The Future Of Selling On Amazon And Key Takeaways From My Ecommerce Mastermind

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As I mentioned in last week’s email newsletter (sign up here for free), I just got back from an ecommerce mastermind weekend with 11 other entrepreneurs and it was an incredible experience.

In the Silicon Valley where I live, almost all of my close friends either work full time at a tech company or practice as a doctor or lawyer. Very few people I know sell physical products online which is why I often feel lonely with no one to talk to when it comes to ecommerce.

The Future Of Selling On Amazon And Key Takeaways From My Mastermind Weekend

Anyhow, this mastermind retreat was just what I needed because it was an opportunity to hang out with other like minded entrepreneurs making 7 and 8 figures selling online.

Not only were these guys and gal(What up Dana?) fun to hang out with but I came away with a bunch of new action items and a better understanding of where the ecommerce landscape is headed in the coming years.

Here were some of my key takeaways.

Amazon Is Getting More Competitive At An Exponential Rate

race

I’ve already been feeling this for the past 6 months, but this weekend pretty much confirmed it.

If you are selling other people’s products with little added value, then you’re not going to be in business much longer.

The level of competition is so fierce that unless you have your own brand and a strong value proposition, someone will hop onto your products and erode your profit margins very quickly.

Amazon feels like the gold rush right now with people throwing up whatever they can and making sales because Amazon’s reach is so large. But I’m predicting that this gold rush will only last a few more years because too many people are jumping on the bandwagon.

One of my mastermind buddies witnessed this first hand when one of his cash cow products making nearly 6 figures per year got piggybacked by another seller.

And when he retaliated by lowering his prices to win back the buy box, the other seller reported to the manufacturer that he was violating MAP pricing. In the end, he lost his cash cow product in a matter of weeks.

In fact, he’s lost many profitable Amazon products in the past year and is now focusing all of his efforts on his own branded products from here on out.

Here’s how I see the future of selling on Amazon.

Those doing retail arbitrage will be the first to fall followed by those who sell other people’s products. The only ones who will be left standing are businesses who have established their own brand with a strong online presence external to Amazon.

Which brings me to my next point…

You Must Have Your Own Online Retail Presence To Survive

tombstone

One of my favorite quotes from the mastermind weekend was this one…

Selling on Amazon is like getting paid to dig your own grave but at least you’re making good money doing it

As you are running your ecommerce business, you should do so with the expectation that Amazon can and will ban you at some point in time.

This week, I have 2 stories to share with you.

The first is a story I heard first hand from my friend Mike Jackness who runs an awesome podcast called Ecom Crew. One of the members of his mastermind group got his 7 figure Amazon account banned in the unlikeliest of circumstances.

Basically, he hired an Amazon consultant who accidentally logged into his account from an IP address that was associated with a banned Amazon account.

And poof!!!! Within the week, his account was instantly banned even though he did nothing wrong.

Amazon keeps track of everything. If you accidentally log into your account from a computer that has previously logged into a banned account, you risk losing your account as well.

Right now, his buddy is appealing the suspension but it’s not looking good.

In other news, I recently interviewed an ecommerce seller who lost his 7 figure Amazon business overnight because he got banned as well.

This person did nothing illegal but an unfortunate stream of events led to his demise. (This episode comes out in 2 days and I’ll link it up here)

Here’s the episode: How John Rampton Lost His 7 Figure Amazon Business

I don’t know about you. But I would never ever build 100% of my business on someone else’s land, especially if you are depending on this revenue to survive.

Everyone who attended the mastermind weekend is focusing their efforts on building their own website and brand for this reason. Amazon is great for cashflow but lousy for brand building.

The Case For Owning Your Own Platform

Control

One of the recurring themes of the weekend was the ridiculous number of services required to run an ecommerce store at scale and the cost/benefit of relying on 3rd party platforms.

On one hand, building your house on a 3rd party platform is both easy and effective. But on the other hand, you are constantly at their mercy.

For example, one well known fully hosted shopping cart platform recently increased their prices dramatically which led to cost hikes of up to 400% for certain sellers. Can you imagine running your store one day and then finding out that your costs were going to increase 4X in a few months?

Here’s the thing. No matter what 3rd party platform you choose, they will do whatever it takes to make a profit and the true running costs are not always obvious.

One of the leading shopping cart providers that rhymes with “opify” provides a very low base price but makes up for it on the backend with numerous plugins that have recurring fees.

For example, one of my buddies pays $80 a month for the ability to display reviews next to their products!

While the base price of the cart is very cheap, by the time you add all of the plugins into the final cost, it often ends up costing significantly more.

Over the past few years, I’ve been carefully considering moving my online store over to a fully hosted platform like a Shopify or a Big Commerce. But for now, I’m staying put because I like having full control over the code.

I’m paying less than $50 a month for my cart and I have the ability to code up any feature that I need on the fly. But don’t get me wrong. It would be really nice to have access to large library of plugins at the push of a button.

