Bezos’s annual letter shows what’s wanted is rapid growth at any cost.
Source: Zappos on the Chopping Block
Shelly Banjo is a must follow on Twitter. Today she posted an article that analyzed the annual shareholder letter from Jeff Bezos. In this letter she made a prediction that verified what I have been discussing with anyone who will listen.
Amazon is a parasite.
I should really create a video to go into greater detail, but her prediction that Zappos would be next on Amazon’s chopping block as a company that would be sold off, or cut off, makes perfect sense.
Let me explain… I built my entire business on Amazon. For years the platform was great for independent sellers. About two years ago this began to change. Like I said I need to explain this in a video because it’s easier to understand via verbal communication.
Well I guess that wasn’t easier at all. There is so much going on here, that I need to do a series of videos, but I think watching this is important. It’s a true business discussion on resale. In particular launching your business via third party outlets.
Many sellers aren’t aware of their profit margins and how those margins are hampered by Amazon policies.
Here are the main points I failed to discuss in the video:
- Amazon does not allow interaction with your customers unless the customer contacts you. All e-mails are monitored and you can not share your personal website or e-mail with your customer. This means you can’t really build a database of customer contact to do flash sales or a newsletter.
- You can’t call your customer. If Amazon does find out that you called the customer they will flag your account.
- You lose 15% of all sales. There isn’t any business model that is a serious business that can sustain a 15% loss.
- Amazon, to Zappos detriment, can now sell footwear and they have a clear understanding of how to sell based on all of the information that shops like mine have provided over the last 7 years.
- Amazon is launching an athleisure company. Don’t think for one moment that they won’t be making footwear soon. Especially with the introduction of 3D Printed footwear.
- Amazon FBA takes on third party footwear from its marketplace people and they don’t monitor or have any idea of how to check for fakes being returned by customers. They don’t check the product at all. It simply goes into FBA, but the marketplace is held accountable if a customer complains about the product received.
- At any point Amazon can change the policies and make a change to the software that could wipe out your entire store. This happened to me in January. I had over 500 listings that had to be recreated.
- It makes sense that Amazon would remove a third party that they owned in Zappos. The revenue generated by the company can be replaced by either more marketplace sellers, or Amazon can carry the products.
- When you sell a pair of shoes via Amazon you don’t have access to your funds for 18 days. Amazon pays out every two weeks. Let’s say you buy 10,000 dollars in a product on Sunday April 2nd, and it sells and makes 13,000 dollars on Monday April 3rd. Which could happen. If your two weeks had just ended on Saturday April 1st, you wouldn’t have access to your 13,000 until Tuesday April 18th. Unlike your own website, or Square Marketplace which would give you access to your money on the following business day, you can’t grow your business at all.
- The imminent threat of losing your account due to feedback beyond your control, due to a policy violation that may have been unintentional, due to canceling orders, or just at the whim of Amazon creates an undue amount of stress on you and your business.
When Shelly Banjo states that she thinks Zappos is on the chopping block, I think it may be one of the biggest predictions and it shows that it’s not only brick and mortar that is being consumed by A to the Z… it’s pureplay/ecommerce platforms big and small.