FBA-Mageddon – Bullshit Or The End of FBA As We Know It?

So. I assume you have all seen the following:

Peter Valley from FBAMastery.com

Ryan Grant for Online Selling Experiment

And the one that started the hysteria.

Lisa Suttora – Patient Zero


So essentially what I am reading is this:

Amazon is restricting products that either have low sales volume or a high number of suppliers. If you buy these items, you will not be able to send them in.

If I could yell while typing, I would say this:

IT’S ABOUT DAMN TIME!!!!!!

Yep. I said it. It’s actually a good thing.


Remember how I have always stressed that the people that will succeed in online selling through FBA are the ones who understand the economics behind it? Here is a perfect example.

Now let’s bring this full circle and talk about why this isn’t the end of FBA as we know it. 

  1. If a product has a low sales volume, that means that the demand for that items is very low. There are two ways to fix this: Lower the quantity supplied to bring us back to equilibrium or decrease the price to move along the demand curve. For those of you that hate economics, here is the real world version: These items aren’t selling, so we don’t want you to take up space in our warehouse. 
  2. If the product has high competition, that means a ton of sellers are going to be on that item. This starts to bring about a perfectly competitive market where marginal revenue is equal to to the price. This means we have reached equilibrium and the price is at the point where some suppliers are actually just breaking even. For those of you that hate economics, here is the real world version: They are restricting you on items that have a high number of sellers, where 1 seller could start the race to the bottom.

In either scenario, we see that Amazon is not trying to screw the third party seller (even though most people would say that they were doing that). They are actually giving you signals that a product might not a good idea.


You may ask yourself: Why would Amazon try to regulate the marketplace and artificially reduce supply or increase demand?

Well you could ask the same thing about the government……

In all honestly, there will be some profit that is lost because of this new regulation put in place by Amazon (typically refer to as deadweight loss). This is the result of an outside regulation that puts the market out of equilibrium. It happens all the time.

Amazon is in the business of making money. If they can incentivize you to find items that can’t be found through traditional means, everyone is better off.

Yes. Profit is lost in the deadweight loss, but it’s not something 95% of us will even notice. There a select group who will be hurt and I would expect those people to look to secondary marketplaces (such as eBay).

This is why I can’t stress it enough.

You need to understand the economics.


Here’s the bottom line:

The whole business model of FBA isn’t dead. The idea of flooding the market with easy to find items and/or items that no one actually wants is dead. And guess what? There wasn’t a huge amount of money to be made on that side of things anyway.

Stop freaking out and start actually doing some logical thinking before you thinking the sky is falling. Everything is a ok.

Note: I can’t guarantee it will be like this forever, but you should always always always focus on multiple streams of income.

CW

 

3 thoughts on “FBA-Mageddon – Bullshit Or The End of FBA As We Know It?

  • March 22, 2016 at 12:00 pm
    Permalink

    I agree with everything in the post. But here is my problem with it. We have no way of knowing (at least at this point in time) what items are restricted when we are sourcing. I had a shipment of shoes on the way to me when this all occurred and 2 pairs of the shoes were restricted when I went to list them. These are pretty high ranking shoes (11,000) with very few FBA sellers. I tried to send them in a couple days later with no luck. How are we supposed to know when we are sourcing what is restricted and what isnt? Do we need to add every item we want to source to an actual shipment to see if it’s restricted? That will add a ton of time to OA and will be almost impossible while doing RA. Thoughts?

    Reply
  • March 24, 2016 at 2:24 pm
    Permalink

    I’m having this same problem. I bought some shoes with a sales rank of 1000 and at the time only had one FBA seller. Once the items landed at my prep center I began setting up my account so they could send it to FBA and received this notice about not being able to send the items.

    There are currently 3 FBA sellers at the moment. I’ll try waiting it out to see what happens. Worst case scenario I have them send it to my address and I sell it on Ebay.

    Reply
    • March 26, 2016 at 11:40 am
      Permalink

      It took a few days but Amazon finally approved my product to be sent in.

      Reply

Leave a Reply

Your email address will not be published.

*