Currently I’m in the process of redesigning my ecommerce store website and the jury is still out. We’ll see what happens.

You Need To Have An End Game In Mind

kiddos

Perhaps the most important takeaway from the weekend was to know and understand your personal goals.

For me, I got into ecommerce in order to spend more time with my family and NOT to grow my businesses to 7,8 or 9 figures and beyond.

However after growing my online store in the double digits for the past 8 years and doubling my blog revenues last year, I’m starting to feel increased pressure to grow even faster. More money, more growth, more success….but where does it lead?

In the end, I’m just a regular Chinese guy who is extremely frugal and spends very little money. My house is almost paid for, my kids’ college education (to Stanford of course:)) is already in the bank and I’m probably one of the least extravagant people you’ll ever meet.

So why do I sometimes get jealous of other more successful entrepreneurs? Why do I need to make more money?

What’s hilarious is that we all went around the room during the mastermind and shared how much we spend in a typical year. And guess what? Almost everyone spends less than 80K per year while making many times that amount with their businesses.

Bottom line, it made me realize that after a certain dollar amount, more money doesn’t make a difference. The goal shouldn’t be to grow or make more money for money’s sake.

You should have an overarching goal in mind that is unrelated to money that truly makes you happy. Otherwise, you’ll constantly be comparing yourself to others who are doing better than you and getting depressed.

I’ll be honest with you. At this mastermind, I was probably one of the least successful of the bunch and I definitely felt like an underachiever next to these folks.

If happiness is your goal, then I recommend that you hangout with people less successful than you are so you can feel good about yourself. But if you want to grow as a person, then you really need to spend time with more successful people.

For me, my primary directive has always been to be there for my kids and my family. But my secondary goal is to constantly learn, improve my skill set and become a better person.

Money is a byproduct of this goal and not the objective. If you want to be happy, then you need to figure out what makes you happy and more money is rarely the answer.

Conclusion

Overall, I learned a lot about myself on this trip and I highly recommend that you arrange your own mastermind retreat with other like minded entrepreneurs.

No matter how successful the entrepreneur, everyone has their own sets of problems that go beyond making more sales and increasing profits.

In fact, I often interview super successful entrepreneurs who are dissatisfied with certain aspects of their lives.

Bottom line, find out what makes you happy and don’t deviate from that path:) And if your goal is to create a long term ecommerce business, focus on your own properties.

Good luck!

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36 thoughts on “The Future Of Selling On Amazon And Key Takeaways From My Ecommerce Mastermind”

  1. I need to find more successful people to hang around. We intentionally moved into a smaller house to live well below our means in efforts to reach financial independence more quickly. As a result, we are really finding ourselves surrounded by people with little ambition to really succeed in life from a monetary perspective. It definitely has an effect on us and our motivation.

    1. Cathy says:

      Don’t focus on their lack of ambition. Keep your eyes on your growth and your goals. I commend you for living below your means. More people would really be happier doing this. I did it and I am much happier. However, there will always be individuals who are less motivated than you regardless of where you live. You mention that they are not monetarily motivated. That’s fine. That’s what they have chosen. Perhaps they are motivated by other things in life, such as coaching baseball or soccer, teaching piano lessons, making furniture, painting, or whatever. Their motivation may not be monetary and may be intrinsic motivation instead. Some rewards in life do not come with a lot of money. For instance, teaching. I left corporate to teach high school business classes in a small rural community. My salary is 33% of what I was making, but I leave school every day knowing I touched a student’s life in some way and will continue to touch them, hopefully, into the future. Be sure that your choice is yours and that you are pursuing monetary goals for the right reasons. Most importantly, do not compare others to yourself. You’ll lose sight of YOU and open yourself up to resenting them. Accept your neighbors and do try to find others who are like you that you can socialize with professionally and personally. That will help to create balance in your life, if you will let it.

    2. Thanks for sharing what everyone spends in a year, and for sharing the message of the importance of happiness. Too many people feel that money is what will make them happy, and as a result, they end up being unhappy in the pursuit of it. Others say the exact opposite, where they eschew money and see it as the root of all evil. It’s nice to see someone say you can be BOTH happy and successful as long as you recognize that making more money does not equate to happiness.

      1. I think it’s a mixture of both. Given that I don’t spend that much money, I don’t think more of it will increase my quality of life at this point

    3. That is generally a smart plan:) Do you find yourself happier this way?

    4. Janet R Chasse says:

      You made me think and laugh too, thank you.

  2. Naeem Ahmed says:

    this is a serious eye opener , especially for people like me considering getting onto the amazon platform..

    Very much appreciate the share..

    1. You should get on the platform, but don’t rely on it

  3. Stef says:

    Great article, thanks for sharing! I just started selling on Amazon, will definitely build the business with what you said in mind. Ha! Getting paid to dig your own grave – sound v grave indeed!!

    1. hehe. Yeah, I fell in love with that quote as soon as I heard it.

  4. Bruce says:

    Thanks

  5. Will says:

    Hi Steve. Are you talking about the people who are just doing retail arbitrage or are you also talking about people doing white labeling?

