people do is, they kind of jump in and go, "Tell me your price," with none of this preamble whatsoever. But when you do that preamble, it's about then saying, "I'm looking to get the dimensions of the packaged product" ... that's important.
So then we have this tool where you can put in the package dimensions, the weight, the size, the height, the width, all of that, so that you can figure out your profitability when you're selling at a certain price point. Our tool will analyze your importing costs and everything to get you the exact landed cost. Stephen Somers (29:45): The problem a lot of people face is they use these tools like the Amazon's profit calculator. Now, the problem with those tools is again they're like ... Sure, you can put in your cost price there and you can put in your selling price there and your size of your product there, but Amazon won't calculate your importing because that's not what it's designed to do. So that's another really important point.
You have to understand that. Stephen Somers (30:06): On from that then as well, finding a freight forwarder then to connect with your supplier. You always need a freight forwarder to speak to your supplier, to actually ship your goods via sea, typically. We always recommend by sea on a container.
You might only be taking a small portion of that container up, but that's a good way to go. A lot of people, they try to go by air when they're starting out, so they'll only sell something that's small and light. That's fine, but you're very restricted into what you can sell. That's why we built Superhero Freight, because we've been shipping by sea for years. And even if it's a small order, you're better to ship it by sea because you're going to make more money.
Stephen Somers (30:41): If you're trying to work with a freight forwarder, you're in a bit of a catch 22 because it's like you have this small order they don't care about. They're going to charge you a lot of money for that small order because they have to make something on it. Whereas we're in a great position.
We have thousands of students who are shipping, so we were able to put on our own containers, and you can still take a small piece of a container from us, but you're going to save a bunch of money because our business model is not charging tons of money for sea shipments. We have a different business model, so that's helpful. But you would need to find a freight forwarder. That's a case of Googling, speaking to other people, looking for referrals. Stephen Somers (31:17): And I really will say, other than ourselves, there's companies like Freightos are pretty good, but no one really operates the same business model we do where we actually want you to have small shipments.
We don't want big shipments, and that's another advantage. But freight forwarder to your supplier, connect them together, try to get somewhere with a pre Amazon location. You have to have that too because Amazon have kind of changed their rules lately where they don't want you sending in a couple hundred units anymore.
They want you to send in less units. So again, that freight forwarder needs to have somewhere you can store your units, or you'll have to get them shipped to your home. That's another big problem we solve in multiple countries.
You can store your products with us. We'll charge you less than Amazon charge for storage. We don't charge long-term storage fees and all of that. Stephen Somers (32:02): So that part, honestly, is very challenging to most people. We've really gone to make that part easy and it's cost us a few million dollars, but it's been worth it.
Robert Leonard (32:13): From the thousands of people you've helped get into this business, or even just people you see trying to operate this business that you see from the outside, what are the biggest or most common mistakes you see people making? Stephen Somers (32:24): Definitely bringing in those hot products and trying to sell those, number one, like I mentioned earlier on, I'd say is a fundamental mistake. The second mistake then is kind of tied to that but different, is saying, "I want to sell yoga products," for example, "So I'm really obsessed with that." That's a big mistake in my opinion because as mentioned earlier, we're really looking to utilize Amazon like the stock market. We want the market to tell us what we should be buying. We don't want to tell the market what we want to sell, because that's never a good strategy.
So by understanding how to utilize Amazon for research, you really have a massive advantage over everybody else. Stephen Somers (32:58): Another big mistake people make is they don't think long term. So let's say you're doing your first order from China. You're doing a smaller order, so your supplier charges you more money for each unit. People that make the mistake have been like, "Oh, well, I want to buy it at $5," let's say, "But the supplier will only deal with me at $7 because I want to order less."
What they're not doing there is thinking long term, where it's like, yeah, you're paying $7 now. Maybe you're not very profitable, maybe you're breaking even, but you're getting to test the market. You're getting to buy data. And then long term, you're going to get that $5 cost price and you're going to be profitable. You're going to double your money every time you make a sale. So there's that.
Stephen Somers (33:38): Another big mistake is not knowing your numbers. Like I mentioned, you want to get the weight of a product, the dimension of a product. You want to understand your importing costs, your duty rates. People that are beginning don't know these things and it can be overwhelming, but having a simple tool that can take into consideration all of these costs and Amazon's costs and still give you your profit margin, that exact figure, that's vital. And for anybody who's wondering what that is, if you sell a product, 30% of the sales price is going to be your net profit after all expenses are paid.
So if you sell something for $20, $6 is going to be your net profit before corporate tax. Stephen Somers (34:14): At the same time then, whatever you invest in a product, you want to double the investment. So if you put in $3, you want to turn it into $6, and so that's what you're looking at there. So you get a quick profitability calculation from that 30% and then every time you sell something, that should be turning $1 into $2, or whatever your cost price is.
That's really, really important as well. Stephen Somers (34:36): I would say another really important thing, a mistake people make is they don't sell in multiple countries at the same time. They only sell in their home country because they feel like, "Somehow because I live in, say, America, or I live in England, if I sell my product in that country, I can control things a little bit more or something like that," when in reality, you can sell in any country and it really doesn't matter where you live. It's just about how you set up correctly, and that's obviously important.
