In light of the recent discussions over the future of RA [see recent blog post by Cynthia Stine, “Is Arbitrage Dead?“], I thought I would share some thoughts . For those of you who may not know much about me, I have been selling on Amazon full time for a little over 4 years. During that time I have sold close to $3 million, 99% from RA. My business hasn’t really grown as I sold my first million in 18 months and have averaged around $600k a year. As those with me from the beginning know, I have diversified across RA going from Health and Beauty, to Grocery, then toys and now Clothing and Shoes. This has been my way to adjust to the adversities I have encountered. Others have grown their business and many have moved into Wholesale, Liquidation and Private Label. I have written a couple of books and started many others. My latest book will cover my experience from start to finish as I anticipate my voluntary extinction at the end of this year.
I drafted up a chart to explain how I feel about the different modalities of sourcing for Amazon and offer it up here for the Scanner Monkey tribe. The chart is based on Maslow’s Hierarchy of Needs:
Basically in a nutshell, Retail Arbitrage/Thrifting are the equivalent level of Freshman year in college. A necessary component.
For me I am kind of like a black and white photography professor. I teach you to get proper lighting with F-stops and how to pick the right angle, developing film in a dark room etc. I leave the digital and advanced photography to others. Does that mean that if you are going to be a digital photographer or work in animation or another form of videography that you shouldn’t take Introduction to Photography. No, I think it is very important, just as I think it is important for a Neuro Surgeon to have taken Anatomy in lower levels of their education.
Are there photographers who still do black and white photography and develop their own film? Yes, and many are very successful, sought after and very wealthy. However, the trend is leaning towards other mediums and sadly so seems to be the case with Amazon.
“So John, where does that leave us?” For me, business as usual. I am trying to grow my business a little and have involved family in that endeavor. Will I stop sourcing RA because of the possibility that they will not accept receipts from retail stores. Not at this time. Do I see this as another shot fired across the bow? Most definitely. Do I recommend RA as a way to start a business selling on Amazon? Yes! To me it is definitely the right path. What you learn, the product knowledge you gain, will only make you more prepared to be successful at the other levels.
Ok T-rex, like you I am a hard charging RA ground pounder who is selling over $300k a year and just quit my job, what should I do? That, of course, is up to your particular circumstances but as Cynthia’s blog post reads, Amazon ‘may’ take steps that ‘if’ you get inauthentic claims, you will not be able to use retail receipts to defend yourself. What is new? Amazon has been unreasonable in the past and will be so in the future. I have said on numerous occasions that selling on Amazon is basically gambling. To me, a new dealer has just sat down at the table and there are signs he/she may have marked the deck. Complaining to management won’t help, he is management. Do I run crying into the night? Did I when they suspended me two years ago? No, I buckle down, pay attention and try to play by the new rules.
So in summary, RA as a method of sourcing for FBA, may be going by the wayside. Makes no sense to me, but hey, Amazon is a self-serving entity and they will do what they will do. Many are fearful. Don’t be, but be cautious. If you were planning on opening a warehouse next month and hiring five people to do RA for Q4, you may want to reconsider. Growth at this time, may not be the best use of your money. Notice I said ‘may’. If I receive an e-mail or an official policy notification from Amazon that leads me to believe they don’t want my stuff I will slowly move in to other modalities. If I get suspended or see many others get suspended because of Amazon’s new policy I will focus on leaving Amazon totally. Any company that bites the hand of the person that is feeding it which is exactly what would be happening, does not deserve my food.
I am not fearful of new developments, I am cautious. To me the real concern should be for those who are selling non-exclusive wholesale. We have seen how profits have diminished when supply outpaces demand. If large RA sellers start putting their sourcing budget in to wholesale, I personally think that will diminish the returns in that arena. As for Private Label, sourcing from China is like playing Roulette with a .38 revolver. In the past you had one bullet out of five. If Trump is elected, you may see different importation regulations that put a hiatus on that endeavor. (Second Bullet) Also isn’t the whole reason for the discussion counterfeits ? where do they come from? (Third Bullet) Did John just say that! Creating local, American made Private Label items to me would be the best solution at this time.
Once again, this is all opinion and of course may differ from yours. I offer it simply as someone who has seen the ups and downs of business. I wish everyone a most prosperous Q4!
~ John Groleau (aka “T-Rex”)