#50 Product Process, Suppliers, Freight and Amazon Future with Anthony Lee Part 2
NEW PRODUCT PROCESS
So a product jumps out at you from the universe.
Can you talk us through your process with a new product (from selection to re-ordering)?
(from product selection, via supplier selection, freight/supply chain, getting products to Amazon, product launch)
What are your criteria/ numbers?
Look for main KW “The thing that it is” on page 1 – using Jungle Scout, Anthony wants to see at least 60% of sellers doing $15,000 sales each. He wants a handful under 250 reviews. They’ve probably been there under a year, so there’s room for AL to take some market share.
He’ll glance at BSR – a number between 2000-4000 =mid competition. Anthony is confident he can easily get on page 1.
80% of all factories in the world are in China – it has lots of real estate, dedicated to factories. Everything AL sources is located in China.
Next step is to find a supplier using Alibaba, Global Sources,. Global sources is his go to place. HK is an easy place to reach and many of their suppliers go to their trade show. HKDTC (never had much success so far) and Made in China as backups.
Criteria: Gold Supplier for 3 years – they have to pay for that. Make sure they take some kind of secure payment -they’re probably not trying to rip people off.
Send out your enquiry. Ask for samples first – if it’s crap, cost doesn’t matter! 3-4 samples generally.
You pare down – send emails. certain %age come back; ask for samples; certain %age respond.
Whittle down to highest quality then pit them against each other for quotes.
“I really like your quality and I personally would like to work with you. But my partners would like to work with your rivals because of price.”
ALWAYS make custom modifications. Put logo on product not just package, have the product itself your brand colours. Better for brand and for hijackers etc.
Give them design specs, place a 30% deposit but have them send you a sample of your design.
Use that to check quality and for photos.
How do you deal with Quality control?
Have an inspection co. like Asianinspection or Richforth. Contract them for a man day (unless it’s electronic in which case you might need a week) 300 USD for one man day.
Have it set against a margin of error. So you know it’s good to go before you leave the factory.
You tell the factory they won’t get 70%
You can work with a sourcing agent. It’s just hard to find someone you can trust. Most of them are very much making a deal with the factory and you. Get paid on the front end and the back end. It turns out AL has 15 years’ experience as an importer and AL is now communicating with him. That will help with QC – they can check factory, batch inspection.
The real low tech way/cheap way to do it – find someone on Upwork to go to the factory and send a Skype video or pictures of the production line or products. Have them toggle switches etc.
What are the biggest issues you’ve met with suppliers? What are your best solutions?
AL has been “lucky” but that’s because he has a lot of hoops to jump through before he’l work with them. He’s heard the horror story e.g. sample quality not real quality or jack up prices last minute etc. Not experienced yet.
The best way is to very very thorough about selection process.
What other hoops do you make them jump through?
Communication. How responsive are they? If it takes 2 days to get an email back, am I a priority?
When we get to a certain point, what’s your Skype? how about your mobile/cell phone?
I have them send pictures of the production facility. Because
- see the factory. 2. How willing are they to do it?
The factory is your biz partner – they’d better act like it! If you were gong into biz with someone in your own country how you would you want them to act?
How do you handle freight? Supplier’s carrier?
How do you deal with inventory management?
It’s a big area of confusion! AL does not have a courier account with DHL etc. because he doesn’t do much air freight. He just uses supplier’s courier account for samples – he even has a standard template for samples.
For everything else he uses sea freight as it is significantly less expensive. Generally he shipped LTL (Less than a Truckload /LCL (Less than a Container Load) although now mostly 20-40 foot containers.
Because the closest US coast to China is the West coast, and the most common port is Longbeach, he specifically looked for a Freight Forwarder in LA. So that is freighting by sea and delivered the shortest distance. Then he does LTL pickup by Amazon who picks up palletized and labelled units ready to go to Amazon.
SO you’re looking for a one-stop shop for warehousing and freight?
Yes, wanted to make process as easy as possible. They contract with a customs agent to handle the customs clearance. AL just gets an email with the bill. They make it really easy.
An alternative is to use Asia based Freight Forwarders – they get amazing deals on fast boats out of China. So you need to go through the same process.
Amazon decided that everything is going to Moreno CA so West Coast made sense. However, every time they have a strike, his products get stuck. The absolutely best way is to go out and get as many quotes from FF as possible. As lots of questions and get one that will take the time to educate you. One of them might say “Well our clients do it this way” and make a suggestion.
Tell us about inventory management – when a product is selling, what then?
What about “Killing off” products with low sales or low profit?
AL doesn’t yet use inventory management software – doing it manually is a pain. It’s tricky because you base reordering decisions on two weeks’ sales; then you get a spike in sales and you will run out of stock. The other danger is demand drops off instead and you buy too much inventory so you pay high warehousing fees. That’s when supply chain management evolves.
You need to look at warehousing deals so at some point you can bring in whole containers and bring only a couple of pallets to Amazon.
Every product is seasonal. You need to be in the game before you learn that pattern for a particular product. A store manager might be your first hire – a necessary one if you’re going to have and grow a business based on importing.
When to let go of products?
A lot of people come in thinking they need to make lots of sales or it’s over. If the product is still making you a profit, you should maybe reconsider. Even if it’s only a small amount. If you get 5% return, it’s worthwhile.
What’s your approach to cashflow management?
Al is just starting that conversation – chances are you will run into this soon enough. The solution is not in the system itself. Cash injections become important.
AL’s short term solution has been credit. Will Tjernlund uses Amazon outside of PL to make cash faster – wholesaling ideas are fantastic. When you’re in this business, you’ll make a lot of connections. It could be someone in your local area who doesn’t have product on Amazon or it’s not selling well. You probably have more Amazon experience than they do. SO soft sell – let me help you with this – good way to make extra cash. AL has recently been working out profit share deals with people who want to
Leverage whatever skills you have. A lot of people want this skill but don’t have time to develop. A lot of retailers are on a 36 month contract and paying whether they make sales or not. You could come in with a solution and make them extra money.
You can work out a wholesale deal. You can do consulting. Whatever comes your way.
What’s working well right now in your business (that you can reveal)?
Finding great margin deals by establishing relationships with factories and suppliers. Then get on page 1 for main keywords. AL has one product only selling 2 a day which will kill it in Q4.
What are the most successful sellers you know doing right now?
One person is leveraging Facebook advertising for both Amazon and Shopify sales.
Either learn an avenue really well, or pay someone else who knows it really well.
Another friend takes advantage of every single offer. Every beta programme they do, she takes it. She’s got someone at amazon who answers her email. She is killing it!
Find an area where you can get visibility for your products and get really good at it.
What do you see coming in terms of changes that we should be thinking about adapting to… In the next year?
Predictions are mostly wrong! But a focus of unique products is coming – we’re in the middle of a Kickstarter crowdfunding craze. SO AL assumes that Amazon will get a lot more of untested unproven concepts coming out. This might be the next generation of sales. The marketplace has proven they like this kind of thing. There will be a lot less competition for those products.
If you have an idea, this will be growing, -there are prototyping companies out there, go for it.
In the next five years, there will be other marketplaces – whatever teenage girls are doing now will become big! App based – right now, teenage girls are buying products on App based programmes like Wish etc, which are basically like eBay
Do you have any parting words of advice?
The most important thing is: understand you are serving a marketplace, a niche, not just selling a product. Treat it like a business – it’s an investment – go at it with a calm pulse, understand that it takes time. The growth curve is never easy, it’s never in a straight line but stick with it.
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