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#51 Using Amazon Suppliers & Building Quality products with Manuel Becvar of Import Dojo – Part 1 of 2

   This episode, #51, is the first of two parts of the interview with Manuel Becvar of Import Dojo. Manuel has 11 years’ experience of sourcing in Hong Kong and China and also is an Amazon seller with several product lines live and selling well. 

EPISODE 51 SHOW NOTES

What took you to Hong Kong?

Went there for a 6 month internship  for an Austrian electronics firm in 2005. He was handling sourcing from suppliers. He fell in love with the city and a woman and never left!

He loved the drive and opportunities of Hong Kong. Very expensive but great place to live.

Do you also sell on Amazon?

Yes since August 2014. Also documented launching a whole brand. He currently has 7 products and 10 more coming in the next few months.

He’s focussed on getting after 3-5 categories in different categories. He launched then stopped a few more.  He has several businesses which were more of a priority till now.

What are they?

  1. Selling on amazon
  2. Sourcing company in hong kong for amazon sellers.
  3. A consulting and import course, step by step guide to import from china and sell on amazon but also sell to retail.

He started out with a consumer electronics brand, selling to retailers in Europe under own brand and their own brand, but also now on Amazon. Now Manuel is focussing on his own Amazon business as it is really picking up.

Tell me about stopping a product?

He used to sell smart phone accessories but then the prices got so low there was not much profit. Electronics can be very competitive.

What’s your process for selecting products? What are your selection criteria? Do you go by the numbers of individual products? Or build a brand in a niche?

Manuel is more old fashioned, doesn’t use Jungle Scout or ASIN inspection so much. He subscribes to relevant product websites. newsletters, goes to trade shows. Also looks at Kickstarter and Indigogo for product concepts.

Manuel doesn’t look into creating a huge brand in one category. Tries out one product in a niche e.g. coffee press. If that takes off, build into that niche. If not, don’t go into say grinders, filters etc. 

Coffee press now selling about 20 a day.

How do you  beat the competition?

you need to stand out to beat the competition.  Tries not to copy the competition. This is his approach. Will Tjernlund does copy the competition, but Manuel is more interested in creating unique products and building a brand.

How can we make a product unique in a simple way?

Example 1: Blue tooth speaker-

The sample looked bad, plastic finish, bad sound, packaging horrible. 

The finish rubber instead of plastic was 20 cents more but immediately looked better.  Then looked at components, sound was bad, different driver sounded much better and cost just 50 cents more.  Used photographer to get better photos. 

He turned a $10  product into a $30 product but only cost him $2 more.

Focus on finish, minor improvements etc.

Example 2 – Coffee Press

There are  lots of stainless steel finishes, but no copper finish.  So Manuel had that done and added in extra filters etc.

Look at the little things you can change.

Tell us about working with suppliers. What’s the best way to approach your supplier about this?

Introduce yourself including company presentation –

Create an excel file or word doc about the product- include bullet points, this is where it’s at, this is what i want instead. 

Also point out that if you improve the product, they will make more sales with other customers as well. so they are more willing to make changes with costs.

So you’re not trying to get an exclusive deal with them?

Amazon sellers are mostly a small part of a suppliers’ business. if Manuel does say $10,000 a year he’s a very small fish. that may be 0.5% of their turnover if you work with a big factory (this is true for his own coffee press. They also work with Tesco’s who order $1m a year)

How do you get an exclusive deal for amazon rights?

He has set up an agreement with the Purchase Order which says – “My plan is to order 10,000 units. Are you willing to give me exclusivity for a year. If I don’t reach 5000 units within 6 months, we can cancel this agreement. “

This give Manuel 6 months to figure out if he wants to place more orders and it means the supplier can make more profit too after 6 months. 

Manuel is okay with that because he would have a head start, maybe 100-200 reviews already. It’s okay to have competition. It’s not all about one item only.

Manuel is happy if he can do 6 months of excellent sales on one product. That repays the time and money invested already. 

Greg Mercer was saying if you get 6 months’ head start, you can defend your product against competition. So you agree with that?

Yes, that does work.

Where do you go to look for suppliers?

Manuel has collected over 1000 business cards for suppliers from previous job being a product manager, when he went to China every 2 weeks.

