Welcome back! 👽
It’s September. The kids are back in school, summer is over, and Amazon sellers are working super hard to launch new products in time for Q4 and trying to plan our inventory ahead of time to get through the year’s busiest shopping period.
Last year, I messed up big time (due to reasons out of my control), so this year, I have already started to send in some stock to Amazon so I can be completely ready for the October/November/December spike in demand and sales.
With the Inventory Performance Index now live on the Amazon UK platform, we do have to be extra careful about how much inventory we send in, but when it comes to stock for the Christmas sales, you just have to take the risk. It’s better to overdo it now and remove the stock from Amazon later on (or liquidate it) than be stuck in a situation where you run out of stock during the hottest sales time of the year.
But today I wanted to talk about the future of Amazon and the future of Amazon FBA sellers.
Is there a future at all for us on Amazon? I mean, what will happen five, seven or even ten years in the future? Will Amazon be around? Will the opportunity for small-time traders to make money on Amazon disappear? Will Amazon take over EVERYTHING?
As we’re approaching the year 2020, I know that many of us wonder what the next decade of eCommerce will look like, so let’s try to look at all these questions logically and find some answers.
The future is Amazon
and the future is NOW!
Yes, that is a very bold statement—but I truly believe in it! Amazon is SO DOMINANT in the eCommerce space that over the next 10 years, I believe it will only grow stronger and stronger. Because, WHY NOT? They’re doing everything right for the customer, they innovate, they are cash rich, they have twenty-five years of consistent growth behind them and, most importantly, there is NO ONE at the moment who could even come CLOSE to taking over Amazon’s position in the marketplace.
In Europe and the UK, we don’t hear about it that much, but in the US, retail giants like Walmart, Best Buy and others have spent BILLIONS of dollars on their online retail operations—and where are they now? Nowhere!!! Meanwhile, Amazon is building their very own airport, getting Alexa into homes around the world and hosting the world’s largest fulfilment network.
The Amazon we know today is not just an online store. They have a super successful web services (AWS) business, they created the Alexa devices that are used in homes across the world, they have Kindle, Prime Video/Music and all kinds of other services and products. Kindle is a prime example of how Amazon won the eBook game, big time, as all the other eBook readers are taking only a very small percentage of the market.
Jeff Bezos has built an ecosystem no one can match—not even close. Keeping customer satisfaction as their primary goal has simply worked out. Easy online ordering, good prices, fast delivery, easy and hassle-free returns—what more could you ask for, right? Now, you, as an Amazon FBA seller, may not like how Amazon handles returns, for example, but guess what? That’s your problem. Amazon will always do what is in the best interest of the customer, and that is one of the reasons why they are the number one eCommerce brand in the world.
I do think that one of the key reasons why Amazon is so successful and will become even more successful is because they have the FBA program. No one else does this at the same scale—not even close! Yes, Shopify recently announced that they will launch a fulfilment program, but it will be more like a fulfilment service for sellers and they will most likely use third-party service providers for this.
If you think about the logistics side of the business, the way Amazon has built theirs is the RIGHT way to do it! Even from an environmental point of view, you can buy all the products you need from ONE place, get it delivered by one courier, ideally in one box. If you order multiple items from multiple online stores or marketplaces, they will all be packed and sent to you individually, which surely is NOT the most economically or environmentally friendly way to do it.
In the next decade, delivery speeds will increase significantly. Same-day deliveries will become the norm, and with the expansion of Amazon’s air fleet and airports, next-day international deliveries could even become standard. And if you live in a major city, you will be able to receive your goods within a few hours. This is not a question of IF it will happen, but WHEN. Be it through drones or some other automated delivery system, this will happen.
