#43: Amazon Supplier Negotiation & The Future of Amazon with Greg Mercer – PART 2 of 2)
Episode #43: Greg Mercer of Jungle Scout Interview (Suppliers & Predictions – PART TWO)
Does negotiating on price ever work much with suppliers or do you have to increase the numbers to get the discount or try to add in extras to get lower prices per unit?
Greg doesn’t worry so much about this now. 10 cents off doesn’t add much to your profit.
But if you keep asking for lower price, the Chinese person at the other end feels more inclined to cut corners, e.g., use worse materials, leading to Quality issues. Or it will get put to back of the queue etc. etc. If you get moved back to the back of the line so you’re out of stock for several weeks, you could be losing $100 a day in lost profit! This doesn’t compare to 10 cents a unit!
Don’t get hung up on low price if it’s profitable. If there’s something left in it for the factory, they’ll be more inclined to be helpful. (This ties in with Peter Zapf’s advice – Global Sources).
Actually factories do have rising costs. Going out there has given Greg a perspective. Your suppliers are a crucial part of your business so treat them well.
Apart from Chinese new year are there any other times of the year that slow down the manufacturing rate such as the Canton Fair?
Gearing up to 4th quarter in Sept, Oct means longer queues. Seasonal items like patio products would be even worse because that involves Chinese New Year.
Just say to your supplier, I’m planning the year out (and they will like this!) so can you let me know when you will need longer to manufacture? This actually sends great signals: a. you’re organised b. you are planning to order regularly.
Is there any way of ensuring that once you have differentiated a product from a supplier (by colour or design) that the supplier won’t then send your differentiated product out to other customers as samples and then they will just order the same differentiated product (just with their logo on it)?
Short answer: not really! You can try to work with your supplier on this – you can try to get them to sign something which could possibly work. But if you tore them apart about saving 6 cents on something, they probably won’t do it! Talk to them about it. You have the most negotiating power BEFORE you place your first order. Or first large order.
However, even if your factory does that, there are probably 7 other factories making the same product. Don’t get too hung up on that.
So how do you build a defensive wall around your products?
It’s almost impossible to do fully with a private Label product. But if you go into a newish market or you are the first into a market with a modification, you can use the time that buys you (say 3-6 months) to build reviews and sales rank to get a solid head start on the competition.
An example from Greg: first person to sell a product with metal instead of plastic buckles. For 6 months he was the only one; now there are 15 others doing it. even though there is tons of competition, he has top rank, 400 reviews, the best pictures etc. So he hasn’t really seen sales decrease.
When I looked on Aliexpress at getting just a few items of the product I was interested in, they seemed quite expensive (like the same amount as similar products were selling for on amazon) and I would be making quite a big loss once I included import duties and FBA fees.
Do people just take this loss to test if a product sells or is there any negotiating on price on aliexpress rather than alibaba?
Greg has never used AliExpress – but it is bound to more expensive because there are no economies of scale! Just treat it is as a market and supplier test. Or to be more cost effective, you could just place an order for say 100 units with an Alibaba supplier.
Would Greg recommend going the route of getting an agent to source products from different suppliers, rather than contacting different suppliers individually through something like Alibaba? If so what is the best way of finding a trustworthy Agent?
Greg for the first year or so just went direct to suppliers. He found an agent as someone he already worked with at a factory. Everyone Greg knows who uses an agent met them through an established relationship. [Same is true for Michael]. In China it’s all about relationships anyway.
There are small advantages to having an agent, such as factories not on Alibaba, but you do have to pay them a cut! It’s really more about outsourcing than money saving.
How do people find out more about you and Jungle Scout?
Greg writes a solid blog post each week. There’s a cool product case study (“Jungle Stix”). Just comment on the blog or Tweet: @mercer_greg
What are your views and thoughts on trends you see happening on Amazon? What are the most successful sellers doing right now?
One thing successful sellers have in common: if you can make a small improvement on a product, it works really well. Find a product with mostly 3 star reviews. Read the 1 and 2 star reviews; if it’s something simple you can fix, make the improvement they ask for. You can both take away sales and charge a premium for it.
For example the product with metal buckle vs plastic buckles – Greg sold his for $29 and the competition was selling for $14.95 , and the cost difference to Greg was about 50 cents!
Also larger/oversized items, although there are still opportunities with smaller, unmodified products.
What’s new and what do you see coming in terms of changes that we should be thinking about adapting to?
If looking at 2016, & probably 2017, there will still be lots of good opportunities in the .com store especially with modifications and larger/oversized items. Realistically it probably will start to get really competitive by say 2018. By then a lot of other marketplaces like UK, Germany, Japan and India will be maturing with more demand, which Greg will be entering in due course.
If you’ve been listening to the podcast and researching for a while, it’s time to get started. A lot of people seem to be worrying about things they don’t need to worry about. You’ll hit little roadblocks but it’s important to keep pushing forward, get your 1st product up for sale. It’s probably not as complex as you think!
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