Stephen Somers (35:02): That would bring me on to my next point, which would be not having the right corporate structure. A limited liability company in any country that you live in is likely going to be the best vehicle for you. A sole proprietor in this model, I do not recommend, because you're trying to protect your personal assets all the time. I always recommend selling with an LLC in the US, a limited company in Europe.
And yeah, if you're looking to sell in multiple countries, there's a little bit more to know, but again, we have accountants and CPAs and whatnot to make that, again, very simple. Because that's the thing. We live in a global society now. We trade globally, we sell globally, so we shouldn't be scared of that anymore.
We should embrace it actually and understand it's pretty simple. All you need is a little bit of knowledge and the right people in the right places and it's really not that hard. Robert Leonard (35:49): From my experience researching this business model, there seems to be a lot of misconceptions around it. One of the things I like about you best is that you're not pitching this as a get-rich-quick scheme, you're not pitching millions overnight.
I really like that because I think, unfortunately, selling on Amazon is often pitched as exactly that. A lot of people pitch it as, "You're going to get rich tomorrow." And as we've discussed, that's not the case. This is a real business and there's a lot of things that go into it.
What misconceptions do you see about selling on Amazon, and what is the actual truth to each misconception? Stephen Somers (36:23): Yeah. I love that question. You're right, the biggest one is what you said. People think they can make a lot of money overnight.
But the reality is, when you're selling your own brand of stuff on Amazon, it takes time to get it in stock. So ... people to understand that it's going to take a month to manufacture your products. It's going to take you about, all in, maybe three months to get it in stock from the time you order.
Some people think, "Oh, that's crazy. What? That's insane," but that's pretty normal to ship a product globally with your own brand of product. So there's that.
There's a bit of a time delay. Stephen Somers (36:54): Also, people have this thing that you can just "send traffic" through all these different sources ... Facebook, YouTube, whatnot ... and you can pretty much sell anything as lng as you do that and you can inflate your sales and stuff like that on Amazon. All those practices have really changed. Amazon have clamped down on those things. What Amazon really want now is a professional selling environment, and so that's another misconception, "I don't need to be a professional."
In other words, "I don't need to trademark my brand. I can just slap something up on Amazon, test it, and then grow it from there." Stephen Somers (37:26): In reality, you want to trademark your brand early on, and then when you do that, you get what's called brand registry on Amazon, which basically means you can protect your brand with Amazon and you can enforce your brand rights with Amazon. So if somebody says, "I can sell the same product as you, Stephen.
I'm going to sell on your listing," well, they're not selling the same brand of product as me. It could be the same item because they got it from the same supplier, but it's not got the same brand, it's not got the same barcode, they don't own it. So if I'm brand registered, I can kick those people off straightaway so I have a level of enforcement and protection there as well. That's really important. Stephen Somers (38:02): Another one is you got to invest money.
I do not know how you could start a successful Amazon private label business on a tiny budget, as in $100 to $500. You're going to need more than that. You're going to need to invest. But also, people run away from investing money. It's even like we're in the crypto space and everything.
I've been learning a lot about that with you guys as well, actually. It's the same thing. People, they think that they can get rich overnight trading bitcoin, when in reality ... and again, this is not investment advice, I'm just kind of saying that the great strategy with bitcoin a lot of the big guys are talking about now is buy it and hold it for the long term. Don't actually sell the bitcoin. Now, that's not me telling you what to do. I'm just saying that's what I'm hearing.
That's the strategy I'm following. Stephen Somers (38:44): So it's kind of like a lot of the things that I would say the kind of get-rich-quick people say are not what the people at the top level are doing, and so there's that. I'd say there's many more, but I think there's some of the main ones, really. Robert Leonard (38:56): When somebody new is getting into this business, from all the people that you've helped or people you've seen, what percent of people do you think actually become successful with this type of business? Stephen Somers (39:07): Well, we actually have a lot of data on that, which is nice, that a lot of people don't, because we ship our members' products from China to our different warehouses. So I can tell you now in 2020, we shipped 2 million individual items with our freight company. In 2021, we're on track ... We thought we would ship 6 million.
We're actually on track to ship somewhere between 10 and 15 million items. It's kind of crazy. It grew very, very quickly in the last year. I think that's for a number of different reasons, and the growth of Amazon with the corona situation has been one of those. But I think people have just taken it more seriously because of some of the big changes in the world that we've experienced.
Stephen Somers (39:44): But for me, I can tell you that about 20% of our clients ... about 25% ... are successfully shipping products and making sales. Now, are there more? Yeah, there are actually more who don't ship with us. They do their own containers. For whatever reason, they decide to use another freight forwarder, which is kind of crazy, but some people do. So it's probably heading to maybe 30% of our members actually are selling on Amazon.
It's hard to know to the cent how successful everybody is, but estimated, our community would turn over the revenue of over $200 million a year. That is an estimate, but based on the different numbers we can see, that'd be quite accurate. Because if we were shipping 6 million items, that would equate to about $120 million in sales.
