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The ‘Middle is Disappearing’ Theory of Amazon FBA
I have a theory about the future of selling on Amazon called “The Middle is Disappearing”.
Now, look…
I aim for a high level of intellectual honesty. The truth is very important. Because with the truth, we can make progress (like in science).
So before I jump in, I’ll say this:
This theory is still a work-in-progress.
If true, it’s very disruptive. But if you can think of a reason why it’s false, please reply to this. Or email me at pat@asteroidx.com. I’d love to hear it.
So here goes:
“The Middle is Disappearing”.
Close your eyes and imagine the Amazon marketplace 5 years from now. 10 years from now.
Have Chinese factories and other root manufacturers gotten BETTER or WORSE at selling DTC (direct-to-consumer) on Amazon?
Better, probably. That’s how it’s trending.
You yourself may sell in some markets that have been flooded with Chinese-made and Chinese-distributed products in recent years. I’ve seen it first hand.
All of these sellers have similar products, so they compete largely on price. They can sell for cheap because, as the manufacturers, they have the best possible margins. Their products appeal to value shoppers (like Walmart shoppers). Their audience is people who want a generic “thing” and don’t care what brand it is. Their listings have 10,000+ reviews (often appearing rather speedily). They don’t try to make a ton of money per individual unit. It’s a volume game, baby!
OK, so that’s the “bottom” of the market. What about the “top”?
The Other Side
On the other hand, there are brands who say “Oh gosh! Look at all these commoditized products fighting price wars and making $0.10/unit. We can’t compete on price. Let’s build a brand!”
So, they build a brand (wrapping physical products in a specific identity or ethos).
Brands let you charge more.
Supreme. Starbucks. Nike. Apple. Mercedes-Benz. They all add “status” to their customers. To make them appear cooler, smarter, more popular, more attractive, more in-the-know. And that’s why they pay the premium. It’s “brand name” stuff.
YETI (they’re at yeti.com) is a great example of a company that took products that are basically Amazon private label-level style products and made a real brand.
So, we’ve got the price-warring bottom. And the branded top.
This leaves the “Middle”.
The products that are moderately priced with NO strong brand. They’re not as cheap as the value options. And they’re not a high-prestige branded option. So, they get largely ignored because they’re neither the cheapest nor the coolest.
And that’s how “the middle is disappearing”.
Many Amazon brands will be forced to pick a side. And unless you manufacture, being a brand is the best.
What do you think of this theory? Let me know.
On the whole, I recommend building a brand and pricing high. When I say “high” I’m talking $40+. Because after FBA fees and Amazon Ads, it’s nice to have some cushion. Higher prices allow for it.
Running efficient, profit-oriented ads is all we’ve been doing for years now.
If you want a partner that will act as an extension of your business and crush it for you on the ads side, here’s a link to discuss with us. We can see whether it’s a fit. We do calls because we want to make sure we can actually help. Link is here:
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