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FBA seller here. A lot of mom and pop businesses (~$20 million) have been built on Amazon over the past 10 years. Most of us are in the $250k to $5 million dol
by jollofricepeas 3y ago
FBA seller here.
A lot of mom and pop businesses (~$20 million) have been built on Amazon over the past 10 years. Most of us are in the $250k to $5 million dollar range.
The impact of Amazon’s monopoly power is felt big time by us as we’re being squeezed with no place left to go online especially post-iOS change.
Our second option used to be the Facebook/Instagram/TikTok to Shopify connection but with that being dead in the water most of us have had to commit 100% to FBA to be able to stay afloat.
With the increase in inflation and Amazon abusing its power to significantly raise its prices for FBA and force us to use its advertising services our revenues have been severely impacted.
This doesn’t include their unwillingness to meaningfully fight counterfeits
Or that they penalize you if you attempt to drive sales elsewhere with lower pricing on other sites
Bloomberg did a write up on this a few months back:
https://www.bloomberg.com/news/articles/2023-02-13/amazon-amzn-takes-half-of-each-sale-from-2-million-small-businesses https://www.bloomberg.com/news/articles/2023-02-13/amazon-am...
- catiopatio 3y ago> post-iOS change What is the iOS change you’re referring to?
- loldk 3y ago[dead]
- likpok 3y agoATT, where apple hobbled other ad networks running on iOS. It used to be that DTC companies could use the fine-grained targeting offered by FB and Google to reach consumers without needing to go through a major distributor. Since the targeting is much less effective it's more expensive (potentially uneconomically so) to reach people. As a result, sellers are forced back to Amazon.
- lancesells 3y agoI work with DTC Shopify brands and I personally haven't found the ATT hurting ads performance in both Meta and Google. I'm sure YMMV but I've not seen it since it started. Maybe I work with very broad targeting compared to others.
- fsckboy 3y agowas there also any change related to Apple wanting a cut of anything sold through an app, and how the Amazon shopping app works on iOS, and could that also affect 3rd parties?
- turquoisevar 3y agoNo, physical goods have always been excluded from Apple’s commission In fact they explicitly prohibit using in-app purchases for physical goods, presumably because they don’t want to deal with the headache that comes with providing customer support for those transactions.
- babypuncher 3y agoBusinesses got along just fine before all that intense user tracking was even possible. If your business absolutely needs it to survive, then your business doesn't deserve to survive. "boo hoo, I can't invade my users privacy anymore! Waaaaah! It's unfair"
- kmeisthax 3y agoA lot of the old machinery for small businesses to find their customers - e.g. news, hobbyist magazines, etc - is no longer around, and so there's nothing for those businesses to return to. The Internet, and specifically advertising companies, killed them off. What's unfair is not that they can't violate privacy, but that Amazon still can.
- catiopatio 3y agoWeren’t those outlets even less targeted?
- kmeisthax 3y agoThe key was that people self-selected into those outlets. If you were selling, say, game controller skins; you'd be making a pretty sure bet buying ads in GameInformer or on Joystiq. The problem with going back to that kind of business model is that these dedicated websites with specific niche audiences are dead or dying because the ad dollars moved elsewhere.
- morkalork 3y agoShouldn't the ad dollars be moving back in after super targeted advertising got neutered?
- Schiendelman 3y agoIt kind of is. Look at magazines like Monocle, and websites like Uncrate, Hiconsumption, and Gearpatrol.
- crznp 3y agoLots of TLAs: ATT: Apple's App Tracking Transparency, not AT&T FBA: Fulfillment by Amazon, not related to FB DTC: Direct To Consumer, not Depository Trust Company
- deleted 3y ago[deleted]
- oezi 3y agoWhat is a TLA?
- ayewo 3y agoTLA = Three Letter Acronym
- adolph 3y agoTIL TLA’s meaning
- PH95VuimJjqBqy 3y agoTIL = Today I Learned Sorry, couldn't resist :)
- Damogran6 3y agoand ETLA = Extended Three Letter Acronym
- deleted 3y ago[deleted]
- asow92 3y agoI've been saying for years—and it's been received un-popularly here on HN—that ATT has been a bad thing for the industry overall, and this thread is a primary case in point.
- jamiek88 3y agoIf ‘industry’ is selling cheap tat by invading privacy then anything bad for that is good for society.
