Amazon plans to kill FBA and FBM (except Chinese FBM sellers). How should we prepare?

Selling on Amazon
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Hi fellow sellers,

I’ve been wondering for a while about why Amazon has been introducing many new fees lately: low inventory fee, inbound placement fee, etc. On the surface, it looks like Amazon wants to make more profit from new fees. However the increasing fees will only be passed on to buyers in the form of increasing prices. Higher prices will make Amazon less competitive against other marketplaces and online sites in the long run. I couldn’t figure out why would Amazon sacrifice long term e-commerce dominance for short term extra profits… until I learned from another famous Amazon seller/YouTuber yesterday.

He explained that Amazon is losing its market share to Temu and Shien. Many items on Amazon are offered on Temu for less than half the price. One extreme listing that he showed was a door mat that is selling on Amazon for $39.99 and only $3.99 on Temu. Yes, exact same mat for 10% of the Amazon price. The economy is getting worse and people are losing jobs. Many of them are willing to wait 10-14 days to buy at 90% discount. To fight back, Amazon is opening a new platform that will ship directly from China. The roll out will occur in stages starting with unbranded clothing and small household items priced under $20 and weight under 1 pound. Amazon is rounding up Chinese factories to sign up with this program. It’s estimated that at least 50% of items on amazon.com will be on this new ship direct from China platform. Basically Amazon is adapting from the FBA and FBM (except ship direct from China) business model to Temu’s business model. That’s why Amazon is trying to squeeze every last dollar out of sellers without worrying about long term damage.

Ok, I don’t want to make this post too long. I would post the source YouTube video URL if I’m allowed. What do you guys think? Is the end (for non-Chinese sellers like us) near and what to do to survive? Please share your thoughts. Thanks.

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  1. Retail is always about adapting to the environment.
  2. Never put all your apples in one basket.
  3. Every race horse gets tired and needs to be replaced.
  4. Never get involved in a race to the bottom.
  5. Just because they say it will doesn’t mean the sky will fall.

Just this week, Google approached us about getting back on their bandwagon. It’s making us rethink our allocation of time and funds.

Yet that sunset through the retirement door is so ever tugging on our heart strings.

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Thanks for your reply. Are you talking about Google Marketplace? I’ve never tried it. Is it worth it?

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While what you’re saying may be true, I’m not convinced.

Amazon always has a good reason (for them) for doing what they do.

My 2 cents on this is they are trying to push low volume sellers out of FBA.

If you have volume, you can navigate all these new fees and actually benefit.

We have yet to pay Amazon a penny in placement fees and we manage our small assortment well (no low inventory fees either).

FBA fee was reduced when the placement fees started. Our profitability has gone up not down this year and I suspect we are not alone.

What Amazon did with these new fees is made it harder for smaller sellers who they do not want in their FBA network to come on board or survive if they already are on board.

ETA - With the new fees, it put my other selling account (business) out of business. Working through the last batches of inventory we sent in on 2-29 now and that’s that.

Case and point to the above.

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I think this will be an opportunity for trade groups to consolidate and make their own systems/catalogs/platforms. Many of the larger brands are exiting or have been declining from Amazon as Amazon pushes toward the cheap Chinese junk business model, I could see various industries making their own platforms.

I think there is a huge opportunity for major brands to make their own platforms using their dealer/distributor networks. We see this with tractor/mower parts where a simple Hustler mower belt will be on Amazon using one picture with crap descriptors and a price point 50% higher due to fees and only 3 dealers in the country on Amazon and be on page 3.
We noticed a lot of dealers simply do not participate in this type of business because just like my grandmother thought online banking caused cancer.

We see the same thing in our own organization. We have 4.5 locations but they all have different inventory, yet combined they cover the entire country as good or better than Amazon. Getting the luddites and mini emperors at different geographic locations within the organization to reach for a common goal is the hard part.

We are lucky that we have a core business that cannot be facilitated online due to logistical and service technician requirements. Not too many offers for a Land Pride AG1584 or replacement parts on Amazon.

