Author Topic: Walmart Seller Store -> Similar to FBA  (Read 998 times)

SteadyDoinIt

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Walmart Seller Store -> Similar to FBA
« on: January 28, 2021, 07:05:29 AM »
Good morning all,

I've been approached by a drop shipping automation company with an offer for them to open and run a Walmart seller store.

Details:
1) initial investment = $35k
2) monthly fee = $500
3) profit share = 30% to them, 70% to me
4) yearly contract renewal fee = $5k
5) this company provides all back end support -> llc, product research, listing, shipping, customer service, returns, books
6) Walmart is loads harder to become a seller than Amazon, thus trimming the seller pool -> there's about 10% seller saturation compared to the available market.

I can't find a ton of resources online about the risk/potential for this opportunity, so I came to MMM! Please help me realize anything I'm missing, and let's have a healthy discussion!

I don't believe this topic already exists, but if there's another thread somewhere, please point me in that direction.

Thank you,
JB

SeattleCPA

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Re: Walmart Seller Store -> Similar to FBA
« Reply #1 on: January 28, 2021, 09:50:37 AM »
Good morning all,

I've been approached by a drop shipping automation company with an offer for them to open and run a Walmart seller store.

Details:
1) initial investment = $35k
2) monthly fee = $500
3) profit share = 30% to them, 70% to me
4) yearly contract renewal fee = $5k
5) this company provides all back end support -> llc, product research, listing, shipping, customer service, returns, books
6) Walmart is loads harder to become a seller than Amazon, thus trimming the seller pool -> there's about 10% seller saturation compared to the available market.

I can't find a ton of resources online about the risk/potential for this opportunity, so I came to MMM! Please help me realize anything I'm missing, and let's have a healthy discussion!

I don't believe this topic already exists, but if there's another thread somewhere, please point me in that direction.

Thank you,
JB

No knowledge on this subject. But my antenna goes up when someone wants to provide a bundle of services that include an LLC filing and doing your books. Seems very odd. Those services have nearly zero to do with successfully running a store. For what that's worth...

BTW, we provide CPA services to a number of Amazon FBA vendors.

SteadyDoinIt

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Re: Walmart Seller Store -> Similar to FBA
« Reply #2 on: January 28, 2021, 10:23:23 AM »
@SeattleCPA  - Thank you for the reply! They will file for the LLC and will maintain books on their end, but I will also be responsible for maintaining a separate set of books for auditing purposes on my end. Would you mind taking a quick look at the proposed contract?

LongtimeLurker

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Re: Walmart Seller Store -> Similar to FBA
« Reply #3 on: January 29, 2021, 12:05:46 PM »
Is this an addition to an existing business or something new?

SeattleCPA

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Re: Walmart Seller Store -> Similar to FBA
« Reply #4 on: January 29, 2021, 02:31:27 PM »
@SeattleCPA  - Thank you for the reply! They will file for the LLC and will maintain books on their end, but I will also be responsible for maintaining a separate set of books for auditing purposes on my end. Would you mind taking a quick look at the proposed contract?

No, sorry, looking at a contract isn't an accountant thing. It's an attorney thing.

Michael in ABQ

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Re: Walmart Seller Store -> Similar to FBA
« Reply #5 on: January 29, 2021, 06:07:44 PM »
Good morning all,

I've been approached by a drop shipping automation company with an offer for them to open and run a Walmart seller store.

Details:
1) initial investment = $35k
2) monthly fee = $500
3) profit share = 30% to them, 70% to me
4) yearly contract renewal fee = $5k
5) this company provides all back end support -> llc, product research, listing, shipping, customer service, returns, books
6) Walmart is loads harder to become a seller than Amazon, thus trimming the seller pool -> there's about 10% seller saturation compared to the available market.

I can't find a ton of resources online about the risk/potential for this opportunity, so I came to MMM! Please help me realize anything I'm missing, and let's have a healthy discussion!

I don't believe this topic already exists, but if there's another thread somewhere, please point me in that direction.

Thank you,
JB

I've never heard of any e-commerce sellers where Walmart was more than 5-10% of their total sales if they were operating on multiple channels (Amazon, eBay, Etsy, own website, etc.).

Frankly, the volume is just not there for Walmart.

So this company wants $35k (plus $11k/year) to set you up as a dropshipper on Walmart.com?

Run away. This sounds like a great deal for them, not so much for you. Margins for drop shippers are usually quite low, say 10-15%. Pretty hard to make a profit on that unless you're able to quickly ramp up to mid 6-figures in sales.

Archipelago

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Re: Walmart Seller Store -> Similar to FBA
« Reply #6 on: January 29, 2021, 10:33:14 PM »
This seems like a sketchy offer at best. Any company asking for $35k up front and $5k annually just...doesn't seem to make much sense. What kind of products do they sell? What is their reasoning for needing the up front capital?

ender

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Re: Walmart Seller Store -> Similar to FBA
« Reply #7 on: January 30, 2021, 06:18:23 AM »
I'm trying to understand what value this company is providing you here.

It seems you are taking on nearly 100% the risk/work.

