6 ms·

I predicted in October of 2018 [1], that in 3 years Amazon will start flying freight directly from China to US fulfillment centers and cut out the middlemen (FB

by moltar 6y ago

I predicted in October of 2018 [1], that in 3 years Amazon will start flying freight directly from China to US fulfillment centers and cut out the middlemen (FBA sellers). Since then Amazon has been on-boarding sellers in China at a rapid pace. - [1] https://www.scaleleap.com/zine/just-in-time-air/ https://www.scaleleap.com/zine/just-in-time-air/

grogenaut 6y ago
To me in 2014 it was really dumb that Chinese sellers were using USA middlemen to get on Amazon instead of just directly selling on Amazon. In general it seems dumb that any manufacturer isn't just selling direct to consumer if they have a consumer finished product on Amazon. However one insight into the reason is embedded in this anecdote: My friend was asked by a Chinese supplier to sell a thing on Amazon. But the seller then went on to try and transfer all of the inventory risk, and customer support risk to my friend. They then also refused to give a unique license to the product for Amazon to my friend and also undercut their offer to my friend with another random person in the USA. 6 months later the supplier listed V2 themselves on Amazon once the first person had built them a market and they could copy pasta all the english product info. Seller was left half their V1 inventory and had to sell at a loss to clear it. Luckily my friend only burned the Amazon seller fee during the trial period and their time.
- deleted 6y ago
  [deleted]
- throwaway201103 6y ago
  Being a small-scale online reseller of someone else's product has always been risky. Low barriers to entry, no such thing as a regional territory, no motive for the manufacturer to protect or reward you over anyone else.
- bg24 6y ago
  Ouch! Doing business is tough. Thanks for sharing.
- forgingahead 6y ago
  They then also refused to give a unique license to the product for Amazon to my friend This is a deal-breaker always for these types of arrangements. I've walked away after months of negotiations when suppliers renege of this key part of any distribution agreement. You cannot be in a position to build up someone else's product or brand, and have them take it away from you at their own discretion, with zero compensation to you. You should not also be diluting your marketing efforts for said product if the supplier is handing out distribution rights like candy. Get exclusive agreements always. You'll likely need to pay some sort of minimum guarantee, but you can negotiate a rolling start, and if the product is not present in the market, you have leverage to get terms in your favour (ie, exclusive to you, but no sales guarantee for the first 6 months, to "test out the market"). This should still be outlined in writing and signed by both parties.
  - mkhalil 6y ago
    It sounds like you have some expierence. Would you mind elaborating on how one would enter this space, aquire supplies/products, examples of licensing deals. Even just some trusted resources would be fine. This fascinates me, as I have wondered how some sellers on Amazon (or eBay but no thanks) become so large just by reselling other people's things on Amazon -- at the same time Amazon is the one who really wants to be that middle man. Ideally, I would love to begin some sort of revolutionary alliance that tries to fight off the behemoth Amazon and how they use their market size, analytics, and predictive analysis to see what's hot, and then either buy or make it at a cheaper cost and a lot of times---a better quality.
    - forgingahead 6y ago
      Sure happy to help. Your email in your profile appears to be invalid, but I'll write a few things here in case other folks are interested. They become big because the competitive edge is not in the supply, it's in the demand, as in, they have access to a customer base. Of course, one can't sell complete crap, supplies/products should fulfill a certain market demand, but supply is always secondary to having access to customers. If you're thinking about becoming a trader or distributor, start backwards from your potential customers. Who are they, what do they want, and what price point and average buying quantity makes sense for them. If you're trading B2B that is quite different from sourcing from a supplier to sell direct to consumers in your market. In the former, your customer is the physical retail stores (or their equivalent), in the latter it is actual consumers themselves. The usual customer profile work should be done here. Once you have an idea of your customer profile, then you can start sourcing. Luckily there are very few barriers to entry in 2021, you can google for product names or categories, find the suppliers online (China or otherwise), and you can just email them to inquire on their prices. If you're starting out, be a simple as you can: a) What are their prices and minimum order qtys b) Can they waive the minimum order qtys while you test out the market on the first few orders (suppliers always have excess stock on previous production runs. You can do them "a favour" by buying that - they recover their costs, you get things for cheap). c) Pre-sell if you can. That could be as simple as walking to stores with a catalogue, or just a sample to show them. Then collect pre-orders from 50 customers (ideally with some money down), use that to make your first supplier purchase. d) Ideally, you have exclusive rights to the distribution for several years. When you're starting out, you don't want to spend the money to "buy" these rights, so again, it becomes a negotiation. The supplier isn't selling in your market, so you're helping them reach a wider audience. It's in their interest to support you. e) Make sure besides exclusive rights, you get collateral support in terms of marketing materials, graphics, ads, freebies, etc. This stuff is huge when you're building up a customer base. The best structure is pre-sell, purchase from your supplier to fulfill existing orders, then the stuff arrives and you just pack it off straight to your customers. Rinse and repeat. High volume items give you about 10-15% gross margins, but standard is about 30-40% gross margins as a trader. Again, all depends on how you negotiate your total costs. Freight is often a huge win -- get some good freight charges, and your profit can literally double on a specific shipment. Ideally in your customer identification process, you'll have found some product ideas that they'll want to buy. You are valuable because: 1. Your customers don't want to buy the volumes a supplier would require, they just want a small subset of that total. They're happy to pay a larger price for smaller quantities. 