Ma and Pa store Vs. mighty Amazon

Ma’ and Pa’ Store front — Photo by Eric Muhr on Unsplash

Do they even have a chance?

It has been known fact that newly opened Walmart store kills all small businesses in a few miles range circle around it. Obviously, that applies to the merchants that offer the same or similar kind of merchandise that Walmart has on shelves. For a long time, food stores were “safe” from competing with Walmart but now almost every Walmart has extensive food section so nobody is spared.

This way or another, stores around Walmart face a slow death. According to Internet sources it takes anywhere from 6 months to 2 years for businesses like that to close doors forever.

And then there is Amazon!

But as we are finding out there are worse things than that. A true behemoth that can spoil everybody’s day in moments is Amazon. So if you thought that Walmart is bad for brick and mortar businesses just watch to see impact of the Amazon on ALL businesses! Jeff Bezos created an online monster and that monster is coming to shopping site near you. That means it impacts everybody, everywhere, at any time.

First of all, I must remove my hat to him. He is about 191 Billion times better businessman than me. That is how much that man worths today. He is the richest person in the world and I am … well, nobody.

But things change don’t they? Yeah right! In his favor, I may add. He makes 215 Million a day for the last 12 months! 8,961,187.00 per hour. People with bigger calculators than mine figured out those eye-popping amounts. I never held in my hands more than 10 thousand dollars in cash and that guy makes 8.9 Million per hour. More than I could make in 4 lifetimes. Crazy right?

Nothing good came out of that admiration. Maybe only will persist. Compared to Amazon we are running a micro business. A speck of dust in the grand scheme of things. And we are not asking for much. Just to survive and sustain what is going on for the last 31 years.

When you can’t beat them join the enemy!

Everybody is making money on Amazon, right? So we decided to listen to the common wisdom and did exactly that, sell through Amazon. It didn’t end well. We promptly lost money and got out from Amazon FBA screaming.

What happened were a series of small and larger mishaps that killed it for us. We sell smart cards and accessories. As part of “how hard it could be” test, we opened FBA (Fulfilment by Amazon) account with Amazon Canada. After the account was established we shipped a sample of most commonly sold items. 5 of SKUs in sufficient quantity.

It was more complicated than it sounds but we went through all the steps. We had to purchase unique bar codes. Pre-package items and label them with proper labels.

Each box we sent contained 10 small packages. Two were lost right at the receipt process in FBA warehouse. Never to be seen again. How hard it could be? Open a brown box and count 10 small bags with parts. They were properly packed and labeled by bar code as requested. Still, whoever opened boxes couldn’t complete even that simple task.

Setting a proper price for each item was a scientific project requiring many calculations. Price had to be just right. Not too high and not really low. Just a notch above loss. We agreed that we are OK breaking even just to prove a concept. Next time we’ll get some profit going.

In 3 months we sold 2 (two!) items at an average total price of about 30 dollars. During that time we have promptly deducted storage, shipping, and monthly fees. After 3 months we pulled remaining stock back and closed FBA account. Our experiment cost was about 400 dollars in loss.

It is far cry from what other people who lost thousands. Still, we lost money and learned a valuable lesson. Amazon selling is not for us as it is probably not for 98% of other sellers as well.

It is like supersport, or entertainment industry where only top few make all kinds of money and everybody else lingers on the edge of profitability or disappears in obscurity with a bitter taste of losses.

Photo by Mike Petrucci on Unsplash

Where did we fail?

Again, not easy to pinpoint. We searched through our moves and looked at possible mistakes. We had FBA account with free next day delivery. We priced products less than other vendors. Or at least that is what we believed so. We had inventory available in an FBA warehouse.

We did not advertise with Amazon. Our impression was that the same product will be listed on the Amazon search page in ascending order according to price. That should take care of product listing being on proper place positioned right. It doesn’t even have to be on top but at least be there on the first page and let the buyer decide.

Still, we failed miserably.

Amazon is running an unfair business

Bezos created a monster selling machine. Again, that is to his astronomically sized benefits but everybody else is thrown into the shithole.

As time was passing by we were glued to FBA admin screen but also read many stories and watched many videos about the dark side of Amazon.

For many reasons, Amazon is treating own vendors quite badly. Over months we learned about Amazon unfair practices we didn’t have a clue about. Among many is competing with own sellers. It did not happen to us since we sell something Amazon can’t manufacture, but it happened to many other vendors.