Manuel also works with a lot of trading companies. He will sometimes be willing to pay say 50 cents more and use a trading company, similar to agent. Some of them work as if you are working with factory, for example if factory doesn’t speak English, don’t know about country requirements eg CE (European Union), FCC (USA), FDA (Food & Drug Administration, USA) approval, doesn’t have experience exporting to a country, etc., etc.

So working with a trading company can make a lot of sense.

Alibaba and Global Sources Manuel does use if he can’t find anyone through his network – you can verify and vet the suppliers. You can still vet them by checking their certificates, asking who they work with,  Which markets they export to etc.

For example, If Manuel asks “where do you export to?” and they say, “Middle East” and you want to export to USA, don’t bother. He wants a supplier

It’s also good to know a few names in the industry eg small supermarket or worked with an Amazon seller before. Check business certificate.

What are the big does and don’ts for selecting a supplier? Assuming Alibaba, Global Sources or HKTDC and someone who is new to the process.

There is a lot of filtering you can do. e.g. a microwave on Alibaba, filter by Gold Supplier, trade assurance, 3rd party verification.

You can also filter by region – say 10 different provinces of China.

Let’s say Guangdong have 5000 suppliers and another has just 10. That shows you where the main factories are for this kind of product.

If a region specialises in making those products, they have the resources and the infrastructure.

Say in Jeijung province, with 10 supplier results, they probably don’t specialise in that.

There are many other filters you can use.

Send out enquiries to 10 suppliers. 3 or 4 get back to Manuel with and answer all his to Qs

Email out “vendor profile”,  asking for:

  • 2 customer references for customers
  • markets. Has he exported to this country before?
  • business certificates, and certificates for prods
  • no workers; when company established; annual turnover.
  • do they do R & D? Have their own engineers? how many product lines?

You get a gut feeling after a while.

This is included in import dojo ebook as a downloadable document.

Import Dojo is actually a 60-page book which is a bestseller on Amazon! It is free at the company’s site. 

 What’s next in your process?

Get a soft copy of any certificates needed – prove he has it!

IF that’s okay, then ask for a sample from at least 2-3 suppliers. Same process with all suppliers.  If all samples are equal, go with most responsive/proactive and helpful supplier, even if price is a little higher. Then place an order. 

So you’re okay with higher prices?

They need to make profit too, they work hard. The factory will be business partner, it should be a fair biz relationship. As long as profit is built into your price, it’s fine to pay a little bit more.

If you have individualised products and with good product price, you can afford
If you’re building a brand, if you squeeze in cheap products, it won’t help. 

I guess it depends on whether you have customised products vs. commoditised products sold en masse?

Yes, I’m building a brand, so selling cheap products to make a quick buck is not part of my strategy.

What is the best tip for negotiating on product price once you have verified that the quoted price is in the fair region? Should simple customisations really cost that much more?

There shouldn’t really be a big difference. Unless the supplier has to invest money into a new tool or a new mould. If it’s just a colour difference, it shouldn’t be much.

To find if it’s reasonable, ask at least 3 suppliers for a quote. IF one is way off on price, he’s either incompetent or trying to rip you off!

To contact Manuel, click here for the Import Dojo contact page.

NEXT EPISODE

In Episode #52, Manuel gives details on keeping your money safe, getting quality control for Electronic Products, simple ways to start with Freight, overall process and predictions for the future of Amazon. Stay tuned!

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#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

  1. 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.

Bigger picture

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.

HOW TO SUBSCRIBE TO THIS PODCAST

A podcast is a free downloadable audio show that enables you to learn while you’re on the go.  To subscribe to my podcast for free, you’ll need an app to listen to the show from.

For iPhone/iPad/iPod listeners – Grab your phone or device and go to the iTunes store and search “Amazing FBA”.

This will help you to download the free Podcasts App (produced by Apple) and then subscribe to the show from within that app.  Every time I produce a new episode, you’ll get it downloaded right away.

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#49 Amazon market research, credit & margins with Anthony Lee Part 1

How did you come to be selling on Amazon?

Working as a waiter! Not really. AL saw a video on PL on Amazon and that was it!

How come Private Label?

AL was taught only PL and that’s what he’s done. He only knows about wholesale from Will Tjernlund.

Do you sell only on amazon.com or also in the UK and/or Europe?

Currently in the USA. Everyone expands their business in their own way. AL has decided to focus on building off Amazon rather than expand Amazon internationally.


How do you find products?

The “Standard” answer: try to find things that you use. Walk around kitchen/dining room and when you see something that you use, you will able to ID with target demographic because you are in it! (About 2 products found this way). Makes figuring out Customer Avatar much less complex.

