The Amazon FBA Apocalypse 2020

by Dan Brock March 7, 2020

The Amazon FBA Apocalypse.

What the gurus are hiding from you and how to avoid losing a whole bunch of money.

We’re starting right now.

For the last 2 months, I’ve been working on my first Amazon FBA store, along with a new affiliate website and I am very excited about both.

What I’ve learned so far about Amazon FBA is not what it’s been pitched to be on YouTube.

I even fell for that, too, I was like, “We gotta get to the promised land! The land of unicorns and rainbows!”

I found it’s not that. In fact, it is the land of death and destruction.

That being said, I’m still 100% optimistic about Amazon FBA. There is a lot of opportunity on there, but it’s much different than it may seem.

Here are the 11 truths of Amazon FBA and what I’ve discovered, starting backward from…

Truth #11: Manufacturing Amazon FBA Products In Your Own Country

For me, it’s the United States. It is very expensive. It’s almost not going to work. The only way you can make this work is if your product is very unique and you have very high-profit margins with that product.

 

Otherwise, the costs are going to eat up your profits. By the way, to get this box made in the US…

This box is insanely beautiful. I’d sleep with this box! I would put 50 boxes on top of me if I had them to sleep with.

They’re that good!

But they are expensive.

So, what I’ve found so far is, in America, let’s say you have a $15 product, it’s going to cost you like $12 bucks to get it made in the United States, so it’s just not going to work.

That is why a lot of people recommend China, and we’re going to be talking mostly about that here, jumping into…

Truth #10: The Chinese Are Not Desperate For Your Amazon FBA Business

The videos make it seem like they’re desperate, like, “Gimme money! Gimme money! We need money, we’re starving!”

That’s far from the truth.

In fact, they are more like, “Bow before me, noob!!”

The reality is they don’t need you at all.

Think about it. Have you seen all the ads about Amazon FBA recently on Facebook and YouTube? All the videos that all these channels are blowing up, what it means is that hundreds of thousands of noobs (beginners) every day and every month are hitting Alibaba and other manufacturers.

They are like, “Give us deals! Give us deals!”

While they are like, “You know what… we are in the power position here. If you prove yourself, we’ll let you give us money. And it’s gonna cost you.”

And this is the scary thing. Lots of times, if you look through the listings, those manufacturers that you work with will actually be your competition. The Chinese are very shrewd negotiators, very shrewd business people.

They know about Amazon; they’re not dumb.

They are there, making their profits. They’re leaving just enough meat on the bone for you, so you can just feed off table scraps.

And that leads me to…

Truth #9: There Isn’t Much Low-Hanging Fruit Left on Amazon FBA

Years ago, just like with affiliate marketing back around 2002, plenty of low-hanging fruit. You’re gonna have to work for it nowadays.

The days of finding these little micro-niches that no one really knows about, those are pretty much over. If you do find one (you’ll certainly find some here and there), it takes months of work that is just not worth it.

Why? Because as soon as it starts taking off, the tools like Jungle Scout and Viral Launch, are going to find out those niche markets.

So, even if they do exist, I would say just forget about it. Focus on creating a good brand (a topic for another day).

Question for you: are you terrified? You should be.

Comment below this blog post with your thoughts and experience with Amazon FBA.

Truth #8: Most Amazon FBA Sellers Have Already Gained Listing Equity

What that means is they’ve been on there for a while. They have customers built up and tons of reviews.

Their listings have proven themselves, so Amazon is going to give it higher rankings just because of that.

So YOU coming in as a beginner, you have to fight against that AND – the biggest problem – you don’t have the skill that they do.

Basically, they can offer their product with higher margins than you will be able to.

I know that everyone is like, “Dude, you can just customize it, bro! Just customize the product. It’ll be unique.”

Truth #7: It’s Not Easy To Customize A Product for Amazon FBA

Here’s the problem with that: it is not as easy as it sounds.

The only thing you can get customized for cheap is apparel. Things like clothes and cloth pieces.

But the moment we’re talking about even simple pieces of plastic, like this little camera level…

…(which doesn’t really work, by the way) if I wanted to go to the manufacturer and be like, “Okay, I got this camera level. I’d like it extended longer. Can you do that?”