- asow92 3y agoAre its unintended consequences in propping up monopoly also good for ‘society’, then? Hate to break it to you, but the topic is a bit more nuanced than ‘privacy good’ ‘ads bad’.
- deleted 3y ago[deleted]
- lulznews 3y ago[dead]
- deleted 3y ago[deleted]
- babypuncher 3y agowhat on earth did iOS change that impacts your amazon business?
- deltree7 3y ago[dead]
- beckingz 3y agoPrivacy. The iOS improvements to privacy with advertiser ID becoming opt-in instead of opt-out has been brutal on targeted advertising.
- babypuncher 3y agosounds like a good thing to me
- asow92 3y agoBut could you have guessed that this policy would have helped (albeit in its own small way) to prop up a monopoly in the advertising world?
- lvl102 3y agoNot to be rude but you made millions on the backs of Amazon. Now you’re complaining that you have competition.
- sudobash1 3y ago> on the backs of Amazon. They were using the Amazon platform for what it was intended for, and Amazon made more millions off of them. It was supposed to be a mutually beneficial relationship.
- lvl102 3y agoAnd I am saying what Amazon is doing is not anticompetitive at all. These “companies” that sell on Amazon are basically glorified trade companies that arbitrage low cost Chinese manufacturing. I don’t feel bad for them at all. If they are hurting so bad, go sell the goods on Shopify store or Walmart/Target. Oh, what’s that? They charge more than Amazon? Interesting…
- binarymax 3y agoYou're over generalizing. There are plenty of sellers that took the time to develop their own products and sell them, only to be copied and undercut by Amazon.
- dtjb 3y agoHow is that different from Walmart selling their Great Value store brand? They see what products sell well then formulate their own cheaper alternative, maybe even giving their product better shelf placement. Every national grocer does this. It seems to be a pretty close analog yet nobody bats an eye at the practice.
- WalterBright 3y agoThe local Kroger supermarket has Kroger branded items on the shelf right next to the national brand. The latter is always more expensive, I usually buy the Kroger brand. The supermarket wouldn't stock the national brands at all if customers weren't buying them.
- reagan83 3y agoGreat insight overall - can you describe more on the FB/IG/TT to Shopify connection not working or now dead?
- lokar 3y agoApple mostly prevents narrow targeting on iOS now
- pmarreck 3y agoSo basically, Apple's focus on user privacy had the knock-on effect of ruining Amazon's potential competition? That's astoundingly rich
- HWR_14 3y agoAmazon's "potential competition" in this case is driven by ads via Meta (or maybe Google). I'm all for Apple preventing Meta from spying on me, even if it makes it hard for small companies to advertise to me.
- dehrmann 3y agoIt's really just a non-obvious consequence.
- lightbendover 3y agoNot really, all the walled gardens were internally celebrating the decision.
- deltree7 3y ago[dead]
- reagan83 3y agoContext on my question: I run one of the that works on this connector at IG - email me rbw at fb.com I’d be happy to connect and filter this feedback.
- pcurve 3y agowow... that BB article makes me sad. https://archive.ph/yw3Bv https://archive.ph/yw3Bv In 2016, they collected 35.2%. In 2022, they collected 51.8% in fee. That's insane.
- s0rce 3y agoDepending on what services they provide that might not be terrible, its basically high end art gallery margins, but for consumer products with low margins that seems unsustainable. I'm curious how much AliExpress takes.
- freeone3000 3y agoBetween 5-8% commission, and you’re responsible for your own warehousing and shipping.
- steveBK123 3y agoYup, it makes me wonder what % of consumer goods for sale via FBA are from retail theft rings. 52% fees on stuff that cost you $0 ain't bad. Otherwise, it's very very bad.
- nwiswell 3y agoThe 52% is dominated by small crap items that basically cost $0 in bulk from China (cables, phone cases, etc) On these items Amazon fully realizes they can charge 90% and the seller is still making a profit, so they do. If you're selling appliances or TVs or computers the % is not nearly that bad.
- steveBK123 3y agoWould be curious to see numbers on the bigger items. Have you used FBA? The warehouse and shipping fees on such large & heavy items would be onerous would be my guess.
- 3y ago
- seatac76 3y agoThanks for sharing your experience. Do you think Amazon dropped the planned fee they were going to charge for those sellers who don’t use prime, in anticipation of this suit? Would that have impacted you?
