Welcome back friend!
We need to talk about your FAT margins
33 MBA students were handed a product, its price, its cost and the odds. All they had to do was pick how many to order. They got it wrong. Then the costs flipped, and they got it wrong again, in the opposite direction.
I have a purchase order sitting in my drafts this week. The product is decided. The quantity isn't.
My inventory software has an answer. It gives me one number for every product: what I'll probably sell before the next shipment lands. The average, basically.
Then I read about a game two business professors, Maurice Schweitzer and Gerard Cachon, ran on 33 MBA students at Duke. They wanted to know one thing: when people order stock, do they order the right amount?
Each round, a student had to order stock before knowing how many customers would show up. It could be anywhere from 1 to 300, so the average was 150. (It was game money, but one of them got paid out in real cash at the end, so nobody was goofing off.)
In the first round the product sold for $12 and cost $3. Every sale made $9. Every leftover lost $3. Missing a sale hurt three times more than a leftover did. The right order was 225. The students ordered 177.
In the second round the same product cost $9. Every sale made $3. Every leftover lost $9. Now the leftover hurt three times more. The right order was 75. The students ordered 134.
Both times they crept back toward 150. These were MBA students, from an operations class. When people have to guess, they drift to the middle.
So how can we, as Amazon Sellers use this as a general rule? Two ways:
Over order on FAT margins
• You keep most of the sale price
• Running out costs the sale, and the paid for ranking
• An extra case costs a little storage
Under order on THIN margins
• You keep a sliver of the sale price
• A missed sale barely costs anything
• A unit you can't sell eats the profit from several that you did
Yes there’s software, algorithm’s and AI. But sometimes it helps to have quick mental shortcuts that will make you a smarter business owner.
The IVS
Big thanks to Andrew Erickson for coming on again and sharing a huge tip! Andrew recently won the BDSS Seller Summit AI Conference’s Hack contest! Day-to-day you can find him running Inventory Hero.
4 Rules for Working With AI (That Won't Expire in Six Weeks)
Hey Selling from the Beach!
Everyone knows that prompt tricks go stale in a few weeks. In the below video I walk through four rules for working with AI that should hold up for the next 3, 5, even 10 years. They come from my favorite AI book, Co-Intelligence by Wharton professor Ethan Mollick.
Always invite AI to the table. Every quarter my company runs an "AI test" on customer service, bookkeeping, listing images and PPC bid changes. Can AI do it yet? Sometimes the answer is no. That's okay. We check again next quarter.
Be the human in the loop. Automate 80 to 90% of the work. The last 10 to 20% is judgment, and that's where you add value. If AI tells you to reorder 1,200 units based on the last 90 days, you're the one who knows December does 4x. Use AI all you want, but it's your name on the report.
Treat AI like a person, and tell it what kind of person it is. Brief it the way you'd brief an employee: who it is, what needs to get done, what success looks like.
Assume this is the worst AI you will ever use. When we tested AI listing images 18 months ago, they were terrible. Six months ago they started looking pretty good. Now they're incredible. That's why we re-run the test every quarter.
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Amazon News Week 39/52
Amazon confirmed Prime Big Deal Days for October 6 to 7 and extended the deal submission deadline to September 22. |
Amazon is giving bundle sellers four months to secure brand approval before those listings get removed. |
Amazon's peak season surcharges, stacked on top of base fulfillment fees, apply to anything sold between Oct 15 and Jan 14. |
Amazon now blocks only the failing FBM offer, not the entire account, when performance drops below policy limits. |
Amazon is reportedly planning more than 1,000 same-day warehouses by 2031, up from about 85 today, which could reshape FBA inventory placement. |
Amazon backed a new SKU-level verification system for officially licensed products, though it is not yet a Seller Central requirement. |
Amazon Ads launched an integration to place ads inside ChatGPT, adding a new channel beyond Amazon's own search results. |
The Deep Dive (Premium Content)
Running out costs you 8 times what over-ordering does
Ask a seller what keeps them up at night and it is almost always too much stock. Cash stuck in a warehouse, storage fees every month, aged surcharges, a liquidation at the end of it. So on every purchase order the instinct is the same: round down, play it safe.
I ran that instinct through the arithmetic on my own catalogue, every product with a live price and a known landed cost.
On 35 of 36 products, running out costs more than over-ordering. On seven of them, more than five times as much.
On my most lopsided product I could buy eight units I never sell, and if the ninth one prevents a single stockout, I have broken even.
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The Only Beach On Earth Where You Can Legally Eat a Sea Turtle Egg
The Arrival.
Just a couple of hours down the coast from where we live there's a beach called Ostional. A few nights a month, mostly between now and November, the ocean starts dumping turtles onto it. Not dozens. Hundreds of thousands of Olive Ridleys over three or four nights, so many that they crawl over each other to find sand. Locals call it the arribada. “The arrival.”
