645: What 300 7-Figure Sellers Told Us About The State Of Ecom With Andrew Youderian

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The state of ecommerce in 2026, based on Andrew Youderian’s annual survey of 300 seven, eight, and nine-figure store owners in his eCommerceFuel community, is that manufacturing your own products is winning, Amazon is fading as a growth channel, owning your own warehouse cuts your growth in half, and deep financial literacy is the single biggest predictor of higher profit margins. The 300 stores in the survey represent about $3.5 billion in aggregate GMV.

Andrew came back on the My Wife Quit Her Job podcast (for the seventh time) to walk through the biggest takeaways from his 61-page report. Some of the numbers surprised both of us.

Manufacturing adoption jumped nearly 50% over three years while every other business model dropped or stayed flat. Amazon’s share of revenue has cratered back to 2017 levels even though more sellers than ever have listings there.

And in the single stat that blew up on Twitter after Andrew released it, store owners who own their warehouse are growing 80-90% slower than those who lease or outsource fulfillment.

Below is the full breakdown: which business models are winning, why Amazon is a demand-capture channel rather than a growth channel, what the warehousing data really means, why 75% of sellers reported “no meaningful alpha” from AI in 2025, and the financial literacy threshold that separates 9% profit margins from 14% profit margins.

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Key takeaways

• Manufacturing your own product jumped almost 50% over three years. Every other business model (dropshipping, private/white label, reselling, hybrid) either dropped meaningfully or stayed flat. Dropshipping fell from 9% to 4%.
• More sellers than ever are ON Amazon (about two-thirds of the 300 stores), but Amazon’s share of their revenue has fallen back to 2017 levels (~20%). Sellers use Amazon as a demand-capture channel now, not the point of their spear.
• Owning your own warehouse correlates with growing 80-90% slower than sellers who lease or outsource fulfillment (4% growth vs. 34% for leasers). Correlation not causation, but the pattern is stark.
• The sweet spot for inventory turns is 5-6 turns per year (turning your inventory every ~2 months). Too little inventory means missed orders; too much ties up working capital. Both extremes hurt.
• 75% of surveyed sellers embraced AI in 2025 but the survey found no meaningful profit or growth alpha versus the 25% who didn’t. Andrew expects that to shift in 2026 as tools mature and sellers get more disciplined about what to build.
• The single biggest jump in profit margin comes at the top of the financial-literacy scale. Going from a self-rated 4/5 to 5/5 lifted average net margin from 9.7% to 14.3%, a 50% relative profit bump.
• Store owners rate their own DTC website 90% enjoyment. Amazon is around 20%. TikTok Shop is the lowest at 11-15%.

What business models are winning in ecommerce in 2026?

Manufacturing your own product is the only business model that grew in the last three years, jumping nearly 50% in adoption among Andrew’s 300 surveyed sellers, while every other model dropped or stayed flat.

Dropshipping fell from 9% to 4%. Private/white label fell from 18% to 11%.

Hybrid (reselling plus your own products) fell from 20% to 14%. Straight reselling stayed roughly flat at 11-12%.

The drivers are the same forces reshaping the whole retail landscape. The end of the de minimis exemption in May 2025 destroyed the economics of most dropshipping and light-touch reselling. Amazon competition on generic products is now a race to the bottom, so slapping your brand on an Alibaba SKU (what Andrew calls private label) rarely differentiates you long enough to build a durable business.

Manufacturing in this context means proprietary product you designed and had made to your spec, not just a rebrand of an existing item. That is the harder path with the higher upfront R&D cost. It is also the path that leaves you with defensible IP when the copycats arrive.

What is the difference between private label and manufacturing?

Private label (what Andrew calls white label) is when you find an existing product on Alibaba, slap your brand on it, and resell it as-is. Manufacturing is when you design a proprietary product from the ground up and have it made to your specification. The difference is how much unique value you are adding, and it is the difference between a product a competitor can copy in a week and a product that took you a year to develop.

Terminology here varies by author. Some people (including me) use “private label” to mean the proprietary/manufacturing version, and “white label” for the Alibaba-rebrand version.

Andrew uses “private label” for the rebrand version and “manufacturing” for the proprietary version. The definitions matter less than the strategic distinction: are you adding real IP, or are you renting somebody else’s product?

Is Amazon still worth selling on in 2026?

Amazon is still worth selling on as a demand-capture channel but not as a growth engine. About two-thirds of the 300 surveyed sellers have Amazon listings, an all-time high, but Amazon’s share of their aggregate revenue has fallen from a peak of ~30% in the early 2020s back down to ~20%, which is roughly the 2017 level. Sellers are keeping Amazon on because branded searches (“Bumblebee Linens” or “your brand name”) still convert, but they are building growth off-Amazon.

The reasons are structural. Amazon advertising costs have risen more than 20% year-over-year for several consecutive years and Amazon fees keep climbing.

Foreign competition floods the marketplace (Marketplace Pulse reports new US Amazon sellers at all-time lows). And Amazon has started blocking AI crawlers from scraping listings, which means the growing share of shopping searches happening in ChatGPT, Claude, and Perplexity increasingly returns non-Amazon results.