- steveBK123 3y agoI ran a small FBA business for a year nowhere near any scale and it was an interesting lesson. People who weigh in on these tech topics should actually try these things out to understand them better. It's nothing like listing on eBay where there's some haircut off the top and that's that. There are fees for - accepting inventory, holding inventory, returning unsold inventory, shipping sales, processing returns, destroying returns, transaction fees, ads to promote your listings in market, and probably 5 other things I forget. Depending on the fee it is - fixed, % of $, weight based, volume based, or some combination. The fees change constantly with not much notice. So every time you think you've got just the right size/weight/price balance you get screwed. And where else are you going to go? Like Uber drivers, I imagine some % of FBA sellers don't know they are losing money in real time. You need to do some decent accounting to track as all these different fees hit at different times. It's not like Amazon gives you the data & tools to track your all-in costs per sale.
- shiftpgdn 3y agoAWS works this way too but I’ll get dogpiled by Amazon sycophants and other people who have built their careers around getting witless companies sucked into the Amazon machine.
- smallnix 3y agoSteve gave examples for the different kind of fees and that it's hard to track them and why. I wanted to ask you for examples for AWS. Would be good to know concrete pitfalls and traps.
- genewitch 3y agoegress fees, inter-DC transfer fees, IP fees, ebs storage fees, transactional fees on things that are transactional. If you don't carefully engineer everything you'll get left with a $15,000 AWS bill. This doesn't cost Amazon anywhere near $15k to provide, so they just "waive" the fees if you promise to be a good little user.
- karaterobot 3y agoI had to look this up, so for other ignoramuses like me: FBA is Fulfillment by Amazon, where you sell things on Amazon and they handle payments and shipping to customers.
- m463 3y agoI think this is basically becoming a de-facto monopsony for some folks: https://en.wikipedia.org/wiki/Monopsony https://en.wikipedia.org/wiki/Monopsony
- blibble 3y agoit's a genius business for a "retailer" normally they'd need to pay for storage, stock, liquidation of stock they didn't sell, returns etc and instead now you pay for all of that for them and what do you get in return? - a listing on page 17 of their ever increasingly shitty website behind legions of MINFARTO, PATRONICS and GIBRANKER aliexpress garbage - customer service staff with an inability to understand simple english or basic problems - your genuine stock mixed with counterfeits, that then they penalise you for - paying to give your sales information to them as a potential competitor, as if you do well they'll ripoff your product and they take essentially absolutely no risk whatsoever not a good deal at all
- musicale 3y agoI would believe those are actual brand names. Has anyone created software or a web site to generate hilarious Amazon brand names automatically? Edit: Looks like there are lots of AI-fueled Amazon/business name generators. Most of the names weren't as funny as your examples, though I got some good ones (electrofakes.com, etc.) from prompts like "low quality tech products" and "cheap knockoff technology products." Another site gave me the more Amazon-appropriate LAMOFY, HOROLY, YORBAX, etc. (all with .com domains and premade logos.) As the NYT noted, "Amazon is to fake products as Facebook is to fake news."
- toast0 3y agoI mean, MINFARTO has legs. But then again, I remember seeing COBY products right next to SONY products and I guess they're still around. :)
- hrdwdmrbl 3y ago> Our second option used to be the Facebook/Instagram/TikTok to Shopify connection but with that being dead in the water most of us have had to commit 100% to FBA to be able to stay afloat. Can you explain this further?
- HWR_14 3y agoMeta/TikTok do less spying on customers, so it is harder to target ads to customers on iOS. This is the desired behavior. It means people who want to use targeted ads (called "the FB/IG/TikTok to Shopify connection" by the GP) are not able to.
- YeBanKo 3y agoI heard some stores switched to Shopify, would be interesting to learn why it is not an option for stores like yours.
- arbuge 3y agoShopify and Amazon are quite different things. Amazon is a marketplace and provides exposure - in other words, they bring you traffic besides providing ecommerce functionality. Possibly a lot of traffic if there's not much competition already in your space. With Shopify you have primarily an online store solution. It's up to you to do your own marketing somewhere to drive traffic. Shopify does have what they call "Shop" now, which works like a marketplace, but in my experience that's still a relatively small channel for Shopify sellers.
- YeBanKo 3y agoWhat about shipping logistic and warehousing? Afaik this is something what Amazon FBA helps with as well?
