Five Signs Your FBA Business May Flop, Part 2

This is part two of a five-part series addressing concerns around “Is an FBA business profitable.”  In part one, I discussed “creating a hustle vs. building a business.”  Part two is concerning building a brand other than your own.

Building a brand other than your own

Building a brand is the goal of the vast majority of businesses.  Just saying that you have a brand isn’t enough, though.  And while brands and brand marks are properties of a company, they don’t reside in the company. 

A brand is what resides in the hearts and minds of your prospective customers when they think of the products your company offers for sale.  An example of the conflict between what a company wants to brand and the results of their efforts is the Chevrolet Nova from the 1970s. 

When the US car manufacturer named their Nova car, they focused the product to the muscle car enthusiasts market.  The term nova refers to a sudden burst of energy—at least in the US.  While the car was popular in the US, it never took off in Mexico. 

The reason?

The Spanish meaning of nova is “not going.”

So, car buyers in the Mexican automobile market didn’t want to drive something that, in their minds, wouldn’t go anywhere. 

The goal of a brand-building

The goal of brand building is straightforward. 

The goal is to leave an impression of your company’s goods and services that set you apart from the crowd. 

It is to be different – unique. 

It isn’t just having a domain name!

There are two basic models that you can employ to attempt to build a brand.  The models are mass market and niche.  Amazon.com is an excellent example of a mass-market brand.  Even when Amazon.com started as an online bookstore, they attempted to position themselves for the masses through advertising. 

The second basic model you can employ in brand building is niche segmentation.  People often overcomplicate the concept of a niche approach—it’s any segment of the overall mass market. 

A hypothetical example of this approach would be if Amazon.com either: stayed in only the bookseller business, only served the western US, etc.  A niche could be tiny, or it could be enormous.  The main thing to keep in mind concerning the model is that you are only trying to serve a portion of the larger market. 

When starting an Amazon FBA company, the default is to focus on a niche.  Not because the founder wants to stay within that niche.  The reason is likely due to minimal startup capital.  Most likely, a founder will pick one or two categories or products and form a company around them. 

This is where a lot of founders interested in building a brand start to fail.

Who’s brand are you building?

The thought process goes something like this:

“I can buy something from China, ship it into Amazon FBA, and I’ll make a ton of money because Amazon is the world leader in eCommerce sales and Amazon markets for me!”

It doesn’t work like that.

Yes, you can buy stuff relatively cheaply from China and ship it into Amazon FBA.  Yes, Amazon markets for you, and you will likely make sales—maybe even a lot of them. 

But, so can anyone else in the entire world!

The level of competition on Amazon is high and growing every day.  Even with keywords that are classified as “low competition,” there will still be competitors.  And in the presence of competitors, what happens? 

Margins decrease. 

That means, after you take the risk of buying products and shipping them into Amazon FBA, paying storage fees, etc., you may make a few pennies on the dollar that you invested. 

Who does that benefit? 

Amazon.

Amazon’s brand proposition includes providing customers with a wide selection of products at reasonable rates delivered quickly. 

What about your brand? 

Chances are the consumer picked your offering because it was the cheapest among the “sea of sameness” that returns from an Amazon search. 

Take a guess who else wins with this approach.

The winners in this model include the software providers and Amazon training course providers that helped you select the product to offer via Amazon FBA. 

Is it a lost cause?

Heavens No!

eCommerce is not only alive and well; it is a growing reality in our lives.  That is where people get taken advantage of–they believe the hype. 

What does it take?

First, you need to shift your mind from building

-an Amazon FBA business to simply building your business. 

-Amazon’s brand to simply building your brand.

-a software or training provider’s brand to building a future for yourself and your family.

Once you do that, the most critical phase is over.  By putting the opportunity in perspective, you have accomplished something significant.  From that position, doors open as you learn and then apply your new knowledge. 

It is a journey, but the journey is rewarding. 

Note: For full disclosure – the story of the Chevrolet Nova is somewhat disputed. Academic researchers have found it to be accurate while Snopes.com has found it to be false. What has not been addressed, though, is how much time was required to allow a brand perception to be swayed by the actual performance of the product. In brand-building, that is a key consideration.

Looking Back to See the Future

In reading this Forbes article from Lisa Caldwell and Sachin Lulla as well as several other pieces that I have read, it is becoming apparent to me that we are attempting to move into a direction where we treat our organizations and supply chains similar to how treated semiconductor fabrication factories in the 1990s. During that time the push towards in situ monitoring generating tons of data being fed into control charts as well as factory performance models attempting to optimizing flow through the factory accounting for equipment failure, etc. was relentless. The one thing that really held them back at the time was the lack of a common data model that was shared by all the components of the factory as well as the manufacturing execution system.  

While the complexity of modern supply chains demand tools like discrete event simulations to be able to analyze impacts of disruptions, I’m concerned that the lack of common data model could limit the usefulness of those tools. Utilizing resident entity models may help with the lack of a common model–just not sure yet.  

I’m really not sure at this point, but the way forward may be assisted with what our predecessors learned fixing smaller scale issues in the past.