2. Suppliers don't want to sell bits and pieces, they like having someone buy large quantities from them. So they'll give you a good price for bulk purchasing. They also don't want to do the legwork to find the 100-1000 smaller customers to fill a large production order. Your profit is the difference between the two numbers. So you do the legwork to get that upside. If you're attempting to sell on crowded locations like Amazon, then you will need to spend/invest on ads to drive the purchasing from you (vs. someone else with the same or similar products). Most marketplaces reward sellers with existing sales volumes, as their algorithms figure you've completed sales before, you'll continue to do so. So that's a game you do need to play to start building a seller reputation. If you have your own Shopify-or-whatever site, it's the same, you'll need to do FB/Google ads to drive that initial customer acquisition. There's a lot more info, but I'll stop here for now. Happy to write more if folks are keen.
- hakfoo 6y ago
  The value for an American middleman should be in curation and market understanding. "Don't bother selling the metric part here, it fits no local products", or "That meme ran its course already here, nobody's gonna buy a phone case with it anymore." and also "there's already 5000 people selling blue widgets, don't try to jump into that crowded market." A big risk factor is choice paralysis. I know legitimate purchase intent browsing/searching gets derailed when customers see too many choices and lose confidence. Did I specify the wrong search criteria? Am I buying the right one of these 500 near-identical items? Is there a better deal I'm missing? Should I check five other shops? If marketplace sellers practiced good curation, this risk is reducible, but I suspect marketplace platforms prefer large numbers of sellers and massive inventory count to convey vast selections (of things you don't actually want).
  - baskire 6y ago
    You gave the exact reason on why I’ve avoided shopping at Amazon for a TV recently. To many crap brands. Too many items. Instead I went to Best Buy who’s curation and quality control made it such an easier process.
bootlooped 6y ago
Isn't this essentially what they're doing with Amazon Basics and probably almost every other Amazon-owned brand? They will let sellers scout products, and then squeeze them out after they have a product that's proven to move. It's better for Amazon this way, you can externalize lots of risk while still making a fat commission + assorted fees.
- jackTheMan 6y ago
  Moreover they have the data (which product sells/returns and where) to optimize the priorities of entries that no other seller has.
- victor9000 6y ago
  They do the same thing at Whole Foods with their 365 brand.
  - mimikatz 6y ago
    and at Costco with Kirkland and Wal-Mart with great Value and Target and something
    - ethbr0 6y ago
      I'd say the difference is inventory costs. Most box retail seems to clone high-sales-volume items. Amazon can afford to clone the long tail, because they'll still make profits off it.
    - minitoar 6y ago
      One of targets brands is “up and up” which always gets a lol because like...trust me, these garbage bags are on the up and up. Who are you trying to convince?!
    - davchana 6y ago
      Agreed, I have seen Great Value things in food isle popping up after few months of something else; my personal observation was Uncle Rice ready made rice.
contingencies 6y ago
This is likely a net good for the consumer, since it nominally lowers costs, increases reliability, and reduces time to delivery. However, there is an antitrust risk of monopolization. It's a case in which Amazon, the producer and the consumer have aligned interests, until Amazon turns around and screws everyone who have become dependent. Undercapitalized niche middle men still running on ancient oasis merchant middle man business models are the immediate losers. Bezos, the Genghis Khan of the internet, famously states Your margin is my opportunity. If you are an importer I'd recommend obtaining both exclusivity and patents or running scared.
- AlexTWithBeard 6y ago
  Good for US consumers, bad for US manufacturers.
  - elefanten 6y ago
    Not when the goods are all cheap junk that breaks in 1/10th of the expected lifespan or poisons you.
  - Aperocky 6y ago
    There are no US manufacturers for most of the stuff on Amazon though. Cheaper consumer good manufacturing in the US is gone for good.
  - tfehring 6y ago
    Bad for US resellers and drop shippers. But I can't see it having much impact on US-manufactured goods.
- mensetmanusman 6y ago
  Bad for the environment though, there is cost arbitrage happening due to lack of regulation
- dcolkitt 6y ago
  > It's a case in which Amazon, the producer and the consumer have aligned interests, until Amazon turns around and screws everyone who have become dependent. Has Amazon ever shown any indication of raising prices after monopolizing a market? As far as I can tell, the more they dominate a market the lower their prices. Amazon does seem interested in monopolization, but mostly for the ability to squeeze suppliers into even tighter pricing- not turning around on consumers. Moreover, similar arguments were made for years about Wal-Mart and never materialized. Increasing market share seemed to go hand-and-hand with "Everyday Low Prices". Who knows. Maybe it really is their secret strategy. One day the shoe will drop, and Amazon will start bleeding consumers in the markets they've grown to dominate. Somehow I doubt it though, and so far their behavior gives zero indication of it.
saargrin 6y ago
all the 3rd party dropshippers on amazon gonna get wiped out on the other hand,that means amazon will be competing directly with Aliexpress ,and might trigger some kind of CCP response

