Just recently, Jeff Bezos, the founder of Amazon became the richest person on the planet with the net worth of $141 billion. It is the second largest company after Apple in terms of market capitalization that reached a trillion dollars. It is both, normal and unusual but definitely a significant event and especially important for us to understand since we are the citizens of a great country, with a rich history who always try to find explanations for our failures some-where outside and justify success of others by a pure coin-cidence and geopolitical location. What is the significance of this event?
The richest person in the world
is an American, it is not so unusual. America is a country with developed institutions, the highest GDP in the world and is on the top ten list in the world by GDP per capita, increasing by capita every 16 seconds! It is doomed to produce (Doomed, Karl!) to produce millionaires and bil-lionaires.
Bezos is not from a wealthy family
and not even from a presidential circle, of which there were four since Amazon was founded. He was simply develop-ing a product but nobody came to him with an offer he could not refuse or suggesting that he should give up a part of his business. FBI did not find cocaine in his storage room and the American Consumer Protection Organization did not block his website because of questionable content.
Amazon is not involved in pro-duction of natural resources
Amazon as a business has nothing to do with production or sale of natural resources. It does not have a monopoly in oil, gas, or gold sectors.
It is trade after all
Maybe Amazon revolutionized commerce but it is very dif-ficult to monopolize it, especially in America or, as it seemed, make big money on it. I have to make a disclaim-er about the last sentence - there was also Sam Walton of Walmart who made a lot of noise at one point. Actually, Walmart makes a profit of half a trillion dollars now, which is three times greater than Amazon, but Amazon costs more.
What is Amazon
While living in Russia, I did not know much about Amazon. An online store that sold books and other things. Probably, it was interesting not because it was cool but because it is in America and everybody is buying something there be-cause they have nothing else to do. After living in the U.S. and dealing with Amazon both, as a customer and as a seller, I can probably draw some conclusions.
Amazon is not an online store with its line of goods and merchandise inventory. It is a marketplace that in addition to providing third persons a platform to sell their goods, it provides logistics services. Not even exactly that. Amazon is not just a marketplace and logistics company. Amazon is an ecosystem that creates jobs for millions of people all over the world. What is included in this ecosystem?
As we know, Amazon itself does not sell anything besides some games, tablets, Alexa, and a few more miscellane-ous items. Everything else is sold by third persons. Many of the third persons make very good money on this plat-form.
For many it becomes their main business and there is no need to launch their own website or open their own storage facility. You can conduct business on Amazon from any-where — from Russia, China, or South Africa. Just register your account, send your goods to Amazon storage, post information about the goods you sell and good luck!
Alright, so sellers are third persons. It is the first and most important element of the Amazon ecosystem. Approxi-mately 2 million sellers have their accounts here. Amazon is not widely used in Russia, but Ukrainians use it a lot. They even organize conferences dedicated to Amazon commerce.
This company offers two options to sellers for product de-livery to customers: FBM (Fulfilled by Merchant) and FBA (Fulfilled by Amazon). You can mail merchandize from your own storage yourself or mail it to Amazon’s storage and Amazon will mail it to your customers for you.
In six months, if your goods are not sold, Amazon will charge you an additional fee for storage. And it is not cheap!
For FBA, Amazon carefully monitors inventory turnover and reflects how well you manage your stock on the scale from one to one thousand in your personal office. Also, if the grade falls lower than a certain value, Amazon will set a limit on the amount of stock that you, as a seller, can keep in a storage facility. In six months, if your merchan-dize are not sold, Amazon will charge you an additional fee for storage. And it is not cheap. It creates one more busi-ness line in the ecosystem of the company - distribution centers where merchandise are stored and mailed to Am-azon on an as needed basis or they could perform the FBM function and mail your merchandise for you.
