Why Most New Amazon Sellers Fail with This One Assumption
New Amazon sellers are being told to just “split the pie.” But in this reaction, Matt explains how sales actually get distributed — and why the top sellers eat first (and most). Whether you’re in wholesale or private label, you’ll want to rethink your strategy after watching this.
There are tons of people out on social media giving business advice. Some of it is good advice, but most of it isn’t good. In this series watch CapForge’s owner react to different advice videos. He’s an expert in all things business and has 20+ years of experience under his belt. Some of the things he reacts to might even surprise you!
Video Transcript:
Business Advice Video:
How do you actually scale your Amazon business with the current products you’re currently selling? So this is all gonna boil down to restocking your products. For starters, we want to maximize our current catalogs. What I mean by this is if you put in time and effort to find a product, we want to maximize its life expectancy. We want to be placing test orders for everything. How do you place a test order? Well, if a product sells 200 times and there’s 5 competitive sellers on it, we would be the 6th. What I would do is take 200 divided by 6, which is like thirty something I think it’s 33. So that would be kind of our number we want to shoot for. We’ve gone with a 33 unit order. What we do is get that product in, send it into Amazon, test it out, see how fast we actually sell a 33 and let’s say we actually sold this 33 in two weeks. That means we need about 66 per month. So total we need 132 to last us two months. And then obviously once we get down to about 30 units left in stock, we would reevaluate for the next order. And we’re doing the same exact calculation for every single product on our store.
Matt’s Review:
OK, here’s the immediate problem with what he just said. If there’s six sellers and there’s 200 orders being placed, I guarantee you it’s not six sellers each getting 33 orders. Why? Because the number one spot is probably getting 60% of all the orders. The number two seller is getting 30% of the orders. The number three seller is getting 5% of the orders and so on. By the time you get to the sixth thing, it’s getting one or 2% of the orders. It is not an evenly split pie that you are now able to split into another even slice. That’s just not how this works. It’s all the 80/20 rule except sometimes it’s the 9/10 rule or the 95/5 rule. The top two, three, four sellers get the lion’s share of all the sales and everybody else is picking over the scraps. So, the only way you move into a new category and compete effectively is to have something that’s different, better, more effective than what the current people are getting for that product, right? So, I think this may apply more to a wholesale product with a rotating buy box, but then, you know, that’s a whole different business model with lower margins and other issues. And again, if you’re just splitting that pie, there’s nothing to say that the next person comes along and the next and the next and the next, and now it’s 200 orders split between 10 sellers and then 12 sellers and then 15 sellers. So I think you’ve got to have a more sophisticated, well-thought-out, and advantageous strategy than just trying to split your pie evenly if you’re talking about wholesale. And for sure, for new brands, private label products, you’ve got to bring something more to the table than just to meet two products or you’re going to be fighting for scraps.