And they’ll be like, “Sure! We can do that. It’ll cost you about $3,000-$5,000 dollars to modify the molds.”

See? Even simple plastic pieces cost money. So it ain’t that easy!

What that means is there’s going to be lots of risk. Imagine you just found your first product, you want to customize it, you’re making no money from it yet… are you really gonna want to invest $3,000-$5,000 in addition to buying out $2,000 worth of stuff?

Not unless you are on crack cocaine or something!

Truth #6: Starting A New Amazon FBA Business Is Expensive

Getting the LLC, getting all the tools you need, the registration services… It’s going to cost you about $1,000 before you can even consider starting your Amazon business.

And, the thing about that is, a lot of those fees are recurring. You’ll have to pay about half of that every year just to keep the business in operation.

In addition to that $1,000, you’re also going to need things like custom packaging, custom logos…

…all of that costs money!

It cost me about $800 just for one logo and one package design.

Of course, I went for the good option. I went to 99designs.com and got a very nice box and nice logos. Better than anything out there (worth it to me!). But if you want to stand out, give it that extra oomph to your listing, it’s going to cost you about $1,000 on top of that.

Now we’re talking $2,000 before you’ve even bought your first product. And that leads me to…

Truth #5: Can’t Leave Amazon FBA Product Manufacturing Up To Chance

With affiliate marketing, for example, you don’t really have to know about SEO when you get started.

You just start writing content, put it on your blog, and make some videos. You can learn SEO along the way.

Amazon FBA is a lot different. Every little piece has to be known before you even consider sending money to someone in another country. There can be no room for error.

Let me give you an example.

What you see in this image is known as a “product die”.

Do you see this little gap, between the two flaps on the box?

That, in and of itself, is a whole process going back-and-forth between the manufacturer and your designer, to get the right spacing for the box type that you use.

This is the most boring, mundane topic ever but this can make or break your product – this one error.

Let me show you…

 

The gap between the box flaps needs to be accounted for before you create your box. If you don’t, the lid will just bang across the edge without going in.

Imagine trying to ship that, and the box with the product inside doesn’t close right – that’s a problem!

That’s just box dies. Box printing, in and of itself, is a whole other skill you have to learn.

And there are like hundreds of these weird skills that you have to learn in addition to everything else involved.

That leads us to…

Truth #4: It’s A Pain In The Butt To Communicate With People In China

You can understand them fine. The issue is that it takes a whole day to get answers.

If I send them two questions today, it’s going to take them a whole day to get an answer to two questions. And usually, it’s not exactly what you wanted to learn.

I’ve been working deals like that for 2-3 weeks with two Chinese suppliers, and we are still not on the same page as far as getting the right type of product, getting the box right…

…it’s SO MUCH that it’s frustrating!

It’s frustrating because you think you’re finally there, and then this whole other thing comes up that you have to work out.

When there’s that gap in between, you kind of lose motivation to keep wanting to do it because it takes so long for minuscule things and getting the right answers.

So, that is a major problem. It’s something you don’t think about until you finally do it.

Which leads me to the next truth, which is something you are NOT going to want to hear, although it’s the truth, and it’s…

Truth #3: You’re Not Going To Turn Profit On Your First Run Of Amazon FBA

Realistically, you are going to lose money on your first run. Here’s why:

You have scale issues.

The way it works is, when you’re starting out, you don’t want to go to the manufacturer and say, “I need 1,000 units.”

…because that’s going to cost you around $2,500 bucks (or more, depending on the price of the product).

So what you try to do is shoot for lower M.O.Q. (minimum order quantity). You want to hit around 200-300 units, to try to get it for about $1,000-$1,300 bucks.

The days of spending $200-$300 on the first test, it’s going to be very difficult nowadays. (I haven’t found them yet if they exist.)

So, to be able to stay there, you have to pay more per unit. So instead of paying $3 between the box and all that, it might cost you $6 just for them to work with you, because it’s extra work for them. They have to go through all this effort. You’re a beginner, and they’ll know it. So they know that and factor it in, just to make it worth their while.

