5 reasons why you have to sell on Amazon and other marketplaces if you are in ecommer (12)
5 reasons why you have to sell on Amazon and other marketplaces if you are in ecommer
First a quick one, when I write Amazon here, think of any local leading marketplaces as well.
1. Potential volume
The reach of Amazon and other marketplaces is enormous. Which translates in massive sales volume. We are in the top of our market when it comes to awereness and visibility, but that all pales in comparison to the awareness and visibility.
In simple terms, the people that I try to make aware of the fact that my company exists, has already bought on Amazon.
We have found that we mainly get new customers on marketplaces and no drop-off in our own customer base.
2. Sales can scale really quickly
We have taken it slowly in the beginning, as we first wanted to test the waters. It quickly became clear that when you have a hit, things move really, really fast.
We are in a niche market, but even there, there are quite a few products that bring in 15K in turnover in a month.
These products start at a few K a month, but even that is interesting enough.
Here’s why.
Especially when it’s additional volume, you use the overall volume to drive your purchase price down. After all, manufacturers and distributors are hungry for volume.
The more you can bring, the more you can get.
And with get, I mean an adjustment of terms in your favour. Which is not limited tot he purchase price. It can be better credit terms (buying more on credit, or taking longer to pay them 60 days in stead of 30 for example), or better warranty, exclusive deals etc.
If you get a “no” on the thing you want most and you’ve tried tot he point where you know it won’t change, all you do is say: ”Ok, I understand you can’t do X, but can you help me with Y”.
Which brings us to the next point
3. The margins aren’t that bad
Yes, you pay up to 15% (which is where we are) commission and you have to learn. So you'd think there wouldn't be much left, with competition driving down the prices as well
But if you play the game well, the margins aren’t that bad.
We have had a product that someone else was selling and we knew we could get the price down if we had enough volume.
So we got the buy box and made €1 on a €130 product.
And that’s not counting shipment cost to the FBA warehouse and our own labour.
But we got the volume and over time, we improved our purchase price, fought hard as every improvement in buying price was used to compete on the buy box (as the competitor fough back with even lower prices).
Due to our existing volume + amazon volume + negotiation skills, we had the competitor give up after 5 or 6 months.
So we increased the price and margins are good now. Took some investment (6 months of making virtually nothing on that product), but now we are making money
4. You will be selling different products
Especially when you sell to different countries, you’ll find that you will sell different product on marketplaces.
Even in our own country, we found that some products that are really not moving on our own site, do well on a marketplace.
I have no explanation fort his, as the opposite is also true. There are products that do well on our site, but don’t perform that well on the marketplace.
The good thing is that it means an increase in overall sales volume. As you will be selling a wider range of products.
The bad news is, that it might take some time to find a winner. It also means putting aside all your assumptions.
As with many things, the best way to test is to take small bets: try products without buying shitloads of them.
Even if it means buying 5 at retail prices and losing money on those 5, if you have avoided a loser, it’s a big win. Because you have gained valuable insight into that product’s performance and saved yourself from a poor investment.
When you find a winner, it’s even better and you now know you can really push this product.
5. You learn about the competition and the level of your own prices and terms
OK, I admit it. I sometime love it when there’s a real fight over the buy box. Why?
Because it allows me to see how far down the competition will drive the prices down. Which allows me to see where I stand with my suppliers.
If they easily beat me on the prices and can keep them below my prices for a long time (say a few months), I can assume they have better conditions and I have work to do.
And again, if I get the price down, it will not just be for the sales volume on the marketplaces, it will also be for the sales on my site. So every sale on my own site will also be more profitable.
You will also learn who your competitors are. Not just in one country, but in many countries.
You might also learn that competition can differ from product to product. So competitor X in France might be able to compete well on product Y.
But competitor B in the UK might not be. But he might be really competitive with product Q.
There’s a wonderful opportunity for arbitrage once you have that knowledge.
I hope this has given you some insight into why you should use more than just one channel and make sure you compete and sell on marketplaces.
Our own turnover has passed well beyond 7 figures and we should be halfway towards 8 figures very soon.
