Amazon: Should You Sell There? | Chris Malta's EBiz Insider Podcast

Chris Malta's EBiz Insider Podcast

Amazon is a great place for LARGE companies to sell products. Not so much for home-based business. Can you make SOME money on Amazon as a small business? Sure. You can also make SOME money collecting old soda cans. It's just not going to be a full time living.

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EPISODE TRANSCRIPT

Let's talk about the whale in the goldfish bowl for a little while.

Amazon is a great place for large companies to sell products. Not so much for home-based business.

Can you make some money on Amazon as a small business? Sure. You can also make some money collecting old soda cans. It’s just not going to be a full time living.

Most people are familiar with Amazon FBA, which is Fulfillment by Amazon. That's where you send wholesale products into an Amazon warehouse, and they basically take over the sale. They sell the product, handle the shipping, customer service returns, etc.

When something of yours sells, you get paid a small profit, on the order of three to four percent. Amazon has fees, lots of them. And as a small business owner who can't get those big bulk wholesale price breaks, those fees will hit you hard right where the sun don't shine.

Also keep in mind that you’re in direct competition with thousands of actual wholesale companies. Wholesalers live on three to four percent margins. They like that number. Remember that wholesalers are in the volume business, not the margin business. As a small business owner, you need a minimum of twenty percent just to survive. You need thirty five percent or more to grow. Not gonna happen on Amazon.

And it’s not just margins that are the problem. Amazon can gate a product on you with no notice and often does. What does that mean?

Let's say you send 30 Minelab Metal Detectors to Amazon FBA so they can sell them for you. Then let's say that a little later on, Minelab decides that they're tired of Amazon sellers selling their products at discount prices.

Yes, that happens all the time. Big manufacturers have to maintain a certain price point for their products in the overall marketplace. Otherwise, the products become devalued, which means their perceived value is less than they really are worth. And then the big box physical stores refuse to sell them.

Why? Because big box stores have lots of overhead. Employees to pay, parking lots and buildings to maintain, mass media advertising to shovel out and much more.

In other words, they have costs. If enough people see that Minelab Metal Detectors are selling on Amazon for half the cost they pay in big box stores, the big box stores going to stop selling it.

That's bad for Minelab because the big box stores are still their bread and butter. The big boxers go screaming to Minelab that they can't compete anymore. And Minelab goes screaming to Amazon, and all of Minelab's wholesalers as well, that the product can no longer be sold at a discount online.

Amazon won’t tell you why you’re gated, only that you are. So then you get to pay for Amazon to ship your unsold Metal Detectors back to you, so that you can store them in your garage until the mice chew the wiring out of them and they become dumpster food. Or, Amazon will offer to simply destroy them for you. Isn’t that nice of them.

The worst part is that gating can apply to entire brand names as well as entire categories of products. Gating is a common complaint with home based business owners, and will cost you a lot of money.

Another problem a lot of Amazon sellers complain about is that Amazon will push them out of the buy box in favor of larger sellers. Amazon watches their sales metrics with an electron microscope. So let's say you send some product into Amazon that starts selling like crazy. When Amazon realizes this, (about a nanosecond after it starts to happen), they go on the hunt for larger companies that can send lots more of those products into their warehouses at cheaper wholesale prices.

If and when they find one, which they almost always will, you get spanked like a rented mule and sent into timeout, while the big wholesale company gets featured on Amazon for that product instead of you.

Is it wrong of Amazon to do that? No. It's their site, their platform, and they have every right to locate large suppliers of products that can fill their customers’ needs better than your small business can.

They also have every right to feature whatever they darn well please. It's not much fun for you, but there's really nothing to be done about it.

Then there are all the tools that other Amazon sellers use to study their competition, meaning you. Amazon sellers are constantly checking out and copying their competition, which makes it easy for people with a little more money to swoop in and out-compete you as soon as you hit on something that actually sells.

While competition is a normal part of any marketplace, it's just way too easy to get hammered like that on Amazon. Add to that all of the other problems and pitfalls that are just too numerous to list here, and this is just not a good idea for your home-based business.

You spend most of your time trying to outfox your competition, dealing with tons of rules and regulations, and being forced to sell at profit margins that home based businesses simply cannot survive on. When you try to work within a business framework like that, you're really not running your own business. You're being told what you can and can't do by a big company. You're getting shafted on your take home pay. You're working far too hard for far too little money, and the ground shifts under you unpredictably every other day.

Isn't that what you were trying to get away from when you started your own business?

Amazon is best left to the big wholesalers and manufacturers that it was designed to work with.

And yet there they are still all the evil clowns on YouTube who swear to you all day long that you're going to make a fortune selling on Amazon in just a few weeks.

All you have to do, they say, is pay them $35,000 for their “Amazing Amazon Coaching System”. Yeah, sure.

If you really want to learn the ECommerce business from someone who's been successful in it for more than 30 years and will not lie to you, check out my Free Video Series and Free Ecommerce Q and A Meetings at Chrismalta.com.

Thanks for listening and I'll catch you next time.