Instead of getting 400 units, you’re going to have to pay more or get only 200 for the same price.

AND… the additional problem you don’t think about is when it comes to shipping on a boat, it costs roughly the same amount of money to ship 200 units as it does to ship 1,000.

The reason why is because there are a lot of fixed costs, as far as customs, brokering, bonds, getting the tax duties… all that is basically the same. The fixed costs are the same no matter how much you ship.

So, you don’t get that scale until you get about 1,000-3,000 units. That’s when you really become profitable. But because you’re a beginner, you have two things that you’re fighting against:

The scale issue with the manufacturer, and the scale issue when it comes to shipping.

Because of that, you will lose money. Your competitors have equity in their brand and listing, they already have scale. They’ll be able to offer their product, the SAME THING, much cheaper than you can.

So, in order to play the game, you’re going to have to take a loss the first time just to get equity as well, to be able to take that initial profit and buy more units. It’ll be back-and-forth several times – over months – just to get up to the same level as your competitors, and that’s a challenge.

Last but not least, perhaps the most underrated problem with Amazon FBA is…

Truth #2: The Hidden Fees Of Amazon FBA

They aren’t so much “hidden”… you just don’t think about them.

After you’ve got all your products and shipping expenses, you now have Amazon storage fees. Amazon advertising fees to get people to actually see your listing so that it’s not stuck on page 7.

AND… refunds!!

Truth #1: Amazon FBA Refunds Are Overlooked

Refunds are always overlooked.

All of this is going to eat into your margin and you’re just starting out. You just don’t have that much to spare.

All things factored in, it’s going to cost you about $4,000-$5,000 to even take one stab, your first run at an Amazon FBA store.

So my question for you is this: are you terrified? You should be.

This is the stuff you should know. I wish I would have known this before jumping in, but I’ve been wanting to do this for so long.

Now that I’ve learned everything, I’m already in, I’m still 100% optimistic about where the business is going to go.

I am going to do things a lot different than what is taught on YouTube (the courses and all that), simply because I think that the Amazon FBA apocalypse is coming!

  •  
  •  
  •  

The Amazon FBA Apocalypse 2020

by Dan Brock March 7, 2020

The Amazon FBA Apocalypse.

What the gurus are hiding from you and how to avoid losing a whole bunch of money.

We’re starting right now.

For the last 2 months, I’ve been working on my first Amazon FBA store, along with a new affiliate website and I am very excited about both.

What I’ve learned so far about Amazon FBA is not what it’s been pitched to be on YouTube.

I even fell for that, too, I was like, “We gotta get to the promised land! The land of unicorns and rainbows!”

I found it’s not that. In fact, it is the land of death and destruction.

That being said, I’m still 100% optimistic about Amazon FBA. There is a lot of opportunity on there, but it’s much different than it may seem.

Here are the 11 truths of Amazon FBA and what I’ve discovered, starting backward from…

Truth #11: Manufacturing Amazon FBA Products In Your Own Country

For me, it’s the United States. It is very expensive. It’s almost not going to work. The only way you can make this work is if your product is very unique and you have very high-profit margins with that product.

 

Otherwise, the costs are going to eat up your profits. By the way, to get this box made in the US…

This box is insanely beautiful. I’d sleep with this box! I would put 50 boxes on top of me if I had them to sleep with.

They’re that good!

But they are expensive.

So, what I’ve found so far is, in America, let’s say you have a $15 product, it’s going to cost you like $12 bucks to get it made in the United States, so it’s just not going to work.

That is why a lot of people recommend China, and we’re going to be talking mostly about that here, jumping into…

Truth #10: The Chinese Are Not Desperate For Your Amazon FBA Business

The videos make it seem like they’re desperate, like, “Gimme money! Gimme money! We need money, we’re starving!”

That’s far from the truth.

In fact, they are more like, “Bow before me, noob!!”

The reality is they don’t need you at all.

Think about it. Have you seen all the ads about Amazon FBA recently on Facebook and YouTube? All the videos that all these channels are blowing up, what it means is that hundreds of thousands of noobs (beginners) every day and every month are hitting Alibaba and other manufacturers.

