EP 88 - Vladi Gordon - Benefits of Using Profitability Analytics Tool in Your Amazon Business Part 3

Benefits of Using Profitability Analytics Tool in Your Amazon Business Part 3

Today’s episode is part three of a three-part series with Vladi Gordon, co-founder of sellerboard.com, a profit analytics service for Amazon sellers. Vladi has worked in the software business for many years. Here are more interesting takeaways on today’s episode:

• Vladi’s background and experience.

• Amazon profit and business model killers.

• How Vladi developed tools for Amazon sellers.

• Vladi’s mission and vision for his company.

Join us on today’s podcast and let’s get to know Vladi’s amazing journey one more time.

01:17 (Steve introduces today’s guest, Vladi Gordon of sellerboard.com.)

02:34 (Vladi talks about hidden Amazon fees or other fees.)

09:40 (Vladi talks about profit killers and profit and loss and cash flow.)

15:15 (Vladi shares his mission and vision for his company.)

18:06 (Vladi talks about the future of Amazon.)

Welcome to the Awesomers.com podcast. If you love to learn and if you're

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01:17 (Steve introduces today’s guest, Vladi Gordon of sellerboard.com.)

You are listening to Episode Number 88 of the Awesomers podcast series. So, the

veterans of the podcast know that all you have to do is jump on over to Awesomers.com/88. 88 is quite the lucky number in China. I also used 88 because that was a year I graduated from high school. It's also the speed that you need to travel in the DeLorean if you're going to go back to the future, I think we all know that. So today's a very special episode and we're nearly halfway to my commitment of 180 episodes total at least for the first six months. So, today is part three of our three-part series with Vladi Gordon. And we've been talking about some of Vladi’s background and experience and we've also been talking about some of the Amazon profit killers and how he has developed some software to help sellers get control of that. And so you’re going to love today's episode because we dive further into some of those profit killers. And I even throw a bonus profit killer too in as well, so you won't want to miss it. I am thrilled that you're here listening.I hope you're subscribing, sharing and saving this with everybody around you. And you know without you we can't get the job done, so thank you.

02:34 (Vladi talks about hidden Amazon fees or other fees.)

Vladi: Okay so the third one is the -- I call it hidden Amazon fees or other fees. So normally everybody knows about the FBA fee and the Commission and maybe about storage fees and you know what else have we got, that's pretty much it. You know everybody talks about these ones, but actually Amazon has like I counted more than 70 types of different fees. And you can see them all in your transaction report guys. Actually, you don't even need a tool for this. You can download a report, it's called transaction report and it has basically every single transaction where Amazon gives you money or charges you for something. And yes, you can take a look in Excel and then you will see all kinds of stuff that you are charged for. And I'll just make a couple of examples, so inbound transportation fee sure, if you're sending goods from your prep center you need to pay for this, but there are actually a couple different flavors of this one. So, one is called inbound convenience fee and another one is called inbound defect fee. So, depending on where you send it to and which marketplace you're selling they may charge you for you know bad pecking basically or for no items that are defect -- well, or like another one is for example lightning deal. Okay, of course, we know lightning deals cost money, but you just need the account for this, right> It's not too much. I think it was $39, right?

Steve: Well it changes based on different timing, and different product categories, and different potential. Some are hundreds, some are not so much, yes and it depends fit fearing exclusives but the point is very well made, if you don't factor in your kind of the ad hoc marketing costs, so the ad hoc inbound storage or whatever, you're missing a whole bunch of fees that really exists.

Vladi: And they sum up, you know this is the thing and then you've got like things like coupon redemption fee and removal and disposal fee, sales tax collection if you're

labeling bubble wrap a poly bagging taping fee. But I guess the good news here is, it's not only fees you're also getting reimbursed by Amazon. And so for example you're getting reimbursed if your customer claims that they will send the item back, claims return 45 days later. If they don't send it a return, you get the money back, right?

Steve: And let me just concentrate that one Vladi, I definitely agree that Amazon will honor their own Terms of Service and which is a big important thing for people remember. A lot of times people think that you know Amazon is that you know the big borg in the sky that is just trying to suck money out of you, and maybe they're even right about that, I don't think so, but obviously they want to make money, but they will do it on a fair basis. So if a customer says they're going to return, you get back charge for it, and then they don't return, they're supposed to refund that to you, and they do 80% of the time. But by Amazon's own admissions they miss it around twenty percent of the time. Do you agree?

