Is ecommerce one of the best opportunities for entrepreneurs? Can it help save the “Rust Belt”?
Over the next ten minutes we’ll:
- Explore the current state of the E-commerce Union;
- Review recent news items that could affect the vertical; and
- Close with further reading links for people thinking of starting an online retail business.
E-commerce is the New Investment Banking: Growth Estimates Are Astounding
Pundits have posited: Brick-and-mortar stores are going the way of the horse-and-buggy; barring a catastrophic event, online retail will be with us forever, in some form or another.
Binny Bansal, co-founder of Flipkart.com, painted the prosperous picture, explaining, “Times have changed. Today, the biggest recruiters in the premier institutions aren’t consultancy or financial firms but the e-commerce companies.”
— Kelly / Warner Law (@KellyWarnerLaw) January 23, 2017
Sound like an exaggeration? Check out these facts and figures:
- Analysts predict that ecommerce will be a $523-billion-dollar market — in the U.S. alone— by 2020.
- In 2016, third-party sellers on Amazon shipped over 2 billion items to 185 countries.
- 71% of shoppers believe they will get a better deal online than in a store (which means more and more shoppers are flocking to online retail platforms).
Societal and Marketplace Shifts Effecting E-commerce
One Million Jobs?
Business luminary Jack Ma, Alibaba’s founder, tucked behind Trump’s doors during the transition. He emerged pledging to “create 1 million American jobs.”
Media outlets alit: Would Alibaba really hire a million Americans?
In a statement, Ma clarified:
“We specifically talked about … supporting 1 million small businesses, especially in the Midwest of America. Small businesses on the platform selling products — agriculture products and America services — to China and Asia, because we’re pretty big in Asia.”
In other words, Alibaba isn’t hiring a million U.S. workers in the heartland. Instead, the company wants American businesses to sell directly to Chinese citizens via Alibaba.
Debate: Is that really the same thing as “creating 1 million American jobs”? Furthermore, do you think it will work?
Arguments stack up on both sides.
China is home to over a billion people (compared to about 320 million in the U.S.), and its e-commerce market is expected to reach $840 billion by 2021 (almost double the estimates for the United States). Moreover, the Chinese middle class is growing — and they’re in the market for American goods. As such, the conditions are ripe for small American businesses looking to expand their markets. Theoretically, there’s enormous growth potential.
Of course, there’s a counter argument.
Several analysts scoffed at Ma’s economic seduction. For starters, China’s laws prevent over-profiting by foreign entities. So, let’s say a small U.S. business takes off in China. At some point, when the profits surpassed a certain threshold (high, no doubt), that small U.S. business would be forced to partner with a Chinese entity — and relinquish a certain amount of control — to keep expanding in the region. (That said, many people think the trade off is worth it.)
Automation: The True Job Thief?
President Trump promised to reinvigorate the American heartland by reviving factory jobs previously lost overseas; and a lot of people voted for that promise.
But, (politics aside), the pink elephant in the room is braying: U.S. manufacturing output hasn’t rapidly decreased over the past 30 years; the number of U.S. manufacturing jobs has. And that loss isn’t solely the fault of offshore plants (they do play a small roll, but not enough to fix the decline). Over the past two decades, companies invested in technology. Because of automation, what once took 10 people, may now only take 2.
It’s a tough pill to swallow, but those factory jobs probably aren’t coming back — at least not the same way and in the same volume. So the question becomes: What can fill the gap? And right now, e-commerce looks like a profitable bet.
Starting An E-Commerce Business
Starting an e-commerce business may be easier than you think. It doesn’t require a trust fund’s worth of capital, nor copious amounts of official paperwork. Just create an account with an online retail platform that allows third-party sellers (Amazon, eBay, Etsy, Jet, Walmart, et cetera) and start selling.
Of course you’ll need procure and promote your wares, which takes times and skill — and yes, a bit of startup capital. Also, to avoid a liability disaster, it’s wise to create a business entity for your ecommerce business. But guess what? People regularly accomplish all these things on a $1,500 budget. In fact, one e-commerce legend started his company with $300; today it’s a multi-million dollar operation.
Further reading links
- Amazon FBA FAQ
- Buying An E-commerce Business
- Recent E-commerce News
- Tips For Shaking Product Counterfeiters
- Information About Online Review Legalities
Questions For An E-commerce Business Attorney?
Our firm, Kelly / Warner, regularly works with online sellers and marketers. We assist with everything from account suspension to product counterfeiting to online payment processing issues. Additionally, our team performs marketing compliance audits and handles the business formation process, step-by-step. Whatever your e-commerce legal needs, we’re here to help.
Want to be the next Shark Tank millionaire, but unsure how? Four words: Start an FBA business. In this post, we’ll:
- Outline the Fulfillment by Amazon (FBA) program;
- Explain why the time is now to start an FBA business and how they’re helping to revive local economies; and
- Review a few legal points all new FBA sellers should consider.
