Only the TRUTH about ECommerce
Amazon - Bad Idea for Home Business
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 (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.
Just like eBay, Amazon has it's 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.
Like eBay, Amazon is price-driven marketplace. Most people who shop there are looking for bargains, and that's a bad place for a small business to be. The profit margins are too small.
There are other issues too. Amazon can "gate" a product on you with no notice, and often does. What does that mean? Let's say you send 30 Sony DVD Players that you got in a liquidation lot (which is another bad idea, more on that in another post) to Amazon FBA so they can sell them for you. Then let's say that a little later on, Sony 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 they're PERCIEVED to be worth less than they really are) 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, etc. They have costs. If enough people see that Sony DVD Player selling online for $50 when a big-box store has to sell it for $75 to make a profit, the big-box store is going to stop selling it.
That's bad for Sony, because the big-box stores are still their bread and butter.
So the big-boxers go screaming to Sony that they can't compete anymore, and Sony goes screaming to Amazon (AND all of Sony's wholesalers as well) that the product can no longer be sold at a discount online.
That's one reason (among many others) why Amazon "gates" a product. They tell you that you simply cannot sell it anymore. So then, you get to pay for Amazon to ship your unsold DVD Players 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.
The worst part is that gating can apply to entire brand names as well as entire categories of products. Gating is a fairly common complaint, and can cost you a lot of money if you have any kind of reasonable investment in the gated product, brand name or category.
Another problem a lot of small 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 Time Out while the Biggie McBiggerson 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 people use to study their competition (you) on Amazon. 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. Now, competition is a normal part of any marketplace, but it's just way too easy to get hammered like that on Amazon.
Add to all of that the other problems and pitfalls (just too numerous to list here) that even people who push Amazon FBA and Amazon Stores admit to, and this is not a good idea for your home-base business. You'll spend most of your time trying to outfox your competition, dealing with tons of rules and regulations, and selling at profit margins that home-based businesses really can't 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...the Evil Clowns who swear to you all day long that you're going to make a fortune selling on Amazon in just a few weeks if you'll only pay them $35,000 for their 'Amazing Amazon Coaching'. Puh-leeeze.
If you REALLY want to learn this business from someone who's been successful in it for more than 25 YEARS and will NOT lie to you, check out my FREE EBiz Insider Video Series.
- Home-Based EBiz: The Unvarnished Truth
- Wholesale Backorders: The Butterfly Effect
- What sells online, what doesn’t, and why
- Still Room to Compete?
- What happened to eBay?
- Setting Up Your Business Name
- Retail Arbitrage
- Private Labeling
- Paid Advertising – Do I Need It?
- Fulfillment Centers
- Amazon – Bad Idea for Home Business
- Automatic Product Feeds: Good or Bad?
- Free Shipping-Should I Offer It?
- Free Trial Websites
- Gold Rush
- Importing from China
- Liquidations-Good or Bad?
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