Amazon's easy to use marketplace is the only online medium that has ever worked out so well for companies that make products but are not savvy in e-commerce. The profits from Amazon are giving these businesses the opportunity to dip their toes in e-commerce.
The real advantage to the world from all of this is just starting to appear: In every example that I know, the manufacturers are now getting the confidence to start seriously selling directly outside of Amazon, because of their experience on Amazon.
Hmmm. Are they concerned about marketing? That seems to be where Amazon provides a ton of value--aggregating a tremendous number of customers that are shopping. A manufacturer's website won't have the same traffic, right?
My experience with FBA was very positive and actually made me consider finding something to sell. For me the main advantages were a) if you sell on Amazon using FBA, you get to use Prime services and people will preferentially choose that over 3rd party sellers on their own b) Amazon will (for a small cut) deal with all the shipping, packing, returns and so on. Shipping was pretty cheap and the UPS van picked up the stuff directly from my house.
It's so heavily automated that aside from the initial shipment to the warehouse - I don't believe you're allowed to dropship direct to them from China - you can sit back and forward parcels to them and they'll do absolutely everything else. The small overhead in warehouse and handling fees is well worth the peace of mind I think.
To me, it's a bit like the relationship between an author and a platform like FB or twitter. Whoever owns the customer relationship is in the driver's seat.
On the other hand however, this is everything that's wrong with Amazon. This feels messy and like wild west ecommerce. If I, as a customer, wanted to shop with little to no curation I'd do that at eBay. Since I'm rarely interested in buying that way I'd prefer Amazon to focus on quality products instead of setting up a free for all environment.
The problem is, what happens when someone buys 100 reviews? If there was marketplace curation - wouldn't matter, still only 4 listings for SD card 16gb. But with 600 people competing and buying reviews for SD cards? Who knows what shows up as the highest reviews...
FWIW Amazon has 1,826 results for that query, and Jet has 35. I am sure Amazon has more unique products, but not that many more.
Nice to see all the steps laid out, it's impressive how smooth the process can be for manufacturing and selling something these days.
That's why many folks use freight forwarders who break out, wrap, label, and send the items to Amazon.
In answer to you question: They do sell on Amazon FBA themselves. More and more so in the last year. In fact, in the seller center there are two choices for language, English and Chinese. That is why I suggest focusing on creating your own products or improving on existing ones rather than just reselling stuff from Alibaba.
Even then you need to do your own marketing. As a consumer in your own market place you should have an advantage over a Chinese seller who can only speak broken English.
It's also worth pointing out that these factories aren't in the business of creating brands. They're in the business of mass producing other people's brands. As such the more people who work with them the better, regardless of where they plan on selling the final product.
The opportunity is in creating your own products and brands and selling on Amazon. In that sense, you already have a valuable business model that would exist without Amazon, but FBA is just a great sales channel and platform for doing that selling directly rather than traditional means of selling to distributors, retail stores, etc.
If you have not sold on Amazon you do not understand the scale of their platform.
If you are interested in getting started I would recommend going the retail arbitrage approach first. It is a great way to get your feet wet without much risk. Trust me you will be amazed.
Unfortunately, many sellers of new products take the easiest way out, and go to Fiverr or a similar service to pump up their product with dozens of fake reviews. A few also use fake reviews to bring down competing products. It's a broken mess that misleads buyers and hurts legitimate vendors.
I totally agree with you that the Amazon review system needs a complete overhaul. I've had fake reviews from competitors damaging my sales, and have seen people get hundreds of reviews in a few hours. The issue is that it's too easy to leave a fake review (you don't even need to buy the product), and too few customers leave a real one. Less than 1%.
Amazon reviewers who get discount codes or free samples are required to disclose this information in their review.
When I hit the top 1000 reviewers on Amazon Canada, I started to get offers for review samples, and as my ranking improved, I started getting even more offers, with most of them coming from Chinese vendors.
1. China isn't the only place to get stuff made. Look locally. We manufacture our products, as well as products for two other companies who also sell partially on Amazon. You probably have local contract manufacturers like us who would appreciate a chance to compete with China. We use lots of automation, and we are cheaper than China on heavier metal goods (over 20 lbs). We are also cheaper in small runs, or MOQ is typically 1; in China it is often 1000. You probably have someone near you that can do the same.
