How pharmapacks on Amazon made money
Pharmapacks isn’t your typical ecommerce business. That’s because they don’t have your typical business model. Their entrepreneurial success came from humble beginnings as a retail pharmacy owned by Andrew Vagenas and his four friends in the Bronx and Amazon’s biggest US seller. Self-described as “organized chaos,” owner and co-founder Andrew Vagenas, described the method to their madness in this ABC interview.
A model for making money selling on Amazon
How did they do it? It was a combination of ingenuity, innovation, and some startup money from their family and friends. Their business model dictates they have the lowest price on the market in order to have the Amazon Buy Box. In order to do this, however, they realized they would need to build a software with enough power to update prices every 45 minutes. Like I said, they’re not your typical ecommerce business.
Whenever a company sees such success as them, it’s worth it to the rest of us to take a look at what we can learn from their strengths. So what can we learn from companies like Pharmapacks who are? I think it boils down to three things.
1. Keep a pulse on the market
There’s a lot of mistakes to be made before you can expect to start making money selling on Amazon, but hopefully we can occasionally use companies like Pharmapacks as examples to live by. One of the most common mistake business owners make is working in their business instead of on it. It’s easy to do. When a manager is out sick or a picker shows up late, it’s impulse to stop what you’re doing and get business taken care of.
But what does this really cost you?
It may be costing you more than you know.
When you’re unable to take a step back from the business and concentrate on growing what you have, instead of simply keeping what you have going, you can’t look at the bigger picture. Pharmapacks started as a little pharmacy in the Bronx, but saw an opportunity to grow when Vagenas took a hard look at the market. When he realized ecommerce was going to be the future of retail he and his friends raised $750,000 from friends and family and lasered in on who they believed would “lead the charge”: Amazon. When he realized he wouldn’t get anywhere running the hamster wheel with the rest of the online sellers in an increasingly saturated market, he instead drove innovation.
Plan of action
If you want to be among those making money selling on Amazon, the best thing you can do is to remain focused. Let the people you hired do the jobs you hired them for. Your job is to look long-term so everyone (including yourself) can keep their jobs. If you lose focus on the market, you leave room for others to seize opportunities you could’ve had.
Always be looking for gaps in the market by keeping up-to-date on ecommerce news at home and internationally. Use seller forums, Facebook groups, or blogs so you can remain aware of problems other sellers are experiencing and brainstorm innovative ways to overcome market issues to stay ahead of your competition.
2. Pharmapacks wins the Amazon Buy Box
Pharmapacks changes the prices of their items every 45 minutes. Why? They want the Amazon Buy Box. They keep a pulse on the market and hot selling products and have product prices that reflect it.
This isn’t something that any ecommerce business can start doing tomorrow, though. In order to keep up with these frequent price changes and push them consistently to their marketplaces, Pharmapacks invested a ton of money into building their own software to create an automated dynamic pricing model. By keeping up with the trends and leading with the most competitive prices, no other companies can compete. They win the Buy Box every time. As a result, Pharmapacks is Amazon’s number one seller.
Plan of action
You can be competitive, even if you’re not quite as big as Pharmapacks. Look for opportunities to differentiate yourself, like using private labeling. Doing so awards you the opportunity to compete on product and branding rather than price. Be aware of market trends in technology so you can beat your competition in efficiency with top-of-the-line products. Read, watch, and listen to thought leaders in your industry like Ina Steiner with ecommerce Bytes or Moz’s Rand Fishkin, who will inspire you to think outside the box.
3. Selling on Amazon with software
Pharmapacks became the biggest Amazon seller in America through their hard work and innovative warehouse software. More and more warehouses are finding the benefits of softwares that allow you to upload, edit, and list softwares in bulk or optimize your warehouse operations.
Creating a software as powerful as Pharmapacks’ dynamic pricing model was an expensive feat (probably between 1-3.5 million dollars and several years of development). However, having a customized top-of-the-line software enabled them to lead the pack to become Amazon’s number one American seller. Alternatively, by outsourcing your softwares to a third-party company, you share the costs of development, maintenance, and innovation with the company’s various clients. You also have the benefit of using their experienced IT department in the event you need help, which frees of time for yours.
Perhaps one of the biggest benefits to outsourcing this task is your ability to shop around for the software that best suits your needs. While you’re at it, ask what others in your field recommend. Check out reviews and testimonials. This way, you don’t have to sink millions of dollars and several years into a software that’s still in beta testing. You know what to expect, and better yet- you can opt out whenever you want.
Plan of action
There’s not any off-the-shelf softwares that offer you exactly what Pharmapacks uses. But you can use companies like SkuVault and ChannelAdvisor to ensure real time up to date inventories and keep your warehouse running smoothly. When you’re able to integrate several softwares like this, you can pick and choose what works for your warehouse best.
The good news is: you don’t need to build your own software to be successful. Outsource some of the work the work to experts in your field saves you time and money that you can focus elsewhere. Let the experts do what they do best and consider outsourcing your warehouse management to people with a proven product so you can concentrate on the bigger picture. Keep a pulse on the market so you aren’t blindsided and scrambling to make changes, be competitive and aware of what your customers want, and be forward thinking– don’t let the struggles of today keep you from thinking about how to improve for the future.