1 00:00:00,040 --> 00:00:01,680 Well folks, I hope you're ready for it. 2 00:00:01,680 --> 00:00:05,280 The downfall of Amazon has officially started according to 3 00:00:05,280 --> 00:00:08,320 Reddit. There is a viral Reddit post on 4 00:00:08,320 --> 00:00:11,560 the infamous Wall Street Bet subreddit that has the title. 5 00:00:11,680 --> 00:00:14,520 The downfall of Amazon has started and this received nearly 6 00:00:14,520 --> 00:00:17,840 4000 up votes, which is a lot. That's a lot for this subreddit 7 00:00:18,360 --> 00:00:22,000 and this in depth write up. It's multi paragraph here. 8 00:00:22,240 --> 00:00:26,800 It goes into great detail is from a seller on Amazon's third 9 00:00:26,800 --> 00:00:29,440 party sales. As we know, Amazon's online 10 00:00:29,440 --> 00:00:31,640 retail portion is divided into two parts. 11 00:00:31,640 --> 00:00:34,600 You have the first party, which is Amazon selling their own 12 00:00:34,600 --> 00:00:36,880 stuff. This is similar like Costco 13 00:00:36,880 --> 00:00:39,800 selling Kirkland's signature. Amazon just lists their own 14 00:00:39,800 --> 00:00:41,600 products and they sell their own stuff. 15 00:00:41,600 --> 00:00:43,880 They're an online store. But then you have a whole other 16 00:00:43,880 --> 00:00:46,480 section which is the third party sellers. 17 00:00:46,760 --> 00:00:50,240 This is where people like you and I could list an item and 18 00:00:50,240 --> 00:00:53,320 sell it ourself and then we can either choose to fulfill it our 19 00:00:53,320 --> 00:00:57,600 self fulfillment by seller or we could choose to fulfill it by 20 00:00:57,600 --> 00:01:00,000 Amazon and use their various services. 21 00:01:00,000 --> 00:01:03,600 So Amazon selling is divided into these two groups, first 22 00:01:03,600 --> 00:01:06,160 party and 3rd party. If we look at the numbers for 23 00:01:06,160 --> 00:01:11,400 last quarter, the online sales last quarter were 70 billion for 24 00:01:11,400 --> 00:01:15,680 first party, this was Amazon's stuff that they sold and then 25 00:01:15,680 --> 00:01:19,040 the third party services were 43 billion. 26 00:01:19,440 --> 00:01:22,920 So Amazon is making a lot of money with their third party 27 00:01:22,920 --> 00:01:24,480 sellers. They're charging all of these 28 00:01:24,480 --> 00:01:28,680 fees which is now amounting to around $120 billion per year. 29 00:01:28,680 --> 00:01:31,040 Now I can also see from this the growth rates of these two 30 00:01:31,040 --> 00:01:33,720 different segments. The first party, the stuff that 31 00:01:33,720 --> 00:01:37,920 Amazon sells grew by 8% year over year, which is still strong 32 00:01:37,920 --> 00:01:40,360 growth. It is growing far above GDP and 33 00:01:40,360 --> 00:01:43,320 as fast as most other companies. But then you have the third 34 00:01:43,320 --> 00:01:46,960 party seller services that grew by 19%. 35 00:01:47,280 --> 00:01:50,120 So the fees that Amazon is charging and the growth of their 36 00:01:50,120 --> 00:01:54,560 third party sales is 2 1/2 times faster than their first party. 37 00:01:54,960 --> 00:01:57,840 And the reason, or at least part of the reason it's growing so 38 00:01:57,840 --> 00:02:00,200 fast is because they're raising prices. 39 00:02:00,240 --> 00:02:03,200 Amazon is raising prices on 3rd party sellers and the sellers 40 00:02:03,200 --> 00:02:04,800 aren't happy about it. Not one bit. 41 00:02:04,800 --> 00:02:08,479 The end of 2023, Amazon started to introduce these new fees that 42 00:02:08,479 --> 00:02:11,320 they're charging to sellers and they did an entire write up and 43 00:02:11,320 --> 00:02:13,840 breakdown of what these fees are and how they're going to evolve 44 00:02:13,840 --> 00:02:15,360 over time. They first say that they're 45 00:02:15,360 --> 00:02:18,080 introducing an inbound placement and service fee for standard and 46 00:02:18,080 --> 00:02:21,400 large bulky sized products to reflect our cost of distributing 47 00:02:21,400 --> 00:02:24,280 inventory to fulfilment centers close to our customers. 