2. Getting a hit product isn't easy. Mostly it seems to be luck. Manufacturing is like software development; sometimes you have to iterate for a while before it all clicks with the customer. Once it clicks, its off like a rocket. One basic path to a hit product is to create a product that is a combination of others. I have a friend who makes a kit out of a bunch of specialty tools for EMT. His is the only kit on the market and is a great seller for him. Another friend had great success with an automotive accessory this Christmas season on Amazon. He sold up to 50 units a day, that season he sold 3000+ units. He was #1 on the “top seller” list. Don’t forget that he had to have 3000 units in stock before this; that is a huge gamble if you are just starting out.
3. Having a hit product isn't easy to manage. Once you get a hit product it goes 0-1,000 real quick. I had to manage 50-100% growth per month in the first year of manufacturing. Per month. With a product made out of steel. If your hit product is coming from China, I hope it is lightweight because you will end up air freighting it constantly. I once air shipped a 1000 10 mm bolts with a special head from China and it cost me $1000 in fees, $1 in shipping per $0.13 bolt. If you ever run out of stock, you will fall of the "top seller" list and your volume will plummet. China can take 3-6 months for a restock order to get made, shipped, through customs and onto Amazon warehouse. How do you keep stock for 3-6 months on hand? My friend who sold 3000 units before Christmas, he had to ship those units to Amazon FBA well before then and pay storage the whole time. The storage is sold by the cubic foot, and he had thousands of cubic feet to pay for at elevated Christmas rates.
4. Single Point of Failure. If Amazon suddenly decides that they don’t like you, sales can go from 100-0 instantly - and now you have money tied up in product, fees in storage, and no cash flow. Even if you have multiple channels, Amazon will be a BIG customer. They are about 10% of our business, and if they disappeared tomorrow it would hurt. If they are over 30% of your business, getting shut off could mean bankruptcy for you.
5. Building a brand is hard, and a different skill set than manufacturing. The article is correct that there are thousands of manufacturers wanting to build stuff for you. How well could you build a brand in a foreign country? Especially if you are a manufacturer (focused on efficiency) and not a marketer (focused on A/b, Social, advertising)? This is why the Chinese manufacturers are happy to let a marketer take on the risk of developing a brand, seeking out a customer base. As a USA based manufacturer I am happy to make whatever you want too! We take Visa, Mastercard, Paypal, Bitcoin …..
The article is fairly complete though, I believe the author has actually done this stuff.
One weekend I had a surge traffic to my website. Then the orders started coming in. Finally I emailed one of the new subscribers to my email list to ask why scores of people had suddenly started searching for that term. She said a radio show host had told his listeners to go to google and search for that term.
Agree with your points about working locally. Arizona Archery's main business is injection molding; they take care of most of the my machining. Maybe I'll come see you some time.
My friend had his product featured twice on the John Oliver show on HBO. Total sales from that? 1 item!
NSFW John Oliver clip https://youtu.be/Vwkqh3lCgvw?t=2m22s
Do you also get discovered through Alibaba or is there some U.S. equivalent version of the site?
I'd love to try someone local for some prototypes I'm building.
Another is by web search: "contract manufacturing <city name>", "injection molding <city name>", or "machine shop <city name>".
If you know what kinds of stuff you want to make, look for someone who builds similar stuff and ask if they take outside work. Some will, some won't.
The manufacturing communities can be fairly well knit also, so if the first company you call can't help you, they might know someone who can.
I'm in the process of making a physical product: a new quick-release plate for DSLRs; I did find a manufacturer in China for CNC machining and had a couple of prototypes sent to me (in France), which were of very good quality.
The problem is however, the final product will be made of several parts from different manufacturers: the plate, a rubber pad, screws, washers, a box for "clean" packaging, etc.
Are there factories that specialize in assembling/boxing a product, and what would the proper keywords be in order to look for them?
Very helpful to see the steps laid out. Thank you