Begin trading on Amazon? Why not? Everyone dreams to buy magnets in China, bring them to Amazon, and Go! It is not exactly so. It is important to know how to find mer-chandise and how to list it (post a photo and description). Here we see one more niche in the Amazon ecosystem: training, courses, education. There are hundreds of them, if not thousands - from $10 for a video course to $40 thou-sand for a complete personal couching (as I have seen). Some are online, some are offline. Some are group train-ings and some are individual. Any size or color. They will teach you everything: how to list your merchandise, how to purchase, how to deal with negative feedback. You can be taught how to develop your brand or how to join an existing product line, how to win box, and how to look for potential niches.
If you type in Selling on Amazon in Facebook or YouTube, you will see how much information is available. Personally, prior to starting my business on Amazon, I watched a course that cost $10 and a friend of mine helped me to open an account. At some point, I may write about my ex-perience as well. A little later. Yes! There is also Fiverr where companies from India, Pakistan, or Bangladesh can photoshop your merchandise for a small fee and British and Americans can write a product description.
However, the most difficult part is to receive the first feedback. Here we have the gray area of the ecosystem - an army of paid reviewers. You are paying a company and it will purchase your merchandise, charge an overhead, and you receive your first positive feedback.
The more, the merrier. You need feedback about your merchandise or your store. Otherwise, your merchandise will always be listed on page fifteen in the search engine and you won’t have any sales. In order to ask a customer to write a review, you need a special software program that will send emails requesting feedback. There are more than 70 programs that will allow you to do it for a certain fee. There are also programs that will help you search interest-ing products for sale.
However, the most difficult part is to receive the first feed-back. Here we have the gray area of the ecosystem - an army of paid reviewers. You are paying a company and it will purchase your merchandise, charge an overhead, and you will receive your first positive feedback.
Amazon is very careful about monitoring these things and it does not hesitate deleting reviews without explaining the reasons if they suspect any violations. Even if they did not delete feedback, but a customer is not sure about the qual-ity or would like to check authenticity of feedback, there are sites such as www.fakespot.com where you can copy/paste a URL address for a certain merchandise and compare assessment on Amazon with real assessment without any advertisement tricks.
Sellers also spend money on product promotion such as purchasing advertisement on Amazon. In 2017, Amazon earned $1.5 billion only selling adds on their website. Here too, software developers can offer you programs to opti-mize promotion costs. In general, Google considers Ama-zon its main search engine competitor in the U.S. Many Americans don’t Google before purchasing something an-ymore. Instead, they go straight to Amazon and look it up there. Moreover, even if they Googled it, up to 60 per cent of links on the first page about this merchandise would take them to Amazon.
Not at all a discounter
There is a common opinion that everything on Amazon is very cheap. It is not so. Many things can be bought offline cheaper. There is а feature on Amazon called cross-reference. It helps you find a product at Walmart or Target if it costs three times less than on Amazon and list it there. Amazon has an application that reads a barcode and you can see the price of the product. Price and time are not Amazon’s main advantages. Amazon is convenient. Unlike other marketplaces, it strictly monitors sellers, which makes them cry, but this approach increases trust for a brand name or a store.
Walmart also launched its marketplace. But just as its competitors were desolate some time ago, Walmart now is trying to jump on the bandwagon. And the train can actually leave the station
We should not say that Amazon is a monopoly or the only company who had this idea. For a while, Ebay was an equal competitor, but they focused more on amateur sellers and provided a selling platform. Whereas Amazon created a platform for professionals, applied stricter quality control rules, developed a friendly user interface, and opti-mized the search engine.
Walmart also launched its marketplace. But just as its competitors were desolate some time ago, Walmart now is trying to jump on the bandwagon. And the train can actual-ly leave the station as it left for Toys R Us - the largest toy retailer, or Orchard Supply - home goods retailer (more about this company and its collapse here).
P.S. In this article, I described how Amazon functions in the U.S. However, I must mention that this company oper-ates in a dozen of other countries. I concentrated on the U.S. market as I have more experience with it.