How cheap goods are sold dearly on Amazon – economy

The bike bag with the chic F is a best seller on Amazon. It has several hundred ratings, an average of 4.5 out of five stars, and a double pack is said to cost almost 80 euros. The brand emblazoned on the bag in capital letters: Forrider. In addition to classics like Vaude, it sounds unknown at first. But the brand has a company site on Amazon that looks like a dynamic start-up with a lot of enthusiasm for tinkering. It is advertised with slogans such as “We build bicycle bags with passion”.

The story is right, so is the price. But what Amazon customers should not have suspected: The bag does not come from a start-up with domestic production, it is a product made in China. There have NDR and Southgerman newspaper I bought the same bag for a few euros from Alibaba’s online portal. So the start-up is less a think tank than a simple retailer who has production in China – and then ships the bag across the world via Amazon.

Forrider is one of thousands of brands that people in this country can currently buy via the Amazon marketplace and where it is difficult for them to see what they are actually having delivered to their home. In contrast to Amazon’s own products, third-party retailers sell millions of products on the so-called marketplace, the quality or safety of which Amazon has little influence on due to the sheer volume. This can be annoying and intransparent for consumers, and in the worst case even dangerous, as former retailers as well as experts and consumer advocates warn. Amazon, on the other hand, takes the position that the responsibility lies with the retailers, not the group. But is it that simple?

63 percent trading turnover with the marketplace

Amazon earns a lot of money with its marketplace. The Cologne Institute for Retail Research (IFH) estimates that the group generates around 63 percent of its retail sales in this country. According to Amazon, there are 40,000 German retailers alone, plus hundreds of thousands from abroad who also sell their goods in Germany. Amazon earns a commission on all of them, and thanks to FBA, it earns significantly more from more than 20,000 German retailers.

The English abbreviation FBA stands for Fulfillment by Amazon. It is the lever that ensures that more and more pseudo brands are being washed into Germany by more and more companies. There are more than 1000 bike bags on Amazon alone, where there used to be maybe three to five at the bike shop around the corner.

In practice, FBA means that a retailer sends their goods to Amazon. The US group then takes care of logistics, storage, shipping to the customer, returns and, in some cases, customer service. According to estimates, he collects up to 50 percent of the sales price for this. The retailer’s only task is to somehow get the goods to Amazon, come up with a brand and a story, and then put the product in the limelight as well as possible. Such FBA brands have experienced such a hype in recent years that other companies have started to buy up the brands for sometimes high millions and continue to operate them.

Hardly anyone in Germany knows what FBA means in practice better than Nicklas Spelmeyer, Managing Director of Spelly Trade based in Berlin. The 23-year-old young entrepreneur sells, among other things, the Forrider bicycle bag, which he has imported from China. In addition to bags, he says he also sells sporting goods and kitchen accessories, and soon also a climbing tree for cats. In short: “Actually anything is possible.”

He compares the business model with the department stores of the world, he says: “We buy products somewhere cheaper, in large quantities, mostly directly from the manufacturer. And then we sell these products on via Amazon.”

A profitable business for traders

He himself reports that he quickly made a lot of money with the business. In addition to his job as a trader, he also earns money as a consultant and explains the newcomers to the FBA business in internet videosHow to make the big money as quickly as possible: “First: Find a suitable product. Second: Buy 100 to 500 pieces. Third: Send the goods to Amazon. Fourth: Present your product well (pictures and description).” And then there is step five, which is the one that attracts the newcomers: “Fifth: sell for four to six times the purchase value.”

Mark Steier, once one of the most successful Ebay sellers in Germany and today an e-commerce expert, is critical of these stories. The FBA business is “a blessing and a curse” at the same time. Because on the one hand, few could earn a lot of money quickly. “On the other hand, many retailers underestimated the risks that the system also entails. They overlook, for example, when products are not allowed to be sold in this country because they do not meet safety standards,” he says.

There are dealers who have also been on site in China or, like Nicklas Spelmeyer, had samples sent to them and changed little things. But neither that nor good quality is guaranteed. Many traders are simply unlikely to have a clue about the business. Amazon expert Juozas Kaziukenas, founder of Marketplace Pulse, an analysis company in the USA, even goes so far as to describe the hunt for the next big brand as “a kind of computer game”. This would be devastating if potentially “unsafe”, “dangerous” or “counterfeit” products were sold. “Anything can go wrong,” says Kaziukenas.

The consumer, who does not even see whether the children’s toys contain toxic substances, is left behind. European consumer advocates recently ordered 250 products at platforms like Amazon and found that two thirds of the products are unsafe. The Danish Chamber of Commerce tested nine products on Amazon – seven were “dangerous” and not compliant with EU regulations.

Amazon did not want to answer any questions on request, but they assert in writing that customer safety is very important to the group and that they demand that all products offered comply with the applicable laws and regulations. To this end, algorithms and people would regularly identify products that violate Amazon standards and then initiate appropriate measures. In some cases, products are blocked before they are published on the platform and, in addition, they are informed when authorities order product recalls.

Mediator between buyer and seller

However, a spokesman for the group also writes: “Amazon sales partners are independent companies.” Amazon, so the message between the lines, sees itself only as an intermediary between buyer and seller, not as the person responsible.

Mark Steier is critical of this attitude and would like to hold Amazon more liable. He says: “Without such a platform, the business model would not exist. That means that if I am the inventor and foundation stone of this business model, then I have a special responsibility to a great extent.”

The consumer center in North Rhine-Westphalia is also concerned about the marketplace, especially when the goods come from so-called third countries such as China. For them, the platform’s lack of transparency is a particular annoyance. When ordering, it is difficult for users to find out who is selling the product. “Most consumers do not know that they are not buying from Amazon at the moment,” says Iwona Husemann from the consumer advice center in North Rhine-Westphalia. Even a look at the imprint is not always helpful. Because there is often the trading address of a German FBA dealer who buys in China – or the German address of a Chinese counterpart. “But where the product comes from, by whom and how it is manufactured remains completely non-transparent for the customer,” says Husemann.

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