We expect to ship about $10 million this year, so that $200 million is about right. Stephen Somers (40:32): So yeah, there's some really good numbers. We're really proud of that. We're proud of our community and ourselves. But again, I do see people out there who are like, "Am I going to make a million dollars with this business overnight or guaranteed or whatever?" And I would say most of our students are not doing a million dollars in revenue. Most of our students are doing high five, multiple six figures in revenue.
We do have a few seven-figure sellers. Most of our sellers are five, six-figure sellers at a 30% profit margin. So what you'll find is typically that it takes time to scale up to doing over a million dollars a year, and I think it's important to put into perspective that in the US, I believe it's 3% of companies ... I could be wrong with that, but I believe it's about 3% of
businesses do over seven figures a year in revenue. And when you consider, that's such a small number in the US, one of the biggest economies in the world. Stephen Somers (41:23): You have to understand, it's quite a rare thing to be doing millions in sales. But I'm not saying it's impossible.
It happens. I'm just trying to reset people's expectations and move away from a lot of the BS that's out there like you mentioned earlier on too, of this loads of money really fast. Yeah, we've seen a lot of our members make a lot of money relatively quickly, but the ones that made the most money, they invested quite a bit of money too, you know? Robert Leonard (41:48): Yeah. It's really refreshing to hear this point of view because I've done a little bit of research into this. I haven't ever actually done anything myself, but almost everything I've ever studied or read about this has been get rich quick.
So it's really refreshing to hear your opinion, and it's actually really timely. I was just sitting down with my grandfather probably a week ago I think it was, just last week, and he knows I'm into podcasting and business and that type of stuff. He goes, "So Robert, what's the deal with selling on Amazon?" He's like, "I keep watching ..." He loves YouTube. He's this older grandfather-type guy. He just watches YouTube videos all day in his retirement age and he's telling me, "I'm watching all these young kids on Amazon and they're making millions selling on Amazon. What is going on with this?" And I basically just told him, I was like, "Grandpa, it's a model that can work.
You can do it, but what you're seeing on YouTube is ... I don't want to say a scam, but they're pumping everything up." You can be successful, but it's not what they're making it look like for most people. Stephen Somers (42:45): Well, I've seen behind the scenes of some of these different people because we've actually offered to do some shipments for them. But I can tell you ... I won't name any names now, but I can tell you from looking into some of these different people, typically speaking, they sell products that are way too competitive.
They're actually not making that 30% of the sales price like I mentioned. They're usually making a lot less than that. And typically, they are making a lot more money just from their course than through Amazon business. Stephen Somers (43:12): Now, that comes with a caveat, because I do make more sales from my course and services than our Amazon business because it's grown to a very big level now. However, we invest in multiple members very heavily. I mean, Ali, one of our members, we documented his growth on YouTube.
I think we bought 32 different products with Ali last year. We invested multiple six figures with him alone. We're doing that with more of our members, so we are looking to create more very successful stores. And we share the journey. The journey of those stores is a lot of selling really well and then, "Aw crap, I've just run out of stock of a couple of my big winners," because that's what can happen on Amazon.
You can scale very quickly once something takes off and you end up running out of stock. Stephen Somers (43:52): A lot of these so-called experts that I see, it's a mess, dude. They're just talking absolute nonsense usually and they don't know their numbers ever, and they're using TikTok, whatever, to push something. It works for a while and then it doesn't and that's just not who we are.
We're not into that. And certainly, there's people that are much higher volume sellers than we are, like they're dealing with multiple millions in ad spend on Amazon and all that. That's just not really what we're interested in.
We like having a business on Amazon that's doing a couple of million, just making a few hundred grand in net profit before tax. It takes time to build, you put money into it, and you can do well. Stephen Somers (44:28): I mean, a good example of this, just to give some more figures ... You have a guy called Steve. I don't know if he wants me to say his surname. Steve G, I'll just say that for his surname. He's a dentist in America, actually, very successful, but he wanted to have something he could build on the side that down the line could provide an income to him.
He put about $50,000 ... 5-0 dollars ... into his Amazon business, and over the course of the two years, he's going to do about $800,000 this year in revenue. So that $50 grand has translated into a very successful business, and he only has about five different products in there. He's putting more time and effort and money into it now.
He will grow that very aggressively. But that's the kind of timeline and the kind of money he put in to get it to those bigger figures. Robert Leonard (45:11): Stephen, thanks for joining me on the show today and providing a transparent look into the business model of selling on Amazon that we don't often see or hear about. For those listening that want to learn more about this business or you or Marketplace Superheroes, where is the best place for them to go? Stephen Somers (45:29): Two places.
The first one, marketplacesuperheroes.com [inaudible 00:45:33]. Go there, pick up our free training. But also, check out our YouTube channel. I'd really appreciate a subscribe. Every week, we put out really high-quality videos twice a week.
I'd love you to go and check those out. Go and see what I'm talking about, see how we do some of the research. If I'm making sense, great.
If I'm not making sense, you might have just learned something new. So that would be my two resources. Robert Leonard (45:52): I will put a link to both of those in the show notes below for anybody that is interested. Stephen, thanks so much.
Stephen Somers (45:59): Thank you very much, sir.