The mental cost is also real for many owners. When Amazon suspends a listing or holds funds, someone on the team spends a week on support chats and it kills morale. Multiple sellers in Andrew’s survey (and me personally) have de-emphasized Amazon over the last few years partly for that reason.

Which sales channels do store owners actually enjoy?

Store owners rate their own DTC website highest at 90% enjoyment. Amazon lands around 20%, and TikTok Shop lands lowest at 11-15%.

The gap between DTC and everything else is the sharpest opinion in the entire survey.

The TikTok Shop enjoyment number surprises people who assume the platform is a gold rush right now. TikTok deliberately makes selling harder than it used to be because in the platform’s early days sellers flooded it with spammy products and failed fulfillment, which damaged the platform’s reputation. TikTok Shop enjoyment is climbing now that Fulfilled by TikTok (their FBA equivalent) is available, but the platform still ranks below Amazon on operator satisfaction.

Should you own your ecommerce warehouse or use a 3PL?

You should use a 3PL for most product categories, because Andrew’s survey found that sellers who own their warehouse are growing 80-90% slower than sellers who lease or outsource fulfillment (4% growth vs. 34% for leasers, 22% for outsourcers), even after controlling for revenue. This is correlation, not causation, but the pattern is stark enough that it blew up on Twitter when Andrew released the chart.

There are legitimate reasons this correlation exists that are not “warehousing kills growth”:

• Owning a warehouse means less time working on product and marketing (the things that actually drive growth).
• Owners with their own warehouse often already maxed out their niche’s opportunity, so growth was slowing anyway and warehousing became the natural capital deployment.
• Deep owned inventory can be a moat that trades growth for durability, which is a valid strategic choice.

The categories where owning your warehouse still makes sense: personalization (embroidery, engraving, custom work) that no 3PL will touch cost-effectively, extremely high-touch handling, and products where you genuinely need eyes on every unit. If your business is straightforward SKUs with clean fulfillment, a 3PL is the better default in 2026.

When does it make sense to buy your own warehouse instead of leasing?

Buying your warehouse makes sense when the rent on your leased space is climbing 30%+ per year and you need peace of mind on your lease horizon. That was my trigger. Rent on my Bumblebee Linens warehouse was going up 30% annually, and buying eliminated that recurring shock plus removed the several moves we had already gone through when previous leases ended.

The upside is stability. The downside is exactly what the survey shows: your capital and attention shift toward the physical operation and away from the levers that drive growth. Only make this call if the warehouse operation is genuinely part of your business moat (as personalization is for Bumblebee Linens), or if the lease math is truly punishing.

What is the ideal inventory turn rate for an ecommerce store?

The ideal inventory turn rate for an ecommerce store is 5-6 turns per year, meaning you cycle through your entire inventory roughly every two months. Andrew’s survey found this range correlated with the highest revenue growth AND the highest net income growth. Turn faster than that and you risk stockouts and missed orders; turn slower and your working capital sits trapped in unsold inventory.

Inventory turn = annual revenue divided by average inventory value. If you do $500K per year and hold $200K in inventory on average, you turn 2.5 times per year, which is on the slow side and probably means capital is trapped.

Watch out for the “amazing deal” trap when a supplier goes under and offers you 50% off their remaining stock. I did this recently and now sit on roughly 18 months of inventory in a cramped warehouse.

The math still works long-term, but the short-term pain (cash flow, physical space, labor to move it around) is real. Andrew’s survey data suggests the sweet spot is discipline, not opportunism.

Did AI adoption actually improve ecommerce financial performance in 2025?

AI adoption did not produce meaningfully better financial performance for ecommerce stores in 2025, according to Andrew’s survey. About three-quarters of respondents said they had meaningfully embraced AI, and their profit margins, growth rates, and net income growth were statistically indistinguishable from the quarter that had not embraced it. Andrew expects that to shift in 2026 as tools mature and operators get more disciplined about what they build.

The reason is not that AI is useless. It is that a lot of the 2025 building was undisciplined, and when you can build anything, you have to be careful not to build everything.

Andrew admits he spent time and money on internal AI tools that were fun to have but did not move the needle. When “no coding required” turns every idea into a buildable app, prioritization becomes the new bottleneck.

There ARE individual stores getting real alpha from AI. On-site AI search, AI cross-sells, AI-generated content for social channels, automated inventory planning, and mini ERPs built in Claude Code have all shipped in Andrew’s eCommerceFuel community.

But at the aggregate level, adoption alone did not win in 2025. Discipline about WHAT to automate is where the 2026 winners will separate.

What AI tools are ecommerce operators actually using well?

The ecommerce operators winning with AI in 2025-2026 are using Claude Code (or similar terminal AI) for one-off internal tools that would previously have required hiring a developer, and using ChatGPT/Claude in the browser for data analysis on Klaviyo, Meta ads, and inventory forecasting. Community members have built mini ERPs, inventory planning systems, and demand-management systems in two weeks each.

