The fear in 2023 is that there will be a worsening recession for our economy.
Now if that is true, what is the state of Amazon FBA and will it be a bad idea to start your business now?
I do believe that we will see a slowdown here in 2023…
But let’s look at some data before we make our final decision of if this is a year to stay away from Amazon.
In 2022, we also expected a slowdown.
Amazon, in fact, broke records including recording their highest-ever Black Friday Weekend amidst all of this economic fear.
Looking at their overall revenue we can still see that year-over-year growth is still trending positive. (2022 Q4 data not out yet where we usually see a nice spike every year)
(Source: https://www.statista.com/statistics/273963/quarterly-revenue-of-amazoncom/)
Although all the concerns of 2022 being a rough year, Amazon still grew and looks to be in fine shape.
I take that as a big positive as I was expecting a down year in 2022, and we did not see it.
That gives me some faith that, among the fears in 2023, I don’t think Amazon will be hurting as bad as the fears might predict.
BUT just because data from the past looks good and 2022 played out the way it did, does not mean we know what could happen in 2023.
Things could get worse…much worse.
Now, let’s say that they do in 2023…
Say Amazon has one of the worst years it has had in 3-5 years.
*As looking at the worst-case scenario can help us make better decisions and weigh the risks.*
This means that Amazon sales are down, less volume on Amazon, and that product sales will drop for private label sellers.
Okay, that sucks…
But what are some pros of volume dropping and a bunch of fear about starting an Amazon business?
1. If volume is down, that means it takes less volume to rank your products vs competitors.
This is because the way Amazon ranks you is by your number of sales per day for certain keywords against your competitors for those same keywords.
So it is a lot easier to rank up if your #1 rank competitor is doing only 10 sales per day vs 20…that means you only have to beat 10 sales per day vs 20.
That is fewer dollars in advertising, getting reviews, and overall inventory since you don’t need to match that velocity.
Okay, cool.
2. If people are scared shitless of the 2023 recession and what that means for Amazon…. Well, that means less competition entering the market.
Less competition, the easier it is to establish your product into the market.
That is also ‘very cool’.
Now you are probably saying, who cares Cam, we still won’t make any money if sales are down…
Well first of all, just because sales are down, doesn’t mean you can’t be profitable.
And secondly, we need to ask ourselves if the worst-case scenario for 2023 is that we break even by taking advantage of the low volume and ranking up to the top organic spots…what does the future look like?
What do you believe the future in 2024, 2025, 2026…2030 for Amazon looks like?
Well, my belief is that we are just at the tip of the iceberg of Amazon growth.
In 2022, according to the US Census Department of Commerce, E-Commerce ONLY accounted for 14.6% of ALL retail sales in 2022 through its first 3 quarters (4th quarter data not out yet, data lags quite a bit).
Meaning that 85.4% of commerce is still left to be captured online in a market that does over $5 Trillion per year…. yes, I said $5 Trillion.
So if we assume that online shopping is the future, which I think a lot of people agree with me there, then we know that there is a ton of market cap left to capture in this space WITH Amazon being the biggest and most dominant player…
Looking long term, this data & logic actually tells us that 2023 is the best year you could start an Amazon business because of the lower velocity and start-up costs to become top in your niche (in my opinion of course).
Now what do you think?
Do you think fear of what could happen should play into what long-term seems to be the right move?
I say this to make you think about it, not to persuade your decision, as you must do what is best for you always.
As always guys, I hope this helps you make the best decision for you.
