I was having a discussion with my business partner about setting up an e-commerce platform. Jimmy did have a point. Amazon is big. That guy, Jeff Bezoz has done a bloody good job in transforming his e-commerce platform into a world beater, in spite of all the opposing trade winds in the past and current. Jimmy questioned me as a matter of factly, “do you even need to think about this proposition?”
Jimmy was probably right when he made the suggestion three years ago. Amazon was growing at breakneck speed and like a great ship, it is bringing all the sellers that had decided to embrace it’s platform to sell the goods into the global stage. There was nothing to “lose”, so to speak. In fact we could join the FBA (Fulfillment By Amazon) program, and let Amazon propelled our goods via its powerful e-commerce platform. We could pull back if we didn’t like it right? Like Nike says “Let’s Do It!” We took haste and after like weeks showcasing our goods through Amazon, we got our first order.
Our sales rose quickly from the first shipment, and both of us even celebrated our “victory” together with our family and co-workers in a posh resort. We hit our pinnacle of six figure in one single month two years after our adoption, all of us grateful in our decision to ride on the great Amazon.
All these times, there was a lingering fear that all the success we were experiencing, was just a bubble. It was too obvious to both of us that the name, Amazon always popped up, when we sat down and did our hazard analysis. We had a simple website that is equipped with the necessary e-commerce bells and whistles, but we never did drive any traffic into it. It can wait…
Our downfall did not come without warning. We started seeing our products bombarded with reviews that sounded just too good to be true. Although they were all one sentence praises (with bad English that is), we didn’t remember selling our gadgets to these reviewers. Something wasn’t right and it sent our spider sense tingling like crazy. We deployed our administrators to inform Amazon about the discrepancies as soon as we can, and for a while, we thought everything was fine. Should be nothing. Let Amazon sort out the fake accounts. It’s their job, anyway!
“Anyway”, was not meant to be. The platform suspended our account and in spite of our pleas, there weren’t any response. Well, this story maybe fictitious, but such life changing nonsense is just too common. As of the time of writing, the great Amazon has already rolled out changes that will affect all sellers in dramatic manner.
Initially, sellers via the e-commerce platform could carry out their business in two basic business models. They had choice to sell their products to Amazon, and collect a commission from the sales. Or, they could opt to use the service called FBA . Like clockwork, FBA works in such that, a seller or a wholesale could send their goods to Amazon, and let the big A handle the packing and delivery direct to customers. No hassle and completely friendly.
The FBA model used to be the main attraction that attracted the whole world to rely on Amazon for their venture into the e-commerce. In return, Amazon benefited from this model because the model enabled Amazon to gather datas on both goods and customers. Subsequently, the intelligence provided so much power to Amazon that from savior, it turned into a monopolistic monster. All these, at the expense of the loyal and lazy sellers. Read about one example here.
Now that Amazon has full control of the information, frankly, there is really nothing to stop them from antagonizing the businesses that still rely on it. The reported negative cash flow has prompted the great platform to force its will into the throat of wholesalers. Instead of the preferred FBA, Amazon is pushing merchants to adopt the FBM (Fulfillment By Merchants) program. In this model, Amazon need not bear the logistic cost anymore. Sellers are required to deliver direct to their customers, under Amazon’s regulation.
Yes, you hear me. You might be responsible for packing and delivering your own goods to your clients, but once you use Amazon, you answer to it. Apparently, Amazon has already achieved a commendable 52 % of the ratio of FBM to FBA. Gradually, this will make Amazon wildly profitable. Don’t get me wrong. I’m not out to bash Amazon. As a small business owner, it pains me when small and medium size businesses foolishly repeat the same mistake of continuously relying on others.
None The Smarter In The Brick And Mortar
Lazy startups and businesses are born all the time. During the heydays of the brick and mortar, small retailers loved to hitch ride on the back of biggies, like Yaohan of Japan and the current Tesco. When the big boys did well, they tend to dictate terms like rental rates and commission. And we continue to pray that they would continue to do well and let us hitch on them, like barnacles.
I could attest to that when I was in consumer goods. Good luck to manufacturers who counted on major retailers to carry their goods for survival. A CEO who was in charge of a chocolate company once told me that they could do nothing with the ever increasing margin cut by the hypermarket and retailers. This was due to their over reliant on this market segment. For donkey years, they had never tried to develop other sales platform apart from simply taking the easy way out by tagging on Tesco, Carrefour and Giant.
To those of you who didn’t know, a retailer did not only make their profits out of the difference in sales and cost. It is a norm for them to induce shelves rental and a percentage cut out of a manufacturer’s monthly sales to them. Well, can we blame them for wanting to make more money out of their overly eager suppliers?
Facebook, Instagram and Youtube
Are you an influencer? Are you setting up yourself for catastrophe by building your business platform only in Facebook and other social medias? My advise to you is “Don’t be lazy!” As you ride on the popularity of Facebook and making great strides with their advertisement, build your website. While you are gaining foot traffic into your store from the foot traffic in Walmart, invest your own standalone flagship near the giant hypermarket.
It doesn’t matter in which industry, you are never too early to create your own pillar of strength for your own business. All said, you don’t want to feel sorry for not taking action sooner.