If you are not familiar with the Amazon Virtuous Cycle you better read this…
The flywheel model is based on a concept from Jim Collins’ classic business book “Good to Great.” Put simply, the central idea is that your customers are your best salespeople. If you make them happy, they’ll tell their friends. And if you make your product easy to learn about and purchase, those friends will buy it.
The Amazon Flywheel or Amazon Virtuous Cycle is a strategy that leverages customer experience to drive traffic to the platform and third-party sellers. That improves the selections of goods, and Amazon further improves its cost structure so it can decrease prices which spins the flywheel.
The Product-Led Growth Flywheel is a framework for growing your business by investing in a product-led user experience. In this framework, the experience is designed to generate higher user satisfaction and increased advocacy, which in turn drives compounding growth of new user acquisition.
Bottom Line?
What the Amazon Flywheel does is great for its customers. But, unfortunately, not so great for third-party sellers because it encourages the “race to the bottom” pricing.
If you were one of the entrepreneurs early to Amazon FBA who got a chance to enjoy some hefty profits you know that things have changed. Once you could buy inexpensive products overseas, private label them and sell them on Amazon for a profit. Now the same manufacturers that you bought products from (to mark up) are allowed to sell directly on Amazon FBA.
Add to that the following challenges:
Cashflow. Amazon pays third-party sellers every two weeks.
Excessive Competition.
Price Wars (“race to the bottom”).
Product Reviews and Seller Feedback.
Changing Sales Tax Laws.
Customer Returns.
Category Restrictions.
Inconsistent Communication from Amazon.Therefore the advantage goes to Digital Products!
Why?
Because the huge advantage of digital products is that there is no limit to the types of products you can make. This is not the case with physical products.
Add to that the following benefits:
You simply Make More Money
Spend Less Time Working
Reach (and Help) More People
Work From Anywhere on the Planet
Start Selling Quickly
Low Overhead
Unlimited inventory!
No Middleman You Keep More Profit