How to recession proof your Amazon FBA business

You may have noticed 2 recent phenomena:

(1) Inflation has increased the price of most things by 8-10% year-on-year. Grocery shopping feels like you’re buying food from an airport or movie theatre! What’s that about?

(2) Folks then use credit cards to finance the lifestyles they’ve become accustomed to (like placing their normal Amazon orders). Because of this, US credit card debt is now $930 billion, surpassing the $870 billion peak during the 2008 financial crisis

My opinion:

Not a great trend 💹👎

The most common question people ask me these days is:

“Pat, you work in 100s of Amazon accounts in every niche. You’re so smart and your jokes are so funny. Are you seeing a slowdown in consumer spending?”

My answer, surprisingly, is no.

Rather:

Not yet.

If trends continue, I’m concerned that the ‘chickens will come home to roost’, as they say 🐔. The boomerang will return. The economy will need to ‘take its medicine’. Whatever metaphor you want to use. There will be consequences.

What’s the best case scenario?

The recessions stays as-is: mild. We get a long, “shallow” recession.

But, I don’t believe in wishful thinking.

To plan ONLY for the best case scenario is irresponsible.

Amazon sellers should prepare for the middle/worst cases. For the sake of their employees, families, and anyone else depending on their success. It’s time to recession-proof.

There’s also no downside to preparedness.

If you prepare and the storm never comes, you’re leaner and more profitable. Recession prep is a win-win.

So, how do you recession-proof an Amazon business?

I’m still formulating my thoughts on this, so stay tuned for future emails.

Here’s 5 things that I have so far:

(1) Achieving “1 and 1” if not already achieved. In other words, get at least 1 product doing $5k/mo via 1 acquisition channel (normally Amazon Ads). This is the base of every Amazon FBA business. After that, it’s all about launching new SKUs and scaling Amazon ads for those, too. It’s now a 7-figure Amazon business. Then, it’s about international Amazon expansion (article here). Then, it’s about other acquisition channels (outside of Amazon ads). 8-figs. Do each step in sequence. It’s easier to do 1 thing at a time vs. tackling everything at once.

(2) Creating a more ambitious product launch schedule. Even if a recession slows down consumer spending (especially in categories folks consider “non-essential”), if you have a wider product catalogue, you can rank for more keywords, make more sales, and offset declines in consumer spending. For example, if you’re launching 1 new SKU per quarter right now, I’d recommend launching 3 new SKUs per quarter. You might be thinking: ‘inventory costs money! There’s no way I can manage that many launches.’ To which I say: it’s time to get suppliers with lower MOQs that allow you to test stuff, and/or find new suppliers. Additionally, I also have a framework to sell on Amazon with no money (reducing the cost of launching a new SKU to $0), which I share briefly here.

– “Fire” some SKUs. Most SKUs make revenue, right? But revenue doesn’t pay the bills. After looking under the hood of many Amazon accounts, I’ve come to realize that while most SKUs generate revenue, some don’t generate profit (after COGS, Amazon fees, etc. are factored in). It’s a seller’s duty to look, SKU-by-SKU, and find out where the lapses in performance are and fix them! 8 minute tutorial here: SKU by SKU.

– running Rick Barry ad campaigns. Rick Barry was a professional basketball player for 14 seasons. And, to this day, holds the 8th best free throw percentage in NBA history: 89.31% (just behind folks like Steph Curry with 90.96%). Brief video here. Rick successfully got the ball in the net by doing the “granny throw” i.e. the underhand throw. It looks ugly. It looks embarrassing. But boy, did it work. In a recession, we need to run ads that actually work. For us, spending $13m/year on Amazon ads, we focus on the basics: Amazon Sponsored Products (a lot of Auto and Auto catch all campaigns), and some Sponsored Brands. There will always be “shiny objects” in the ad world. But a recession isn’t the time to test them.

– Invest in skills. Skills are yours to keep, making them recession proof. For example, learning how to work with influencers. Building an email list. Networking with other successful sellers. Or product development. Learn skills for free online and monetize them immediately.

My team and I helped 100s of brands growth through COVID, and we’ll help 100s more with what is to come. If you’d like us to take a look at your account and provide some guidance on navigating the recession, our doors are open. You can book a time in the calendar below: