W hy Amazon? Simple – scale. Allow me to explain. Certain products are ideal for selling from home and leaving out a middle man to take a cut – the smaller and lighter the more likely it is to be reasonably shipped to all parts of the country for minimal cost. Take my buddies over at Milwaukee Candle Company. Small, light, its really not necessary for something like that to be put into a car, sent to Amazon Fulfillment, only to post online and have them take 15% (their standard cut).
But, the larger your item gets the harder it gets to move around. Something that’s 50 pounds can have wild variations in costs to ship to different psrts of the country. This is why furniture tends to have an avg markup of 200-400%, all that moving around gets expensive and those costs end up getting passed onto you the end user.
So how can I come in well under 200% markups, run an international heavy goods import/export all while keeping my prices affordable, the core mandate of this company? Well Amazon makes it happen.
allows lean and small operations
to scale up at no significant cost…
Once my products come into the US via sea freight, a freight forwarder takes em straight to the nearest Amazon Fulfillment center. This is the first in a series of streamlining moves. Amazon centers are strategically distributed throughout the US, making it cheap to get my products to anyone in the US without traveling on the road too much via traditional delivery companies. Once its in a Fulfillment center, Amazon itself uses fancy algorithms to distribute the products evenly across the country, meaning even though they all got delivered to one center, Amazon shoulders the cost of spreading them nice and even all over the country at their own expense.
So now we’re in Amazon, don’t they take a cut? Sure, but only if it sells. So Amazon is not only letting me warehouse at no upfront cost, but theyre also giving me access to a larger audience than any individual startup website could hope to have. I could spend millions and still never drive a fraction of the traffic Id get with some well place ads on Amazon directed at people in the market for, say, a coffee table.
Now that its on Amazon, and in their FBA (fulfillment by Amazon) centers, Im eligible for Prime, which means 2 day shipping, and even same day in larger cities. I could never compete with that on my own – If I warehouse all my products here in Milwaukee, it could take weeks and hundreds for shipping on top of the sale price for me to send to either of the coasts.
Add to it they help my small operation by handling returns and dealing with customer service. The bottom line is Amazon didnt become a goliath by chance, they have a good business model that empowers small operations to scale up faster than we ever could by allowing us to focus on our company while the logistical headaches are sorted by them. So when you’re surprised at the reasonable prices, its made possible in part by Amazon!