Amazon Service Business Idea (kind of) - actionable idea or not?

[Taktik]

In the last couple of weeks I thought a lot about what business to start. I had many ideas, also in areas, where I don't have any expertise or clue of how things work. But in the last days, I had the feeling that I should start out in an area, where I already know, how things work. That way, I can move faster and make at least a litte less mistakes, at least at the beginning.

So last week the e-commerce-company I currently work for made a deal with one of the biggest drugstore chains in middle europe. Turned out that they do have nearly 1000 branch offices, but that they don't have an online shop until now.
That got me thinking. If such a big company with more than 3 billion revenue per year is only now starting out online, what about other, smaller businesses? There have to be many, that are successful since decades, but that don't have really started out online or are just beginning to try to do so.

As I work in public relations and marketing, I don't really have expertise in helping them build their own online shop, but I know how Amazon works, because I already sold things there for my own business (now closed) and also the company I work with. So I was thinking, what if I start looking for established companies, that are not yet selling on Amazon themselves and do that for them?

The business model I have in mind would be, that they pay a monthly fee (maybe 200 bucks or so, depending on the size of the company and the number of products they have) and then my company becomes the only authorized reseller on Amazon. I would then exclusively sell the complete product range of that company on Amazon, create good listings ... As my company would buy the products of the companies, that want this service, the risk the companies have, is only the monthly fee.
Thus I would handle the sales channel Amazon for them and they don't have to worry about it. I would also make sure, that their company and their products would have the right representation on Amazon (Which is often not the case at the moment. Just a quick look on Amazon proves, that many companies don't sell themselves, but there are many Amazon sellers, that sell products of these companies with bad listings, horrible pictures and so on.) There is room for improvement, if one would really get at it professional.

Analysis of the five commandments:
-Control: This business model completely violates the commandment of control, as you are completely dependend on Amazon. I haven't really found a solution for this problem yet (as I had the idea just yesterday).
Entry: When I am the only authorised reseller on Amazon, entry should not be a problem, as there cannot be other resellers, if the company I work with does not authorize it.
Need: I think that there are many companies, that would like to use Amazon as a sales channel, but don't know how or don't have the ressources to do so.
Time: I think, that I could leverage my time quite efficient, especially when using FBA. I just have to find the right companies to work with.
Scale: The inventory value could be huge and binds a lot of capital. (If there is a company that has 100+ products, you have to make a big investment up front and that money is then bound for unspecified time.) If you are short on money, it could negatively influence the commandment of scale.

What do you think of that? Any feedback or suggestions for improvement on this idea are really appreciated.

Thanks.

 

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[MJ DeMarco]

The business model I have in mind would be, that they pay a monthly fee (maybe 200 bucks or so, depending on the size of the company and the number of products they have) and then my company becomes the only authorized reseller on Amazon. I would then exclusively sell the complete product range of that company on Amazon, create good listings ... As my company would buy the products of the companies, that want this service, the risk the companies have, is only the monthly fee.

Idea seems pretty solid, you're a contracted third party and your business would be (technically) B2B.

Entry would be strong as well, as the systems for this to work would be pretty complicated.

-Control: This business model completely violates the commandment of control, as you are completely dependend on Amazon. I haven't really found a solution for this problem yet (as I had the idea just yesterday).

True -- the entire basis for the business is based on the livelihood of Amazon as a vibrant, dominant eCommerce channel.

That, however, is foreseeable in the near future (5 years minimum).

 

[Tourmaline]

What if you had your own online drugstore that featured drugs sold by the various small shops?

Kinda like being an amazon marketplace, but only for drugs. You take a cut and provide the marketplace and the transaction layer, as well as the branding for being the place people go to to get drugs online.

 

[Blazen56k]

Analysis of the five commandments:
-Control: This business model completely violates the commandment of control, as you are completely dependend on Amazon. I haven't really found a solution for this problem yet (as I had the idea just yesterday).

My e-commerce business currently violates the commandment of control, but I hope that is a temporary risk (one that I’ve invested a good deal of time and money in limiting since I read Unscripted ).

I think it is billion times more likely that you’ll get your account suspend permanently than that Amazon will stop being the primary e-commerce marketplace in the next five years.

The risk of suspension by some random bot algorithm remains my primary concern with the market place.

But I think the real hurdle for you is going to be convincing your clients to trust you as their e-commerce exclusive seller.

You mentioned you have experience on the Marketing side of the company, but do you know anything about operations side of Selling on Amazon? Do you know how Seller Central works? If so, is your Seller Account aged enough to have all of the limits of new sellers taken off of it by Amazon? Do you know how to bulk create listing in mass with hi res images successfully through the platform? Do you know the basics on listing optimizations and PPC advertising?

You’ll need to know all this and more when you approach these companies. Because these companies are going to expect you too, especially the big ones. They aren’t going to let you represent their Brand without some serious proven track record.