If you have any questions, let me know
Amazon is a beast! Thanks for summing up the reasons, it was a great read even for myself who's not really into ecom much 
Thanks Perkadis for this great post re Amazon. There are stats indicating that 50% of all ecommerce purchases in the US currently go through Amazon. And with the prevelance of Amazon Prime membership among US consumers - Amazon simply can't be ignored as a marketplace, especially if you are targeting the US. But Amazon is a tough market with intense competition constantly driving down prices and Amazon costs (commission, FBA, advertising) to be factored. Some great strategies here and a reminder that you need to play the long game to succeed. Thanks again!!!
@conchow, thanks and yes, competition can be quite intense. Even in a niche like ours.
But the best thing is to test for yourself. If anything, you will learn a lot about the market, the competition and where you stand in terms of competitiveness.
And, as I mentioned in the beginning of the post, there are more options than Amazon.
Our turnover on a local marketplace (bol.com in The Netherlands), went from 0 to 6 figures per year. Not very impressive, but if you can string together a couple of these in a few different geographical markets, you can get 7 figures and the amount of work is next to nothing.
Which makes it a great alternative to dropshipping as a lifestyle business.
Even with our current turnover, 2 to 3 hours per day would cover it. And even that work could be outsourced to a 3PL or you could hire someone for €12 per hour to do it for you.
I am simplifying things here, because there are some one-offs that do take more work (like the whole VAT regstration and compliance) but that is some work up front, but no more than 2 hours per month of actual work afterwards + accountants cost.
Originally Posted by pekadis
Nice post.
Any recommended place to learn amazon fba from stretch?
Sent from my iPhone using STM Forums
Hats off again for a great post! On point as always, that's how the Dutchies roll... 
@elisha - let me know if there's anything you want to learn.
Do you have any idea with regard to the product / market already?
@matuloo
You are right - it was half my turnover in the year I started. So it's not too bad indeed. My perspective has changed of what is possible / achievable.
Even in a niche market like ours.
Trouble is that we need a small team to run everything in the company. Looking back, it's tempting to think "I wish I only did the marketplaces".
But it's all intertwined.
I couldn't have done Amazon if I didn't already have some volume. That brought us in the competitive zone price-wise. And suppliers had confidence, we had credit terms etc.
My thinking has changed a lot.
It will further change with more experience and more reading.
Most important concepts for me right now are:
- Detailed plans are pointless. We operate in complex systems, so there's no way to predict what will happen long term (especially since the variables all react to eachother)
- Quick execution with delegated resposibilities
- Data is one thing, but we are to a large extent driven by emotions and processes of which we are largely unaware.
Some interesting reading:
- Alchemy by Rory Sutherland (marketing)
- How emotions are made by Lisa Barrett Feldmann (psychology)
- The Art of Action: How Leaders Close the Gaps between Plans, Actions and Results - by Stephen Bungay (military / business )
It's a bit off track, but IMO, this is when it gets most interesting...
Even in a niche market like ours.
When I first heard about people running $X.XXX per day campaigns with paid traffic, I was like: "Yeah sure, who're you trying to bullshit"
Then, couple years later I made my first million in revenue with paid traffic and realized how little I knew about what's possible.Some time later I met a guy I knew from my SEO days, I told him I'm buying traffic now. He asked if i'm able to spend at least $1000 a month... I told him I spend multiple $K's a day and he gave me that look: "Yeah sure, who're you trying to bullshit"
I totally felt like talking to myself couple years back Some things are simply hard to imagine and believe until you experience them firsthand.
my understanding is that on amazon fba deciding on what product \ market is less important, but rather the process of research itself.
hence, the process of analytical research is what's interest me most. how to cross between multiple data points in order to find a winning product to sell. any any will be greatly appreciated.
@elisha
I see things in a broader view, that's why I asked that question.
There's a difference between building a long term business compared to finding a winner, of which you don't know the longevity for you.
Analytical research without any market knowledge is easy if you just want to find what is selling. Get a subscription to Jungle Scout and you'll be able to set all sorts of filters to find products based on sales volume, price, geo, vertical etc.
That's it.
But when you find a winner, you have to source the product negotiate with the potential suppliers, set up your logistics etc. A lot of trouble to go through.
I'd rather do that for a business that is built to last, rather than to win the buy box for a few weeks.
Your choice of course.
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