[ckib16]

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

Sources

1. https://stratechery.com/2017/planet-of-the-apps-deleteuber-a...

2. http://l.goodbits.io/l/l64vu14d

[petra]

>> 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.

[sfifs]

> 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.

[petra]

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.

[sfifs]

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.

[petra]

Maybe you're right about capital.

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.

[ckib16]

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.

[petra]

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.

Or am I missing something ?