48 00:02:24,560 --> 00:02:29,280 So basically this fee, which ranges from $0.27 per unit to 49 00:02:29,280 --> 00:02:33,960 $1.50 per unit that are large and bulky, is the fee for Amazon 50 00:02:34,120 --> 00:02:37,520 to take your product in one warehouse and distribute it 51 00:02:37,520 --> 00:02:39,840 across the country so it's closer to the customers. 52 00:02:40,200 --> 00:02:43,240 So far, Amazon has been taking the hit on that. 53 00:02:43,240 --> 00:02:46,280 They've been paying for it. Now they're introducing a fee so 54 00:02:46,280 --> 00:02:49,600 that the sellers pay for that if they use Amazon service. 55 00:02:49,960 --> 00:02:54,280 If you ship your own product to multiple locations, you avoid 56 00:02:54,280 --> 00:02:56,520 these fees. So they're basically saying you 57 00:02:56,520 --> 00:03:00,280 can use us, you can have us do it for you and ship our product 58 00:03:00,280 --> 00:03:02,480 to multiple locations so they're closer to customers. 59 00:03:02,720 --> 00:03:06,000 Or you can do it yourself and you avoid this fee if you do it 60 00:03:06,000 --> 00:03:09,880 yourself, but they're forcing customers to ship products to 61 00:03:09,880 --> 00:03:12,920 multiple locations. And the reason being is because 62 00:03:12,920 --> 00:03:15,880 Amazon wants fast shipping and if you only have your product on 63 00:03:15,880 --> 00:03:18,240 the East Coast, it's going to take a long time for it to get 64 00:03:18,240 --> 00:03:20,760 to the West Coast. So they want it everywhere 65 00:03:20,760 --> 00:03:23,480 across the country. Now this fee is being introduced 66 00:03:23,480 --> 00:03:27,600 March 1st, 2024, which is why you're hearing a lot of noise 67 00:03:27,600 --> 00:03:30,960 from Amazon sellers right now. A lot of them are complaining 68 00:03:30,960 --> 00:03:33,960 because they're now seeing the brunt of this fee or the work 69 00:03:33,960 --> 00:03:36,760 that's required to do this fulfillment like Amazon has been 70 00:03:36,760 --> 00:03:38,200 doing. Now they also mentioned that 71 00:03:38,200 --> 00:03:41,200 they're introducing a low inventory level fee for standard 72 00:03:41,200 --> 00:03:43,480 sized products. This fee applies if you 73 00:03:43,480 --> 00:03:47,440 consistently carry low levels of inventory relative to your unit 74 00:03:47,440 --> 00:03:50,600 sales as this inhibits our ability to distribute products 75 00:03:50,600 --> 00:03:53,560 across our network, degrading delivery speeds and increasing 76 00:03:53,560 --> 00:03:56,160 our shipping costs. Sellers can avoid this fee by 77 00:03:56,160 --> 00:03:59,960 maintaining more than four weeks of inventory relative to sales. 78 00:04:00,200 --> 00:04:03,760 These fees will apply starting April 1st, 2024. 79 00:04:04,200 --> 00:04:07,160 So we not only have this distribution fee that was 80 00:04:07,400 --> 00:04:11,000 implemented just this month, we also have a low inventory level 81 00:04:11,000 --> 00:04:13,400 fee. You have to keep four weeks 82 00:04:13,400 --> 00:04:16,560 worth of sales so that they can consistently ship it across 83 00:04:16,560 --> 00:04:19,640 their distribution centers. And again, this all looks like 84 00:04:19,640 --> 00:04:22,680 it's centered around the customer making sure that they 85 00:04:22,680 --> 00:04:24,680 can get their product as quick as possible. 