At the end, we’ll hook you up with further reading links.
Comfortable? Ready to start? Great! Let’s do this.
What Is Fulfillment by Amazon (FBA)?
Billed as a “pick, pack, and ship” service, FBA members ship inventories to Amazon warehouses instead of their homes, offices, or private warehouses. What’s the benefit of sending directly to Amazon? You don’t have to worry about the logistical and administrative headaches associated with inventory and shipping.
When an order comes in, Amazon picks the item from the shelf, packs it, and then ships it. On their end, sellers get notifications, updated inventory reports, and, of course, proceeds from sales (minus FBA fees).
Customer isn’t satisfied? No problem, Amazon also handles the return process.
Why Is It A Great Time To Start An FBA Business?
Amazon has always cared about invention and long-term thinking — and its FBA program embodies these core values. Since its inception, the operation has grown exponentially and stands to become a major — and sustainable — economic niche.
Marketplace sages predict that, within a matter of years, online retail will be the new investment banking. In other words, ecommerce is where the money is (or, at least, where the money is going).
Check out these stats for 2016:
- FBA sellers shipped over 2 billion items.
- Amazon sellers, from over 130 countries, fulfilled orders for customers in 185 countries.
- The number of FBA sellers that reached $100,000 in sales grew by 30 percent.
People Buy Online
Customers conquered their online shopping fears. Internet retailers are taking over. In the U.S. alone, experts expect the industry to reach $485 billion by 2021 — not to mention overseas opportunities.
So, if you want to be America’s next rags-to-riches story, go where the shoppers are — online.
FBA Growth = Local Growth
Not only are FBA sellers killing it online, but their efforts are spilling offline. According to analysts, over the past few years, Fulfillment by Amazon entrepreneurs have created approximately 600,000 small business jobs in their local communities.
Extra Credit Reading & Help
Are you leaping into the FBA Ocean? If you do give it a whirl, arm yourself with knowledge. To help out, we’ve compiled some links.
- A Legal Guide To FBA Businesses – This is an overview of legal issues frequently faced by FBA sellers.
- E-Commerce News & Tips Blog – Click for the latest happenings affecting online sellers and marketers.
- Fulfillment by Amazon Legal FAQ – An extended legal Q & A for people who want to start an FBA business.
- Amazon’s Review Policy – Reviews are a big part of ecommerce; it’s important to understand the platform’s stance on reviews before jumping in.
- “Organic” Labeling and Online Marketing — A short explanation about the dangers of using “All Natural” in product marketing.
- Introduction to Native Advertising Rules — A summary of the Federal Trade Commission’s native advertising rules.
- 5 Tips For Shaking Counterfeiters – Product knockoffs are a frustrating part of online selling. Here are some target avoidance tips.
Get Answers To Your FBA Business Questions
Got questions about starting an FBA business or other online retail venture? Give us a call. Our team has assisted hundreds — if not thousands — of entrepreneurs and startups with various Internet law and online business matters, from minor governance issues to complex litigation support.
To learn more about Kelly / Warner, head over to the “About Us” section. Interested in reading more about e-commerce case studies and business tips? Digitally ambulate your way over to the e-commerce resource section.
The FTC sued Prevagen’s marketers. Charge: Unsubstantiated marketing. Is the FTC’s claim meritless? Prevagen says yes. So, they’re fighting back.
The case serves as a reminder for dietary supplement marketers: Make sure your promotional materials are in line with FTC compliance standards!
Federal Trade Commission (FTC) to Quincy Bioscience (Prevagen Marketers): Your Brain Supplement Marketing Is Misleading!
Who is suing who? The Federal Trade Commission, alongside the New York Attorney General’s office, is suing Quincy Bioscience (“Quincy”) — marketers of Prevagen.
Why is the FTC suing Prevagen’s Marketers? The FTC regularly penalizes companies for promoting questionable findings. But this case is a bit different. The commission objects to how Quincy presented information, not the veracity of the study from which the information came. Specifically, the FTC condemned Quincy’s failure to disclose near identical results for both placebo and active participants.
How does Prevagen feel about the lawsuit? Often, companies caught in an FTC web lick wounds, cut losses (and a check), and call it a day. But Quincy is swinging back. The supplement marketer feels the FTC has overstepped its bounds and is forcing unfair scientific interpretations down the throats of small businesses.
The Curious Case of the Jellyfish Protein
A jellyfish protein — and active ingredient in Prevagen — researches have used apoaequorin since the 1960s in calcium studies. But newer — arguably fringe — research suggests the substance may enhance memory function.
But, like many touted supplements — (omega-3’s come to mind) — the medical community’s jury is still hanging outside the courtroom. To wit, the American Pharmacists Association summarizes its stance thusly: “Human data on apoaequorin are limited to small, company-sponsored trials that do not meet expected scientific standards.”
