10-15% could be 50-60% profit for most sellers. Sure they’re beneficial to you now, but what happens when Amazon starts private labeling the same things you sell? Or your supplier starts selling on Amazon and undercutting you? There’s a reason new DTC brands avoid Amazon and that’s cause you’re not building a customer base or your brand, just helping Amazon build there’s.
>There’s a reason new DTC brands avoid Amazon and that’s cause you’re not building a customer base or your brand, just helping Amazon build there’s.
THIS X10000! Happened to a colleague of mine not too long ago. She developed a product, and sold on Amazon as well as her own storefront. As soon as she started seeing solid volume on Amazon, her product became an "Amazon preferred product" or something like that. However, within 2 weeks of getting that distinction, her sales dropped to 0 on Amazon. Why? Amazon started selling a nearly identical product - Amazon used the sales data to understand her product was popular, and went right to her supplier and cut her out of the equation.
> Amazon used the sales data to understand her product was popular, and went right to her supplier and cut her out of the equation.
This is not a new thing either. Or unique to amazon. This has been going on for decades (or as long as retailers have had own label products). Every Walmart/safeway/target/kroger branded product is essentially a clone of somebody else's product that they figured out they could do cheaper.
Years ago my MiL was selling her baked goods directly to a local grocery chain. They then decided to bring baking in house and came out with an almost identical product line.
If you have a product that is easily copied/reproduced (and not patentable) then a retailer can remove your margin by doing it themselves and in this case your value becomes the brand/brand recognition and not the product itself.
Yup. Amazon provides an extremely valuable service to us: they provide a stream of customers who are at the end of the sales funnel and ready to convert because they trust Amazon's platform.
> What happens when Amazon starts private labeling the same things you sell? Or your supplier starts selling on Amazon and undercutting you?
This is going to blow your mind, but we compete against both Amazon Basics and our factory.
We compete with Amazon Basics by selling a differentiated product. Amazon will never be able to compete in every product niche and at every level of quality/differentiation. It's actually not possible for the same reason that a centrally planned economy breaks down above a certain level of complexity: there are simply too many different niches that need to be addressed and the profit motive is the only system we've discovered which ensures that they get addressed.
And we compete with our supplier by understanding the market better. They're good at manufacturing, but they don't really understand the end user. The type of personality that is good at operating a factory tends not to be the type of personality that is good at marketing. HN doesn't really like to hear this, but sales and marketing are actually an important part of running a business, especially one that sells to consumers.
By your theory, any business with suppliers or retail customers is one hire away from extinction. But we don’t actually see all that much of this kind of competition out in the real world. There is a reason that firms specialize: the size and organization of a firm is tied pretty tightly to the kinds of activities that pay the bills and manufacturing is very different from sales and marketing is very different from running an online retail marketplace.
