If there has been one recurring theme for Amazon sellers in 2018 so far it’s watch your back. With evil competitors lobbing false claims, ominous account suspensions with little to no explanation, surprise trademark violations and other nerve-racking instances, many sellers are feeling trapped.
And they should.
If all your sales are dependent on Amazon, your business is in a dangerous place. While it sounds dramatic, it is none the less solid truth: one wrong move and your income can be frozen. Indefinitely.Click To TweetUnfortunately, I personally know of a handful of sellers who have been through these types of disasters with their Amazon FBA businesses. There are countless more stories in Facebook groups and on websites as well. That’s why creating multiple streams of income is vital.
Meet Maxim Godin, Co-founder and CMO of Crazy Lister. Maxim will clarify what I’m saying and explain some ways you can thrive in your Amazon business without being so vulnerable. Enjoy!
What is one of the most crucial lessons that I have learned in 10 years of online sales? As an eCommerce business owner, never rely on a single source of revenue. You should always develop multiple streams of income.
No matter how many products your Amazon FBA business plan includes or how much revenue you generate, your Amazon business is not your business.
As an Amazon seller, you “rent” space on Amazon’s platform. Ultimately, Amazon allows you to promote your products through its website as you long as you comply with their terms of service (TOS).
Problem #1: Amazon is known for being very inconsistent as far as compliance goes.
You could have been in 100% compliance yesterday but in violation today because of an update to the terms of service agreement or a Seller Central Rep’s awkward interpretation of the TOS. This could lead to the deactivation of listings, the pausing of PPC campaigns, suspension of your account, or worse.
Problem #2: If your account is suspended (usually without prior warning), Amazon is in no hurry to resolve the issue.
I have been suspended several times. In each case, it took me weeks to get up and running again. This is not because the reinstatement process is long, but because of the slow handling of time.
Amazon’s Private Label vs. Your Private Label
Unlike eBay, Amazon started actively competing with its sellers back in 2009 when it launched its first private-label brands.Click To TweetSince 2017, Amazon has gone on a private-label rampage by releasing at least 60 of its own brands predominantly in clothing, shoe, and jewelry categories.
Amazon now sells more than 100 of its own brands, competing directly with your products.
According to CNBC.com, Barrons.com, and other sources, it is projected that Amazon private label sales will be worth $7.5 billion in revenue this year and as much as $25 billion by 2022.
From the seller’s view, Amazon is a double-edged sword: on one hand, it provides you a huge marketing opportunity with 300 million potential buyers.
On the other hand, it (Amazon) easily collects and analyzes tons of data about competitor brands (yours) that sell on its site. This data also includes which products and price points are selling, and why. Then, Amazon creates a new private label that competes with your brand.Click To TweetCouple those abilities with Amazon’s unparalleled distribution abilities and you get an eCommerce giant on the verge of disrupting any brand sales.
Using Multiple Streams of Income to Protect Your Business from Amazon
I’ll give a short example to explain what relying solely on Amazon sales means to you:
Scenario #1 – Amazon FBA business as a single sales channel:
You sell only on Amazon FBA and you make $10K monthly income. One glorious morning, you wake up, open your email box, and discover that Amazon has suspended your account.
In a heartbeat, you go from $10K to $0.
You are left with no income, no way to pay the bills, and all your inventory is trapped in Amazon’s warehouses where you can’t get to it.
Scenario #2 – Multiple sales channels:
You sell on three channels which make up 100% of your income in the following manner:
- Amazon FBA – 30% ($3K)
- eBay – 30% ($3K)
- Your own website – 40% ($4K)
One glorious morning, you wake up, open your email box, and discover that Amazon suspended your account.
In a heartbeat, you go from $10K to $7K.
You are left with $7K income which will still pay your bills, buy food, and support your family. That’s still a big hit, but it won’t wipe you out because your multiple streams of income provide stability.
That’s a huge difference, but it’s one that might save you in those difficult situations while Amazon takes its time to investigate the issue before reinstating your account …if at all.
When Should You Expand?
When you’re just starting out, you must focus on growing your business on one channel as resources are limited and your time is more valuable than anything else.
Focus is regarded by many of the top businesspeople as the key to success, so the time to expand beyond Amazon is only after you’ve established a reliable revenue stream.
The next step would be hiring someone to maintain and optimize your Amazon sales so that you can put all your time and effort into opening more sales channels.
Amazon FBA Business Alternatives
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- Time to setup and ease of maintenance – Let’s take eBay for example. For many years, setting up your eBay seller account was a breeze, you didn’t have any selling limits, and documentation was not required. Although eBay has raised requirements for new sellers, it’s still relatively easy to setup a seller account compared to all the Amazon documentation you need to provide.
- Maintenance time cannot be ignored – marketplaces that go through constant changes are likely to take up a lot of your time to make sure that you comply with all the new rules and policies. For example, eBay is going through extreme changes these days with their new product based shopping experience which will make it very similar to Amazon in terms of product listing experience.
- Relevancy – Don’t be tempted to automatically choose the largest marketplaces. Those marketplaces may attract many shoppers, but the competition on them is usually fierce which then result in price wars that erode your net profit. The eCommerce evolution over the past 10 years created niche marketplaces for almost every large product category and you may benefit much more by selling on a smaller marketplace with a more targeted audience. Take Etsy as an example. In just a few years, it has evolved into the go-to niche marketplace for everything handmade and attracts nearly 35 million buyers!
- Buyers product discovery habits – Mcommerce (shopping via mobile) is quickly catching up with shopping via desktop devices. For example, in China, more than 80% of purchases are via mobile. There are product categories where most of the purchases are made on-the-go via mobile while other purchases still happen through desktop. It’s your job to learn how your buyers usually search & buy and take this into consideration when choosing a new marketplace to expand to. Some prominent example of up-and-coming mobile-only marketplaces include Wish and Letgo.
- Buyers geography – although we live in a connected world where you can purchase almost anything from anywhere, buyers from specific locations have preference to specific marketplaces. By looking into your sales history, specifically buyers locations, you can determine where there is a popular area and look into expanding into a marketplace in that area.
Case in point: A few years ago, I was selling filmmaking gear as a part of my Amazon FBA business plan in the US and noticed that many of my buyers were in the UK, specifically London. I analyzed the filmmaking industry and realized that one of the biggest filmmaking hubs is in London with hundreds of production companies buying this equipment.
I then decided to open a dedicated online store for the UK market which proved to be very successful.
Amazon may be the largest eCommerce platform in the western world with more than 300 million potential buyers, but the rise of multiple factors in the past few years has turned Amazon into a very high-risk sales channel, especially if it’s your only one.
If your only source of revenue is your Amazon FBA business, you should start planning your expansion strategy to multiple streams of income today. Do yourself a favor and set clear goals (dates and sales figures) to establish at least one more sales channel in the next 90 days. You’ll thank yourself later!
Maxim Godin
Co-founder and CMO of CrazyLister the world’s leading eBay listing software, used with love by 100,000 retailers. He is also a 2-time eBay award recipient for excellence in sales. Maxim started hi journey in eCommerce back in 2008, grew an online business from zero to $5M in sales, and never looked back.