Vladi: Yes, that's huge, so one thing where they miss it is actually when the customer doesn't return the item, as you said this example. And another one is for reimbursing for damaged and lost inventory. So yes normally they do reimburse it if they lose your inventory or if they damaged it, they reimburse it based on their calculations, so they pay you kind of more than or less than if you would have sold it, but normally more than the buying price and you still make profit. But yes those things are really hard to track because I also don't see them in the Seller Central. You need to download these transaction reports for every two weeks, and then add them up in Excel and then you will see this number. And by the way what's also important, if they lose your inventory, right. Okay. They will reimburse you. They give you like $1,000, because they lost 100 items. What you need to do is you need to subtract the cost of goods of those 100 items from the money that they reimbursed you right because these items are kind of soul, right?

Steve: Yes, the soul of the Amazons lost department.

Vladi: Yes,exactly.

Steve:They have big department that loses stuff everybody.

Vladi: So these hidden fees, a lot of different things they charge you for, they tend to add up. But the good thing is they're also positive reimbursement.

Steve: Yes, you got to know both sides of the ledger. That's I think a very good point from you Vladi. And just a quick story, so one time we had a big box, they placed a bunch of orders, unexpectedly and we were short of inventory for some other big boxes that we were selling too. So we said hey Amazon returned, I don't know it was like 10 or 20 pallets of product. We're like hey, just return that, they're going to do it via LTL and we know the fees and it's not ideal, but it is what it is right and at least we could make customers happy. So first of all, they take a long time on those returns unless you do a multi-channel sale and you just do a standard return they can take up to three weeks to assemble your order and send it back to you, which is not ideal. But anyway after several weeks were like hey, where's the shipment? They’re like hey, here's your tracking number. We checked the LTL tracking number, nothing. It's never been scanned even as you know received at the dock. So, we go back to them where like hey, nothing has been scanned what's going on with this after another week or so. So, we're probably five weeks into it. They’re like talked to the shipper, we don't know nothing. So, we go again, again, two or three more weeks. Finally, and I don't remember the exact amount of this product, but it was somewhere between $10,000 and $20,000 worth of product at cost, not at retail. And so finally we said, “Okay, well you know this stuff hasn't arrived. You're the one who put it on the shipper, you're responsible, we're out.” And so we just send them a bill for whatever it was. I remember it being around 19,000 bucks. And then suddenly they got interested. They're like, “Oh, well let's go check and see if we can find this because it got escalated.” And believe it or not they actually did find after something like six or seven weeks, they found these 10 or 20 pallets sitting on a dock somewhere and finally returned it to us. But it took us almost 10 weeks to get that product back. We were not reimbursed for the last time. We did lose all of those orders from the big box in the meantime. So, the point is as good as Amazon is and I think they’re you know certainly among the world's best when it comes to logistics and shipping and so forth, they're not perfect. And this is supporting Vladi’s point that the inbound money coming to you make sure you got everything is due to you and make sure you understand the outbound money and that it's worth it to you. Otherwise, you're going to have some unwelcome surprises. So that's three of the five. Vladi, what else you got?

Vladi: Actually let me skip one.

Steve: Oh, okay.

Vladi: Because I think we're a little bit over time and I'd like to talk more about the last one, last but not least.

Steve: Okay

09:40 (Vladi talks about profit killers and profit and loss and cash flow.)

Vladi: It’s not a profit killer. It’s actually a business model killer. And so we said you know most of the guys are not like bookkeeping fans and I'm not for sure and for me was kind of interesting, I didn't really realize that you have like kind of two reports, one is profit and loss and one is cash flow. And I think that a lot of sellers are confusing them and we kind of got asked a lot about these two and sometimes people say “Okay, I don't need Profit and Loss. I see the cash on the bank account right. I see there's cash coming in so what's the problem right.” So and to me I kind of understood what these are, but I didn't really like understand it in a systematic way, so I think it's interesting. So, what's a profit and loss? Basically profit and loss, and you can do it with the tool or you can do it with Excel, or on a napkin. Basically it's a calculation where you see, are you making money per unit. You factor in all those costs and all those fees and you kind of need a way to see okay, I'm selling for 20 bucks and after I subtract all the fees, subtract the cost of goods, is there any profit left or no? Now, this is kind of a virtual number because you know when you place an order and buy 5,000 units right and then sell one of them on Amazon, then your profit and loss will say dude you just made 5 bucks profit right, but if you look on your bank account, you say, “Okay, I'm in trouble right. I just spent a lot of money and I don't have it, so I'm not making profits right?” So, this is why this profit and loss, it says profit but it's kind of a virtual profit. Are you making money per unit sold? And this is absolutely critical for your business model because if you are making money on every unit then you'll have a healthy business model, but if you're not then you know regardless some of the cash flow, you will know you will lose, right.

