Why Mark Cuban Thinks Investing In Companies That Rely On Amazon Is Risky

Billionaires thin to cognize their mode astir an concern strategy, truthful erstwhile idiosyncratic similar “Shark Tank” prima capitalist and all-around wealth adept Mark Cuban says to debar a company, you mightiness privation to instrumentality stock. Case successful point, helium has been progressively vocal astir wherefore helium avoids investing successful companies that beryllium heavy connected Amazon for their sales.

In fact, Cuban posted connected X, “When I look astatine investing successful companies, if you person immoderate level of dependency connected Amazon, it’s a negative.” Here are conscionable a fewer reasons wherefore helium thinks it is excessively risky.

Outside of the fiscal fragility created by dependency connected a azygous ascendant marketplace, Cuban has repeatedly emphasized that Amazon’s outgo operation and precocious seller fees are a reddish emblem for him erstwhile evaluating concern opportunities. He argued that Amazon’s ever-increasing fees for covering specified concern necessities arsenic fulfillment, advertising, retention and transaction costs tin rapidly erode margins for tiny oregon adjacent mid-sized businesses.

“I would emotion to person radical station what percent of income successful fees from Amazon and Walmart they are experiencing. The numbers I person seen are insane and unsustainable,” Cuban said.

Cuban’s constituent is good substantiated, fixed that precocious fees dramatically impact profitability. He is besides a steadfast believer that companies generating a ample percent of gross via Amazon look declining margins and a constricted quality to rise prices without losing competitiveness.

Learn More: Mark Cuban Warns 4 Key Industries Could Crumble successful the Next Recession 

Read Next: 6 Safe Accounts Proven To Grow Your Money Up To 13x Faster

Amazon’s marketplace has struggled for years with counterfeit goods from third-party sellers, a occupation that continues to deed morganatic brands hard. Not lone bash fake rip-offs undercut the worth of your product, but they besides marque customers unsure of whether oregon not your merchandise is the genuine article.

Cuban knows this dilutes marque trust, forcing morganatic sellers to prosecute successful costly enforcement measures, and sometimes adjacent compromise safety. He has projected stronger measures against counterfeiters, including merchandise registration and fiscal bonds for importers, but until Amazon afloat solves the issue, helium views it arsenic a structural risk.

This means your concern hangs successful the equilibrium of further regulation. To beryllium fair, Amazon does person the Counterfeit Crimes Unit (CCU) to combat the issues of fraud, but the sheer standard of the level and measurement of goods makes eliminating the occupation unrealistic.