The pattern is: AI as leverage on the tasks a small team could not otherwise afford (custom apps, one-off analytics dashboards, personalized email drafting), not AI as a replacement for the core work of understanding customers and making product decisions. The stores getting outsized value have both technical intuition AND deep customer knowledge; AI multiplies both.

What is the single biggest predictor of ecommerce profit margin?

The single biggest predictor of ecommerce profit margin is the operator’s own financial literacy, and the jump happens at the top of the scale. Andrew asked respondents to self-rate their financial knowledge 1-5.

Going from a 3 to a 4 barely moved the needle (9.0% to 9.7% average net margin), but going from a 4 to a 5 lifted average net margin from 9.7% to 14.3%. That is a 50% relative profit bump for the last step.

The implication is that “reasonably good” financial understanding is not enough. Deep financial competence, the kind that includes understanding your financial statements cold, knowing how to take money out of the business, understanding debt and risk, and running unit economics on every SKU, is where the outsized returns live.

Andrew put together a free eight-part Financial Mastery series on his eCommerceFuel podcast covering exactly this territory. Anyone whose self-rating is a 3 or 4 should work through it (ecommercefuel.com/mastery).

What is contribution margin and why does it matter?

Contribution margin is the profit you make on each individual sale after subtracting the expenses that vary with that sale. It matters because most operators eyeball their profitability at the gross margin level (“we do 60% gross margins so we’re fine”), which massively overstates real profit once you include fulfillment, packaging, advertising, and labor. Understanding contribution margin per SKU changes how you discount, how you price, and which SKUs you push hardest.

There are typically two or three tiers you can calculate:

• CM1: revenue minus COGS, shipping, packing materials, and payment processing. The “what does one unit cost me to fulfill?” number.
• CM2: CM1 minus advertising and marketing costs attributable to that sale.
• CM3: CM2 minus a share of fixed costs (warehouse rent, salaries, software).

I calculate CM1 for every Bumblebee Linens SKU and include the labor cost of embroidery, which drops the “90% gross margin” on an embroidered handkerchief down to something much lower. The habit of running this math on every SKU changes what you promote, what you discount, and what you quietly retire.

Frequently asked questions

What are the biggest ecommerce trends according to the 2026 seller survey?

The five biggest trends: manufacturing your own product is up almost 50% while all other business models dropped, Amazon revenue share fell to 2017 levels even as more sellers list there, owning your warehouse correlates with 80-90% slower growth than outsourcing, financial literacy at the top of the scale drives a 50% profit-margin bump, and AI adoption in 2025 produced no aggregate financial alpha. All from Andrew Youderian’s survey of 300 seven-figure and above ecommerce sellers.

Is dropshipping dead in 2026?

Dropshipping is not dead but has shrunk significantly. In Andrew’s 300-seller survey, adoption fell from 9% three years ago to 4% today, driven mainly by the end of the de minimis exemption in May 2025 and the intensified Amazon competition on generic products. The dropshippers still succeeding are almost all in specific niches with barriers to entry (heavy freight, regulated products, or supplier relationships that are hard to replicate).

Should I put my ecommerce store on Amazon in 2026?

Yes, if you already have a DTC brand and want to capture branded search demand on Amazon; no, if you are treating Amazon as your primary growth channel. Amazon’s share of revenue for the surveyed sellers has fallen back to 2017 levels because rising fees, ad costs, and foreign competition have made it a demand-capture channel rather than a growth channel. Use Amazon so your existing customers can find you there, but build growth elsewhere.

Should I own my warehouse or outsource to a 3PL?

Outsource to a 3PL as your default in 2026, because Andrew’s survey found sellers who own their warehouse are growing 80-90% slower than those who lease or outsource, even after controlling for revenue. The exceptions where owning still makes sense: personalization (embroidery, engraving), extremely high-touch handling, high SKU counts with complex fulfillment, or when the warehouse operation is genuinely part of your business moat.

What inventory turn rate should I aim for?

Aim for 5-6 inventory turns per year, meaning you cycle through your entire stock roughly every two months. Andrew’s survey found this range correlated with both the highest revenue growth and the highest net income growth across 300 seven-figure stores. Slower and your capital sits trapped; faster and you risk stockouts.

Is AI worth investing in for a small ecommerce business?

AI is worth investing in specifically as leverage on tasks a small team could not otherwise afford (custom apps, one-off analytics dashboards, personalized email drafting, content repurposing), but Andrew’s survey found no aggregate financial alpha for AI adopters in 2025. The winners are disciplined about what they automate. Start with 1-2 high-ROI use cases and measure the outcome before building anything else.

How much can improving financial literacy boost my profit margin?

Improving financial literacy from a self-rated 4 out of 5 to 5 out of 5 lifted average net profit margin from 9.7% to 14.3% in Andrew’s survey of 300 seven-figure ecommerce sellers, a roughly 50% relative bump. Deep understanding of financial statements, unit economics per SKU (contribution margin), debt, and risk is the single biggest predictor of ecommerce profit margin in the data.

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