Become a Cockroach and Build and Sell Large and Expensive ItemsMarch 8, 2021 in Blog
In this post, I am going to detail how I reliably launch products with minimal risk. I’ve used this exact strategy now to build several multi-million dollar brands over my e-commerce career selling BIG and expensive items. And I mean big – like boat anchor big.
It’s not a sexy strategy that involves selling billions of dollars of keratin supplements every month, but it’s a reliable strategy that has a much higher success rate than other strategies that sellers pursue.
So if you’ve tried launching products before and failed or you’re a seasoned seller just looking for different opportunities, hear this strategy out.
My Cockroach Launch Thesis
This is likely the most unsexy, unglamorous Amazon product strategy you will find. It focuses on consolidating freight, working tirelessly to trim an inch off a box, and low-volume products where selling five units a day is huge. It’s a low-margin strategy where you’re happy to add a couple of percentage points to your net margin. It doesn’t focus on Many Chat flows and SFB campaigns or crazy product giveaways. But this strategy has worked for me for nearly ten years, across several brands, across brand exits, and brand startups. And it’s a reliable formula that results in a 90%+ success rate for my products.
Here are the key points of this strategy:
- Focus on oversize products. High price points often mean larger products. You win by having super efficient logistics (more on this shortly). You get MASSIVE wins when you can turn an oversized product into a standard size product.
- Focus on high-price-point items. Almost always $50+ and often $100+. The competition is lower here and advertising costs will almost universally be lower at these price points.
- Focus on low-volume products. These are typically items where the main search volume is <2000 searches a month (and often <1000).
- Shipping for oversize products is disproportionate to the costs. Because you will have low volume, it is CRITICAL you have as efficient logistics as possible. In fact, my strategy is less of a product or marketing strategy and more of a logistics strategy. What does this mean? Suppliers must be strategically located close to one another to consolidate shipping; Shipments need to be divided between standard size/oversize to result in as few Amazon FCs as possible.
My Experience Working at an Amazon FBA Oversize Warehouse
My real epiphany for systematizing this strategy came after I sold my previous brand and went to go work at an Amazon FBA Oversize warehouse for 3 days.
While working at the FBA warehouse, I got to see every product that sellers send to Amazon. I’ve seen sellers sending into Amazon full-sized kayaks, six-foot-tall Michelangelo statues, 300-pound stone birdbaths, and more obscenely sized items. And Amazon was VERY good at handling these items.
Most third-party warehouses struggle massively to handle these large items (shipping delays, surcharges, etc.) but Amazon handles these items with ease. I realized focusing on large items while utilizing FBA was a real business model.
This Strategy Is All About Logistics
This strategy is all about logistics and optimizing your freight costs. In economics, this is what you call cost leadership.
There are no cost savings on the product side. Not because you can’t compete with Chinese sellers but simply because everyone is paying the same product costs nowadays.
Where you make your margin is on shipping.
This isn’t a new strategy. Ikea’s entire business model is built around packing bulky furniture in as small of packages as possible to maximize store real estate usage and reduce sea/overland freight costs.
Here’s how you save on shipping:
- Look for items that are barely oversize. This means items that are barely oversized. Normally, this means items that are barely over the 18″ longest size requirement or just over 20 lbs. Now aggressively work with suppliers to get the dimensions into a standard size box. Here’s an example of two cases (calculated using the free EcomCrew FBA fee calculator):
Product A: 19″x14″x8″ (Oversize), FBA Fees: $13.96
Product B: 18″x14″x8″ (Standard Size), FBA Fees: $9.98
On a $100 item that adds 4% to your net margin, which in ecommerce is HUGE.
- Oversize items are OK. There’s no possible way that you can fit a kayak into a standard size box? No problem. Oversize items are fine and there’s still lots of opportunity for freight savings (see below).