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I read somewhere recently, and wish I could remember where so I could see if it was a legitimate source, but it said something along the lines of that third party vendors make up 60% of products sold on Amazon.

I can’t think any company would think it would be a good idea to expell 60% of its marketplace, when Amazon has built it’s brand on offering everything you can think of.

Overall I think they are looking to reduce risks in certain areas. They don’t want to store items for ever, so that’s why we are seeing FBA fee’s going up. Amazon is not in the “Long Term Storage Game”…they want items in and out asap to make room for more items that go in and out asap. They don’t want to keep building warehouses to store items that are not selling.

Let’s take a closer look at the items that are not selling: I have to wonder how many of them are ‘duplicate’ items. Is your item not selling because you were seller A to import first, but then seller B came along with better branding, or an ability to sell the item for 50 cents cheaper? If you have 20 people selling the exact same thing…then yes you can afford to get rid of 60% of people selling. For a long time there were “youtube guru’s” and people selling guides on “how to get rich quick on amazon” which basically consisted of yes…buying product, and shipping it to FBA. These are people who have no knowledge of any sort of business skills (hence falling for a get rich quick guide scam to begin with). There is probably a TON of people’s ‘hopes and dreams’ rotting away in an Amazon warehouse.

Most big giant businesses selling on Amazon…already have their own logistics network and don’t use FBA as they are selling on their own websites, and other marketplaces such as Target/Walmart. Amazon is not worried about those people at all.

I highly doubt Amazon will get rid of FBM because of this. They get a cut without even handling inventory. That’s free money for them. They probably also get a cut if shipping labels are purchased through time. I can’t think recently (but I could be wrong) that any recent fee’s have all been FBA and not FBM?

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Is it because all your inbound is small parcels?

Excellent! I couldn’t send in my inventory fast enough sometime and got hit with it :frowning:

Was it because your other selling account smaller (didn’t have enough volume)? Yep, I have to retired many items that don’t have enough volume as well.

Thanks for sharing your experiences.

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Do you specialize platform like ClothStore.com, SupplementStore.com, etc? That would be interesting.

Yep, you’re right. Chinese sellers cannot provide services after purchase (especially locally) like your company does. :+1:

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Thanks for your comment. Amazon is not going to eliminate 60% of its marketplace. They just replace them from FBA sellers (who are basically middlemen) with Chinese FBM sellers (who sell at a fraction of FBA price). Most FBA items are made in China already. So it’s just a matter of switching sellers.

With their new business model (copied from Temu), Amazon wouldn’t have to hold any inventory. Items will be shipped direct from China… The point of the post is not about storage. It’s about Amazon fighting Temu to get their lost market share back. Amazon can accomplish that by working directly with Chinese factories.

FBM will stay but most sellers who benefit and remain will be Chinese factories because they could sell at the lowest cost. They don’t have to pay for things that US FBM sellers pay such as import fee, freight costs, warehouse cost, etc. Also Amazon is helping them to succeed.

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Not all of it. We routinely split 11K unit production runs into 5 equal pallets. Most of the time Amazon says it’s going to 5 places but ends up only being 4 with 2 pallets going to 1. Their system is actually smart enough to recognize that those 2 pallets can actually be 1 and only gives 4 pallet labels.

We do this with single item pallets of equal size as the input for the shipping plan.

So freight ends up being $500-$700 more but we save $2700 in placement fees AND get the reduced FBA fee of 18 cents a unit.

We also sometimes set up 5 shipper SPD shipments for slower sellers using shippers of 144 units each. - 720 units total.

Either way it’s margin positive vs. last year - with LTL obviously being the big winner.

SPD shipments going to CA and NV kill a lot but certainly not all of the savings.

FBA seems to have figured out how to deal with all of this because check in times have greatly improved recently for SPD. LTL is still sometimes faster which is crazy but I think we all know why.

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Agreed. Far too many sellers filling up the DCs with unsellable crapola. I’ve never thought FBA was a good fit for small sellers, and I don’t think any type of used item should be allowed in the warehouses.

