Project Detail
Project Overview
This case study highlights the strategic efforts undertaken to transform an underperforming Amazon Private Label product in the Arts and Crafts category. The initial challenge faced was a high account landing cost of $5.80 for the ASIN, resulting in consistently low profits and frequent losses. To address this issue, a comprehensive approach was adopted, resulting in a significant reduction in landing cost to $3.90 and an impressive 80% increase in profits. Background: The product in question was a private-label item in the Arts and Crafts category, listed on Amazon. The product had a strong potential market due to its creative and artistic nature, but the profit margins were being severely impacted by the high landing cost of $5.80. Despite initial efforts, the product was not generating satisfactory returns, making it necessary to reevaluate the manufacturing and sourcing process.
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Challenges Faced
High Landing Cost: The account landing cost of $5.80 was eroding profit margins and causing the product to sell at a loss.Profitability Concerns: The consistently low profits not only hindered business growth but also discouraged the team due to their inability to achieve positive returns.
Action Plan
- Supplier Relations and Negotiation:
- A dedicated resource was assigned to establish direct communication with manufacturers and factories in China.
- This resource engaged in detailed negotiations to lower the manufacturing cost without compromising on quality.
- Sourcing Optimization:
- The team leveraged their connections and expertise in China to identify alternative suppliers who could provide better pricing without compromising quality.
- Manufacturing Process Optimization:
- By working closely with the manufacturers, the team identified cost-efficient modifications in the manufacturing process that did not affect the product’s appeal.
- Logistics and Shipping Optimization:
- Streamlined logistics and shipping processes helped in minimizing transportation costs and reducing lead times, improving overall efficiency.
- Quality Control:
- Regular quality checks were implemented to ensure that cost-saving measures did not lead to a decline in product quality.
Results Achieved:
- Landing Cost Reduction:
- The concerted efforts to renegotiate with suppliers and optimize sourcing resulted in a remarkable reduction in landing cost from $5.80 to $3.90.
- Profit Increase:
- The reduction in landing cost led to an 80% increase in profits, turning the product from a loss-making venture to a highly profitable one.
- Improved Competitiveness:
- The reduced landing cost allowed for more competitive pricing, attracting a larger customer base and increasing sales volume.
- Business Expansion:
- The increased profitability enabled the business to consider expanding its product line within the Arts and Crafts category, capitalizing on the newfound success.
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