- arbuge 3y agoIt does, yes. Shopify did try to get into providing those services for its clients but they later reconsidered: https://www.freightwaves.com/news/flexport-acquires-shopifys-fulfillment-business https://www.freightwaves.com/news/flexport-acquires-shopifys...
- dnissley 3y agoHm, all of a sudden the seemingly outrageous fees don't seem so outrageous anymore.
- arbuge 3y agoThere are additional fees for using FBA...
- snuxoll 3y ago
- pmarreck 3y agoHow much would a "Fulfillment By <Company Other Than Amazon>" be worth to you? Could you get together with a large bunch of other FBA folks and somehow fund an alternative?
- shopifyeocks 3y agoWhat’s do you mean exactly about the Shopify tiktok Facebook connection being dead?
- adamsb6 3y agoProbably that Apple's privacy changes made those advertising channels far less effective.
- shopifyeocks 3y agoThanks yes I reread the comment and that sounds most likely
- nwiswell 3y agoI can't help but think that Amazon should be replaced with a non-profit or regulated public utility that provides a single unified online marketplace, part of internet infrastructure like ICANN. Sellers would select among competing fulfillment services (warehouse+shipping). Platform referral fees would go toward customer remediation, anti-counterfeiting, and review integrity. I don't merely say this as a "fuck Amazon" reflex or a "fuck capitalism" reflex. I say it because it obviously would allow so much of the dying segment of mom and pop small business to become viable again. Just from a policy perspective it's a home run because it's a way to juice GDP, improve consumer purchasing power, AND reduce income inequality. As a matter of fact I would suggest that Amazon as it exists is anti-capitalist. It is feudal. Capitalism is the deployment of capital and assumption of risk in pursuit of new value creating activity. Amazon is not marshalling new capital to innovate or improve its digital marketplace. Rather, Amazon simply owns digital real estate and extracts rent, like some kind of futuristic dystopian corpo-baron. The best part of all this is that Amazon doesn't have to be forcibly nationalized or broken up or anything like that. The government just needs to support and endorse a good alternative, because Amazon seriously sucks.
- blibble 3y ago> I can't help but think that Amazon should be replaced with a non-profit or regulated public utility that provides a single unified online marketplace, part of internet infrastructure like ICANN. if the market was working correctly Amazon's profits would be driven down to zero and you'd effectively have this > As a matter of fact I would suggest that Amazon as it exists is anti-capitalist. It is feudal. absolutely
- nwiswell 3y ago> if the market was working correctly Amazon's profits would be driven down to zero and you'd effectively have this Are you sure? Consumer behavior seems to be to simply go to their default marketplace rather than to search the whole internet (which is slow, painful, and low-trust), so it ends up being a winner-take-all system where alternative marketplaces like eBay are almost irrelevant and Amazon charges whatever they like and basically ignores counterfeiting and review fraud. There are "natural monopolies", like with roads and power distribution networks, and I would argue that online marketplaces have turned out to be another one, and we should modify our public policy to reflect that.
- mrraj 3y agoFrom the Bloomberg article : "Chuck Gregorich, who sells fire pits and outdoor furniture, says turning a profit on Amazon is getting harder. One of his popular fire pits costs $200, of which Amazon takes $112 for its commission, warehouse storage, delivery and advertising. That leaves him with $88 to pay the manufacturer, ship the product in from China and cover his overhead." I have a hard time sympathizing here. They farm out manufacturing to China and logistics/warehousing to Amazon, and then also lend brand to a marketplace they don't own. Assuming this is how FBA selling works on Amazon, it sounds like the low profits they make are just a byproduct of them not actually doing much work.
- thomastjeffery 3y agoConsidering they have to pay 56% of their revenue to Amazon, how do you expect them to be able to afford locally manufactured products?
- verdverm 3y agoDo the fees and commissions scale linearly with product price? Are any of them flat fees or capped? Perhaps selling a higher priced product would find a lower share going to Amazon? I don't know myself
- highwaylights 3y agoIt wouldn’t matter if they could, Amazon can still acquire and sell them for less regardless. The only viable business here would be a product you’re self-manufacturing or having made bespoke, and even then you better hope you can get some recognition behind your trademark before the chaps out in Shenzhen get a hold of it.
- danielmarkbruce 3y agoThey don't have to. They could get their own distribution channel. Distribution is a thing, you can't just complain that you don't have it for free.
- 3y ago
- mvdtnz 3y agoHow much do you personally shop at Amazon versus other outlets?