Steve: Do you know how this podcast is produced? The guys were about to introduce to you are paying the bills, let's take a quick and intensive listen on this commercial break.

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Vladi: So yes, you can be making money per unit, but have no cash, like if you just placed a big order and then you need 10 months to sell this whole inventory, so after like, I don't know, maybe seven months, you will break even and you will start getting more cash than you had before, right. So it can make money per unit, but you’re low in cash and can work the other way around right. So, like my bookkeeper in Germany he was saying “Okay, we have an awesome month.” But I knew just because I didn't place any orders in this month, right. But it can very well be that the accountant saying, “Okay, you're making profits, but you're actually not because you're selling as a loss, you're selling your old inventory off that you want just get rid of, right.” So you're positive on cash, but your profit and loss shows negative profit and losses right. So, basically you need both, you need a system which tracks both profit loss and cash flow because if you're out of cash, of course, it's a disaster also, also for the business model because maybe then you cannot place another order and you run out of stock and you lose your rankings and basically you go out of business. So you need to have enough cash, but you also need to make sure you're making money on every unit sold.

Steve: Boy, I think that's really, really important. Cash flow really is king. I would highly recommend people pay attention to cash flow as even the tip of the spear especially in a small business because when you can't place those orders, it can really be a business model killer. I think those are great, great killers. Now, you've given four killers, I'm going to throw in one that I'll do in 30 seconds here. I think that sellers too often don't understand what they're landed costs are for products. They think well the factory told me it was going to cost $5 per unit and I know shipping is costing me something, but they don't really factor in shipping, receiving port storage, there's something called drayage fees if you're running containers, there's tariffs, there's anti-dumping duties you know and this does apply to every product. There's so many layers of costs, that I don't think people really understand they're landed cost to the extent they need to, and I think it's costing people money and it's costing them opportunity because they're investing in things that are really not as profitable. They should probably raise the price a little bit or consider selling other items. So there's a little bonus to make sure we deliver on those five. Now, I love these profit killers Vladi. I want just ask you before we jump, have you found people be able to fix these problems as a result of using some of your tools?

15:15 (Vladi shares his mission and vision for his company.)

Vladi: We’ll basically I told you at the beginning our mission and vision is to be the world's most accurate profit analytics tool. So, we kind of made sure we can track all these things as accurately as it is possible with the Amazon interface and actually it works decently well. So, we can calculate the cost of returns 100% precisely and we can also automatically evaluate whether an item is sellable or no when it comes back to the warehouse. We can track the storage fees. Sometimes Amazon doesn't show them like on the day-to-day basis but once a month, but still on the product level as well. We can track all the other Amazon fees or all the hidden fees, whatever you know shows up in the transaction report, we show in our tool and ok ignoring or basically confusing P&L and cash flow. So, basically we have a dashboard for P&L and we also have a cash flow view. You can use it or you can just use your bank account as, basically as a form of your cash flow and then you should be good if you know are interpreting those numbers correctly.

Steve: Oh, I love it. I have walked through the demo of Seller Board and it is nice to be able to see kind of a comprehensive view of the product and other expenses for that matter. I'm a huge believer that you know what gets measured, gets managed and bringing some light to these types of things is a really good thing. I appreciate what you're doing you know for sellers out there and trying to bring some information to the table. I think it's a big thing. For you as sellers or if you have a U.S. company, don't forget when some of the sales tax changes -- not sales tax, when some of the federal tax changes. You should have an entity set up to expense your inventory. It will make a massive cash flow difference. If you already have a company that's doing it, cool. I would even consider spinning up a new company to expense your inventory. It is the largest hit on phantom profit that you can have with your taxes where you have money in the bank and you get a bill for $100,000 from the IRS because you have 300,000 of inventory or you know some number, pick your own number and it's because they want you to pay on an accrual basis taxes and you can't take any of that inventory and deposit with the IRS you will be in trouble. So make sure you understand that. Again, Vladi I wish you great success. Can you tell me -- so you said you've been doing Seller Board for a couple years now, yes?

