Waiting for my Amazon Auto-Payment
On December 28th, came my first sale! The Millionaire Next Door: The Surprising Secrets of America’s Wealthy was purchased by a wonderful lady from Romford, London. Excellent choice.
I jumped into this enterprise based on my expected cost of goods sold (COGS) or cost of my books. In my mind, my COGS were $0. The lack of joy I felt for them made them worth nothing to me. Therefore, Gellerholz Books had a very low bar to put us in the black.
For each book, in the UK, Amazon gives the seller $3.75 for postage. Regardless of the size or weight of the book. Small, paperback books cost about $2.00 to ship while a large, hardcover textbook cost about $11.50 for postage. This varies based on size and weight but I’ll use averages going forward.
Besides postage, another cost is packaging and printing the packing slip. Low cost but the recommended padded envelope cost about $0.35 when bought in bulk or $0.80 when bought at the local stationery store. I’m not selling enough books to justify buying in bulk. Damage to the book during shipment will result in a return and/or a bad review. Two things I don’t want for Gellerholz Books – your neighborhood international bookstore. Therefore, I used the nice padded envelopes.
Amazon also charges a fee for every sale. The fee is a sliding scale starting with a default $1.00 per book. They also take a 15% referral fee for books. They tack on some other sliding rate fees to keep you guessing.
After a few sales, I realized my break-even point (the price I needed to sell it for in order to not lose money) wasn’t as low as I expected. Based on average postage, packing, and Amazon fees my breakeven sales price was $3.18 for a small, paperback. A hardcover textbook break-even price was $15.77. A lot of folks are selling books for a $1 or less. I can only assume they are losing money or getting a big discount on bulk postage, packaging, and lower Amazon fees by having a business account.
These expenses don’t include my own time. I’m not cheap. The initial set-up of the bookstore and entering the books into Amazon took a few hours. After that, I averaged about 15 minutes for packaging and shipping per book. How much was I earning per hour? Probably not enough.
Time to Not Hire an Account
In mid-January, I had a few sales under my belt. I was selling 3 to 4 books a week. Then one day at the post office I got in a tiny quarrel with the worker. I accused them of over-charging me postage. Afterward, I realized was getting too passionate about this store. So, I took some time to look back on my accounting notebooks.
Small, soft-copy books were selling the best but the money in the small books was tiny. It was obvious that the money is in textbooks.
As Erica poignantly asked, “are textbooks selling?”
No, no they are not. No one needs a textbook in January and February. The profit-making part of the business opens when school is back in session. 6 months from now.
From the table above, you can see I was making on average $11/hr with this job in February and March. It was fun, but was it worth it?
Book Store Differentiation
Selling books is like selling a commodity – wheat, oranges, oil, etc. There is very little, to no differentiation between products. So how do Amazon sellers stand-out?
When a customer sees your product, they can only see your reviews and review rankings. A short time seller like me won’t have my storefront open long enough to get reviews. I’ve sold 14 books and still don’t have a review.
Not to mention, I’m competing against UK charity shops. That just made me feel lousy. I don’t want to compete against a charity shop. My books and time are better spent walking them down to a charity shop than walking to the post office a couple times a week.
Achieving our 2018 Goals
I’m not going to lie, it felt great to be selling. I like the operations aspect of checking my inbox, printing the package slip, shipping it to the customer, closing the deal, and getting the payment from Amazon.
It is a real business. Amazon Seller Central tracks all your metrics for their own benefit and mine. It is fun to see the health of the store via their dashboard. My record was flawless.
Too bad I wasn’t improving our living standard. I could buy a few pints at a pub, once a month, at this rate.
We have our 2018 goals. These goals are our life priority focus items. Anything else is just a distraction.
These results are really no surprise. If I would have taken the time upfront to estimate the cost of shipping, Amazon fees, and price of my books, I could have realized right away this venture would not have been worth it.
Gellerholz Bookstore closed its doors. Decision made. A few clearance sales in March but besides those, the books were packed up and carried to the charity shop.
Onto the next business idea for Gellerholz LLC.
My Exit Strategy
My textbooks are worth a pretty penny and their listing price is well above the break-even point above. I’m talking sale prices of $40 to a $100. Chemical Engineers and MBA students are chomping at the bit for this stuff.
While I love the charity shops, before giving them my extremely valuable textbooks, I looked for options to give someone this amazing opportunity to buy a family-run, international bookstore.
After speaking to my lawyers, business partner, and accountants, I identified a potential buyer: the 8-year old daughter of a co-worker. She’s brighter than most 8-year olds and I figured this would be a good opportunity for her to learn to start a business, run the numbers, and experience the thrill of the sale.
My pitch deck was spectacular. I went through all the numbers, the opportunity, and the pot of gold come school season. I offered to let them come over that night to pick up the books.
Because she is smarter than the average 8-year old, she turned me down. It was easy for her to see there was no money in this game and her time was better spent in school than walking books down to the post office to sell.
While Gellerholz Books was immediately disbanded when I donated the last box of books, I learned some valuable lessons from my first side hustle:
- Anything that is that easy to start probably isn’t going to bring you a massive return
- Run the numbers before you jump into anything. Was it worth it for me to make $11/hr when we have bigger goals that I could’ve been working on?
- Have an end goal in mind. If an 8-year-old girl isn’t willing to take over your business, it probably wasn’t the best idea to begin with
This was my first side hustle, but it certainly won’t be my last.
Erica Gellerman is a CPA, MBA, personal finance writer, and founder of The Worth Project: personal finance and family travel. website. Her work has been featured on Forbes, Money, Business Insider, The Everygirl, The Everymom, and Lifehacker. When she's not writing about personal finance you can find Erica exploring Europe from her temporary home base in London.
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