86 00:04:25,000 --> 00:04:28,800 The main goal for Amazon is to have when you click a button for 87 00:04:28,800 --> 00:04:30,760 that product to get on your doorstep the next day 88 00:04:30,760 --> 00:04:33,520 consistently and reliably. So they're incentivizing sellers 89 00:04:33,520 --> 00:04:36,560 to keep adequate amounts of inventory by this low inventory 90 00:04:36,560 --> 00:04:37,800 fee. And then they mentioned that 91 00:04:37,800 --> 00:04:41,040 finally we'll expand the return processing fee to apply to high 92 00:04:41,040 --> 00:04:44,280 return rate products in all categories, excluding apparel 93 00:04:44,280 --> 00:04:46,480 and shoes. So if you're selling something 94 00:04:46,480 --> 00:04:50,440 on Amazon that's consistently returned, Amazon no longer wants 95 00:04:50,440 --> 00:04:52,280 to take the brunt of those return processing. 96 00:04:52,400 --> 00:04:55,520 So Amazon is introducing many of these fees to sellers and 97 00:04:55,520 --> 00:04:57,800 they're implementing them over the course of the year. 98 00:04:58,040 --> 00:05:01,120 Now sellers are trying to figure out these complex and nuanced 99 00:05:01,120 --> 00:05:02,920 fees and how they impact their business. 100 00:05:03,200 --> 00:05:06,080 Many of them say that it may actually save money in some 101 00:05:06,080 --> 00:05:09,720 cases, but most of them, the majority of sellers are saying 102 00:05:10,000 --> 00:05:13,360 that this is a big additional cost, it's going to be a price 103 00:05:13,360 --> 00:05:15,720 hike. And of course they're not happy 104 00:05:15,720 --> 00:05:18,320 about prices going up. We can look at the case here, 105 00:05:18,760 --> 00:05:22,360 Chase, the capital allocator, is an Amazon seller that says I've 106 00:05:22,360 --> 00:05:25,600 sold on Amazon Marketplace for 10 years and I've never seen 107 00:05:25,600 --> 00:05:28,800 Amazon sellers more outraged than they've been in the last 108 00:05:28,800 --> 00:05:33,240 week after the FBA, inventory placement fee increased 200 to 109 00:05:33,240 --> 00:05:37,200 400% for most sellers. So this isn't validated data, 110 00:05:37,560 --> 00:05:40,600 but in his case he believes that Amazon is increasing prices by 111 00:05:40,600 --> 00:05:45,520 200 to 400% for most sellers. For me, the cost per item to 112 00:05:45,520 --> 00:05:50,720 ship my average item on Amazon FBA went up 300% with the fee 113 00:05:50,720 --> 00:05:53,400 changes. Folks are absolutely outraged, 114 00:05:53,400 --> 00:05:57,080 especially low margin sellers. So we look at some emails that 115 00:05:57,080 --> 00:05:59,160 he's received from different sellers and different people 116 00:05:59,160 --> 00:06:02,560 working with his business. They go over the placement fees, 117 00:06:02,800 --> 00:06:06,600 how it's increasing by $36 per item or per package. 118 00:06:06,840 --> 00:06:09,240 We have other ones here where he's gone over different sellers 119 00:06:09,240 --> 00:06:13,360 saying that there's are going to be $400.00 per 1000 units, which 120 00:06:13,360 --> 00:06:15,400 is ludicrous. Ridiculous. 121 00:06:15,560 --> 00:06:18,160 One of the Amazon sellers here say that this is a double 122 00:06:18,160 --> 00:06:19,840 whammy. They've been browsing through 123 00:06:19,840 --> 00:06:22,880 the forms, taking in the widespread frustration regarding 124 00:06:22,880 --> 00:06:26,160 the new inbound placement fees, and the situation seems to be 125 00:06:26,160 --> 00:06:29,600 reaching a boiling point. It's astounding to see shipment 126 00:06:29,600 --> 00:06:34,280 costs skyrocketing 8 to $14.00 per box to an exorbitant 90 to 127 00:06:34,280 --> 00:06:37,880 $140.00 per box. However, I've noticed a 128 00:06:37,880 --> 00:06:41,160 significant piece of the puzzle that may seem to be missing. 129 00:06:41,480 --> 00:06:44,000 It's not just about the increase in fees for placements. 