- 22289d 3y agoOnce I figured eBay out, it's about 90% eBay, 5% Amazon, 5% other. Amazon does a great job of making it appear that they are the best option to shop at. But they really aren't. Even with Prime Free Shipping, if you search eBay correctly - the prices are likely better there. I know what some are probably thinking, eBay is full of scammers and knockoffs etc. That's not really accurate. Especially when you figure out how to use it correctly. eBay policies are designed to protect the buyer. If the item doesn't arrive, you're getting a refund. Every. Single. Time. If you're unhappy with the item: tell the seller. Most will make it right for fear of negative feedback, and knowing they'll lose the INAD. INAD? If the seller wont fix it, file an Item Not As Described claim. You will win and they'll be forced to either refund you or accept a return.
- doktorhladnjak 3y agoI feel like going into eBay, I expect it to be the bargain basement race to the bottom. There’s no veneer. It is what it purports to be. Meanwhile Amazon is full of fake reviews, counterfeits, sponsored listings, and other scams that are passed off as legitimate or even premium.
- mahastore 3y agoGo sell in Temu or Walmart. No one is stopping you.
- patrick451 3y agoI'm missing some context to understand all of this. What was the "post-iOS change" and why did this make it difficult to go elsewhere? Why is Facebook/Instagram/TikTok alternative dead in the water?
- mighmi 3y agoApple privacy changes reduced advertising effectiveness
- cm2012 3y agoYou can thank Apple's IOS 14.5 updates for making Facebook/IG/TT ads much less effective than they used to be for SMBs.
- jiveturkey 3y ago> lot of mom and pop businesses (~$20 million) have been built on Amazon over the past 10 years. Most of us are in the $250k to $5 million dollar range. > The impact of Amazon’s monopoly power is felt big time by us as we’re being squeezed with no place left to go online especially post-iOS change. you either wouldn’t have a business at all without FBA, or you’d have higher margins with the same net earnings. if you don’t like FBA try advertising on facebook. it’s very expensive because it’s very effective. the cost of the ad is so great that socks have to cost $20 and t shirts made in china have to cost $30. i used to buy from marketplace on amazon. but dealing direct with sellers is worse than the ebay gamble. so i only buy FBA. i prefer direct sale from amazon if possible. the price is always higher but i have guaranteed no hassle. otherwise i shop local. i don’t know about dirty tricks but from my POV amazon earned their market by having consistent and reliable customer service. if you want to increase your sales it’s worth it to ride on _their_ brand. $250k to $5m for a mom and pop drop shipper sounds absolutely fantastic to me.
- iancmceachern 3y ago>A lot of mom and pop businesses (~$20 million) have been built on Amazon over the past 10 years. Most of us are in the $250k to $5 million dollar range. It's interesting, Amazon also put a lot of mom and pop businesses out of business during this time period as well. The overhead that used to go to local commercial property owners, independent trucking and warehousing companies and such now all goes to Amazon. It's a total monopoly in the old school robber barron sense. Not only do they own the railroad they also own the steel plant and the coal mine. Break 'em up like Bell I say!
- jollofricepeas 3y agoSelling anything in America is incredibly difficult even when you make design and or manufacture your own products. Amazon controls the connection to the customer. Walmart/Family Dollar control pricing. Stamps.com controls independent shipping/stamps. Stripe and the major card companies take a chunk of fees for credit card transactions.
- TheKarateKid 3y agoeBay controls the consumer reseller market. (FB Marketplace, etc. are designed for local, not national, sales)
- moneywoes 3y agowhat is the biggest barrier to moving to the second option, customers?
- tacker2000 3y agoAmazon has around 60-80% market share in ecommerce, depending on where in the world you are.
- rmbyrro 3y agoWhy was the Apple privacy change so severe to making "the Facebook/Instagram/TikTok to Shopify connection ... dead in the water"? I understand a bit about digital marketing, but not why this was so bad...
- PeterStuer 3y agoFBA SKU pooling has completely killed Amazon for me. I used to purchase on Amazon regularly but I just can't trust them shipping me a genuine product anymore. I've gone back to select local eShops, even if the quoted Amazon price is often cheaper.
- manicennui 3y agoBy "mom and pop businesses" do you mean people selling cheap crap from China that is the same as the crap sold by a dozen other "mom and pop businesses"? Hard to feel sorry for businesses that are contributing to the rapid decline in the quality of all product categories.