So. I assume you have all seen the following:
And the one that started the hysteria.
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.
- 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.
- 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.