130 00:06:44,200 --> 00:06:46,880 There's an additional layer where we've been penalized for 131 00:06:46,880 --> 00:06:50,600 failing to meet sufficient stock levels to meet demand. 132 00:06:50,920 --> 00:06:53,400 That is the elastic demand price. 133 00:06:53,400 --> 00:06:55,760 Amazon wants you to keep a certain level of inventory 134 00:06:55,760 --> 00:06:58,720 depending on your sales. This essentially forces us to 135 00:06:58,720 --> 00:07:01,120 increase the frequency of our shipments to ensure our 136 00:07:01,120 --> 00:07:04,520 inventory levels are adequate. Failure to do so results in per 137 00:07:04,520 --> 00:07:07,040 unit charges. Amazon strategy seems to be 138 00:07:07,040 --> 00:07:10,240 pushing us into a corner where we're compelled to send more 139 00:07:10,240 --> 00:07:13,320 units, all the while increasing the cost for replacement. 140 00:07:13,480 --> 00:07:15,320 Now they say. As a potential workaround, I'm 141 00:07:15,320 --> 00:07:18,560 considering sending a larger shipment to Amazon storage and 142 00:07:18,560 --> 00:07:20,560 distribute. This would allow Amazon to 143 00:07:20,560 --> 00:07:23,880 automatically pull inventory as needed, potentially helping 144 00:07:23,880 --> 00:07:27,920 circumvent these fees. Or just switch to FBMFBM is an 145 00:07:27,920 --> 00:07:31,600 abbreviation for the seller fulfilling it their sells, not 146 00:07:31,600 --> 00:07:33,440 going through Amazon's fulfillment network. 147 00:07:33,840 --> 00:07:35,520 And that's the case with all of these complaints. 148 00:07:35,520 --> 00:07:37,840 You see, Amazon has a defense here. 149 00:07:37,920 --> 00:07:40,480 Unlike a lot of other big tech companies with a controlling 150 00:07:40,480 --> 00:07:44,760 marketplace, Amazon can say, if you don't want to use our 151 00:07:44,760 --> 00:07:48,800 fulfillment network and all the services we offer, that's fine. 152 00:07:49,000 --> 00:07:53,120 You can use FBM. That's fulfillment by yourself. 153 00:07:53,360 --> 00:07:56,640 You're fulfilling it as a seller, so you can avoid all of 154 00:07:56,640 --> 00:07:59,840 these fees and all the trouble of what we charge if you fulfill 155 00:07:59,840 --> 00:08:02,200 it yourself. But the truth is, and what these 156 00:08:02,200 --> 00:08:05,720 sellers don't want to say, is that FBM is expensive. 157 00:08:05,720 --> 00:08:09,160 Fulfilling it by yourself is very, very expensive. 158 00:08:09,440 --> 00:08:11,760 So even though they're complaining about Amazon raising 159 00:08:11,760 --> 00:08:14,760 costs, the alternative is also very expensive. 160 00:08:15,120 --> 00:08:17,480 And this highlights the amount of work that Amazon has been 161 00:08:17,480 --> 00:08:21,080 doing at a subsidized cost. So we have many complaints like 162 00:08:21,080 --> 00:08:24,280 this from Twitter, with sellers on Twitter saying that these 163 00:08:24,280 --> 00:08:27,760 fees are sticking it to small businesses, but that's not it. 164 00:08:27,760 --> 00:08:31,320 We also have from Reddit, the Wall Street Bet subreddit saying 165 00:08:31,320 --> 00:08:33,320 the downfall of Amazon has started. 166 00:08:33,679 --> 00:08:36,360 Investors and consumers need to know this very important fact 167 00:08:36,360 --> 00:08:39,400 about Amazon. They just dug their own grave. 168 00:08:39,400 --> 00:08:42,240 The third party sellers make up around 65% of the sales 169 00:08:42,240 --> 00:08:46,160 generated on Amazon and recently they did a dirty move to 3rd 170 00:08:46,160 --> 00:08:48,920 party sellers that will have many leaving the platform or 171 00:08:48,920 --> 00:08:52,760 raising prices so high that Amazon becomes uncompetitive to 172 00:08:52,760 --> 00:08:55,120 consumers. Amazon just announced and 173 00:08:55,120 --> 00:08:59,160 implemented 2 new double dip fees that will crush third party 174 00:08:59,160 --> 00:09:01,880 sellers and that's not even an exaggeration. 