What is Amazon FBA?
If you’ve been in the search for a side business or looking to start an online business, one of the business models you’ll have encountered is an Amazon FBA business.
Amazon FBA is Amazon’s Fulfilled-by-Amazon program. This program allows sellers to sell products on the Amazon marketplace and leverage everything the Amazon e-commerce platform has to offer, including it’s massive e-commerce buying audience.
Amazon FBA has become so popular it spawned an entirely new business of selling “How to” courses specifically fro Amazon FBA.
There are a gazillion “courses” and Youtube videos on how to “make millions” through the Amazon FBA program.
I’m not going to link to any of them here because I’ve had pretty big issues with those courses and feel many of them have conflicts with their students.
Hold Your Horses…
Now, before I continue and all the Amazon FBA kool-aid drinkers start swarming the comments, I’m not saying people have not, will not or can not earn an income through Amazon FBA. I suggest you read my entire post here before making comments (***if you make comments and I can tell you didn’t read the entire post, your comment will be deleted because I waste no time on idiots).
I know this may be odd, but I like to use common sense to evaluate everything I come across. If something doesn’t make sense to me, despite it seemingly on the surface looking like a popular thing, I will question it even further.
Just like the tech bubble back in 2001, none of it made sense to me when venture capitalists and even normal everyday investors were throwing their money at anything with an “e-this” or “i-that” in its name.
And so we get to Amazon FBA…
What I See Wrong with Amazon FBA Program
One of the Income Academy Club’s (IAC) philosophy is to focus on assets.
For example, having and building your own customer list is an asset.
So, already Amazon’s FBA program starts off poorly, because even if you sell on Amazon, you do not own the customer. Amazon does.
Amazon FBA sellers have NO access to customer details.
Meaning, the time, money and effort you invest in getting customers to buy through Amazon FBA, you have no control or access to those customers over the long-run.
That’s a no-go for me.
So, you sell widget ABC on Amazon? Guess what, so do hundred’s of other Amazon FBA sellers.
Amazon doesn’t care which Amazon FBA seller gets the sale, either way they win because the purchase is made on their platform and they make money from the sale one way or the other. (e.g. on the initial sale and upsells and cross-sells of OTHER products).
So, problem # 2 is whatever you sell, you become commoditized.
Everything comes down to price.
And that’s the biggest killer of a business when you sell solely on price.
When a customer adds your product to the shopping cart, Amazon shows competing products right there!
That race to the bottom is fast and furious.
As mentioned, an IAC philosophy is accumulating assets. Amazon has access to so much customer and buying behaviour data, that is a huge asset.
Unfortunately, you don’t have access to that data.
Not only that, but when people buy your product on Amazon’s platform, you’re contributing to that valuable data.
And the worst thing about this, which I think is really a conflict of interest for Amazon and Amazon FBA sellers, is there seems to be evidence that Amazon uses the data it collects from best-selling Amazon FBA products and launch their own-private labelled/branded products of these best-sellers and promoting them over the brands that Amazon FBA sellers are selling.
So, Should You Even Consider Amazon FBA?
Having presented the big problems above, if you run or plan to setup an e-commerce business, it’s pretty hard to ignore the massive customer-based that Amazon FBA can offer.
So, that’s why you can consider Amazon’s FBA program as a complementary and/or additional selling channel to having your OWN e-commerce shop.
My suggestion is to offer only select products through your Amazon FBA channel (preferably not your best-selling products). The strategy would be to get customers for cheap or break-even on Amazon FBA, so you get customers who are familiar with your brand and/or shop.
Ultimately, you want customers to buy from your e-commerce shop directly. That’s where the profits are made.
If you are looking to rely SOLELY on Amazon FBA as a long-term business model, my recommendation is don’t do that.
However, if you’re goal is a long-term e-commerce business, Amazon FBA is just one of a handful of selling channels you should consider in your arsenal, just not the only one AND not your best-sellers.
Hopefully all of this makes sense and sounds like a RATIONAL presentation of foundational concepts/principles of business so you don’t get all caught up in the Amazon FBA hoopla.
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