Virtual reality should also become mainstream in the next decade, but I don’t think it will happen in the form of the devices we currently know of. They’re simply not practical. What we need are “glasses” that look and feel exactly like our everyday glasses, but with built-in VR or at least AR capabilities. The ultimate endgame, of course, is brain implants—or at least invisible lenses we can wear and use to “connect” to the internet—but I don’t think that will happen on a mass scale over the next ten years. Fingers crossed, though, Black Mirror fans! 🙂
Basically, Amazon has accumulated such a MASSIVE and loyal following and they’re so far ahead in the game compared to others that I can’t see this direction changing any time soon.
They will only grow bigger and bigger, dominate even more international markets, and attract more and more customers. So, the platform will be there and the customers will be there. The question is: will we, as Amazon FBA sellers, still be selling on the same platform in the year 2030?
This question is intriguing, and it will be super fun to come back and read this post in 2030! I have already set a reminder in my Google calendar about this, but will there be a Google in 2030?
Anyway, the main problem that sellers are potentially facing is a scenario where Amazon begins to take over everything. They optimise their supply chain and basically squeeze out all the FBA sellers and start selling everything directly. If that happens, they no longer need us, right?
Personally, I don’t think it will happen, and here’s why.
Why Amazon Won’t
Take Over FBA Sellers!?
Amazon has already launched dozens of brands in various product groups. Amazon Basics is their best-known brand that offers household goods, small electronics, pet supplies and other items. I know that many Amazon FBA sellers are scared that Amazon will eventually take over everything, but I don’t foresee that happening.
In my opinion, there are two very good reasons why:
- They can’t do everything on their own;
- They make TONS of money from FBA sellers!
First of all, there are MILLIONS of products listed on Amazon! MILLIONS! Imagine how much manpower Amazon would need in order to get into each and every tiny niche and sub-niche. They would need to do the branding, sourcing and everything else to properly launch a product under their own brand. It’s simply not possible.
Yes, they do enter the most obvious markets and spend resources on those, but it’s only a tiny fraction of the whole marketplace. Also, just because Amazon starts to sell something doesn’t mean that they prohibit others from selling the same item. While Amazon Basics batteries provide great value, there are still lots of people who choose the much more expensive Duracell brand.
And the same thing will happen in any product category, unless Amazon really takes over everything and simply BANS third-party sellers, which I don’t think will happen at all. Why?
Because third-party sellers like you and I make Amazon a lot of money. BILLIONS of dollars every year, in fact!
Amazon has now reached the place they have been working towards for years. They have built a PRODUCT search engine that gets more searches for products than Google and they are MILKING that opportunity by selling advertising to third-party sellers. This approach is much more lucrative than selling the actual physical product itself.
Let me give you an example to illustrate my point. Let’s say Amazon sells a water bottle under their own brand. As it’s an Amazon brand, the bottle is cheap and sells for £5. Let’s assume that they make £2 profit for each unit sold.
If they ban all other water bottle sellers from the marketplace, they will make a £2 profit on each sale and, at the same time, will have very limited options for customers to choose from (as they won’t be able to launch hundreds of various types/styles/colours/sizes, etc.). Inevitably, with the limited options available, the customer satisfaction rate will go down.
What is also missing in this scenario is the ad revenue from PPC advertising, which can actually generate a LOT more money than selling the bottle itself!
For example, if a click in that niche costs £1 (which is a very conservative estimate; it’s most likely more), and 20% of customers convert, it takes an average of five clicks before a sale happens. This means Amazon would make £5 on that sale WITHOUT doing anything!!! Without launching their own product, without dealing with branding, sourcing, etc.
This is a simplified example, but I hope you get the point. For Amazon, it’s much more lucrative to charge sellers for paid clicks than it is to sell the product directly to their customers. Plus, as I have already said, a lively marketplace like Amazon offers customers much more choice, which is more beneficial to their business in the long term.
So, with all this taken into account, I’m not worried at all that Amazon will take over from FBA sellers and put us out of business. It’s simply not in their best interest to do so.
However, there’s a much more realistic threat on the horizon that we should be worried about…
It’s inevitable: the more popular Amazon becomes, the more sellers it attracts. This means competition is only increasing.
