A lot of people dream of setting up a store on Amazon, but it is a lot more difficult than it looks.
By ZEV STUBAmazon entrepreneur Shlomi Nidam, CEO of Nidam Communications. (photo credit: AVITAL MOSHE)
It is not easy to create a successful Amazon store, especially from Israel, but Shlomi Nidam has done it, and he thinks he can do it for others, too.Nidam, owner and CEO of Nidam Communications, owns one of the 500 largest stores on Amazon, with accounts in 13 countries and sales of more than $1 million a month.His company has thousands of products available on the world’s largest online retailer, including consumer electronics, computers, clothing and sunglasses. It has seen rapid growth during the pandemic and is planning an initial public offering on the Tel Aviv Stock Exchange at the end of March, hoping to raise about $10m. at a company valuation of $40m.Amazon accounts for a massive 56% of the entire US e-commerce market, and it offers tremendous opportunity, Nidam said. His company is also a supplier for Walmart, the second-largest US superstore, which gets about 100 million visitors per month.“We mostly deal with super brands – companies and products that everyone has heard of,” he said. “We sell some private-label products as well, but people need to understand that it can take years to create awareness and develop a market for those. The best sellers are the products that already have high demand.”Only about 16% of online shoppers actually visit a manufacturer’s website to buy from the maker directly, Nidam said.“Amazon has 400 fulfillment centers all over the US, and they offer free shipping, often within hours to its Prime customers,” he said. “No one else can offer that kind of service.”Running a successful Amazon store requires a large operation to manage all aspects of the business, with teams handling logistics, purchasing, product selection, customer service and more.“We have contracts with our distributors, and we have to coordinate large inventory shipments to our logistics center in Dallas, Texas, before we store the products in Amazon’s warehouse,” Nidam said. “People think of e-commerce as being purely virtual, but it really is all about handling physical products in real-world distribution channels.”In addition, the company has developed sophisticated technology in-house to analyze sales activity to predict what items will be most profitable.
“We track data, like how many sales a product has, how many competing sellers are offering the same item, what each seller’s margins are and how much inventory they have in stock, and much more,” he said. “We compile a lot of data so that we can make the best decisions. These are all things a small seller can’t do on his own.”For that reason, Nidam has created a unique program to allow Israelis to open their own stores, using the company’s infrastructure. Israelis can open their own Amazon stores with an investment of NIS 200,000, with 75% of the store owned by the investor and 25% owned by Nidam Communications. The package comes with about $30,000 of inventory, and Nidam Communications manages all aspects of the business, including registration and setup, product selection, logistics to day-to-day management.“This is passive income, with a return on investment of about a year,” he said.Nidam already manages nearly 200 shops, each selling different products.“The idea is that we can build a business that will grow with time,” he said. “If we use the example of a high-end smartphone that costs $1,000, we are talking about an investment that buys 30 units. Amazon sells that many phones in a few minutes, and we would expect to sell our inventory in about two months. Then, we would keep reinvesting the profits to buy more and more inventory.”A lot of people dream of setting up a store on Amazon, but it is a lot more difficult than it looks, Nidam said, adding: “This is an investment for regular Israelis – accountants, teachers – to make money somewhere that isn’t the stock market or real estate. The way people shop has changed, and this [concept] is only going to grow.”