by moltar 6y ago

grogenaut 6y ago

To me in 2014 it was really dumb that Chinese sellers were using USA middlemen to get on Amazon instead of just directly selling on Amazon. In general it seems dumb that any manufacturer isn't just selling direct to consumer if they have a consumer finished product on Amazon. However one insight into the reason is embedded in this anecdote: My friend was asked by a Chinese supplier to sell a thing on Amazon. But the seller then went on to try and transfer all of the inventory risk, and customer support risk to my friend. They then also refused to give a unique license to the product for Amazon to my friend and also undercut their offer to my friend with another random person in the USA. 6 months later the supplier listed V2 themselves on Amazon once the first person had built them a market and they could copy pasta all the english product info. Seller was left half their V1 inventory and had to sell at a loss to clear it. Luckily my friend only burned the Amazon seller fee during the trial period and their time.

deleted 6y ago
[deleted]
throwaway201103 6y ago
Being a small-scale online reseller of someone else's product has always been risky. Low barriers to entry, no such thing as a regional territory, no motive for the manufacturer to protect or reward you over anyone else.
bg24 6y ago
Ouch! Doing business is tough. Thanks for sharing.
forgingahead 6y ago
They then also refused to give a unique license to the product for Amazon to my friend This is a deal-breaker always for these types of arrangements. I've walked away after months of negotiations when suppliers renege of this key part of any distribution agreement. You cannot be in a position to build up someone else's product or brand, and have them take it away from you at their own discretion, with zero compensation to you. You should not also be diluting your marketing efforts for said product if the supplier is handing out distribution rights like candy. Get exclusive agreements always. You'll likely need to pay some sort of minimum guarantee, but you can negotiate a rolling start, and if the product is not present in the market, you have leverage to get terms in your favour (ie, exclusive to you, but no sales guarantee for the first 6 months, to "test out the market"). This should still be outlined in writing and signed by both parties.
- mkhalil 6y ago
  It sounds like you have some expierence. Would you mind elaborating on how one would enter this space, aquire supplies/products, examples of licensing deals. Even just some trusted resources would be fine. This fascinates me, as I have wondered how some sellers on Amazon (or eBay but no thanks) become so large just by reselling other people's things on Amazon -- at the same time Amazon is the one who really wants to be that middle man. Ideally, I would love to begin some sort of revolutionary alliance that tries to fight off the behemoth Amazon and how they use their market size, analytics, and predictive analysis to see what's hot, and then either buy or make it at a cheaper cost and a lot of times---a better quality.
  - forgingahead 6y ago
    Sure happy to help. Your email in your profile appears to be invalid, but I'll write a few things here in case other folks are interested. They become big because the competitive edge is not in the supply, it's in the demand, as in, they have access to a customer base. Of course, one can't sell complete crap, supplies/products should fulfill a certain market demand, but supply is always secondary to having access to customers. If you're thinking about becoming a trader or distributor, start backwards from your potential customers. Who are they, what do they want, and what price point and average buying quantity makes sense for them. If you're trading B2B that is quite different from sourcing from a supplier to sell direct to consumers in your market. In the former, your customer is the physical retail stores (or their equivalent), in the latter it is actual consumers themselves. The usual customer profile work should be done here. Once you have an idea of your customer profile, then you can start sourcing. Luckily there are very few barriers to entry in 2021, you