175 00:09:02,680 --> 00:09:05,840 The first fee which has been implemented already is an 176 00:09:05,840 --> 00:09:10,120 inbound placement fee, which is a shipping fee Amazon tracks on 177 00:09:10,120 --> 00:09:13,840 sending inventory to Amazon Prime and Amazon FBA. 178 00:09:13,880 --> 00:09:17,120 Fulfilled by Amazon, this fee has increased the shipping cost 179 00:09:17,120 --> 00:09:19,960 for 3rd party sellers by 6 to 10 times. 180 00:09:20,400 --> 00:09:22,600 Now how does he know it's increase the cost by that much? 181 00:09:23,040 --> 00:09:25,520 We don't really know, but that's just what he's saying here. 182 00:09:25,920 --> 00:09:29,480 For example, a seller sending a truckload of inventory prior to 183 00:09:29,480 --> 00:09:32,560 this inbound placement fee to Amazon traditionally spent 184 00:09:32,560 --> 00:09:36,080 around 600 to $800, sometimes way more. 185 00:09:36,440 --> 00:09:39,160 Now on top of this, they are charged with an inbound 186 00:09:39,160 --> 00:09:42,560 placement fee of around 3000 to $5000. 187 00:09:42,800 --> 00:09:45,680 This essentially wipes out a huge chunk, if not most, of the 188 00:09:45,680 --> 00:09:48,000 profit margin from sellers on Amazon. 189 00:09:48,360 --> 00:09:51,840 Add in the additional fee. Amazon's charging 15% referral 190 00:09:51,840 --> 00:09:55,320 fee just to list the one on their site, or 8 to 15% 191 00:09:55,320 --> 00:09:58,280 fulfillment fee. FBA picking, packaging and 192 00:09:58,280 --> 00:10:02,400 delivery, storage fees around $0.78 per cubic foot, and 193 00:10:02,400 --> 00:10:04,720 advertising costs around 2 to 15%. 194 00:10:05,120 --> 00:10:07,560 I wouldn't call that really a fee, that's an optional thing to 195 00:10:07,560 --> 00:10:10,240 advertise, but he's grouping it in with the fees here. 196 00:10:10,760 --> 00:10:13,600 The second fee, which will take place in about a month is a low 197 00:10:13,600 --> 00:10:18,120 inventory fee, which is a fee imposed by Amazon algorithm when 198 00:10:18,120 --> 00:10:21,800 inventory is starting to run low at Amazon fulfillment centers. 199 00:10:22,040 --> 00:10:26,400 This fee can be anywhere from $0.32 to $1.11 per item. 200 00:10:26,480 --> 00:10:28,520 Now it continues on. Why is this important for 201 00:10:28,520 --> 00:10:31,600 investors and consumers? The only solution for 3rd party 202 00:10:31,600 --> 00:10:34,840 sellers to barely keep their head above water and to maintain 203 00:10:34,840 --> 00:10:37,560 remote semblance of their razor thin margins prior to the new 204 00:10:37,560 --> 00:10:41,560 fees is to raise prices. I'm talking 20 to 30% price 205 00:10:41,560 --> 00:10:45,360 increases are required at a minimum just to keep back to 206 00:10:45,360 --> 00:10:47,480 par. You want to talk about all the 207 00:10:47,480 --> 00:10:50,840 issues with inflation? Well now you know corporate 208 00:10:50,840 --> 00:10:52,640 greed is being shown at its finest. 209 00:10:52,920 --> 00:10:58,000 Amazon reported $30.4 billion net income for 2023, but with 210 00:10:58,000 --> 00:11:01,920 Penny pitching third party sellers even more at the expense 211 00:11:01,920 --> 00:11:04,640 of driving prices up for consumers like never before seen 212 00:11:04,640 --> 00:11:07,000 on the platform. This will cause consumers to 213 00:11:07,000 --> 00:11:10,680 look elsewhere to shop other than Amazon because Amazon will 214 00:11:10,680 --> 00:11:14,280 now be highly uncompetitive. It's just a matter of time 215 00:11:14,520 --> 00:11:18,080 Amazon shot themselves in the foot and needs to reverse course 216 00:11:18,080 --> 00:11:20,640 on these absurd fees. Now of course after Twitter 217 00:11:20,640 --> 00:11:22,840 started to blow up with complaints, Reddit started to 218 00:11:22,840 --> 00:11:25,440 blow up with complaints. We also had the mainstream media 219 00:11:25,440 --> 00:11:29,600 jump in with Fortune doing a huge write up on Amazon and 220 00:11:29,600 --> 00:11:31,520 these exorbitant fees they're charging. 