Amazon and Brands are currently in a clean up mode, and for good reason. There are more sellers on most Brands than are needed. And Brands and Amazon will continue to try and limit who represents them on the marketplace. So you are going to need to learn EVERYTHING about what it would take to be a top 1% seller before you even think about approaching a large company. (More on this to talk about but I’m trying to stay focused here lol)

TFL teaches to save your time by vetting a solid idea that can scale, before dumping time into it. This is a solid idea but to execute on it, I think you’re going to either need to create a seller account, and start selling something (used books is probably the safest and easiest place to start) or, you need to have the capital to acquire an existing e-commerce company (most likely one of these companies that services other sellers and ships in product for them) to acquire the expertise needed. I think this would be the fastest way for you to get to your goal, you’ll just need to convince someone to lend you the money acquire a successful company and repurpose it.

 

[Taktik]

What if you had your own online drugstore that featured drugs sold by the various small shops?

Kinda like being an amazon marketplace, but only for drugs. You take a cut and provide the marketplace and the transaction layer, as well as the branding for being the place people go to to get drugs online.

That could work, but not in the country, where I live. The regulations for selling drugs online are insane. You have to have a license, which you only get, when you own a pharmacy, which you can only open, if you have studied pharmacy at university. The drugs, that are allowed to be sold online, are also extremely restricted. I am not even sure, if it is allowed to sell a drug that helps for headaches.

 

[Taktik]

Entry would be strong as well, as the systems for this to work would be pretty complicated.

I am not quite sure what you mean by that. Could you elaborate a little bit more which systems you mean?

 

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[Taktik]

You mentioned you have experience on the Marketing side of the company, but do you know anything about operations side of Selling on Amazon? Do you know how Seller Central works? If so, is your Seller Account aged enough to have all of the limits of new sellers taken off of it by Amazon? Do you know how to bulk create listing in mass with hi res images successfully through the platform? Do you know the basics on listing optimizations and PPC advertising?

I know most of the things you mentioned, because I already sold on Amazon from february 2015 until october 2018. Due to personal reasons my partner and I closed the company back then. So I don't have a seller account at the moment, but I am going to create another one soon.

 

[Blazen56k]

I know most of the things you mentioned, because I already sold on Amazon from february 2015 until october 2018. Due to personal reasons my partner and I closed the company back then. So I don't have a seller account at the moment, but I am going to create another one soon.

Ok, you might already know this, but depending on how your account was closed, you’ll need to be very careful how you open it. If it was closed in good standing, then you’ll want to reach out to Amazon and ask if it is better to reopen that account or create a new account, because they track accounts based on IP, Name, Bank Accounts etc, and they could lock you down from the start if they match a new account to an older closed account. Also ask that they notate the old and new accounts with what you are doing.

If you were suspended, then it gets a LOT harder, you’ll need to have clean IPs, never logging into the new account from any old IP, and open the account with a new business checking account and tax ID different that is not linked to you or your partner. Even then, there is a huge possibility that you’ll somehow become linked to the account in bad standing. Before I’d ever attempt this, I’d reach out to a professional service to help you get your original account back in good standing.

Best of Luck!

 

[Blazen56k]

I am not quite sure what you mean by that. Could you elaborate a little bit more which systems you mean?

I believe MJ is saying there are other barriers to entry beside just having the exclusive with the vendor. Capital and Expertise are two big ones that come to mind.

 

[Taktik]

Ok, you might already know this, but depending on how your account was closed, you’ll need to be very careful how you open it. If it was closed in good standing, then you’ll want to reach out to Amazon and ask if it is better to reopen that account or create a new account, because they track accounts based on IP, Name, Bank Accounts etc, and they could lock you down from the start if they match a new account to an older closed account. Also ask that they notate the old and new accounts with what you are doing.

If you were suspended, then it gets a LOT harder, you’ll need to have clean IPs, never logging into the new account from any old IP, and open the account with a new business checking account and tax ID different that is not linked to you or your partner. Even then, there is a huge possibility that you’ll somehow become linked to the account in bad standing. Before I’d ever attempt this, I’d reach out to a professional service to help you get your original account back in good standing.

Best of Luck!

The account on Amazon still exists, we have never closed it, my old company does not, however.
I alread have a new business, new tax id ...

As we had very good reviews on the old account, I am wondering, if it is possible to use the old account with my new business. Do you happen to know anything about that?

I believe MJ is saying there are other barriers to entry beside just having the exclusive with the vendor. Capital and Expertise are two big ones that come to mind.

Ah, I see. That makes sense.

Thanks.

 

[Blazen56k]

As we had very good reviews on the old account, I am wondering, if it is possible to use the old account with my new business. Do you happen to know anything about that?

If you can still log into the account, then yes you can update the company name and tax ID, lots of people do this, but call Seller Support and they can walk you through it after you’ve logged in.

 

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[Taktik]

If you can still log into the account, then yes you can update the company name and tax ID, lots of people do this, but call Seller Support and they can walk you through it after you’ve logged in.

Great, thanks.

 

[MJ DeMarco]

I am not quite sure what you mean by that. Could you elaborate a little bit more which systems you mean?

It just means there's a level of difficulty in getting this established. It protects your business in the future from competitive incursion.