can google for product names or categories, find the suppliers online (China or otherwise), and you can just email them to inquire on their prices. If you're starting out, be a simple as you can: a) What are their prices and minimum order qtys b) Can they waive the minimum order qtys while you test out the market on the first few orders (suppliers always have excess stock on previous production runs. You can do them "a favour" by buying that - they recover their costs, you get things for cheap). c) Pre-sell if you can. That could be as simple as walking to stores with a catalogue, or just a sample to show them. Then collect pre-orders from 50 customers (ideally with some money down), use that to make your first supplier purchase. d) Ideally, you have exclusive rights to the distribution for several years. When you're starting out, you don't want to spend the money to "buy" these rights, so again, it becomes a negotiation. The supplier isn't selling in your market, so you're helping them reach a wider audience. It's in their interest to support you. e) Make sure besides exclusive rights, you get collateral support in terms of marketing materials, graphics, ads, freebies, etc. This stuff is huge when you're building up a customer base. The best structure is pre-sell, purchase from your supplier to fulfill existing orders, then the stuff arrives and you just pack it off straight to your customers. Rinse and repeat. High volume items give you about 10-15% gross margins, but standard is about 30-40% gross margins as a trader. Again, all depends on how you negotiate your total costs. Freight is often a huge win -- get some good freight charges, and your profit can literally double on a specific shipment. Ideally in your customer identification process, you'll have found some product ideas that they'll want to buy. You are valuable because: 1. Your customers don't want to buy the volumes a supplier would require, they just want a small subset of that total. They're happy to pay a larger price for smaller quantities. 2. Suppliers don't want to sell bits and pieces, they like having someone buy large quantities from them. So they'll give you a good price for bulk purchasing. They also don't want to do the legwork to find the 100-1000 smaller customers to fill a large production order. Your profit is the difference between the two numbers. So you do the legwork to get that upside. If you're attempting to sell on crowded locations like Amazon, then you will need to spend/invest on ads to drive the purchasing from you (vs. someone else with the same or similar products). Most marketplaces reward sellers with existing sales volumes, as their algorithms figure you've completed sales before, you'll continue to do so. So that's a game you do need to play to start building a seller reputation. If you have your own Shopify-or-whatever site, it's the same, you'll need to do FB/Google ads to drive that initial customer acquisition. There's a lot more info, but I'll stop here for now. Happy to write more if folks are keen.
hakfoo 6y ago
The value for an American middleman should be in curation and market understanding. "Don't bother selling the metric part here, it fits no local products", or "That meme ran its course already here, nobody's gonna buy a phone case with it anymore." and also "there's already 5000 people selling blue widgets, don't try to jump into that crowded market." A big risk factor is choice paralysis. I know legitimate purchase intent browsing/searching gets derailed when customers see too many choices and lose confidence. Did I specify the wrong search criteria? Am I buying the right one of these 500 near-identical items? Is there a better deal I'm missing? Should I check five other shops? If marketplace sellers practiced good curation, this risk is reducible, but I suspect marketplace platforms prefer large numbers of sellers and massive inventory count to convey vast selections (of things you don't actually want).
- baskire 6y ago
  You gave the exact reason on why I’ve avoided shopping at Amazon for a TV recently. To many crap brands. Too many items. Instead I went to Best Buy who’s curation and quality control made it such an easier process.