They are like, “Give us deals! Give us deals!”

While they are like, “You know what… we are in the power position here. If you prove yourself, we’ll let you give us money. And it’s gonna cost you.”

And this is the scary thing. Lots of times, if you look through the listings, those manufacturers that you work with will actually be your competition. The Chinese are very shrewd negotiators, very shrewd business people.

They know about Amazon; they’re not dumb.

They are there, making their profits. They’re leaving just enough meat on the bone for you, so you can just feed off table scraps.

And that leads me to…

Truth #9: There Isn’t Much Low-Hanging Fruit Left on Amazon FBA

Years ago, just like with affiliate marketing back around 2002, plenty of low-hanging fruit. You’re gonna have to work for it nowadays.

The days of finding these little micro-niches that no one really knows about, those are pretty much over. If you do find one (you’ll certainly find some here and there), it takes months of work that is just not worth it.

Why? Because as soon as it starts taking off, the tools like Jungle Scout and Viral Launch, are going to find out those niche markets.

So, even if they do exist, I would say just forget about it. Focus on creating a good brand (a topic for another day).

Question for you: are you terrified? You should be.

Comment below this blog post with your thoughts and experience with Amazon FBA.

Truth #8: Most Amazon FBA Sellers Have Already Gained Listing Equity

What that means is they’ve been on there for a while. They have customers built up and tons of reviews.

Their listings have proven themselves, so Amazon is going to give it higher rankings just because of that.

So YOU coming in as a beginner, you have to fight against that AND – the biggest problem – you don’t have the skill that they do.

Basically, they can offer their product with higher margins than you will be able to.

I know that everyone is like, “Dude, you can just customize it, bro! Just customize the product. It’ll be unique.”

Truth #7: It’s Not Easy To Customize A Product for Amazon FBA

Here’s the problem with that: it is not as easy as it sounds.

The only thing you can get customized for cheap is apparel. Things like clothes and cloth pieces.

But the moment we’re talking about even simple pieces of plastic, like this little camera level…

…(which doesn’t really work, by the way) if I wanted to go to the manufacturer and be like, “Okay, I got this camera level. I’d like it extended longer. Can you do that?”

And they’ll be like, “Sure! We can do that. It’ll cost you about $3,000-$5,000 dollars to modify the molds.”

See? Even simple plastic pieces cost money. So it ain’t that easy!

What that means is there’s going to be lots of risk. Imagine you just found your first product, you want to customize it, you’re making no money from it yet… are you really gonna want to invest $3,000-$5,000 in addition to buying out $2,000 worth of stuff?

Not unless you are on crack cocaine or something!

Truth #6: Starting A New Amazon FBA Business Is Expensive

Getting the LLC, getting all the tools you need, the registration services… It’s going to cost you about $1,000 before you can even consider starting your Amazon business.

And, the thing about that is, a lot of those fees are recurring. You’ll have to pay about half of that every year just to keep the business in operation.

In addition to that $1,000, you’re also going to need things like custom packaging, custom logos…

…all of that costs money!

It cost me about $800 just for one logo and one package design.

Of course, I went for the good option. I went to 99designs.com and got a very nice box and nice logos. Better than anything out there (worth it to me!). But if you want to stand out, give it that extra oomph to your listing, it’s going to cost you about $1,000 on top of that.

Now we’re talking $2,000 before you’ve even bought your first product. And that leads me to…

Truth #5: Can’t Leave Amazon FBA Product Manufacturing Up To Chance

With affiliate marketing, for example, you don’t really have to know about SEO when you get started.

You just start writing content, put it on your blog, and make some videos. You can learn SEO along the way.

Amazon FBA is a lot different. Every little piece has to be known before you even consider sending money to someone in another country. There can be no room for error.

Let me give you an example.

What you see in this image is known as a “product die”.

Do you see this little gap, between the two flaps on the box?

That, in and of itself, is a whole process going back-and-forth between the manufacturer and your designer, to get the right spacing for the box type that you use.

This is the most boring, mundane topic ever but this can make or break your product – this one error.

Let me show you…

 

The gap between the box flaps needs to be accounted for before you create your box. If you don’t, the lid will just bang across the edge without going in.