221 00:11:31,840 --> 00:11:34,200 We have many quotes here from customers and I won't go over 222 00:11:34,200 --> 00:11:36,720 the entire article, but I just want to highlight some of the 223 00:11:36,720 --> 00:11:38,560 things that they they are saying here. 224 00:11:38,920 --> 00:11:41,520 It's becoming increasingly difficult to sell on Amazon. 225 00:11:41,640 --> 00:11:43,560 You're getting squeezed from all sides. 226 00:11:43,560 --> 00:11:46,200 It's a very high fee. It doesn't make sense how much 227 00:11:46,200 --> 00:11:48,920 money they're charging. I'm very experienced on Amazon 228 00:11:48,920 --> 00:11:51,960 and I've spent so much time on this, but for many items I still 229 00:11:51,960 --> 00:11:54,240 don't have clarity on how exactly I'm going to sell 230 00:11:54,240 --> 00:11:56,280 profitably. Yet it's crazy. 231 00:11:56,280 --> 00:11:59,480 You got to precisely thread the needle to not get completely 232 00:11:59,480 --> 00:12:01,360 killed. This article was published March 233 00:12:01,360 --> 00:12:04,840 1st when Amazon charged that distribution fee, and then only 234 00:12:04,840 --> 00:12:08,120 a week later, March 8th, we have an article that the FTC is now 235 00:12:08,120 --> 00:12:12,240 probing Amazon on its new controversial fees around its 236 00:12:12,240 --> 00:12:16,000 $140 billion seller business. Now why is that important? 237 00:12:16,000 --> 00:12:18,360 Because the FTC chair is Lina Khan. 238 00:12:18,720 --> 00:12:21,720 Lina Khan, who has made it her life's ambition, her life's 239 00:12:21,720 --> 00:12:25,280 goal, to go after Amazon. That's what she really wants to 240 00:12:25,280 --> 00:12:27,960 do. In fact, in 2017, she authored 241 00:12:28,360 --> 00:12:32,280 Amazon Antitrust Paradox. This is while she was still in 242 00:12:32,280 --> 00:12:36,560 school, the Yale Law Journal. This was back in 2017, before 243 00:12:36,560 --> 00:12:40,840 she was ever part of the FTC. She even had it then that Amazon 244 00:12:40,840 --> 00:12:43,560 was a big bad company. Lena Khan views herself as some 245 00:12:43,560 --> 00:12:47,440 Obi Wan Kenobi going after the bad empire, the empire which is 246 00:12:47,440 --> 00:12:50,040 Amazon. She wants to take Amazon down a 247 00:12:50,040 --> 00:12:51,560 pig. And it's clear to see that in 248 00:12:51,560 --> 00:12:54,720 her long term ambition and taking down Amazon, these 249 00:12:54,720 --> 00:12:57,000 complaints have added fuel to her fire. 250 00:12:57,000 --> 00:13:00,080 She wants to take down Amazon and now she has the complaints 251 00:13:00,080 --> 00:13:03,160 from sellers on Twitter, on Reddit and highlighted by the 252 00:13:03,160 --> 00:13:05,720 mainstream media. Top sellers are upset that they 253 00:13:05,720 --> 00:13:09,960 have to pay more and Lina Con is going to use that as fuel to 254 00:13:09,960 --> 00:13:12,040 take down Amazon. I would not be surprised. 255 00:13:12,040 --> 00:13:14,480 In fact, I think it should be expected that in the coming 256 00:13:14,480 --> 00:13:18,520 months Lina Con and the FTC will launch a new lawsuit against 257 00:13:18,520 --> 00:13:21,560 Amazon over these fees. So where does that leave us? 258 00:13:21,560 --> 00:13:24,080 We have lots of sellers complaining, and we have the 259 00:13:24,080 --> 00:13:26,760 FTC, the likely suing Amazon in the coming months. 