How they do it? I am sure that they have the best reporting software money can buy. They also have a room full of analysts who look into those reports. They take notice of bestsellers, being that a sunglasses or battery cell or beach umbrella it doesn’t matter. They then call China and ask for a competitive quote for that kind of product. Sure enough Chinese welcome such inquiries and better themselves with ever lower prices. For them, the Amazon purchasing agent could be their most valuable caller in the world.

For example, Tesla uses famous 18650 battery cell in all cars they make. About 7000 of them per car. If it’s good enough for the Elon Musk must be good for the rest of us. People buy those for their projects. In thousands. But wait now there is an Amazon 18650 cell … you guessed it right, for less.

Suddenly all vendors that sell similar product fall into the precarious position. They already negotiated their costs with manufacturers. Went through initial orders, problems with shipping and whatnot. They have stock of parts in FBA warehouses. Margins are already razor-thin since they must be listed on the first page of search to start with. And now there is vendor whom they stand little chance of beating.

Vendor, WTH, Amazon is now a vendor? What kind of crap is that? Are Is they a selling platform or they are vendors? Can’t be both. Actually, the ugly truth is that Amazon is a vendor when they want to be therefore competing with own vendors who brought them a success in the first place.

We are feeding a monster

You are feeding a monster that will eventually destroy us. It is truly very hard and risky. Amazon system is rigged in such a way that it destroys small businesses, not builds them up.

Even big businesses have a beef with Amazon. Just yesterday FedEx announced that it will no longer carry packages for Amazon. One has to ask himself why would they do that? Surely not lightly. Business is business but they maybe had a similar dilemma as we do. It is a damned if you do damned if you don’t. I guess little birdie told FedEx that Amazon will compete with them … when? … soon … how soon? … very soon.

Keep in mind that Amazon is not a business opportunity like Uber, where every participant has a pretty much same chance to make money as a next driver. Model is such that it forces vendor into razor-thin margins. Amazon acts as a search engine for products. If you are not on the first page you are pretty much nowhere. Irrelevant to the buyer. Bleeding money on every level.

Monster is out there to destroy you. How? They don’t have geniuses sitting at PC stations inventing great new products. They don’t spend a dime on R&D. They don’t have to. You are doing it for them! They may just copy it if they chose so.

Sales platform like Amazon cannot have an ownership stake with vendors and give them an advantage in the selling process. But they do that as well.

Photo by Tim Mossholder on Unsplash

How much is enough?

You see, Amazon is run by cunning foxes. They thought of everything and enabled every possible venue to squeeze the last cent from the system. Not only that now there are Amazon manufactured and branded products, like batteries, computer parts, bulbs … but they also invested in various vendors that proved to be successful in the first place. So now having a stake in those companies they are getting indirect profit from sales.

The single small vendor simply cannot compete with machinery like that. They sink into obscurity slowly or fast, still paying fees while clutching on Amazon with fingernails.

Ma and Pa fighting back

So after all that doom and gloom what can brick and mortar or cyberspace store do to fight against mighty Amazon?

Find niche products or activity

As life is not hard enough already now business owner must find products that are not being sold by Amazon (yet). Special niche products would fare well in that space. It is easy to check, just type it in Amazon and if it is not there you may have a winner.

Strike special relationship with manufacturers

That is if they are not on Amazon already. Many of them are not and they are pissed at Amazon for killing their business as well.

I wanted to give you an example of 50 caliber bullet bottle opener made by small manufacturing production in the USA. And what you know, there is a full page of those products on Amazon! So not that, something else :(

Emphasize your expertise like there is no tomorrow!

I like this one a lot and honestly, it keeps us busy. There are tons of products that require a certain level of expertise to be used. Let’s say we sell smart cards and if you don’t know what you are doing they are useless. People call in or write an e-mail and ask for advice before buying.

Just remember Amazon comes with ZERO knowledge about anything! They advertise millions of products that are either easy to use or self-evident like a t-shirt. You can’t call anyone to get advice which water filter model is most suitable for your house. You must know that already or know whom to call to acquire that knowledge.

Give good advice

This one is very similar to one above. Here is an example.