Marketing and Science: An Uneasy Partnership
The intersection of science and marketing is riddled with potholes. On one hand, dangerous products shouldn’t land on shelves, which requires a certain amount of oversight. However, mixing scientific studies with promotional materials can be a messy legal recipe. Why? Because science is not a monolith; a singular idea. Scientists don’t always agree. Which raises the question: Should judges be determining the proper way to present scientific findings?
This suit is unique because the FTC and AG aren’t questioning a study’s veracity, which is the norm in “unsubstantiated claim” cases. Instead, commissioners contend that Quincy failed to present the results adequately; (specifically, the near similar results for placebo and dosed participants). To put it another way, the FTC doesn’t think Quincy is providing “reliable evidence of a treatment effect.”
The FTC’s Rule About Scientific Support
You may be wondering: “Why can the FTC sue over some scientific studies but not others?” And that’s the question Quincy wants people to ask. But is it the right question?
Quincy insists the lawsuit is subjectively rooted, and therefore meritless. In a statement the company argued:
“Quincy has amassed a large body of evidence that Prevagen improves memory and supports healthy brain function. This evidence includes preclinical rat studies, canine studies, human clinical studies, and, most importantly, randomized, double-blind, placebo-controlled human clinical testing. This type of testing has long been acknowledged by both the FTC and the FDA to be the ‘gold standard’ for scientific evidence.
“The FTC does not allege that Quincy’s principal clinical study fails to meet the FTC’s and FDA’s own definition of ‘gold standard,’ nor does the FTC allege that the study was poorly designed or inappropriately conducted, or that it failed to rely on scientifically-validated measures.
“The sole dispute rests on the interpretation and analysis of the data, with the regulators attempting to hold the company to a standard that is unreasonable, scientifically debatable, and legally invalid. Their experts simply disagree with ours over how to interpret the study results. The FTC should not be the arbiter in matters of scientific debate. We are proud of the work we have done to support Prevagen’s effects and believe our large body of evidence clearly satisfies the longstanding standard to support such claims.”
This squabble over semantics may prove to be the crux of the case. Quincy could win by convincingly framing the FTC’s argument as scientific interpretation, as opposed to objective oversight. But is an interpretational variance truly the problem?
Scientific method convention stands: If a control group’s results aren’t statistically different than “activated” participants’, then it’s back to the lab to form a new hypothesis. The FTC will undoubtedly argue something to this effect. But, hey, you never know; a sympathetic judge could see it Quincy’s way.
Lame-Duck FTC Means Ruling Should Be Vacated?
Quincy’s also upset that only two commissioners voted on the action. In a statement, the company characterized the suit as “another example of government overreach and regulators extinguishing innovation by imposing arbitrary new rules on small businesses like ours.” Quincy also accused the agency of being “short-staffed and lame-duck.”
FTC Sued Prevagen And They’re Not Backing Down
The FTC and AG are standing firm in their decision. Jessica Rich, an agency director, chastised, “The marketers of Prevagen preyed on the fears of older consumers experiencing age-related memory loss. But one critical thing these marketers forgot is that their claims need to be backed up by real scientific evidence.”
Warning Letter Dates Back To 2012
Was the suit a shock to Quincy? Maybe not. According to reports, the Commission sent the company a warning letter in 2012. Which just goes to show: Don’t assume you’re in the clear if nothing ever came of that FTC caution from years ago.
The FTC Keeps A Close Eye On Dietary Supplement Marketers
The FTC’s Prevagen censure comes as little surprise. Not only are the ads ubiquitous (in certain regions), but they appeal to senior citizens. The AG remonstrated, “It’s particularly unacceptable that this company has targeted vulnerable citizens like seniors in its advertising for a product that costs more than a week’s groceries, but provides none of the health benefits that it claims.”
Yes, The FTC Wins Dietary Supplement Lawsuits – A Lot
This post isn’t a case-merit analysis. It’s still early stages; both sides have reasonable arguments; the devil will be in the litigatory details.
However, as attorneys who work with dietary supplement marketers and keep abreast of industry happenings, we wanted to point out a small curiosity in Quincy’s statement. It reads:
“The FTC has already brought three similar cases against three other companies in which the Commission tried to impose its own rigid interpretation of a company’s scientific evidence to prohibit truthful, non-misleading claims. In each case, the FTC lost.”
How did you interpret that statement? Did you walk away thinking the FTC lost every deceptive marketing case involving a nootropic? Not the case. For example, in 2015, the Commission went head-to-head with the folks behind Procera AVH, a product promising to “restore memory loss and improve brain function.” Originally, the court slapped a $150 million judgment on the supplement distributors, but the FTC agreed to a final payout of $1.4 million to satisfy the censure.
We point this out not to question Quincy, but to warn dietary supplement marketers: The FTC does prevail…often. Don’t be complacent when it comes to advertising compliance.
Connect With An FTC Attorney
Being investigated by the FTC? Have questions about advertising and marketing compliance? We’re here to help.