When Nathan Schwarzbaum started Velocity Sellers, a Jericho consulting and marketing firm that helps businesses sell products on Amazon.com, he never thought his millennial son would rescue the start-up while he was recovering from leukemia.
His son Jake, 24, eventually moved from Manhattan back home to Long Island to help his father run the business after he became ill in December 2014, requiring hospitalization for a month. Eventually, Nathan’s illness went into remission, and the pair began to build their niche business as Amazon specialists.
“I always had a sense of what could work in business, but I couldn’t have done it without Jake,” said Nathan, 58, who is the company’s president and has 25 years of experience as an owner and operator of several marketing and online commerce businesses. “The business was really born out of my hospital bed. He would bring his laptop in the middle of my treatments.”
After being diagnosed with leukemia, Schwarzbaum said, his finances took a hit.
“I relied on my business income, my savings and the help from my friends and family to get me through the tough times,” he said.
He also realized that his initial business plan to provide online marketing and website building was too broad.
“For one person to start a company with such a broad spectrum of services — it became hard,” said his son, who is director of operations and studied film and television at New York University, graduating in 2014. “We saw there was more of an opportunity to focus on a niche avenue.”
That’s when they turned the sole focus of their home-based company to helping businesses sell products on Amazon. They now have 10 clients for Velocity consulting services and three manufacturers as partners, for which they provide search optimization, account management, inventory management and marketing services.
Velocity Sellers forecasts that it will bring in about $1 million in sales this year through fees and its own digital store on Amazon’s Marketplace, a growing platform for third-party merchants that list and sell products.
“Manufacturers want their products sold on Amazon because it is such a large marketplace, but they don’t want to deal with managing their own store,” said Steve Bookspan, president of Tell All Digital, a Smithtown marketing firm, who owns a 5 percent stake in Velocity Sellers. “They are willing to give a percentage [of sales] to Velocity Sellers because they are handling everything. All the manufacturer is doing is shipping” to Amazon.
Top Grade Products Inc., a family-owned wholesale business based in Maspeth, Queens, hired Velocity Sellers in April to sell its merchandise on Amazon. Top Grade imports products such as kitchenware, hardware and holiday decorations from China.
“For us, our online presence as a wholesale business is not very high, and it is very business-to-business,” said James He, 24, a partner at Top Grade, which distributes merchandise mostly to retailers on the East Coast. “We want to sell directly to individuals and not just to brick-and-mortar stores. For the millennial generation, more of us are shopping online. I don’t want to be out of the loop.”
There are more than 2 million businesses and entrepreneurs selling on Amazon, Amazon spokesman Erik Fairleigh said. About 50 percent of the items sold on Amazon are from third-party sellers, he said.
Amazon takes an average of 15 percent of the retail cost of every sale, Nathan Schwarzbaum said. It also charges shipping fees to sellers who use the Fulfillment by Amazon service, which allows them to store products in Amazon’s fulfillment centers so they can be packed and shipped. The products are eligible to be shipped under the Amazon Prime program.
“We found that Amazon had the best tools in order to sell,” said Jake Schwarzbaum, adding Velocity Sellers has built its own in-house program that helps calculate profitability. “There is a lot less investment, a lot less time and a larger audience in the Amazon Marketplace than any other marketplace.”
The downside of selling on Amazon is that once your product is listed, there is no guarantee that the product won’t be sold by another seller at a lower price or that a proprietary item won’t be bootlegged, said Thomas Shinick, an entrepreneurship and marketing expert and an adjunct professor at Adelphi University’s business school.
But the benefits could outweigh the risks. “The volume and the instant cash flow on Amazon are benefits,” Shinick said. “Your name is out there, and the brand is out there.”
At a glance
Company: Velocity Sellers, Jericho
Co-founders: Nathan and Jake Schwarzbaum
Projected revenue in 2016: $1 million