I have worked for companies that have sold on Amazon and have had my own company that sold on Amazon and over the years, I have learned many things. So much so, that I am personally phasing out of my selling on Amazon for a number of reasons.
I am a small business owner. I have started out like many by purchasing merchandise from manufacturers and distributors, marking them up and selling for profit on Amazon as well as other marketing channels. In the beginning, a few years back, there was certainly money to be made, especially on low cost, high margin items which have yet to saturate the markets. However, as Amazon has grown so has their database which can certainly be considered a goldmine. It seems that Amazon’s best strategy is to collect data from sales on Amazon by small business such as those owned by me or with who I have worked.
At one point I sold patio furniture on Amazon. After some good success by myself and other small businesses, the manufacturer from whom I purchased the furniture began to sell the furniture on Amazon themselves as a dealer at a much lower price. Of course it was easy to do as there is certainly more profit selling direct then there would be selling at wholesale to dealers like myself. This move essentially forced me and other dealers out of the patio furniture business for that manufacturer’s products as there was no way we could compete. Some dealers tried to sell cheaper which only drove the manufacturers to lower prices to the point that their retail price was lower then the wholesale price we were paying for the same items which they could easily do because of the volume of sales they were now enjoying; especially when many of these other dealers were using repricing tools.
After a while, manufacturers and distributors have been approached by Amazon as potential customer based on the aforementioned collection of data. Amazon would purchase merchandise directly from the manufacturer at insanely low cost and offer these items directly to consumers at super low prices combined with free shipping based on Amazon’s own low cost to ship. Prices were once more out of reach for small business owners such as myself and others to compete on any level.
But it does not stop there! After a while, if Amazon has enjoyed success at all with a particular product line, Amazon may choose to completely discontinue purchasing from the manufacturer and have the items manufactured directly for them to be sold under their own brand! Let’s look again at the aforementioned patio furniture! After a time of purchasing some of the products form the manufacturer, Amazon decided to make the items themselves and market them under their own Home Basics brand. IN a case such as this, it is impossible for anyone, including the manufacturers to compete selling the same products. The only winners are Amazon and the consumer. Small business and distributors are very effectively forced out of the online market for these goods. Many small business who have depended on Amazon to keep their businesses alive have gone under because of Amazon and/or manufacturers directly. What else could really happen when a small business not only has to buy products for resale in smaller quantities and has the operation, marketing and other overhead that is easily absorbed by Amazon’s volume?
In conclusion, I do not recommend selling on Amazon in any way, shape or form if you are an individual or a small business. You may do well for a little while if you have a niche product, however, in the end, you are bound to lose
Again, these are just my thoughts, opinions and suggestions