005 – My Biggest Failure. $16,000 Loss – Amazon FBA Product 

 May 22, 2020

By  Jake Lang

In this episode...

Today, I am sharing my biggest failure as an entrepreneur. Today I share my experience launching my business "NE Lounge". An Amazon FBA product that resulted in a $16,000 loss.

That's a lot of money! I wrote about this over at Failory, where I shared my entire experience. Below is a snippet from the article I wrote for Failory explaining why I failed and lost $16,000 from an Amazon FBA product:

In the end, it came down to profit. I just could not turn a profit. No matter what I did. My marketing effort, trying to rank for my keywords on Amazon, was not working. No matter how many 5-star reviews I got, and no matter how many discounted items I sold, my Best Seller Ranking was not climbing fast enough to rank on the first page of Amazon.

I was in over my head. I chose an expensive product ($20 per unit), I was trying to sell at a premium price ($50 per unit) but no one was buying. The only buyers I was getting were the people buying through JumpSend at a 50% discount. After Amazon fees, I was taking a loss on those JumpSend sales and it wasn’t even helping my organic ranking!

In the end, I sold more inflatable loungers at a discounted rate through JumpSend then I sold organically at full price. I was essentially paying money for people to take these inflatable loungers from me.

After accounting for the initial investment, marketing fees, Amazon storage fees, Amazon sales fees, JungleScout fees, professional photography, and graphic design the end result after selling 500 units of NE Lounger inflatable loungers was a loss of $16,000.

I shut the business down in April 2018 after selling all 500 units (for a loss). The nail in the coffin came when I brought the dilemma to my mastermind group, a group of entrepreneurs I trusted and had been meeting with on a weekly basis for over two years. I asked them if I should re-order more inventory to try and turn a profit, or cut my ties and walk away. I got a lot of great feedback from an outside perspective; it was eye-opening.

The choices were clear, spend another $16,000 and maybe turn a profit or double down on my other online businesses and scale those to reach my goal of $10,000 income per month. It was an easy decision. In the end, I decided not to re-order the next round of inventory. I shut down NE Lounge and walked away with a $16,000 learning lesson.

I can point to a number of reasons why this business failed. First, I suffer from shiny object syndrome. I jumped in too quick after just learning how to launch an Amazon FBA product. I saw the profit potentials, and I was really pushing myself to generate a little extra money so I could leave my 9-5 job and pursue entrepreneurship full time. I chased the shiny object when I could have doubled down and scaled my successful businesses.

Second, I chose the wrong product. I chose an expensive product to manufacture, one with lots of competition, one that is known to break (and get bad reviews), one that is a fad product that I had never personally used or even heard of before researching niches on Amazon. I should have chosen a simpler item for my first FBA product, one that was less costly and cheaper to manufacture on a per-unit basis. I was in trouble right off the bat when I dropped over $10,000 just to manufacture my inflatable lounger. I put myself in a hole from the beginning. I should have started smaller, and started cheaper for my first attempt. It would have softened the blow of this failure.

Third, I didn’t fully understand Amazon. This was my first Amazon product. I didn’t understand the fees, I was learning about manufacturing, I didn’t understand importing, and I didn’t realize how hard it was to rank a product organically on the Amazon search platform.

In hindsight, there are hundreds of reasons why NE Lounge failed. I am the first to admit, I jumped into this business too quickly. I should have done more research; I should have slowed down. I should have re-evaluated my options, weighed the pros vs. cons, and conducted a better cost-benefit analysis before launching NE Lounge. It was a good idea, I did my research talking to customers, and I entered the market with a better product that met the needs of the target market. But I needed to slow down, take a step back, and re-evaluate the risk of starting a new business on Amazon, a platform that I was unfamiliar with.

NE Lounge Product Photos

NE Lounge Profit
NE Lounge Product Photo - The Entrepreneur Ride Along Podcast
NE Lounge Product Photo - The Entrepreneur Ride Along Podcast V3
NE Lounge Product Photo - The Entrepreneur Ride Along Podcast V2

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Jake Lang

Jake Lang is an author, entrepreneur, and founder of over seven online businesses. Jake now helps new entrepreneurs start and scale their first online business at TheEntrepreneurRideAlong.com where he shares his experiences along the entrepreneurial journey starting and growing new businesses.

It’s Jake’s mission to start a new online business every year and share everything behind the scenes on The Entrepreneur Ride Along Podcast and The Entrepreneur Ride Along Blog so that new entrepreneurs can learn from Jake’s mistakes, understand the struggles of starting a new business, and find the path to entrepreneurial success.

Jake Lang

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