260 00:13:27,160 --> 00:13:30,240 The first thing I want to mention is that raising prices 261 00:13:30,240 --> 00:13:33,120 is not illegal. The FTC is going to have a very 262 00:13:33,120 --> 00:13:36,880 difficult case if they sue Amazon on the basis that they're 263 00:13:36,880 --> 00:13:38,960 raising prices unfairly on sellers. 264 00:13:39,240 --> 00:13:43,880 Defining what's unfair to sellers is legally dubious and 265 00:13:44,000 --> 00:13:46,680 Amazon can always go back to the excuse. 266 00:13:46,680 --> 00:13:49,240 They can go back to the, I believe, very rationable, 267 00:13:49,240 --> 00:13:52,400 reasonable excuse that sellers don't have to use their 268 00:13:52,400 --> 00:13:55,680 fulfillment network. Sellers can sell by FBM 269 00:13:55,840 --> 00:13:58,720 Fulfillment by Merchant, where they simply do the work 270 00:13:58,720 --> 00:14:00,080 themselves. They ship it out to the 271 00:14:00,080 --> 00:14:03,600 locations themselves, They do all the manual labor themselves. 272 00:14:03,840 --> 00:14:05,840 The reason that they don't want to do that, even though they 273 00:14:05,840 --> 00:14:08,880 would avoid most of Amazon's fees, is because they would take 274 00:14:08,880 --> 00:14:11,520 on the cost of the shipping and doing it themselves. 275 00:14:11,800 --> 00:14:14,840 So most of them are admitting that even though Amazon is 276 00:14:14,840 --> 00:14:18,600 raising prices dramatically, it's still cheaper than doing it 277 00:14:18,600 --> 00:14:20,960 yourself. It's still easier, more cost 278 00:14:20,960 --> 00:14:22,920 effective, than doing it yourself. 279 00:14:23,000 --> 00:14:26,200 This also proves how valuable Amazon's fulfilment network is. 280 00:14:26,480 --> 00:14:29,120 Even though these sellers are griping and complaining about 281 00:14:29,120 --> 00:14:31,800 these new fees, most of them will still choose to pay it 282 00:14:31,800 --> 00:14:34,240 because it's still easier than doing it yourself, and still 283 00:14:34,240 --> 00:14:36,160 cheaper. Many of them are complaining 284 00:14:36,160 --> 00:14:39,520 that they already have a razor thin profit margins, and if the 285 00:14:39,520 --> 00:14:42,120 fees go up, they're going to have to raise prices or they're 286 00:14:42,120 --> 00:14:45,000 going to be unprofitable. That may be a problem for some 287 00:14:45,000 --> 00:14:47,360 businesses, but look at the case of Amazon. 288 00:14:47,600 --> 00:14:50,360 The people complaining about profit margins should look at 289 00:14:50,360 --> 00:14:53,160 Amazon's profit margins over the past decade. 290 00:14:53,440 --> 00:14:55,480 We can look at it right here on the ratios chart. 291 00:14:56,120 --> 00:15:00,520 If we look at this over the past 10 years, Amazon in 2014 had 292 00:15:00,520 --> 00:15:03,760 negative margins. The FTC didn't jump in and 293 00:15:03,760 --> 00:15:06,520 defend Amazon there. They were fine with Amazon 294 00:15:06,560 --> 00:15:11,440 losing money profit margins of half a percent in 2015. 295 00:15:11,800 --> 00:15:14,560 Now if we look at the amount of revenue Amazon was doing in 296 00:15:14,560 --> 00:15:17,400 2015, we can see that right here. 297 00:15:17,760 --> 00:15:24,160 Amazon did $107 billion in revenue and made half a percent 298 00:15:24,160 --> 00:15:26,760 profit margin. The government didn't care. 299 00:15:26,880 --> 00:15:30,200 The Amazon was basically running a giant charity, building out 300 00:15:30,200 --> 00:15:33,120 all of this infrastructure, investing in the US economy, 301 00:15:33,320 --> 00:15:36,160 providing 10s of thousands of jobs, hundreds of thousands of 302 00:15:36,160 --> 00:15:38,120 jobs. They didn't care all. 303 00:15:38,120 --> 00:15:41,440 Then third party sellers were happy to sell on Amazon when 304 00:15:41,440 --> 00:15:44,360 they were subsidizing the cost of their logistics network. 