SteadyDoinIt

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Re: Walmart Seller Store -> Similar to FBA
« Reply #8 on: February 01, 2021, 06:27:21 AM »
Is this an addition to an existing business or something new?

This is a new business. I understand getting approved to be on Walmart's marketplace is difficult, so the bulk of the initial investment is creation of business pages to be legitimate and product research to stock your store.

SteadyDoinIt

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Re: Walmart Seller Store -> Similar to FBA
« Reply #9 on: February 01, 2021, 06:36:07 AM »
Good morning all,

I've been approached by a drop shipping automation company with an offer for them to open and run a Walmart seller store.

Details:
1) initial investment = $35k
2) monthly fee = $500
3) profit share = 30% to them, 70% to me
4) yearly contract renewal fee = $5k
5) this company provides all back end support -> llc, product research, listing, shipping, customer service, returns, books
6) Walmart is loads harder to become a seller than Amazon, thus trimming the seller pool -> there's about 10% seller saturation compared to the available market.

I can't find a ton of resources online about the risk/potential for this opportunity, so I came to MMM! Please help me realize anything I'm missing, and let's have a healthy discussion!

I don't believe this topic already exists, but if there's another thread somewhere, please point me in that direction.

Thank you,
JB

I've never heard of any e-commerce sellers where Walmart was more than 5-10% of their total sales if they were operating on multiple channels (Amazon, eBay, Etsy, own website, etc.).

Frankly, the volume is just not there for Walmart.

So this company wants $35k (plus $11k/year) to set you up as a dropshipper on Walmart.com?

Run away. This sounds like a great deal for them, not so much for you. Margins for drop shippers are usually quite low, say 10-15%. Pretty hard to make a profit on that unless you're able to quickly ramp up to mid 6-figures in sales.

This company (and others like it with similar automation structures) handles the complete back end - website building, product research and shuffling, listing, fulfillment - total automation.

A couple of questions/points just to establish the devil's advocate POV. I'm open to more conversation based on your input.

1) Pardon my ignorance, but what is your e-com background?
2) With Walmart's platform being new, is there any credence to the idea that since that market is not saturated with sellers, there is a ton of low hanging fruit?
3) With Walmart only taking a 15% cut (where other platforms take additional fees per unit), could margin be closer to 25-30%?
4) I've been shown the back end of live stores with gross sales >$50k. Are you saying that $50k is likely only 5-10% of that business' total top line?

SteadyDoinIt

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Re: Walmart Seller Store -> Similar to FBA
« Reply #10 on: February 01, 2021, 06:48:32 AM »
I'm trying to understand what value this company is providing you here.

It seems you are taking on nearly 100% the risk/work.

For one, they understand the droppshipping model both on Amazon and Walmart - they have 7+ years of dropshipping experience and have currently over 70 Amazon stores and 50 Walmart stores that they run. They have an expertise that I do not.

For two, to scale as quickly as the market will apparently allow, it will take a team and more than just me wandering around blind. On the front end, this includes approval to sell on Walmart, website creation, initial product offering(s), etc. Day-to-day, this includes product research, shuffling of products that have fallen out of favor, listing, fulfillment, customer service, returns, etc.

In essence, I'd be franchising their knowledge.

SteadyDoinIt

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Re: Walmart Seller Store -> Similar to FBA
« Reply #11 on: February 01, 2021, 06:51:46 AM »
This seems like a sketchy offer at best. Any company asking for $35k up front and $5k annually just...doesn't seem to make much sense. What kind of products do they sell? What is their reasoning for needing the up front capital?

The reason for up front capital is explained in a previous post, but simply, it is paying for their model/knowledge.

Any product that is sold by Walmart is a possibility. From a dozen eggs, to a washing machine. The whole business is understanding where the demand lies at any given moment.

Michael in ABQ

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Re: Walmart Seller Store -> Similar to FBA
« Reply #12 on: February 01, 2021, 08:00:33 AM »
Good morning all,

I've been approached by a drop shipping automation company with an offer for them to open and run a Walmart seller store.

Details:
1) initial investment = $35k
2) monthly fee = $500
3) profit share = 30% to them, 70% to me
4) yearly contract renewal fee = $5k
5) this company provides all back end support -> llc, product research, listing, shipping, customer service, returns, books
6) Walmart is loads harder to become a seller than Amazon, thus trimming the seller pool -> there's about 10% seller saturation compared to the available market.

I can't find a ton of resources online about the risk/potential for this opportunity, so I came to MMM! Please help me realize anything I'm missing, and let's have a healthy discussion!

I don't believe this topic already exists, but if there's another thread somewhere, please point me in that direction.

Thank you,
JB

I've never heard of any e-commerce sellers where Walmart was more than 5-10% of their total sales if they were operating on multiple channels (Amazon, eBay, Etsy, own website, etc.).

Frankly, the volume is just not there for Walmart.

So this company wants $35k (plus $11k/year) to set you up as a dropshipper on Walmart.com?

Run away. This sounds like a great deal for them, not so much for you. Margins for drop shippers are usually quite low, say 10-15%. Pretty hard to make a profit on that unless you're able to quickly ramp up to mid 6-figures in sales.

