Throwback: Mastering Amazon - Essential Strategies for Supplier Relationships, Cash Flow, and Inventory Management

In this episode, host Josh interviews Pradeep, a scientist-turned-entrepreneur who built a seven-figure Amazon business in under a year. They discuss advanced strategies for Amazon sellers, focusing on negotiating cost of goods sold, building strong supplier partnerships, optimizing inventory and cash flow, and avoiding the pitfalls of launching too many products at once. Pradeep shares actionable tips on supplier negotiations, payment terms, and expense management, emphasizing the need for a sophisticated, business-minded approach to succeed in today’s competitive Amazon marketplace.

Chapters:

Introduction to Pradeep and His Background (00:00:00)
Josh introduces Pradeep, his scientific background, and transition to Amazon e-commerce and asset acquisition.

Beyond Basic Amazon Strategies (00:00:37)
Discussion on moving past common optimization tactics to focus on COGS, supplier negotiation, logistics, and inventory.

COGS Negotiation and Supplier Relationships (00:01:45)
Pradeep explains the importance of negotiating COGS, exclusive agreements, and sophisticated supplier relationships.

COGS Tracking and Unit Economics (00:04:19)
Emphasis on tracking COGS, using software, and managing multiple brands and inventories.

Inventory Management Pitfalls (00:05:44)
Analysis of overstocking, poor forecasting, and leveraging inventory in distressed asset acquisitions.

Amazon Warehousing Changes and Cash Flow (00:06:53)
Transition to how Amazon’s warehousing changes impact cash flow and inventory strategies.

Cash Flow Mistakes and Overspending (00:07:13)
Discussion on unnecessary spending on consultants, poor HR choices, and excessive conference expenses.

Negotiating Payment Terms for Cash Flow (00:09:42)
Advice on negotiating 30-120 day payment terms with suppliers to improve cash flow and acquisition leverage.

Launching Multiple Brands: Cautionary Advice (00:11:50)
Warning against launching multiple brands/products without sufficient cash flow and the risks of overextending.

Key Takeaways and Action Steps (00:13:04)
Josh summarizes actionable steps: focus on supplier partnerships, negotiate terms, and improve cash flow management.

Expense Management and Exit Planning (00:15:08)
Highlighting the impact of recurring expenses on business valuation and the importance of efficient spending.

Closing Remarks (00:15:57)
Final thanks and acknowledgments as the episode concludes.

Links and Mentions:

Tools and Websites 
"Jungle Scout": "00:12:30" 
"Helium 10": "00:12:30" 

Key Takeaways 
"Supplier Partnership": "00:13:45" 
"Negotiation with Suppliers": "00:14:10" 
"Cash Flow Management": "00:15:08"

Transcript:

Josh 00:00:00  Today I am excited to introduce you to Pradeep. He is trained as a scientist at Oxford University and Harvard University, and then he became the vice president of Global Business development for a biotech company. During the pandemic, he found himself in a unique situation which led him to start his Amazon e-commerce business. He became a seven figure seller in just 11 months and now has a new business model of acquiring distressed assets, and he also owns a boutique Amazon account and launch management agency. So welcome to the podcast, Pradeep.

Pradeep 00:00:36  Thank you so much.

Josh 00:00:37  I love that you made the mention of when we go to conferences. And as you listen to speakers speak on stage or even listening to podcasts time and time again, we hear the same optimization strategies and the same keyword strategies, and it's just a new tool that people are using. But instead what you're saying is like, the hard stuff is what people aren't necessarily talking about. People aren't getting into the weeds of cogs and negotiating with suppliers and renegotiating on an ongoing basis, and the finer details of logistics and where you're warehousing things.

Josh 00:01:14  And with Amazon, you know, reducing inventory limits across the board for people. What are people doing now to kind of prepare themselves for a world where Amazon does limit you completely and with maybe 1 or 2 months worth of inventory and that's it. And how are you staging your inventory and still winning on Amazon in that environment and then cash flow? I mean, all of these things are such great topics. So yes, let's do a deep dive into each of these. Let's start with the cogs first.

Pradeep 00:01:45  Yeah, sure. so what we see is quite interesting with cogs. the cog numbers to start off with, sometimes a minimum, we say 3 to 5, but as Amazon and e-commerce goes more expensive, I think it's about 8 to 10. So if you're buying something for $1, you should be above 8 to 10 in terms of selling prices, if not more, right? What we see is again and again people are saying, hey, we have particularly beginners, hey, we have this 3 to 4, but with inventory, PPC, shipping and all these things, it's just the profits are gone.

Pradeep 00:02:21  Before the pandemic or during the pandemic is very profitable. And this is, by the way, experienced. This sounds stupid. I find I find myself finding myself stupid explaining this to someone, but we actually see it every day. Seven, eight, nine figure sellers saying you want this brand because the cogs have gone too expensive because they haven't worked out. Fundamentally, the multiples and the multiples have to be really strong now and the bigger multiple margin to sell. So those cogs are fundamentally negotiable, and you have to have the right product and the cogs are cheap. Price number one. It sounds stupid, but that's what we see. Number two is the negotiation. Hey, we bought 100,000 units. Next time we're going to have three 400,000 units. But you're still selling for the same price. Why? Your your factory should be giving you a note or, you know, handle cash flow or a cheaper price because they're getting raw material cheaper. And what we see is, you know, I sign NDAs, but what we see is some of these aggregators and others who are famous when they go back and some of these factories are quite savvy, say, hey, you raise X amount of money.

Pradeep 00:03:29  All of a sudden your cogs are gone up. So, you know. So I think that's again how you negotiate and how you have exclusive agreements for a period of time, particularly on your best selling products. We do this in pharma and other business tools all around the world. You want it for five years. This is the price. If the if if inflation goes down or if the market changes, this is going to be a price. We have the power to change it not you. So it might be having exclusive agreements. And that's how sophisticated you guys we have to get in e-commerce. Because this is no longer a, a mom and pop kind of operation. This has to be sophisticated. Even if your mom and pop or a guy in a basement. That's how you should be thinking. you know, solar. It could be a corporate on your own, but you've got to think like that. So, cogs and how you define the first cogs, the renegotiate the cost is very important.

Pradeep 00:04:19  Then thirdly, how are you people storing cogs, right. How are you doing unit economics and how are you storing Excel sheet or software and so forth. And that has to be updated on a daily basis. we see fundamental mistakes and we see fundamental errors as well. You can pick it out straight away from, profit and loss statements as well. so that's something people have to be aware of. And it gets really hard because if you have multiple brands, multiple products, multiple inventory, you know, it's all over the place.