Amazon Is Still Viable, but the Wrong Opening Move Will Burn Through Any Budget

Many people who start an Amazon business often begin like this: rent the office first, hire the full team first, then quickly choose several products and send them straight to FBA, calling it "teamwork and fast product testing." The result is that before a single order is sold, most of the startup money is already gone. By the time the products arrive and they are ready to start advertising, they find that the cash on hand is already tight.

For the new Amazon seller, I believe the right opening move is this: do it yourself first, test and make mistakes at low cost, and start by getting the first product to work.

Because the biggest problem for newcomers is a huge misunderstanding of starting an Amazon business: they think that as soon as a product is listed, they will immediately see payouts and can just wait to make money.

Actually, anyone who has done Amazon for a few years knows: the biggest pressure on Amazon comes from cash flow. If most of the budget is already spent before any product is making a profit to support it, you will soon find that there is no money left for the next round of inventory, the advertising budget is already tight, and you even have to figure out how to raise money for team salaries and your own living expenses.

So anyone preparing to enter Amazon, no matter how big the budget, must first answer three questions: what level of results do you expect, how much money can you actually use, and would losing all of it affect your life. If you have not thought these three questions through, I suggest you slow down before entering.

Actually, how much money you need to prepare also has to be calibrated to your expectations for this business. In my view, if a newcomer wants to enter, the goal at the starting stage is to survive; breaking even and steadily earning living expenses means you are on the right track. If you enter with the idea of making big money in a year, once you hit a temporary difficulty, your actions will definitely become distorted.

Once expectations are set, how should the money be allocated? The core is the principle: save where you should save, spend where you should spend. Leave the majority of the budget for inventory and advertising—the two things that directly generate orders. Fixed expenses such as an office and hiring can wait until the business is running on its own.

But many people do the opposite: at the start they first indulge in being the boss, lose several hundred thousand in a few months, and end up with nothing left.

Next comes listing products. At this stage, the biggest taboo is thinking about launching many products right away, because when the methodology has not been validated and the process has not been run through, rushing into many products at once spreads out your energy, your budget, and your operating actions, and the result is that none of them are done well.

My approach is to first concentrate all my energy on doing solid research and preparation for one product, then put all the budget and resources behind it, focusing force on one point to build that product up.

Specifically for categories and product direction, you need to avoid three pitfalls: so-called blue oceans without a real customer profile, products that rely on low prices to trade for volume, and low-repurchase products that a user may buy only once in a lifetime.

We should try to choose categories with a clear target audience, decent profit room in the core price range, and ideally a relatively high repurchase rate. With such a category, you have a decent foundation, and even if one product does not take off, you still have a chance to try again through upgrades and iterations.

Another big taboo is a common problem many people have: always wanting to pursue disruptive innovation and make one big bet.

In my view, when doing products at the startup stage, you must not bet on major innovation and redesign, because heavy innovation with new tooling basically means tooling costs in the tens of thousands or even hundreds of thousands, plus inventory of more than a thousand units. For the startup stage, that is an enormous risk.

So in the early stage, when experience and operating capability are still insufficient, what you should do is visible small improvements: do enough research on user needs, use small optimizations to meet users' core needs and pain points, and put these differentiated improvements as key information into the packaging, copy, and images so users can see these optimization points at a glance.

On timing, during Amazon product research we can list an FBM link and run ads to test the category's ad exposure and click cost. This is also an important part of product validation. If the click cost is too high and a single product's gross profit cannot support more than a few ad clicks, then you basically need to consider whether to give up on this category.

If the click cost is within an acceptable range, this becomes the anchor for our early advertising bids in the future promotion stage. When we have tested the real traffic cost and the cost falls within expectations, we can start with small-batch inventory, for example a few hundred units in the first batch, and if it sells well, gradually increase inventory based on order volume. This way, the cost of early trial and error is pressed from hundreds of thousands down to less than tens of thousands; even if the first product does not take off, you still have the capital to do the next one.

Then comes operations and advertising.

In advertising, we generally start with a large number of low-cost long-tail traffic keywords, using low bids, many keywords, and broad match to get running. First pick up a large number of keywords with modest search volume and low bids, use them to build up listing data and ranking weight, and after validating high-value keywords, shift the budget to phrase and exact match on core keywords.

This approach lets us gradually validate high-value keywords in the early stage at a lower and controllable cost.

Many sellers are used to coming out with high bids and exact match to push big keywords. In my view, this is the most common way for newcomers to burn through money the fastest.

During the new-product stage, our listing cannot compare with the top competitors on big keywords in terms of reviews, data, or ranking weight. If you want to use high bids to fight these competitors that have sold for years and have high review counts for top positions, that is no different from spending money to seek death.

So in the new-product stage with few reviews, we should not rush. Instead, we first pick up orders through low-cost traffic, less prominent positions, and around weakly competitive competitors. After sales and reviews build up, we gradually move to bigger keywords and more prominent positions.

Throughout our entire Amazon business, from day one we should aim for profit, not set out with the goal of strategic losses to grab rankings.

In my view, the essence of this set of opening moves is to keep the cost of every step within a range you can afford to lose.

Amazon never lacks opportunities; what it lacks is people who stay at the table. We need to set expectations a little lower and do the basic work more solidly. In the early stage, the most important thing is to survive first, and survival does not depend on luck—it depends on leaving yourself enough chances to make mistakes.

So do not go all out for rapid expansion, do not rely on gambling, but move forward one step at a time.