    1. Most retail arbitrage and selling other peoples products. If you are just white labeling copycat products, you’re better off but you had better have a decent head start.

  6. Hi Steve,
    I really enjoyed this article and your thoughts about these issues. You actually articulated a few things I had been vaguely thinking about and have helped me with some clarity.
    Many thanks for your honesty.
    Cheers
    Alison
    ps ADORE the photo of your kids:)

    1. Thanks Alison. Yeah my kids are awesome:)

  7. Dear Steve

    You really have a nice thought on how you look to things. I admire you for this wonderful thinking. Family, definitely is the most important wealth and assets of life. What money could do if it is only used to increase illness and heart attack?.
    You have a nice product, this is educate others free of charge. But, believe me never it is free. You are reworded by having customers who admire your services (Your Help).

    I have an advise to you, be expert in SMEs consultation and training. You have the ability to do it and definitely you will have hundreds of people who want your services (I am one of them). Make it chargeable but a fordable. By, doing so, you could even have more time with family, and you will not think what Amazon might in any time (I know you have your own brand, but keeping business going is an effort in itself.

    Live is not money, life is about how much you contribute to the happiness of others. Could be your self, you children, your customers, your readers, and so on.

    Thank you, Steve.

    Ayed

  8. I LOVE this post, everything about it. I am just starting to think of putting my own product line on Amazon. I have been running my website for 5 years and am ready to branch out, but I will be assuming I will get shut down from the very start so that I never rely on the income it will bring in. I also love how you said making money doesn’t make a difference. I have often said I don’t want to be a millionaire. I want to run my business, comfortably and easily to support the lifestyle I want to have. No need to drive and push to get more and be bigger if I can be comfortable at a lower income. LOVED this :)

    1. Thanks Amanda. It’s very easy to fall into the trap of more more more :)

  9. Great article, Steve,

    I particularly enjoyed the advice (as you have advised before) to just ignore the lure of Amazon and other third-party platforms and just dig in an own what you build.

    You’re an inspiration. Keep it up.

    And thanks for the pics of your children, they’re precious. Take the rest of the day off and have a special day with them.

    1. Thanks Dave. I’m not saying to ignore the lure of Amazon but to not depend on the income. And yes, I should be spending more time with them:)

  10. John Etienne says:

    This article hit it on the head, I needed that, helps put things in perspective.
    Thanks Steve.

  11. I joined Shopify on your recommendation that at least suggested you were joining it. It’s worked out ok but not sure I would have signed up without your recommendation. I know things are changing but it’s a little hard to know what to believe from you affiliate marketing types. good luck. Ken Foster

  12. Steve I have question for you:
    Does Amazon charges fees for purchases made using promotional codes?
    Imagine, I have a product with the listing price of $40. Amazon normally charges $7 per order. If I give out $40 promotional codes to my buyers, does Amazon still charge me for $7?

    1. You have to pay the FBA fee no matter what. But the 15% is based on the selling price.

  13. Beth Clark says:

    Relating to your story about banned/suspended accounts, does that mean if I log in at a trade show (like the one you were at) or somewhere like Starbucks, and other people also log in (same IP), that we’re at risk of being banned?

    1. I don’t know exactly how people are tracked. But I doubt it’s by IP address. Instead, they likely track by MAC address and based on someone’s individual computer.

  14. Thanks for the shout out Steve, though I wish it was under better circumstances. My friend is now in the middle of his 3rd appeal and still no luck. It’s pretty gross since he has mid five figures of inventory stuck at Amazon. If he can’t get this resolved, then it’s going to be quite painful as Amazon charges to recall all the inventory.

    Anyway, back to work “digging my own grave, but getting paid to do it”. You’re right, that was a pretty funny statement.

  15. Wow, there are some real gems in there.

    I knew Amazon was competitive but, obviously, I really had no idea.

    Oh and I like the ‘never build a business on someone else’s land’ analogy as it’s so true. It’s much better to claim your own piece of the Internet.

    And remain in total control.

  16. Anyone here have experience with Shopping Cart Elite? I’ve been thinking of moving my store over to their platform.

  17. Rod says:

    Hi
    Interesting. How did you set up the Mastermind, please?
    Regards
    Rod

  18. John says:

    Do you share the details of what technology stack you used for your store? And what do you think of Woocommerce?

  19. Hi! Great info – but I don’t see dates on your articles? When was this one published? It’s helpful to know if the material is 2 years old (or more) or current. Thank you!

  20. Nadia Anafcheh says:

    Hi,
    Its great and very educational information specially for a new- bie like myself, learning a lot about Amazon since that was the way to go for me but now, sure am going to put my thinking hat on before deeding my toe in the water.

    Thank you.

  21. Boris says:

    Hello Steve,

    That was a good read. I am interested in your opinion about starting on Amazon versus starting on your own eCommerce website.

    Other than your product having high chance of getting copied, what other concerns do you see in that approach?

    Thanks.

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