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A new forum member, TheMezz, just posted an interesting story of FBA:
Ryan Grant also wrote a good post recently about his view of FBA. His opinion is that Amazon is pushing out the retail arbitrage sellers and trying to attract only wholesalers:
http://www.onlinesellingexperiment.com/does-amazon-want-you-to-sell-wholesale/He actually is happy with the changes because it helps bigger, more professional sellers like him who can handle the high overhead. He’s willing to do the work of getting un-gated and pay for permission to sell for certain brands.
A motivated seller can make Amazon work, but we’re basically dumping out. With the kind of long tail items we sent in, we’re not experiencing the firehose of sales. eBay is really more our speed.
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What a well written and insightful article. From my experience I completely agree this is currently Amazon’s current mission. I have a couple of additional thoughts.
Amazon may very well change that direction tomorrow, next week, or next month. I think it is a fair statement taht Amazon does not have a direction that is clear to most of us. They seem to change with the wind. From online media sellers, to full blown retailer that built it’s pipeline on third party merchants, to pushing most merchants or small mom and pop operations out.
Diminishing margins encourage larger volume sellers but come with risk. Amazon is a bully and really makes no qualms about it.They constantly change selling requirements and fee structures unilaterally. Yes, they force sellers to acceot it in the initial agreement, but a tenent of contract law is that if one party has unilateral power on major changes the contract is likely null and void. Amazon doesn’t care. It is their sandbox. Have 5000 units in inventory and Amazon decides to suppress the listing or fee structure even though you are in full compliance? Tough stuff. You take the hit. So as scalability through wholesaling is touted as a positive, there is little security you can sell your 10k units on Amazon because they may change the rules. You already paid 1500 to be ungated. What if Amazon decides to extort another 10,000 once your large inventory is sent in? You have no sense of security. They have raised fees, including storage fees multiple times in the last year. Margins are down. Risk of stranded inventory is up.
I think most of us sell on ebay and amazon because of the income and the shot at having control of our day. Once we start fishing for wholesalers, scrubbing their catalogues for items we can make money on, and handling the volume, it starts to feel like a suit and tie kind of job. And that is what I no longer want. I am not looking to build an empire. I am creating a life where every single day I have control over the majority of things that happen and that they are primarily happy things.
I agree Amazon is currently going in the direction where you have to source through wholesalers. I believe they will change direction and that I have no security through Amazon and their unilateral willy nilly decisions. I know sourcing through a wholesaler is not the direction my life will go. i would be miserable and miss scavenging.
whiskey, stepping off his soapbox
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Well said. If I remember your story, you guys actually sold quite a bit on Amazon. I think Private Labels, right? So your opinion rings true.
We simply dabbled in Amazon in the last year. Sent in stuff we scavenged at thrift stores. Books, NIB stuff. It was kind of fun, but just a tiny fraction of the profit we make on eBay. We certainly don’t have interest in getting as big as Amazon needs us to be.
I think Ryanne and I have more in common with the guys who sell out of the back of their cars at the flea markets. We have much less in common with guys who have brick and mortar businesses, signing contracts with large manufacturers. Just a choice.
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If we could work with folks selling out of their cars at flea markets, off tables on their patio, and just walking through estates we would be estatic. Isn’t it simply fun and doesn’t seem like “work” at all? Shan and I are happiest doing those things. Do the two of you get ungated in any categories? That might be the best thing going forward. As Amazon randomly walks through it’s business model, having been previously ungated may be the greatest asset on Amazon in the future.
26 months ago we started AZ with yard sale and thrift finds. We were enamoured with not having to store so much stuff and super passive income. How awesome to wake up and see you’ve made a couple hundred bucks and don’t have to do anything further? We moved on to RA and did very well with discontinued product lines and I would put in 7 or 8 marathon days a month sourcing in several states once we identified items that provided huge margins. We continued that and did a couple of white label procucts. Only one took off, but it did very well. Throughout all of this the gating and fee changes have occurred, margins dropped, frustrations rose, and we are building our pipeline even bigger.
Throughout all of it we maintained our ebay stores. For the most part, you know which way the ebay winds blow, you know that if you scavenge and list sales occur, and we just really enjoy scavenging for treasures.
Thank you for all you and Ryanne do to allow a great exchange of ideas.
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We are un-gated in some categories. I forget which, but I agree that anyone who got in when it was easier has an advantage.
Though it doesn’t help when trying to sell a name brand product that demands some kind of permission from that company. This seems to be more and more common from what I read. Companies want control over who sells their products.
Will you continue to sell “white label” products?
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I agree about permissions, but there are still thousands of major brands that can be sold without permission. Funny amazon charges a fee to get permission and the money goes in amazon’s pocket and not the brand owner.
We may continue white labels, but our current one is on it’s way out. A bunch of competition from Chinese sellers over the holidays have killed margins. Our success was ultimately our failure once we hit a sales ranking under 10,000 in health and beauty for a couple of months. There was no way to protect what we did as we just took a generic item, created a kit, and put it in a different category. It’s a lot of energy coming up with something, sourcing it, and fighting off competition for as long as possible.