You have to understand what you’re getting into. This is not 2010 anymore, when you could simply source something from China, list it on Amazon and make money while drinking margaritas on the beach. Sorry, if you’re looking for quick and easy money, an Amazon FBA business is not for you.
That doesn’t mean it’s impossible to launch a successful Amazon operation. What I’m saying is that only the SMARTEST and HARDEST working people will survive. You won’t believe how LAZY and uneducated most people are when it comes to this. They think they can quickly find a golden product, source it, brand it and launch it on Amazon within a few weeks.
They’re not willing to put the time and energy into proper market research, really studying what people want, how to improve products, how to find the best suppliers, how to create a brand that is a BRAND and not just a logo, and so on. Then they go onto the forums and say that it doesn’t work and Amazon is too competitive.
Yes, it is competitive. Only the fittest will survive in this game. If you’re not ready to work, don’t even get started. Get a job.
Then there are a bunch of people who blame the Chinese sellers for everything. Again, I don’t agree with this. On Amazon, Chinese sellers actually don’t have that much advantage over someone who is based in the UK and selling on Amazon UK. They still have to pay FBA and seller fees and advertising fees, just like everyone else. PLUS, they have to register for VAT from day one, unlike people living in the UK, so I could even say that they’re at a disadvantage.
Yes, they can source the products cheaper, but you have to understand that when you sell on Amazon, the product cost is actually only a small portion of all the costs incurred. It could be that you source a product for £5, sell it for £19.95 and pay £10 in FBA, seller fees and PPC costs. Chinese sellers could maybe source that product for £4, but it doesn’t make that much of a difference really.
Plus, they’re still far behind us in terms of branding, which is something you can really nail if you put some time and energy into it.
Competition is real, though, and apart from being the BEST at what you sell/do, I believe that right now there are two other ways to find your way on this marketplace with less competition. These are:
- Niching down
- International markets
Niching down means that you’re going after products that are very small in terms of demand. Usually, this will be just a few thousand pounds per month. Such products often don’t have much competition because many sellers think “the demand is too small, it’s not worth my time.”
But it actually is. If you can launch a product in a market with little to no competition, get organic top rankings from week one and make 100 sales a month for that product, netting you £300 a month, why not do it? Yeah, it’s not millions, I know, but it’s a much safer way to start an Amazon FBA business. Plus, you could potentially launch dozens of such “small-demand” products over time to build up a full-time income.
The second opportunity lies in the international Amazon marketplaces, especially in Europe. It’s like day and night compared to Amazon US and even Amazon UK. There are LOTS of opportunities in Europe, and if you’re willing to deal with the whole VAT registration thing, it can be very lucrative. Personally, I have started selling in Europe this year and have seen that it is super easy to get sales, PPC costs are low and, in general, the competition is not really there—yet!
I say YET because, from 2021 onwards, the VAT situation in Europe is planned to change. It will become much easier to do business and manage VAT as it will all be centralised. So, the next year is the perfect opportunity to get ahead of other sellers and build up your rankings and reviews. Then, when 2021 arrives, you will already have an established presence for your products on the European marketplaces.
To sum it up, competition is a real thing and you have to accept it. Work hard, work smart, be the best—always. And take opportunities as they come.
Today, those opportunities are international markets and niching down. In five years, it could be something else, but there’s ALWAYS an opportunity to get into the game if you’re willing to work hard and be smart about it.
Ok, so far, so good, right? I mean, nothing we have covered so far indicates that Amazon could go out of business, right? But, could they?
WHY Amazon won’t end up
like Nokia or Kodak!?
This, again, is only my opinion, but I do think that Amazon is smarter than that. Times have changed. Companies like Amazon, Google and Facebook hire the smartest minds in the world. They’re always heavily invested in future technologies, and I do think that the Kodak scenario is totally out of the question. The people working at Amazon, especially those at the top with Jeff Bezos, are simply too smart to not see a major shift in the eCommerce world, like a huge competitor coming along, etc.