I also think Amazon has to be concerned with the possibility of a mandatory breakup resulting from the FTC lawsuit. It’s possible Amazon will have to spin off its warehousing (FBA) and/or transportation/delivery operations into separate companies.

Temu, by the way, said in May that it is pulling back some from the U.S. market. Also, there are A LOT of Americans who do not and will not buy from a Chinese company, for a variety of reasons.

Chinese FBM sellers could not possibly sell all of the items offered by U.S.-based FBM sellers, small and large. Drop shipping has its limits.

ETA: If Amazon wants to lose more market share, all they have to do is start shipping orders directly from China. No way buyers accustomed to same- and next-day delivery will stand for that. (Some book buyers blow a gasket even if their purchases arrive from the UK.)

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This is what I’m counting on. Someone should develop a Chrome plug-in that shows the country of seller on every listing page (just like Helium 10 does). See the green arrows below. I’m sure that some people would avoid buying from Chinese sellers.

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Everywhere you look on Amazon - Made in China - Seller in China

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Certainly you may post it, as long as it’s not any consultant or guru who has been criminally convicted of bribing Amazon employees, or their known associates.

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Thanks Papy :slight_smile: Here’s the source video.

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Very much agree with your assessment.

FBA fee was reduced when the placement fees started. Our profitability has gone up not down this year and I suspect we are not alone.

That’s the case for us as well. We’re using this to our advantage and I’ll be happy to see many sellers who aren’t supposed to be on the platform forced out.

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We were disagreed with and called all kinds of names right up to racist
when we correctly predicted this transformation.

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From what I have read, TEMU is getting lots of new customers and relatively few repeat orders.

Shien is hurting other sellers of low end fast fashion, but their strategy does not scale up to higher priced goods. It is probably hurting used clothing sellers as much as it is hurting H&M and other low end clothing.

I think the new effort is an offensive move to hit Temu and Shien and distract them from trying to move up to compete with Amazons middle and upper class business.

It is another business not a replacement for Amazon’s current business.

Amazon is not going to write off its investments in fulfillment centers and transportation.

If you have low end crap to sell, which is not going to be delivery time sensitive, the Temu model will destroy you. But if your buyers require fast and reliable delivery times you will be unaffected.

If your buyers require consistent products from order to order, you are unlikely to be vulnerable either. Both Temu and Shein use multiple independent factories to supply the “same” product which may not be producing identical product. Temu and Shein are not providing quality control as part of their cost structure,

When I buy cheap Chinese crap electronics, I buy on Ebay because it is cheaper than Amazon, It is usually under $20 and if it fails, I throw it away, Those Temu and Shein buyers have similar throw the cheap crap away attitudes, or they stop buying there.

The sky is not falling.

I regularly see the former FBA products sent in by Chinese sellers when they reach my friendly liquidator. My friendly liquidator is going to have a problem when this new Amazon effort hits. He will lose a major source of product. But a lot of what he buys now gets sold at 90% off the FBA price or gets donated to Goodwill.

Let me touch on the new Amazon fees.

FBA has always had issues with Amazon sellers. The logistics and warehousing professionals Amazon hired and the bean counters at Amazon devised FBA assuming the sellers knew how to run their business, manage their inventory and track their return on investment.

A large portion of them had none of those skills.

FBA fees have repeatedly been modified and creative to force sellers to have those skills. B.F. Skinner would be heartened by the understanding Amazon has of “aversive conditioning”. Do the wrong thing and Amazon gives you a painful shock.

Amazon is unlikely to make further investment in distribution any time soon, They are going to force the efficient use of what they have, If some sellers fall by the wayside that is just fine. That is the way of business, either you have to be skilled or lucky. Skills do not disappear, but luck always fades away.

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Where can I find info about this FBA fee reduction? I’ll be curious to do the calculation see whether my profitability has gone up after Amazon implementing the placement service fee.

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Thank you. Your reply is the best one on this topic! I agree with everything you said and have learned on some points that I didn’t think of before. :+1:

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