bootlooped 6y ago

Isn't this essentially what they're doing with Amazon Basics and probably almost every other Amazon-owned brand? They will let sellers scout products, and then squeeze them out after they have a product that's proven to move. It's better for Amazon this way, you can externalize lots of risk while still making a fat commission + assorted fees.

jackTheMan 6y ago
Moreover they have the data (which product sells/returns and where) to optimize the priorities of entries that no other seller has.
victor9000 6y ago
They do the same thing at Whole Foods with their 365 brand.
- mimikatz 6y ago
  and at Costco with Kirkland and Wal-Mart with great Value and Target and something
  - ethbr0 6y ago
    I'd say the difference is inventory costs. Most box retail seems to clone high-sales-volume items. Amazon can afford to clone the long tail, because they'll still make profits off it.
  - minitoar 6y ago
    One of targets brands is “up and up” which always gets a lol because like...trust me, these garbage bags are on the up and up. Who are you trying to convince?!
  - davchana 6y ago
    Agreed, I have seen Great Value things in food isle popping up after few months of something else; my personal observation was Uncle Rice ready made rice.

contingencies 6y ago

This is likely a net good for the consumer, since it nominally lowers costs, increases reliability, and reduces time to delivery. However, there is an antitrust risk of monopolization. It's a case in which Amazon, the producer and the consumer have aligned interests, until Amazon turns around and screws everyone who have become dependent. Undercapitalized niche middle men still running on ancient oasis merchant middle man business models are the immediate losers. Bezos, the Genghis Khan of the internet, famously states Your margin is my opportunity. If you are an importer I'd recommend obtaining both exclusivity and patents or running scared.

AlexTWithBeard 6y ago
Good for US consumers, bad for US manufacturers.
- elefanten 6y ago
  Not when the goods are all cheap junk that breaks in 1/10th of the expected lifespan or poisons you.
- Aperocky 6y ago
  There are no US manufacturers for most of the stuff on Amazon though. Cheaper consumer good manufacturing in the US is gone for good.
- tfehring 6y ago
  Bad for US resellers and drop shippers. But I can't see it having much impact on US-manufactured goods.
mensetmanusman 6y ago
Bad for the environment though, there is cost arbitrage happening due to lack of regulation
dcolkitt 6y ago
> It's a case in which Amazon, the producer and the consumer have aligned interests, until Amazon turns around and screws everyone who have become dependent. Has Amazon ever shown any indication of raising prices after monopolizing a market? As far as I can tell, the more they dominate a market the lower their prices. Amazon does seem interested in monopolization, but mostly for the ability to squeeze suppliers into even tighter pricing- not turning around on consumers. Moreover, similar arguments were made for years about Wal-Mart and never materialized. Increasing market share seemed to go hand-and-hand with "Everyday Low Prices". Who knows. Maybe it really is their secret strategy. One day the shoe will drop, and Amazon will start bleeding consumers in the markets they've grown to dominate. Somehow I doubt it though, and so far their behavior gives zero indication of it.

saargrin 6y ago

all the 3rd party dropshippers on amazon gonna get wiped out on the other hand,that means amazon will be competing directly with Aliexpress ,and might trigger some kind of CCP response