Fearless Salary Negotiation is a great book - very approachable and practical. I learned a lot from it.
Also for context - just remember that actually negotiating already puts you in a good subset of people. Many people - including myself initially - are reluctant to negotiate. It's a learned skill.
Learning about financial independence. The peace of mind that comes from knowing you have your financial world in order is enormous and opens up many possibilities. You are in control once you have 'F--- You" money.
Yeah, there are definitely too many FBA sellers who are 100% reliant on the Amazon audience for sales. No online store (Shopify etc.), no marketing, no email list etc. It's hard hearing those cases where seller accounts get turned off for some reason and the seller has to fight to get them item back online.
As for some being "scammy" - yeah sure, there's definitely a bit of people looking to make a quick buck on whatever they can at FBA. Every market has that. But the people I've seen have the most success on FBA do just what you mentioned
- listen to the customer via reviews
- improve value via product fixes, bundling, packaging, etc.
- provide good feedback & service
That said - I don't know how anyone selling commodity, off-brand stuff does it. I could see that being a huge race to the bottom as stated. The only people I know doing FBA stuff are going the private label route to avoid competing solely on price.
My brother actually makes a full-time living off of FBA now via private label goods. He really enjoys being his own boss and providing a BETTER product than what was available before.
I sold my first FBA product, not a huge success, but validated the business model is real if you work at it. FYI - I've started compiling info for small-scale eCommerce sellers at http://www.privatelabelweekly.com for any sellers interested.
I'm in the same boat @BeetleB. Sold a line of private label toys on FBA. Not a run-away success but definitely a great introduction to the market. My family members are also FBA sellers.
The thing that most people don't realize is that Amazon is moving away from selling everything itself. As stated by Ben Thompson in his excellent
"Stratechery" blog (paywall):
> "...I wrote about the ongoing transformation in Amazon’s e-commerce business: while Amazon was originally a traditional retailer that bought products from manufacturers and wholesalers and then sold them on to customers, the company has been shifting to a marketplace model, wherein 3rd-party retailers sell to users on Amazon’s site through a program called Fulfillment by Amazon."
For some direct proof, check out the highlights from the 2016 Q4 earnings report:
- Sellers on Amazon’s marketplace accounted for 49% (!!!) of units sold during the fourth quarter
- Fulfillment by Amazon delivered more than 2 billion items on behalf of sellers in 2016 and the number of active FBA sellers increased by 70 percent.
In short, Amazon is in a good spot by creating the marketplace. They own the audience. Sellers on FBA "borrow" that audience & Amazon logistics in return for storage and sales fees. No need for Amazon to sell everything. FBA sellers do that for them.
FYI for any online sellers out there: if interested, I curate an eCommerce newsletter for the small-scale seller covering Shopify, FBA etc. at http://www.privatelabelweekly.com
>> Amazon is moving away from selling everything itself
This is a 2 sided story. Yes Amazon is moving away from selling stuff itself - but they are building a platform that would make it easy and more affordable for manufacturers to sell directly to customers, and most of the jobs FBA entrepreneurs do today won't require expensive entrepreneurs to do.
For example:
Logistics:Amazon is working on an end-2-end logistic solution, from china to the US, fit for small and medium manufacturers.
Financing:Amazon, using their sales data etc, will offer credit to manufacturers, similar to a service done by alibaba today.
Marketing:Amazon has the customers, the software skills, and can build labor platforms that easily enable chinese manufacturers to hire more affordable marketers(cheaper than entrepreneurs), maybe similar to affiliates in skills and investment .
Product improvement:more than anything, it's a decision by manufacturers/entrepreneurs, the tools/data are already there. Also Amazon could build platforms for manufacturers to gauge demand and value of new features more easily, maybe similar to kickstarter
Returns and warranties: Fedex bought a company that does that(as a service) pretty well a few years ago, So Amazon will probably copy or outsource.
Sure, it will take some time, but i think FBA entrepreneurship is mostly a temporary thing.
> but they are building a platform that would make it easy and more affordable for manufacturers to sell directly to customers
Manufacturers really don't want to be sellers in most categories. As a manufacturer, you want to be paid just as soon as you produce the product because you want to reduce your working capital. So you sell to retailers and distributors on say 15 days or 30 days terms and get paid with certainity. In fact for a manufacturer, the "customer" is a distributor or retailer - end users aee called "consumer".
Retailers and distributors take on the risk of locking in their money into inventory until the product gets sold to final customers.
True. But some manufacturers in the Alibaba platform already solve these problems with alibaba's financing services , which remove all/most of their risk.
And if that all allows some manufacturers to offer cheaper prices, other manufacturers will have to do the same.
Sure you can.... but working capital financing always comes with a cost and typically it's quite high. If you're funding inventory with your own money which is generally cheaper than a working capital finance, you're still taking a hit on opportunity costs.
If you're a small manufacturer with an unknown brand, you may still be forced to go this route to sell your products.
If you're a hundred million dollar brand with consumer demand, you typically don't need to bother being a seller yourself as well and can easily pass on the risk to a distributor or retailer and turn around your cash faster.
Branding often trumps pricing. Most products in the world are not purchased with detailed price/features comparison analyses (soap, cola, food) because our minds would get exhausted making so many choices.
But branding - sure if you have $100M to advertise your product, you have branding power in the classic sense(cola/soap). But branding on the Amazon platform is of a much weaker form, more tied to reviews, and with a good product, it's not that hard to get those.
And the other case is of course of the $100M brand - he has the brand, not the reseller.
Yeah these are really good points @petra. Honestly I don't know what the future is. I lean more towards your interpretation about FBA selling being a short-mid term opportunity. Though I don't think it will just evaporate in the next 5 years.
The thing is - sellers should be using this opportunity to build up a brand by borrowing Amazon's audience while they can. AND simultaneously building their own storefront. But I don't see many talking about that.
I do also agree with @sfifs below that many manufacturers don't want to be bothered with marketing and selling, no matter how easy Amazon makes it. They seem to want to stay in their core competency, which is understandable but probably short-sighted on their part.
Will brands matter much,long-term ? In most products, once someone has got a few hundred good reviews(including some in reliable blogs and sites) they are good to go.
Pilots are repeatedly taught to never "silence" the annoying warning horns that come on for different reasons (slow speed, wrong landing gear configuration). The idea being that mindlessly dismissing alarms will build a bad habit pattern. Especially when you're actually in trouble.
The only logistics / fulfillment experience I've had so far has been Flexport (excellent BTW). They currently don't do 3PL - but may want to keep an eye on them as they expand.
However, my brother is also big into FBA and just expanded into 3PL - I'll get his info and re-post here when I have it.
FYI - I started a newsletter to cover this stuff. Fast-paced niche, so I figured why not curate the best info and share.
Update - so...my bad. My brother actually uses http://www.zebrapals.com/ which is a logistics company but NOT a fulfillment center. They take your shipment, inspect, label etc. and send to the fulfillment center.
He has had great success with them, if you need those services.
Great point r2dnb. This used to be my mentality as well and it hurt me.
I was looking for a "smart" business that was "worthy" of me. How could these people spend so much time on such an indefensible & unscalable process?!
Well, the joke was on me. My brother stopped consuming info and started Amazon FBA. And he does really well (full-time job replacement). Instead of waiting for the perfect idea - he executed.
Now I'm happily off my high horse and trying to follow in his footsteps.
Lesson learned - there is no perfect business. Get started with something simple and build from there.
Also for context - just remember that actually negotiating already puts you in a good subset of people. Many people - including myself initially - are reluctant to negotiate. It's a learned skill.
https://fearlesssalarynegotiation.com