Amazon: billion dollar business with pseudo brands


Status: 02.12.2021 09:29 a.m.

On Amazon, customers can buy thousands of branded products – often imported bulk goods – exclusively. What is non-transparent for customers and harbors dangers is lucrative and almost risk-free for Amazon, like Panorama– Research show.

By Christian Baars, Sebastian Friedrich and Annette Kammerer, NDR

Everything is very simple, promise the self-appointed experts and consultants online. Everyone could get rich. “55,509.66 euros in sales in just 30 days” or even “six million a year”, everything seems possible. The supposed magic formula is called “FBA”.

The abbreviation stands for an all-inclusive package from Amazon for processing sales: “Fulfillment by Amazon” (FBA). Merchants who use the service only have to ensure that their goods arrive at an Amazon warehouse from the manufacturer. The large corporation takes care of almost everything else – the payment process, packaging, shipping, customer service – including the destruction of returns and unsold new goods, if necessary.

FBA business is booming

Thanks to the Amazon service, a very special branch of business, the so-called FBA business, has been booming for several years. Retailers use special software to search for gaps in the market on Amazon – mostly in the price segment of less than 100 euros. Then they order the bulk goods via other platforms, such as Alibaba in China. Manufacturers offer their products in large numbers there. The highlight: the middlemen can have their own logo and name printed on them. You can present your goods on Amazon as “branded” products – and offer them at a multiple of the purchase price.

Nicklas Spelmeyer is someone who knows his way around this business. The 23-year-old portrays himself in several YouTube videos as a successful businessman and consultant. He says opposite Panoramathat he’s helped 500 people start their FBA business. He himself started selling cold smoke generators for smoking meat or fish, he reports in one of his videos.

He currently has pans and pots on offer. A climbing tree for cats is to come soon. It’s hard to find something that you can’t sell on Amazon, says Spelmeyer. He is currently also selling bicycle bags. He officially registered his “Forrider” brand two years ago. On Amazon it presents itself as a young, dynamic, bicycle-enthusiastic company: “We build bicycle bags with passion,” it says there. In fact, they are manufactured and supplied by Chinese companies.

“Completely non-transparent”

Spelmeyer does not find this objectionable. Things would be assembled all over the world. “I wouldn’t say just because it’s from China that there’s no passion behind it,” he said in an interview with Panorama. And: The dealer pretends to be a manufacturer in the FBA system.

The problem for customers: they cannot tell where the products are coming from. By whom and how they are produced remains “completely non-transparent,” says Iwona Husemann from the consumer center in North Rhine-Westphalia. In the case of bicycle bags, for example, “Forrider” is named as the manufacturer on the Amazon site, and a company based in Berlin is listed in the imprint. Nowhere is it stated that the bags are being delivered from China.

Amazon: The billion dollar business with pseudo-brands

December 2, 2021 8:58 am

In addition: “Most consumers do not know that they are currently not buying from Amazon,” says Husemann. The group sees itself only as a kind of mediator between dealer and buyer. If something is wrong with the product, Amazon assumes no liability in Europe.

“Most of these sellers probably never hold their products in their hands,” says Amazon expert Juozas Kaziukėnas from Marketplace Pulse, a research firm in the United States. He describes the FBA trade as “a kind of computer game” – but with physical products. This could be devastating if potentially “unsafe”, “dangerous” or “counterfeit” products were sold. “Anything can go wrong,” says Kaziukėnas. Because not only bags and pans are imported this way, but also helmets, children’s toys, electronic devices and medical products.

Many products dangerous

Two samples from last year show how great the risk is: from the European consumer association BEUC and from the Danish Chamber of Commerce. Both have ordered and tested products from third-party retailers on platforms, including Amazon. The result: many were dangerous and should not have been sold.

And that not only carries risks for the customers, but also for the sellers, explains Mark Steier, once one of the most successful Ebay dealers in Germany and now an expert in e-commerce. You could establish brands quickly through the FBA system and thus generate profits. On the other hand, many would underestimate the risks. “They overlook, for example, when products are not allowed to be sold in this country because they do not meet safety standards, for example.”

Steier is therefore calling for Amazon to be more responsible: “Without such a platform, the business model would not exist. That means that if I am the inventor of this business model, I have a special responsibility to a great extent.”

Safety has “top priority”.

Amazon did not want to give an interview on the subject, a spokesman for the company shared at the request of Ed and “Süddeutscher Zeitung”, however, with the fact that the Amazon sales partners are independent companies, but must adhere to the terms of sale. Amazon demands that all products offered comply with the applicable laws and regulations. The safety of customers has “top priority”.

The group has “developed reliable programs to ensure that the products offered are safe and comply with the regulations”. Suspicious companies would be blocked before they could register or post offers.

Business for Amazon almost risk-free

Overall, this business is almost risk-free for Amazon and at the same time very profitable. Around 40,000 German retailers offer products on Amazon, around half use the FBA service. In addition, there are hundreds of thousands of third-party retailers from more than 100 other countries who also sell goods on the German Amazon site. They all pay high fees and often a lot of additional money for advertising in order to appear prominently on the platform. Juozas Kaziukėnas of “Marketplace Pulse” estimates that the dealers would end up with around 20 percent of the sales price. Amazon collects 40 to 50 percent. When asked about these specific figures, the company did not respond.

But it is clear: Globally, Amazon took about $ 300 billion from this business in 2020, according to MarketplacePulse – about 50 percent more than in the previous year. In Germany it was just under 30 billion euros, and thus around 63 percent of its retail sales, estimates the Institute for Retail Research in Cologne.

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