- Consolidate Shipping: You’re ordering a lot of low volume, high price point items. For many of our products, 50 pieces is a BIG order (especially when the cost is $200 a piece). This means you need to either consolidate lots of items into one container. And on that note, you NEED to use container shipping. Absolutely no air shipping and avoid LCL at all costs. Here’s an example of a quote I got: $1640 for 75 products, 4.3CBM going from China to Phoenix, Arizona. This is roughly $21 per item.For a 20′ container (which is roughly 28CBM, or 6x larger), the price is around $3500 or $3.50. You need to do two things to consolidate these low-volume products: you need to be using batch product development. This means developing 3 to 5 products at a time with one supplier (shameless plug for our Build a 7 Figure Brand Course where I detail this to great extent) and source your products all within the same geographic location within China (this roughly means all suppliers must come from either Northern China, Middle China, or Southern China).
- Avoid Using 3PLs and Ship Everything Direct to Amazon: You need to avoid 3PLs at all costs. They steal your margin. They charge container de-stuffing fees and pick and pack fees. On top of this, they’ll lose and damage your inventory. You avoid 3PLs by shipping directly to Amazon. This means you can never ever mix standard size and oversize items. If you’re shipping a lot of oversized items, you should also use Amazon Global Logistics because they allow you to ship oversized items direct to one Amazon FC (one more shameless plug for our course where we show how to get enrolled in AGL).
Other Success Factors:
At its heart, this strategy is about shipping and logistics but there are some other things that compound your probability of success:
- Low volume and high-price-point products. Almost all of my products have a main keyword search volume of under 2000 searches per month on Amazon.com (or sub 25,000-100,000 keyword rank according to Brand Analytics). But the competition is FAR lower at this volume. A good product will do around $5000-$10,000 in this range. I’d rather have all of a grapefruit to myself than just a bite of the watermelon.
- Amazon grows at 17% per year and an OK item today will become a great item later. A product with 2000 keyword searches today will have 2340 searches next year, 2737 searches the following year, and 3203 searches the next year OR, given that all other things are equal, a $10,000/month product today will be a $16,000/month product three years from now.
- Focus on Other Marketplaces like Canada and Europe. Competition is far lower on the other marketplaces because logistics are hard (if you can barely fill a container to America, how do you fill one going to the UK with a population 1/5 of America?). Strategically plan your shipments every quarter to these marketplaces and consolidate all of your products to make it worthwhile.
- The sexy still matters. Great photography and videography is no longer optional – it’s the minimum buy-in for Amazon today. Crappy PPC management will sink any product. Off-Amazon marketing, email lists, influencers, and product giveaways can increase your chances of success.
How I Sold My Business Using the Cockroach Model
Can you sell an Amazon brand using the cockroach business model? Absolutely.
I sold my previous company selling boat anchors in 2016 for just under $1million.
In fact, it can be an attractive business model for some buyers. The buyer of my company was the former CEO of a Fortune 500 company running it as a retirement gig. His specialty? Logistics and operations.
What Are the Downsides of the Cockroach Strategy?
So what are some potential downsides to this strategy? Let’s take a look:
- More focus on the steak and less on the sizzle. Setting up viral contests and landing pages is sexier than consolidating freight and negotiating with freight forwarders. This may or may not be for you.
- Photography is a pain. I envy all the people of the world selling coloring books and ice packs. These items are easy to photograph in your bedroom on a quiet Saturday afternoon. Large items are much trickier to photograph and often require much more advanced planning.
- Handling the inventory is a pain. No matter how much you outsource logistics, there will always come a time when you need to handle your inventory. Whether it’s for a photoshoot or because you suddenly need to store a bunch of items in your garage. Dealing with boat anchors as opposed to coloring books is much harder!
Hopefully, this gives you a good summary of the cockroach approach to finding and developing products. It’s a strategy I’ve instinctually used for nearly 10 years but I didn’t formally systematize it until after working at an Amazon FBA warehouse in late 2016.
There are more glamorous ways to make money on Amazon but I’ve yet to find a method that is as reliable. It’s not guaranteed by any means but the probability of success is far higher than trying to launch another protein powder.
If you’re interested in getting step-by-step instructions for utilizing the cockroach method, check out EcomCrew Premium where there is an entire course dedicated to brand development and using the Cockroach Method.
Dave Bryant has been importing from China for over 10 years and has started numerous product brands. He sold his multi-million dollar ecommerce business in 2016 and create another 7-figure business within 18 months. He’s also a former Amazon warehouse employee of one week.