305 00:15:44,920 --> 00:15:49,040 In 2016 it bumped up to 1.74 and then for a couple years it 306 00:15:49,040 --> 00:15:53,160 stayed at that .2018. The profit margins were 4%. 307 00:15:53,400 --> 00:15:56,720 This is still below Walmart now. An important thing to keep in 308 00:15:56,720 --> 00:15:59,920 mind here is that during this time period of profit margins 309 00:15:59,920 --> 00:16:03,680 being 4 and 5%. This is for the entire company, 310 00:16:03,840 --> 00:16:08,640 Amazon the whole thing. But AWS has profit margins of 311 00:16:08,640 --> 00:16:12,160 30%. So all of this profit right here 312 00:16:12,160 --> 00:16:15,160 presumably is being generated by AWS. 313 00:16:15,440 --> 00:16:18,640 The only reason the company had positive profit margins at all 314 00:16:18,880 --> 00:16:21,760 was because of this unaffiliated business with retail. 315 00:16:22,200 --> 00:16:25,720 In reality, Amazon has been losing money on their retail 316 00:16:25,720 --> 00:16:27,920 business for the better part of a decade. 317 00:16:27,920 --> 00:16:33,280 The most recent year, 2023, Amazon had 5.29% profit margins, 318 00:16:33,560 --> 00:16:38,360 5% profit margins for the entire company when AWS had around 30% 319 00:16:38,360 --> 00:16:41,520 profit margins. So most of this again is being 320 00:16:41,520 --> 00:16:44,840 driven by AWS. So as Amazon raises prices on 321 00:16:44,840 --> 00:16:47,360 3rd party sellers, there's going to be a battlefield of opinions 322 00:16:47,360 --> 00:16:50,520 based on different incentives. As a shareholder of the company, 323 00:16:50,840 --> 00:16:53,560 I see this is a positive thing even though there's going to be 324 00:16:53,560 --> 00:16:55,400 a lot of complaints and a lot of noise. 325 00:16:55,680 --> 00:16:58,920 Ultimately, what Amazon offers to sellers is an incredible 326 00:16:58,920 --> 00:17:02,000 value and many of them will still continue to fulfil their 327 00:17:02,000 --> 00:17:05,599 products by Amazon because they know the value of all of this 328 00:17:05,599 --> 00:17:07,960 type of logistics being taken care of for them. 329 00:17:08,400 --> 00:17:12,119 They also know that the customer of Amazon is unlike most 330 00:17:12,119 --> 00:17:16,000 customer bases, they're higher income and they're very sticky. 331 00:17:16,200 --> 00:17:18,960 Amazon customers are not going to go to some third party 332 00:17:18,960 --> 00:17:20,760 website to save a couple dollars. 333 00:17:21,000 --> 00:17:24,599 They prioritize the trust with Amazon and they prioritize the 334 00:17:24,599 --> 00:17:27,440 consistent fast shipping. So even if prices go up 335 00:17:27,440 --> 00:17:30,600 slightly, I don't see Amazon customers leaving. 336 00:17:31,000 --> 00:17:33,800 So when I look at the stock, there's going to be a lot of 337 00:17:33,800 --> 00:17:37,240 opinions this year, but I still remain with my prediction. 338 00:17:37,680 --> 00:17:41,160 The Amazon this year in 2024 will generate record high 339 00:17:41,160 --> 00:17:43,520 amounts of cash flow. My prediction is somewhere 340 00:17:43,520 --> 00:17:46,720 around $70 billion, which puts the valuation of the company 341 00:17:47,040 --> 00:17:50,640 right around a 4% free cash flow yield, which I think is still 342 00:17:50,640 --> 00:17:52,600 good value. So I'm bullish on it. 343 00:17:52,880 --> 00:17:54,480 I don't think it's a downturn of Amazon. 344 00:17:54,960 --> 00:17:57,480 Maybe you agree more with the people on Reddit or the people 345 00:17:57,480 --> 00:17:58,960 on Twitter. Let me know what you think. 346 00:17:59,240 --> 00:18:00,040 That's all for now.