Here's the part that would get you arrested anywhere else on the planet. When it starts, the village walks onto the beach with sacks and digs up the eggs. Legally. Under the eye of park rangers and biologists. Then they sell them, by the bag, to the whole country.
Ostional is the only beach in the world where this is allowed and why: The turtles come in waves, so very wave digs up the nests from the wave before it and smashes the eggs. So the first night's eggs were never going to hatch anyway. In 1987 the government made a deal with the village: you get the first couple of days of each arribada, on 900 metres of a seven-kilometre beach, the turtles get everything else, and the money stays in town. The village now guards that beach against poachers better than any fence! Last Thursday, during this month's arribada, rangers caught three people walking off the beach with 101 eggs. They weren't from the village. Straight to jail.
What happens to the eggs? They end up in licensed bars where you order a beer and the bartender sets down a shot glass of tomato juice, lime, salt, hot chile and a splash of orange juice, cracks a raw turtle egg into it, and you knock it back without chewing. About 300 colones, (less than a dollar.) Some places throw one in free with your beer. Ticos swear it does things for you that I'm not going to get into in a business newsletter. 😂
I've lived here for years and I still can't fully wrap my head around it. A protected species, a poaching problem everywhere else on the coast, and the solution that actually worked was letting the locals sell the eggs at the bar. No I have not tried it…….
If you're ever down this way in the fall, go stand on that beach at dawn during an arribada. Whatever you think that many turtles looks like, it's more.
I'd email my customs broker about this today
There's a US customs refund called duty drawback. If you paid duty to bring stock into the US and later shipped any of it back out of the country unused, customs will refund 99% of the duty you paid on those units.
It counts if you:
• Moved FBA stock from the US to Amazon.ca
• Launched in the UK or Europe with stock that was sitting in the US
• Sold a wholesale order to a buyer outside the US
The China tariffs (Section 301) are included. You have 5 years from the day the goods entered the US to file.
Quick math: say you paid $10,000 in duty on a shipment, and later sent half of it to Canada. That's $4,950 back.
Claims are filed electronically in the customs system, so in practice you need a customs broker who files drawback. Ask yours if they do. If they don't, find one who does. They match each export to the import it came from.
A few catches:
- For future shipments, customs wants notice before the goods leave. It's Form 7553, at least 5 working days ahead. For exports you already made without it, there's a waiver you can apply for. You only get it once, and one application can cover a bunch of past exports, so put everything in it.
- The stock has to be unused. Units a customer opened and sent back don't count. For Canada and Mexico it also has to leave in the same condition it arrived. Repacking, sorting and marking are fine.
- Destroyed stock only counts if customs was told first and supervised it. A normal Amazon disposal order gets you nothing.
- The refund belongs to whoever exported the goods. If your freight forwarder or 3PL is the name on the export paperwork, they have to sign the claim over to you.
- If the same shipment also paid the IEEPA tariffs (the ones the Supreme Court threw out in February 2026), file that refund first. Customs rejects an IEEPA refund on any shipment that's already on a drawback claim.
If you've shipped stock out of the US in the last 5 years, it's one email to your broker to find out what it's worth.
P.S., if ALL of this seems confusing to you… just ask… say it with me now… “AI!”
Your Credit Cards Have Travel Perks You Never Turned On
Claude or ChatGPT will go through the benefits on every credit card you have, all at once, and tell you which travel perks you're paying for and not using, and which card should be taking your biggest spend.
I have six cards, over $2,000 a year in annual fees between them, and until July I couldn't have told you what a good chunk of that was buying me. Ten minutes with Claude found hotel Gold status I never enrolled in, rental car status I never activated, a lounge program on my Mastercard I never registered for, and a NEXUS credit (the Canada-US trusted traveller card) I never used. Earlier this year I also paid for two monitors on Amazon with 75,000 points at 0.7 cents each, when taking the same points as a statement credit pays a full penny. Stupid…
Oops.
Here's the prompt to use. Card names only, don't paste card numbers. And leave Amazon ads off the spend list, that comes out of your payouts now, not a card.
"These are a year of statements from every credit card I have. From them, work out which cards I hold, what each costs me a year, where my spending goes by category, and how I travel: airlines, hotels, rental cars, countries. Then tell me, first, every travel benefit, credit, insurance and status each card includes and whether I have to enroll to get it. Second, which of those I'm not using given how I travel, and what each is worth. Third, anything I'm paying for twice. Fourth, which card should take each spending category, and whether a card I don't have would earn meaningfully more after its annual fee and any card fee a supplier charges. Show the math, link the issuer's page for anything you recommend, and only ask me for what the statements can't tell you."
Disclaimer: You are giving AI your bank statements. If that weirds you out, either don’t do this or block out any personal info.
Give it a shot - then before your next trip, paste the itinerary in and ask which card should pay for the flights, the hotel and the car.
Inspiration is for amateurs. The rest of us just show up and get to work.
Chuck Close
BEER! Now that I have your attention… you probably would like the Facebook community.
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