This company (and others like it with similar automation structures) handles the complete back end - website building, product research and shuffling, listing, fulfillment - total automation.

A couple of questions/points just to establish the devil's advocate POV. I'm open to more conversation based on your input.

1) Pardon my ignorance, but what is your e-com background?
2) With Walmart's platform being new, is there any credence to the idea that since that market is not saturated with sellers, there is a ton of low hanging fruit?
3) With Walmart only taking a 15% cut (where other platforms take additional fees per unit), could margin be closer to 25-30%?
4) I've been shown the back end of live stores with gross sales >$50k. Are you saying that $50k is likely only 5-10% of that business' total top line?

1. I've been selling on Amazon since 2017 using FBA. Started out as retail/online arbitrage but I've switched to a wholesale model primarily in the grocery space. I've learned from trial and error and listening to hundreds of podcasts of e-commerce sellers ranging from those just starting out to others doing 8-figures in annual revenue. I'd recommend EcomCrew, eCommerce Fuel, The Quiet Light Podcast, and The Smartest Amazon Seller.

2. Yes, Competition on Walmart will be much lower and there is almost certainly some low-hanging fruit. But sales volume will also be far lower. Over 50% of product searches online start on Amazon. The latest figures I can find show Amazon's market share is about 8-10x larger than Walmart. Also, I'm not sure how much they count in-person pickup that's ordered online. Obviously, Amazon is not able to compete as strongly for a gallon of eggs, a loaf of bread, and a package of eggs.

3. Amazon only takes 15% unless you use their fulfillment services (FBA). Actually, that's one reason I went with the grocery category as it's only an 8% commission on products priced under $15. It's hard to compete on Amazon unless you use FBA. Walmart.com is dominated by drop shippers now but as they continue to roll out Walmart Fulfillment Service (WFS) their direct competitor to FBA, I'm sure they'll prioritize those sellers like Amazon did. For buyers, they'll almost certainly pick that 2-day shipping versus the longer shipping time for most sellers using 3PLs or drop shipping.

4. I've heard dozens of eCommerce store owners talk about trying to diversify off Amazon. In most cases they report that these other channels (not counting their own store, usually using Shopify) make up a small percentage of their business. I've evaluated about a dozen eCommerce stores myself to buy and Amazon or their own website are always the dominant channel. Granted, I'm looking at companies in the $500k - $2M gross revenue range. Once you're into 7-figures of sales it makes more sense to try and diversify off Amazon. So a store doing $50k a month on Walmart doesn't necessarily mean they're selling on other channels. Like I said, drop shipping is tough on Amazon so most people using that business model have their own website or operate on platforms other than Amazon.

Archipelago

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Re: Walmart Seller Store -> Similar to FBA
« Reply #13 on: February 01, 2021, 11:34:12 AM »
This seems like a sketchy offer at best. Any company asking for $35k up front and $5k annually just...doesn't seem to make much sense. What kind of products do they sell? What is their reasoning for needing the up front capital?

The reason for up front capital is explained in a previous post, but simply, it is paying for their model/knowledge.

Any product that is sold by Walmart is a possibility. From a dozen eggs, to a washing machine. The whole business is understanding where the demand lies at any given moment.

You can interchange "paying for their model/knowledge" to paying for expensive Amazon FBA courses and guru-type advice. In the end, they're the same thing.

The bottom line is you do not need to pay or buy in to learn and run a successful e-commerce business. IMO, the proper (and perhaps the only*) way to build a successful e-commerce company is by doing and learning, not spending your capital to "buy into" something. This means learning first-hand how the platforms work, buying your own products and learning from experience. Look at it this way: let's say you start buying products only to find that some of the products flopped. Even if they do, you're out maybe a couple hundred $ or maybe even $1000. But the experience is gained and experience is invaluable. Still then, even if you lost $1000, you're still ahead $39k which is what you would've been charged for the buy in fee.

One other note - drop shipping is playing with fire on Amazon and Walmart I wouldn't expect to be much different. Amazon rules with an iron fist and wipes out sketchy/foreign sellers like whack a moles. Just be careful with that. I've never engaged in drop shipping and doubt I ever will.

*Saturated FBA markets necessitate the idea of learning and developing the business yourself, IMO. You need your own niche, not latching on to other sellers who all use the same suppliers and flood the market.

Source: Been an FBA seller for almost 4 years. Progressed the business to $250k+ in annual sales operating at a 28% profit margin. Did not buy any courses or education. Started with $500 and credit cards.

SeattleCPA

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Re: Walmart Seller Store -> Similar to FBA
« Reply #14 on: February 02, 2021, 07:38:52 AM »
This seems like a sketchy offer at best. Any company asking for $35k up front and $5k annually just...doesn't seem to make much sense. What kind of products do they sell? What is their reasoning for needing the up front capital?

+1

hodedofome

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Re: Walmart Seller Store -> Similar to FBA
« Reply #15 on: February 03, 2021, 09:17:24 AM »
I sell on Amazon and this sounds like a crappy deal. I'd run away.