Vladi:Yes.

Steve: And think about five years in the future, what does it look like? What does your venture look like?

18:06 (Vladi talks about the future of Amazon.)

Vladi: Yes. Actually, let me tell you about Amazon you know because I think that's key also for all tools and service providers and everybody. So, I have a theory. I don't know if I'm right, but I'm thinking a lot about it. I think Amazon will be more like eBay. And what I mean is you know eBay is very mature, so you won't find a course online, you know how to earn one million dollars on eBay with just one product you know, that's not there. And there are a lot of sellers, a lot of shops, you know E-commerce companies selling on eBay who are very successful, but they're like very professional. It's a mature thing and I think Amazon at the moment is growing, still growing like crazy you know and of course the competition is growing, but E-commerce is growing and Amazon is growing. So, we're still not there, but maybe in five years, maybe in ten years Amazon will become more mature. So, it will not be possible to earn like millions solely with cardboard classes you know. I didn't earn millions though, but it was still nice. So, a full-time income you know it's hard to earn a full-time income with just one product on eBay you know. There is no such thing. So, I think Amazon will go into this direction, so there will be -- at a certain point, there won't be too many new sellers that are not professionals, so everybody will become more and more professional. And yes, I think that this will require, I don't know, new tools, but also a systematic approach you know, our business processes and certainly more professionalism maybe less, maybe it will be less fun because it can like explode, but that's just life and that's just business and entrepreneurship. And I think that you know guys who are there from the beginning or who started five years from now or who even start now there will be a better positions in like in five years just to stay in this game you know when the market will be closed for new sellers.

Steve: I love it! That’s a good crystal ball prediction. Go ahead, add another bit.

Vladi: And for us I know as a tool provider we just need to support this. So, I think it's going to be more about, more sophisticated business processes and more about you know things like taxes and you know even deeper bookkeeping and management accounting functions, maybe less. I don't know product research because at a certain point it will be harder and harder to find like those gems with single product which can make your full time income, right?  

Steve: Yes, I definitely, I appreciate you putting out your prognostication there what's coming in the future. And the reality is none of us know, but I think those are good bets that it will continue to consolidate. There will be some changes as the platform matures and as some of the noise that's coming into the system with you know so many sellers that are doing on the various things start to fade away, you know, there's so many things happening on. It's a very dynamic -- in many ways it's fun and exciting and in other ways it's you know scary and the unknown is constantly causing fear, so those two things go together. But Vladi I want to thank you for taking the time today and joining us on Awesomers, I appreciate it.

Vladi: Thanks you so much, Steve. It was my pleasure.

Steve: It's great fun having you. Awesomers, if you’re listening out there we're going to be

right back after this.

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Steve: Alright there it is, that puts the final notes on our three-part series with Vladi Gordon. And you know what a great sport he is to you know kind of call in late in the day. I was calling on the European timezones. And you know here's a guy who's been studying and you know learning about computer science and applying that knowledge to his Amazon business and then figuring out you know what this is a tool that I'm creating that perhaps other people find value in. And we certainly believe in the concept of you know automation and adding tools to make your life a little bit easier. I don't -- I'm a huge proponent of this idea that you should get control of your finances. But I'm saying, “I don't really necessarily want you to do it by pen and pencil.” So, in whatever way it's best for you including pen and pencil all acquiesce and say “that's okay”, but I'm not a fan of the pen and pencil at this stage because there's so many things to make our lives easier. If you are like me, you've suffered at some point you know kind of you're neck deep drowning in spreadsheets and this is why I think tools are so important. So, Vladi also feels the same way. That's why he built his tool and I'm thrilled that he was able to join us and get in on this exchange of ideas and to share some of these profit killers with you. If you sell on Amazon, you should listen to this. If even if you don't sell on Amazon, this type of profit killer is indicative that you'll find in any company of any business, so really, really important lessons and takeaways. I hope you enjoyed it as much as I did.

Well we've done it again everybody. We have another episode of the Awesomers podcast ready for the world. Thank you for joining us and we hope that you've enjoyed our program today. Now is a good time to take a moment to subscribe, like and share this podcast. Heck you can even leave a review if you wanted. Awesomers around you will appreciate your help. It's only with your participation and sharing that we'll be able to achieve our goals. Our success is literally in your hands. Thank you again for joining us. We are at your service. Find out more about me, Steve Simonson, our guest, team and all the other Awesomers involved at Awesomers.com. Thank you again.