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Last week, Amazon China registered to become a licensed ocean freight forwarder. The goal being to provide Chinese manufacturers with direct shipping from the factory to FBA facilities to be distributed via FBA.
What does this mean for everybody else?
Shit just got real.
The barrier to entry to selling on Amazon, and any other ecommerce platform just became increasingly difficult and more expensive.
Competition will be priced out
For those that are unaware, the majority of importers on Amazon follows a generic process taught in many courses which sources products via Alibaba, DHGate, and Aliexpress, ship items to the importer for prepping, and then ship to FBA for distribution. They have always served as the middle men in terms of providing Chinese manufacturers with a route to Amazon (whether they aware of it or not).
In the recent years, manufacturers began discovering that they can sell on Amazon directly. One of the advantages of importing was accessibility to FBA, which provided shipping times and costs unavailable to manufacturers. Now that they have direct access, this advantage turns into a necessity rather than a luxury.
Freight Shipping costs will be subsidized by Amazon. While these services may be available to importers, shipping directly from the factory to Amazon becomes more riskier than ever before. Once manufacturers are able to directly learn sales volume on Amazon for a particular product, there is nothing stopping them from shipping directly to FBA using Amazon services.
Importers now compete against lower product pricing, lower shipping costs direct to FBA, and an essentially unlimited supply of products.
Amazon is slowly running their competitors out of business - Brand building is necessary
With the inclusion of subsidized freight forwarding, ecommerce stores will be unable to compete on pricing and will be ran out of business until Amazon is the only ecommerce store for generic products. Essentially the Walmart of the internet with the ability to provide quality products in addition to the generic listings
Control is one of the pillars of Fastlane, and anybody getting into Amazon FBA/Ebay should have an end goal of diversifying their revenue streams to other sources than Ebay and Amazon. @Ecom man recently migrated from selling solely on eBay to solely on his own website and is able to not only maintain control, but demand higher pricing due to his diligence in building his brands and their product lines. While eBay and Amazon are terrific vehicles for traffic, the lack of control coupled with the kinds of buyers they attract are not always the greatest for business and margins.
Compete Against the Big Man Upstairs
As Amazon moves towards working directly with manufacturers, I have no doubt that there will be teams specifically designed for creating content and listings for these clients. Amazon, in their infinite (data mined) wisdom, understands the gold mine they have on their hands and will do everything possible to accelerate their growth.
What can Amazon assist with?
Red Pill or Blue Pill?
With Amazon moving towards cutting out the middle man, Chinese manufacturers will cannibalize all sales until there are only two kinds of products left:
1. Generic Products directly from the manufacturer priced cheaper than what importers could ever get the product to FBA for.
2. Genuinely innovative products. These are the products we should be focusing on as importers by examining at existing generic products and significantly improving each in every aspect possible. @Vigilante and @biophase have provided a ton of content on this topic in particular and do an amazing job on providing value on these platforms.
Fortunately, Amazon still values its customers above all else which means that the Chinese manufacturers will be bound to the same ToS as all other amazon sellers. Low quality products will get the boot, and account suspensions will become abundant if products are not up to Amazon and customer standards.
The Flip Side - Higher Prices Demand Higher Value
If we can't compete on price, we must provide value equivalent to our asking price. Take a look at luxury brands vs generic brands. What is the difference? The whole experience.
In the end, the manufacturers will take a large percentage of sales, but in the process, they will also drive competition out of the market due to sellers lack of innovation. Those who are able to differentiate and provide immense value to the customer will be in a position where the lack of competition and quality products will justify their higher margins and will ultimately allow for a healthier, more profitable business.
What does this mean for everybody else?
Shit just got real.
The barrier to entry to selling on Amazon, and any other ecommerce platform just became increasingly difficult and more expensive.
Competition will be priced out
For those that are unaware, the majority of importers on Amazon follows a generic process taught in many courses which sources products via Alibaba, DHGate, and Aliexpress, ship items to the importer for prepping, and then ship to FBA for distribution. They have always served as the middle men in terms of providing Chinese manufacturers with a route to Amazon (whether they aware of it or not).
In the recent years, manufacturers began discovering that they can sell on Amazon directly. One of the advantages of importing was accessibility to FBA, which provided shipping times and costs unavailable to manufacturers. Now that they have direct access, this advantage turns into a necessity rather than a luxury.
Freight Shipping costs will be subsidized by Amazon. While these services may be available to importers, shipping directly from the factory to Amazon becomes more riskier than ever before. Once manufacturers are able to directly learn sales volume on Amazon for a particular product, there is nothing stopping them from shipping directly to FBA using Amazon services.
Importers now compete against lower product pricing, lower shipping costs direct to FBA, and an essentially unlimited supply of products.
Amazon is slowly running their competitors out of business - Brand building is necessary
With the inclusion of subsidized freight forwarding, ecommerce stores will be unable to compete on pricing and will be ran out of business until Amazon is the only ecommerce store for generic products. Essentially the Walmart of the internet with the ability to provide quality products in addition to the generic listings
Control is one of the pillars of Fastlane, and anybody getting into Amazon FBA/Ebay should have an end goal of diversifying their revenue streams to other sources than Ebay and Amazon. @Ecom man recently migrated from selling solely on eBay to solely on his own website and is able to not only maintain control, but demand higher pricing due to his diligence in building his brands and their product lines. While eBay and Amazon are terrific vehicles for traffic, the lack of control coupled with the kinds of buyers they attract are not always the greatest for business and margins.
Compete Against the Big Man Upstairs
As Amazon moves towards working directly with manufacturers, I have no doubt that there will be teams specifically designed for creating content and listings for these clients. Amazon, in their infinite (data mined) wisdom, understands the gold mine they have on their hands and will do everything possible to accelerate their growth.
What can Amazon assist with?
- Optimized Product Listings based on Amazon Analytics
- Low cost AmazonPPC + Manufacturer product ranking
- Vendor/Manufacturer Accounts with associated benefits
- Distribution AND Returns
- Volume Discounts
- Customer Service
Red Pill or Blue Pill?
With Amazon moving towards cutting out the middle man, Chinese manufacturers will cannibalize all sales until there are only two kinds of products left:
1. Generic Products directly from the manufacturer priced cheaper than what importers could ever get the product to FBA for.
2. Genuinely innovative products. These are the products we should be focusing on as importers by examining at existing generic products and significantly improving each in every aspect possible. @Vigilante and @biophase have provided a ton of content on this topic in particular and do an amazing job on providing value on these platforms.
Fortunately, Amazon still values its customers above all else which means that the Chinese manufacturers will be bound to the same ToS as all other amazon sellers. Low quality products will get the boot, and account suspensions will become abundant if products are not up to Amazon and customer standards.
The Flip Side - Higher Prices Demand Higher Value
If we can't compete on price, we must provide value equivalent to our asking price. Take a look at luxury brands vs generic brands. What is the difference? The whole experience.
- Their products bleed quality. Packaging to the smallest details.
- Service is phenomenal.
- A++ Customer Services is essential.
- Like Amazon, they also value their customers above everything else.
In the end, the manufacturers will take a large percentage of sales, but in the process, they will also drive competition out of the market due to sellers lack of innovation. Those who are able to differentiate and provide immense value to the customer will be in a position where the lack of competition and quality products will justify their higher margins and will ultimately allow for a healthier, more profitable business.
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