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This is why Amazon doesn’t sound like our pace.
It certainly doesn’t sound like you find some quality items and then it’s autopilot.From every serious FBA seller I’ve spoken with, it sounds like you have to put in many hours finding new items to wholesale, private label, or make new combination of bundles.
Once you get a high ranking item that is making you money, other sellers simply buy the same item and compete. The process stats all over. It’s just a different kind of work.
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Amazon has a real problem with knockoff products, and gating off brands (by requiring extensive documentation and a large fee) is directed at eliminating the scammers. While that will probably reduce the knockoff problem, it also eliminates a lot of small, legitimate 3rd party sellers doing retail arbitrage. Amazon has also been taking steps to make it much easier for Chinese manufacturers to put their products directly on Amazon. This squeezes out the American middle men.
Amazon may have made it too easy for normal people to list products on their site. They’ve filled up the warehouses and are now scrambling to reduce all the junk people have sent in. I’m subscribed to a Facebook group (The Amazing Seller) with 40,000 members. In just this one group, thousands of people are desperately trying to find some under served niche on Amazon and send in “private label” Chinese products from Alibaba. Until recent rule changes, the whole “cult” of this group was based on the idea of slapping a label on a generic product from China, spending a fortune on pay-per-click advertising on Amazon, and then paying for a service to get a bunch of those lovely “I received this product at a discount for my honest opinion” reviews. Some people made a lot of money that way, but the fake reviews have definitely hurt Amazon as a company.
It really feels like a bubble with Amazon. Too many people trying to get rich in a hurry. I wish I would have got into Amazon maybe 10 years ago, when it really was easy money, but I think that ship has sailed. The rules change constantly and the system is set up in a way that sellers really have no recourse if your account or product gets flagged or suspended. Squeezing out 3rd party sellers is bound to increase prices. Combine that with a plethora of fake reviews, knockoff products, and cheap “private labels,” and eventually consumer trust for Amazon will sag. I think a lot of sellers are turning back to channels like eBay, as well.
That said, I’m still making decent money selling on Amazon, even as a “scavenger” style seller. I don’t feel especially secure in that income for the long run like I do with eBay, but I believe in staying diversified the best I can. For me, I’m going to stick with books on Amazon for the most part, although I’m going to be much pickier on what I send in.
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Good summary of what looks like Amazon’s directions. If Chinese manufacturers ever start selling directly on Amazon, it’ll kill the current model of US sellers. As you said, they just buy bulk from China and resell. There’s not much added value.
What percentage of your income comes from selling on Amazon?
I think we might make $400/month on a good month.
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Looking over my sales numbers, after removing ebay and Amazon fees from the equation, I make about 35% of my annual income from Amazon (kind of scary, now that I look at it).
The ebay versus amazon percentages vary a lot from month to month, but that’s the overall bottom line for me for a year.
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Another thing that Amz is doing is Amz is making their own brand called AMAZON BASICS
i.e. if you are importing an Apple Peeler (random example) and selling it with your own brand private label – and if you sell tons of them .. Amz will make their own and brand it Amazon Basics .. and put you out of business.
They have done it with MANY items so far. Amazon brand Cables, Batteries, etc .
You will see more and more Amazon Branded items
Kind of sucks when a person spends months developing, sourcing, testing, and branding a private label item and then it’s a high sales item, only to have Amz notice – and duplicate it and rebrand it.
It happens more and more and is a commom complain in the FBA community
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Le Mezz, your comment about Amazon Basics overtaking seller’s turf (plus the Chinese competition trying to do the same thing) is why I’m going to continue my book experiment. I follow this guy’s blog who deals exclusively in Amazon books and his reasoning makes a lot of sense. With long tail book and text books you have an item that neither the Chinese nor Amazon can firehose reproduce, plus the process of finding them retains that scavenger feel.
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But the problem with selling long tail books on FBA is the Long term storage fees. If a book doesn’t sell in six months, that extra fee for storage is really eats into profits.
I also noticed that a book I could sell for $10 on FBA and make profit, now needs to be sold for $12 because of extra fees on media. And that’s really with the slimmest of margins.
I understand why Amazon is now charging for storage on single items. Just really changes the equation for us. We really love “list it and forget it”. Sellers who really ride their inventory to get it out the door have a different skill than we do.
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And today they just opened up Health and Personal Care so you no longer need approval to sell.
It’s an interesting development in a time where they are becoming more restrictive rather than less.
I have my theories, but they are simply conspriracy theories and nothing more.
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They have been aggresively blocking brands and categories requiring a fee to then become ungated. They have been pretty random in who they grandfathered in and who had to apply.
When they opened up the category they took away our authorization. I assume that happened across the board. If they now close the category in a month or two everyone will have to reapply. They’ve set it up so no one is grandfathered.
I really hope I am wrong. All that drives my theory is a basic mistrust of Amazon and it’s history of making it harder, not easier, for third party merchants to sell. Making it easier in such a huge category that could really get screwed up with knock off products is counterintuitive to what they have been doing. Something else is coming.
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