Close to home where we live, Stoney Creek, we have a Home Depot (who doesn’t?) nearby. Before moving into the new house we renovated a lot and I had to go to Home Depot and buy parts every day, sometimes 2–3 times a day. We did a lot of reno on plumbing and I go straight to guy in the plumbing section.

His name is Steve and he hangs around plumbing and electrical sections. Exactly what I need the most. Far-right corner in the Home Depot.

He is giving away a piece of good advice effortlessly. I like him so much! Sometimes there is a crowd around him and I have to wait my turn. He saves me money, time and nerves. I show him a picture of the problem on my cell phone and he walks to the shelf and says like “ … you need this and this and don’t forget to put this before …”.

I don’t know how much they pay him but he worths every penny. Because of Steve, I am always back to Home Depot. Otherwise, I could order on Amazon, could I?

So try to talk to the customer from the position of knowledge and give a bit of good advice. Don’t forget to say at this end magic words: “… take this part we have right here and you solved your problem …”. Customers will appreciate it and buy a solution to their problems from you. You don’t want them to walk away and search for it on the Internet.

You can not put price on history. Photo by Danica Tanjutco on Unsplash

Service business

You are pretty much safe from Amazon behemoth. You can sell parts that you want to sell and charge for service at the same shot.

Software business

About the same. The customer gets a custom solution and is pretty much chained to your supply. Gives you a healthy leverage. Lucky you!

Give rewards and incentives

Doesn’t have to be something big but token of appreciation to keep old customers and win new customers. Like percentage discount on repetitive buys or small present, coupon, a gift card, free pop… something.

Be more flexible than Amazon

It is very hard to be better than them. It is a 24/7 store, polished to perfection, unlimited resources, fast delivery, easy returns … hard to beat. But not impossible.

You can beat them in small things. Have extended working hours. Answer every call that comes in. Amazon customers can’t call anyone.

Answer every e-mail, immediately. Amazon doesn’t do that either.

Consider investing in on-site chat software. You know, somebody is dying to find out about the product. Why not. You could provide sales information even after regular business hours.

Sell only real McCoy

Sell quality products only, backed up by good warranties, made by known brands. If you are selling garbage it will not last long.

I am not talking about fly by night companies, but ones that want to be in business forever. The company I work for is in business from 1990. That means something. We sure didn’t survive that long by selling bad products.

Manufacturing something?

Hopefully, it is something cool and unique. Possibly complicated enough that can’t be easily copied. Before you had a whole China to worry about, but now Amazon may be lurking from the shady corners as well.

You MUST put some serious thoughts in the design of the product to make it very hard to copy or emulate. It doesn’t have to be a full-blown invention that is patentable but if you were genius enough to make something nice and useful you should make an extra effort to protect it against copycats.

Complaint!

Amazon probably has a building full of lawyers but that doesn’t mean they are immune against prosecution that has a solid grounds. Here is an example that you didn’t expect. In India, sellers complained to the Government about Amazon running unfair business practices competing with them. Sure enough, Government caught Amazon red-handed and ordered them to remove more than 400000 products from the shelves. 
A similar trend is noticeable in Europe as well where the EU is curbing monopolistic and unfair business practices by Amazon.
The truth is that even in US legislators are interested to let all businesses grow not only one. Monopolies are not good for anybody.

Photo by Riley McCullogh on Unsplash

Write about it on write.cash

Please do. Share your story on write.cash . As simple or complicated story can be. Amazon pissed into everybody’s boots and all business owners will gladly read your story. I know I will. And will give you a clap for contribution.

Conclusion

You will notice that I didn’t mention a word about social media. Two reasons, everybody is already doing it. Secondly, we had several Facebook business sites and Twitter accounts. Do you know what came out of it? Absolutely nothing! We spent a fair amount of money and time building those resources, advertising and still nothing.

At least we learned to know when enough is enough. We shut down all that and closed all accounts and profiles. The conclusion was that what we sell is not something that you would go to Facebook to find about. So that’s that. If social media is working for you, all power to you, keep doing it.

Here is a bottom line. Amazon wants to own sales of everything. From needle to a locomotive. Very soon healthcare, also soon banking, like mortgages. They want to run courier service bigger and better than UPS and FedEx.

There is another very, very scary thought: Amazon wants to own food sales. Step by step they’ll own everything.

That’s no good. It’s actually troublesome and quite wrong. What do you think?