Imagine trying to ship that, and the box with the product inside doesn’t close right – that’s a problem!

That’s just box dies. Box printing, in and of itself, is a whole other skill you have to learn.

And there are like hundreds of these weird skills that you have to learn in addition to everything else involved.

That leads us to…

Truth #4: It’s A Pain In The Butt To Communicate With People In China

You can understand them fine. The issue is that it takes a whole day to get answers.

If I send them two questions today, it’s going to take them a whole day to get an answer to two questions. And usually, it’s not exactly what you wanted to learn.

I’ve been working deals like that for 2-3 weeks with two Chinese suppliers, and we are still not on the same page as far as getting the right type of product, getting the box right…

…it’s SO MUCH that it’s frustrating!

It’s frustrating because you think you’re finally there, and then this whole other thing comes up that you have to work out.

When there’s that gap in between, you kind of lose motivation to keep wanting to do it because it takes so long for minuscule things and getting the right answers.

So, that is a major problem. It’s something you don’t think about until you finally do it.

Which leads me to the next truth, which is something you are NOT going to want to hear, although it’s the truth, and it’s…

Truth #3: You’re Not Going To Turn Profit On Your First Run Of Amazon FBA

Realistically, you are going to lose money on your first run. Here’s why:

You have scale issues.

The way it works is, when you’re starting out, you don’t want to go to the manufacturer and say, “I need 1,000 units.”

…because that’s going to cost you around $2,500 bucks (or more, depending on the price of the product).

So what you try to do is shoot for lower M.O.Q. (minimum order quantity). You want to hit around 200-300 units, to try to get it for about $1,000-$1,300 bucks.

The days of spending $200-$300 on the first test, it’s going to be very difficult nowadays. (I haven’t found them yet if they exist.)

So, to be able to stay there, you have to pay more per unit. So instead of paying $3 between the box and all that, it might cost you $6 just for them to work with you, because it’s extra work for them. They have to go through all this effort. You’re a beginner, and they’ll know it. So they know that and factor it in, just to make it worth their while.

Instead of getting 400 units, you’re going to have to pay more or get only 200 for the same price.

AND… the additional problem you don’t think about is when it comes to shipping on a boat, it costs roughly the same amount of money to ship 200 units as it does to ship 1,000.

The reason why is because there are a lot of fixed costs, as far as customs, brokering, bonds, getting the tax duties… all that is basically the same. The fixed costs are the same no matter how much you ship.

So, you don’t get that scale until you get about 1,000-3,000 units. That’s when you really become profitable. But because you’re a beginner, you have two things that you’re fighting against:

The scale issue with the manufacturer, and the scale issue when it comes to shipping.

Because of that, you will lose money. Your competitors have equity in their brand and listing, they already have scale. They’ll be able to offer their product, the SAME THING, much cheaper than you can.

So, in order to play the game, you’re going to have to take a loss the first time just to get equity as well, to be able to take that initial profit and buy more units. It’ll be back-and-forth several times – over months – just to get up to the same level as your competitors, and that’s a challenge.

Last but not least, perhaps the most underrated problem with Amazon FBA is…

Truth #2: The Hidden Fees Of Amazon FBA

They aren’t so much “hidden”… you just don’t think about them.

After you’ve got all your products and shipping expenses, you now have Amazon storage fees. Amazon advertising fees to get people to actually see your listing so that it’s not stuck on page 7.

AND… refunds!!

Truth #1: Amazon FBA Refunds Are Overlooked

Refunds are always overlooked.

All of this is going to eat into your margin and you’re just starting out. You just don’t have that much to spare.

All things factored in, it’s going to cost you about $4,000-$5,000 to even take one stab, your first run at an Amazon FBA store.

So my question for you is this: are you terrified? You should be.

This is the stuff you should know. I wish I would have known this before jumping in, but I’ve been wanting to do this for so long.

Now that I’ve learned everything, I’m already in, I’m still 100% optimistic about where the business is going to go.

I am going to do things a lot different than what is taught on YouTube (the courses and all that), simply because I think that the Amazon FBA apocalypse is coming!

  •  
  •  
  •