In the aftermath of this apparent revelation, a plethora of advisors,
companies, and even an entire industry have risen up around the
basis of managing or helping to manage FBA and its associated
inventory. In short, FBA has become the focal point for nearly every
marketplace solution provider in existence since it was popularized
by this Buy Box hypothesis.
But what if they are wrong? What if the belief that FBA is essential
is, itself, incorrect?
Today, there are more than 488M unique items listed on the Amazon marketplace. The pace by which product offerings are growing on Amazon exceeds 200% annually. Yet the staggering fact is that no more than 17% of these items are sold from Amazon directly or through FBA sellers!
I like to split the products sold on Amazon into three distinct tiers, cleverly named Tier 1, Tier 2, and Tier 3. Tier 1 includes the top selling items of the top selling brands in the top selling categories. This represents Amazon’s best sellers and fastest movers, including exclusive brands that are unavailable to most sellers. The demographic of the sellers that sell Tier 1 items is mainly Amazon themselves, as well as a handful of authorized sellers – all FBA. Tier 2 items still represent bestselling items, but are a notch below Tier 1 items in terms of accessibility and exclusivity. Like Tier 1, most of the sellers are FBA sellers as well as a slightly less prevalent Amazon direct presence. Tier 3 items cover all the rest of the product spectrum which, as noted, represents the vast majority of the items listed on Amazon. Unlike the first two tiers, Tier 3 sellers are rarely Amazon direct or FBA sellers. These items are not FBA friendly, and thus for the most part offered as FBM (Fulfilled by Merchant) items only… and this is where the real opportunity lies!
We all know the upside and the opportunity that FBA offers sellers.
I would like to shed some light on some of the downsides of FBA: