A Survival Guide For Third-Party Amazon Sellers
The following is an excerpt from an article written by Etail’s CEO Michael Anderson that was published by Ecommerce Platforms.
Business as usual is coming to an end for many third-party Amazon sellers. Competition on Amazon U.S. is reaching new heights and it’s only going to get worse from here.
- Chinese sellers are flooding the marketplace thanks to preferential treatment from Amazon and the USPS. Because their costs are lower, Chinese sellers are underpricing and outselling U.S. competitors in their own backyard.
- The original categories of top third-party Amazon sellers have saturated. So they’re entering new categories – categories you may be selling in – and all of the systems and resources that launched them to the top of their original categories are coming with them.
- The supply chain is shrinking fast. Manufacturers and brands are cutting out the middleman – you and other third-party sellers – and going direct. According to Forbes: “The number of manufacturers selling directly to consumers is expected to grow 71% this yearto more than 40% of all manufacturers.”
All this increased competition has resulted in a ‘race to the bottom’ in many categories on Amazon. Chinese sellers, top third-party sellers and manufacturers and brands, however, have more pricing flexibility with lower costs and higher margins. Many third-party sellers are finding that they have to work harder and harder to generate the same top line sales, but are not receiving the same bottom line profit.
When you add it all up, it’s easy to see that the long-term viability of the reseller model is very much in doubt. The situation isn’t hopeless, however. This guide lays out what you can do as a third-party seller to put your business in the most competitive position possible.
To stand a chance of surviving, you must do one of two things. The first is develop a unique sourcing advantage. There must be something unique about your supply chain or how you source products to sell. But what if you can’t negotiate exclusive distribution agreements with your suppliers or don’t want to create your own private label products?
You Need to Achieve Economies of Scale to Last Long As a Third-Party Amazon Seller
To achieve economies of scale … to drive up your sales and purchasing volume … you must first drive down your costs … and then your prices on Amazon.
In this guide, we’ll go over each of the costs you have a realistic chance of lowering, and more importantly, how to do it. You’ll find out how to create the necessary leverage to negotiate lower product costs with suppliers even if they are fixed initially.
We’ll explain what it takes to fulfill orders for less than you are now … how to create margin points after the sale … so you can pass the savings onto your customers in the form of lower prices … giving you a better chance of underpricing and outselling your competitors.
You’ll also discover the often overlooked cost you need to lower if you’re unwilling or unable to lower your product or shipping costs.
Achieving economies of scale isn’t the only thing you need to do to stay relevant. There are several other things you need to do, or do differently, keeping in mind that speed and accuracy are now basic competitive requirements.
Now, more than ever, you need to protect your margins and Buy Bux ownership. There should never be a time when your products are overpriced or underpriced. In this guide you’ll find out how to do this. How to always be selling at your best prices while protecting – and growing – your margins.
You Must Be Capable of Pivoting Your Business to Make It More Defensible and Formidable
You never want to be at the mercy of only one fulfillment method, one or two suppliers, or a handful of products. You need to develop the capability to quickly diversify your fulfillment, product and channel mix. In this guide, you’ll discover the requirements for changing how you ship and what and where you sell – so you can quickly pivot in any direction you want at any time.
What are the potential consequences of not heeding the warnings and advice given in this guide? There’s a chance you’ll go on believing the lie that past success on Amazon is a guarantee of future success. You’ll keep doing things the way you’ve always done them … you’ll continue to take your business down the same path … but you’ll likely find that no matter how hard you work or how good a job you do, it’s never enough. Competitors could soon take the lead – if they haven’t already – and your business could become irrelevant.
On the other hand, instead of fearing your competitors, this guide can help you become the competitor who is feared. Instead of watching your business collapse, you’ll know what it needs to stand the test of time. Regardless of the current state of your business – whether it’s healthy and growing, treading water, or in serious trouble – it’s exactly where you decided it would be … and it will go exactly where you decide it will go. Will your business still be around in one, two or five years? The choice is yours and yours alone.
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