Yes, I know that even Bezos said that “One day, Amazon will die”, and it’s true. One day, it will fail and go out of business, BUT it won’t happen over the next decade (unless something really terrible and unpredictable happens).
Amazon is now taking more than 50% of all online sales in the US, and this is growing every year. They grow double digits in international markets, and their web cloud service (AWS) takes more than 30% of the US market and growing. They’re way ahead of everyone in terms of their distribution and logistics network—so why would they fail now? Why?
Yes, there’s always a chance that a market disruptor will gain traction and change everything, but let’s not forget that Amazon is a disruptor too. They totally changed the book space and now completely dominate the eCommerce world. They disrupted traditional retail, and the next wave will be something totally different.
It’s not like Amazon is the yellow New York taxi waiting for Uber to come along and put them out of business. No, Amazon is the Uber, and that puts them in a much safer position—at least for now.
I know that new technologies will come. It’s not a question of IF, but WHEN. But I also believe that Amazon will keep a very close eye on such developments and be amongst the first to get into whatever the new game is. They have NEVER been afraid to experiment and innovate. They launched the Alexa home products long before it was even a thing—in fact, they made it a thing!
Jeff Bezos has always been obsessed with identifying and meeting customer needs. That’s what built the Amazon marketplace into what it is now. It’s very unlikely that they will miss the next wave of eCommerce, like Kodak missed the advent of digital photography or Nokia missed the early signs of the smartphone era.
And that’s about it. Those are my thoughts, opinions and projections on the future of Amazon FBA sellers for the next decade. I believe that we still have the greatest opportunity of our time in front of us. With a very small investment, almost anyone can start a business from the comfort of their home and be successful. Yes, many people will fail in their attempt to do it, but most of the time, it’s their own fault.
Right now, Amazon is the safest ship to sail with and I’m staying my course. Every day, I’m spending time thinking about ways to improve my products and my interactions with customers. My goal is to be the best in the game, and I recommend you do the same.
You have no choice but to be the best. I’m serious here. As the years go by, more and more people will enter the game and, in order to survive, we will all have to adapt and change along the way. I guess it all comes down to what type of person you are: a complainer or fighter. It’s hard for complainers to do this because there is SO MUCH to complain about and so many things you can blame your failures on. It’s hard. I get it.
Fighters will keep fighting, that’s how it goes. I have been doing this for more than 15 years now, and I have seen how Amazon has risen and taken over the world. Things change all the time, but I have always found ways to adapt and stand out. You can too. You have to.
The purpose of this article was to work out if Amazon FBA sellers will survive the next decade of eCommerce. The answer is: yes. Amazon will still be around for years to come.
They won’t take over the third-party sellers because we make them too much money. However, competition will continue to increase, so only the fittest will survive.
It will be interesting to see what happens when the next big recession hits the market, though. How will Amazon handle it and how will overall sales change? Maybe we’ll see the first DECLINE of online sales since…hmm, ever? Could be.
I didn’t talk about eBay, Etsy or Wish in this article as I don’t see them as a real threat to Amazon. I do think that these companies will continue to do business in their usual way within their own niche demographics:
- eBay – place you buy/sell secondhand goods
- Etsy – the marketplace for handmade, rare or design items
- Wish – website that sells cheap, crappy products
And there will be more. The only site that actually had a chance against Amazon was eBay! But they lost that game through poor management decisions, slow implementation of new features, not listening to customers, etc. I don’t think they can turn it around anymore UNLESS they completely change their whole strategy and basically create an Amazon clone under the eBay brand. Still, it would still take them MANY years to turn the “behemoth” around, if it’s possible at all.
I would LOVE to hear your thoughts, opinions or predictions on the things I have covered in this post. Please leave your comments and questions below and I will personally reply to all of them within the next 24 hours, Mon-Fri.
If you would like to learn more about what I do in the Amazon FBA space, check out my Amazon Sharks program, where I personally teach people how to start and run a successful Amazon FBA business that survives the next decade of eCommerce!