4 May-2016

4 Tips to Save Time & Increase Profits by Applying the 80/20 Rule to Your Amazon Business – by Skubana

Perhaps you’ve heard of the Pareto Principle, or more commonly known as the 80/20 rule. It states that 80% of the effects come from 20% of the causes. What are some of the applications of the 80/20 Rule when it comes to optimizing your Amazon Business? Well, look at your product line with a broad view and see where the so-called attention lies. By attention we are speaking about activity in terms of sales, reviews, competition, and inquiries from customers. Statistically, you will have products that sell and get reviewed, but you will also have “dead” products in your inventory. These are the products that actually cost your business money with increased long-term sitting fees and diminished ROI on advertising efforts. If eight out of ten products are close to the “dead’ category then what is a seller to do about it?

Insight and Action to Applying the 80/20 Rule

20% of Your Products Receive 80% of your Reviews.

Insight: For a client to find the need to devote the time and attention to writing a review for your product, they first need to be motivated to do so. Whether that motivation is positive or negative is irrelevant as applied to this 80/20 rule. Good or bad, the client must be driven to write a review. The impression that a client gets is not always based on the actual product, but how you present or represent that item on Amazon.

Action:  Monitor all reviews for all of your products, as they will give insight as to whether you should improve the product, lower the price, bundle it or liquidate it altogether. There are several services available to Amazon sellers that automate product review monitoring. Just be careful not to focus your attention on one review, but instead on the collection of reviews as a whole. It takes several reviews to paint a true picture of how the product is portrayed by the customers who use it.

20% of your time leads to 80% of your results.

Insight: Think about your daily routine when it comes to running your Amazon based business. See if you can chart the amount of time spent on the repetitive daily tasks; answering customer messages, checking orders, printing labels and invoices, picking orders, packing orders, shipping orders, managing inventory, ordering inventory, etc. Once these repetitive and mundane tasks start bogging you down, it will seem like there’s just not enough hours in a day to get everything done.

Action: Cut time-wasting, repetitive duties and outsource time-absorbing tasks so you can focus on your Amazon business. There’s an app or some form of software for everything out there now. Instead of slogging through data, you should be processing orders with the click of a button and generating shipping labels with the click or two of another. Outsource tedious shipping related tasks with companies like Skubana. Delegate the nitty-gritty of customer services to your in-house staff and trust them after training them. Same goes for your social media tasks. Educate, delegate and trust. Avoid micro-management and focus on what works well and how to grow your business. This does not necessarily mean that you have to hire more employees, but it might mean that you have to re-task them to fit within the schema of dealing with Amazon.

20% Of Your Best Sellers Make Up 80% of your Revenue.

Insight: Remember we talked about “dead products” before? As with any type of business, you’re going to have strong and weak products and product sales. Some of those products need a little “TLC” to reach their full potential—sometimes it can literally be as simple as re-writing the title of the product and adjusting the search term keywords—but know that the performing 20% will not necessarily be the most expensive 20% of the products in your inventory.

Action:  Study your product data carefully and forecast efficiently. Amazon has all the tools there for you to use as well as many 3rd party software options that pull the data and organize it for you. Many of these software options do it so well and so efficiently that there is literally no excuse for being in the dark about any of your product stats. Pulling your product data and identifying the ranks of your products in their respective categories allows you to optimize these listings, escalate their rankings, and compete efficiently.

If your best selling product has a 4% profit margin–you’d better have an amazing way to sell a LOT of them as efficiently as possible. That being said, have you devoted the time and effort necessary to the products you have that are just outside the category of “best sellers”? As mentioned, sometimes it’s just a little tweak of the listing that can make all the difference. Other times it can require a major overhaul of the listing, it’s the description, title, bullet points, pictures, etc.

Be careful about your top sellers—ignorance of their competition can lead to their downfall. This may seem blatantly obvious, but we easily become blind to what is going on around us when things are good and orders are plentiful with the good feedback rolling in. Unfortunately, this is also when you can become blindsided as a competitor sneaks up and steals your offer’s thunder.

Bonus Action: Skubana has an incredibly intuitive SKU profitability analytics system that could tell you exactly how much each of your individual SKUs bring in for you. Every cent is accounted for including all costs, overhead costs, Amazon fees and much more so that you know the TRUE worth of each product. Using this tool, you can identify your top 20% of SKUs that make 80% of your profit. With this knowledge you can allow yourself to focus on these SKUs while liquidating the other SKUs that bring your business down.

The 80/20 rule provides focus.

The concept is not difficult, but it is also not the end-all to how your product listings are going to run. Use it with a wide-overview of your product line and as each of our three rules here come into focus, use it to narrow down to the category level and finally the product level. Use it as a tool, apply the rule and watch as your profits grow.

This guest post was contributed by the Skubana team. Skubana is an all-in-one ERP system that seamlessly integrates with most e-commerce marketplaces, 3PLs, and warehouses. It also provides state-of-the-art profitability and multi-channel inventory management. Skubana compiles all of your marketplaces on a single page so you can intuitively control and understand your entire business. Try Skubana free for 14 days, or feel free to contact us at info@skubana.com with any questions!