Sam Parr breaks down Thrasio, a company buying Amazon FBA brands for hundreds of millions, and why selling on Amazon has gotten brutal. A typical seller makes $3-5M in revenue but only 10-20% profit margins. Amazon's algorithm, surprise account suspensions, and sudden commission cuts make the platform increasingly hostile to independent sellers.
Me and Sam are here. Sam, you wrote something at the top of this. I want to hear what you have to say, which is people's reply about what we talked about last time. Gracias. Let's jump in with that.
All right. You want to— I'm going to read just word for word. I have it pulled up on my Twitter. Okay. You ready? I'm not going to read the guy's name. He goes, I'm a modest size, mid-seven-figure Amazon seller in a network of guys that range from $1 to $2 million to probably $50 million plus. We have a few guys in our network. That actually sold their company to— how do you call it?
Thrasyo.
Thrasyo. I'm happy to chat about Amazon e-commerce sometime. Okay. So I'm going to read his replies now. For those of you listening, the background is, is that on Tuesday, Sean and I talked about Thrasyo. It's a company that raised money. They raised $100, $200 million at a $750 valuation. I don't remember.
Yeah, close to $100 million. At a $750 million valuation?
A big company. You can, um, they're only 2 years old. They're— and what they're doing is buying Amazon fulfillment and Fulfilled by Amazon company— Fulfilled by Amazon companies, and they are, uh, making the brands better and just owning them. They're doing a bunch of stuff. Um, and so I had a guy reach out to me and he's— I go, that's That's great. Tell me, what's the— I asked them, what's the cash flow situation like? For most guys sub $10 million, they're probably working with 0 to a handful of US employees, still actively involved in the day-to-day, large team in the Philippines and in cheap locations, and are probably netting between 10 to 20% a year. And so the typical size for $3 to $5 million— the typical size is $3 to $5 million in revenue, and they're probably pulling in $500,000 to $1 million a year for themselves. But the problem is, is that it's getting harder and harder. In 2013, you could sell almost anything and scale a 7-figure business. Now, there are a lot more dominant, more sophisticated players and it's incredibly hard to enter in the business. The Amazon algorithm is much smarter and it makes ranking incredibly expensive and difficult. Also, Amazon treats their sellers like trash. So it's kind of a mixed bag. I could take a month and do nothing and let my team run it and it can go perfect. Or I can get an email tomorrow saying my account has been suspended or killed and I need a lawyer to reinstate everything or I'm just crushed. So anyway, Sean, I wanted to fill you in on this because I thought it was cool insight. I didn't know about that.
Yeah, that's, that's a good insight. So a couple of thoughts on that. So the first is I think he's right. You know, back 2013, 2014, it was a lot easier to do it than it is today. That seems consistent with what I've heard. In fact, it seems like the formula is build a successful Amazon business in 2013, '14, '15, then start teaching other people how to do it because it's too hard to do anymore. And so now you start giving away the sort of secrets and you become a teacher for the next 3 years. So I think that's the career path right now. The other thing that comes to mind, we were talking, I was talking to Andrew Wilkinson about this, and he was saying he used the, I think it's a I think it's a Charlie Munger quote, um, which is— or no, no, it's a Nassim Taleb quote, which is, it's like picking up pennies in front of a steamroller. So, you know, there's a high probability you can make a little bit of money, um, you know, consistently, everything, every single time you reach down, you pick it up. And then there's, you know, a low probability of complete death. And that's what he's talking about when he says you can get a letter tomorrow that says your account is suspended, goodbye, um, and, and that's it. Or Amazon cuts the rates of your category. Like, I have a friend who was doing millions of dollars of book sales as a third-party bookseller on Amazon, and then Amazon was like, you know what, now our take rate on books has, you know, not 10%, we're going to do 25%.
Thanks.
And that like killed—
that happened to me. That happened to me the other day. So in our— we are in the Trends group. Someone was like, uh, just so you know, Amazon changed the fee. So basically I have various blogs, like my personal blog or something like that, and it makes just like small amounts of money, like $3,000 to $5,000 a month off Amazon affiliates. And I don't even check it. It just runs because, because I've just written a lot of content over the years. They changed the rate and someone told me in the group, I think that I forget what I was earning. I don't even check it. I think I was earning 6% to 9% for affiliate revenue and then they changed it to— they like halved it. So that money just halved and it's no big deal because it wasn't a— it wasn't like a big income stream for me. But if you're Wirecutter or if you're BuzzFeed and you made $100 million from this, it's a huge deal, right?
Yeah. That 20% cut makes it— makes a really big difference.
No, no, no, no, no. It wasn't a— it wasn't a 20% cut. It was way bigger than that. It was like half. They halved.
Ouch. And what, what category are your links mostly in? Is it electronics? Is it some cat? Is it one category or is it just across the board?
Okay. Um, they rate, they lowered it across categories, but across the board it's close to half. Um, my categories were probably personal care and electronics. I mean, just anyone who, yeah. Or books, a lot of books. Right.
Okay. Um, I wanna know another topic. So we good on Thrasyo? You wanna add anything else? No.
Do you not want to?
No, I think it's consistent with what we thought. I like when people fill in the gaps with information that we don't have. I'm not an FBA seller. I don't know the ins and outs of that market. I just think it's interesting. We talk a little bit about it and then people fill in the gaps and the next episode we come back a little smarter. That's a nice little formula we have going. So I appreciate that. Before we ever talk about stuff you know, tell us more about what you know that we don't.