Then check the numbers to see if other people are making money with the product. If they check out, go deeper.

The “real answer”: Decide on a Category e.g. kitchen. Then look in the relevant dept at the shops, in your friend’s cupboard – become mindful and the universe will show you a product! [Then check the numbers]

Do you believe in staying in one Amazon category? Or do you pick each product on its own merits/just follow the numbers?

Start with product on own merits. Then plan to expand into the category with your brand.  Then start thinking of the implications – what are complementary products?

How do you deal with the increased competition in the Private Label Amazon market( esp. USA)?

A lot of people look at the competition – there is a lot of “sky is falling” thinking!

The days you could trip over something to make $100K a month are over but that was always going to be short lived. Now it’s just levelling out.

BUT The idea it’s too saturated is silly. More people starting on Amazon leads to new products on Amazon which create new markets – also if you intro a new product, you’re the only seller!

You don’t sell a product and have an Amazon business; you have a physical prods biz and Amazon is just a channel.

Do you use other sales or marketing channels?

Took a while to learn that FBA is the most affordable fulfillment centre. AL spend 6 months looking for alternatives but Amazon is the best!

The next was finding companies to connect Amazon FBA to other channels. AL has put products on Jet – long approval process – eBay templates are being built. Next month going on Sears, Rakatan. Shopify site is nearly up. 

Tell us more about a “Customer Avatar”?

If you sell anything, you always have an ideal customer/target demographic. Person most likely to see, love and buy your product. Focus on them and don’t go broad – you will miss easily sales if your message is too diluted. Focus language- when you’re writing bullets/description e.g. if you sell male enhancement, the language is men “he/him”etc. – refine that ever deeper the more you know your avatar.

Ask” by Ryan Levesque (on Smart Passive Income podcast) uses surveys for this.  Do you do this?

It’s hard to do this because Amazon’s customers are not your customers. But once you have an email list, it’s very powerful, yes. But until you have that, just pay attention to your data.

If you run FB ads, look at the demographics and over time build a picture.

Gender, age range etc. e.g. Baby market – AL started with idea of just mums but gradually got more specific.

Surveying your own audience/buyers really does give you amazing results.

Yes, it is very important who you’re hitting

[Andre Chaperon the email marketing “guru” is obsessed with Customer Avatar].

Dealing with increasing competition – from moderate to tough. How do you deal with this?

Before AL used to say: “Find a product and do it really well.”  Now it’s: “He who has the most SKUs wins”. [SKU=Shelf Keeping Unit, i.e. a product line]

When you start out,   “failing” may be that your listing is buried in page X.  Once you get to the point where you know what you’re doing, “failure”=selling only 5 a day of a product.

But if you have 300 product lines doing 5 sales, that’s a living!

Having a fleshed out catalogue is  great for your brand. if you approach wholesalers you’re better placed. there are many benefits. It’s a very capital intensive approach but all of Amazon products business is capital intensive so you just have to be very intelligent with your product choices of inventory and expansion.

How do you make intelligent choices i.e. use of capital?

Most people come in thinking “If I can make $8000 sales/mo at 45% margin i could quit my job.”

AL says: “Keep your job and reinvest your money for 5 years.”

With a traditional business, you would give it 5-10 years before you give up on it. So why not with Amazon?

It’s a tough sacrifice but if you reinvest everything repeatedly, you’ll really build out your cat and have more options. That and intelligently using credit. Business credit cards are building AL’s credit and opening new SKUs.

Where would you advise using credit and where avoid?

If you can afford to make 3X the minimum payment per month, then using a credit card to expand your brand is okay. So in the end, that won’t hurt your credit. What you do have is new inventory to make new money off. This is a strategy if you have  couple of products doing pretty well.

If you’re starting out, it’s more of a risk. AL did max out 3 credit cards to start because he had no capital. It’s a personal choice. But it’s not a good idea to take out credit for a highly competitive product.

What sort of margin would you aim for in general?

Aim for 50-55%. It never works out that way because of competition and price wars. AL has an average across all SKUs of 36%. But the wiggle room is there now.

HOW TO SUBSCRIBE TO THIS PODCAST

A podcast is a free downloadable audio show that enables you to learn while you’re on the go.  To subscribe to my podcast for free, you’ll need an app to listen to the show from.

For iPhone/iPad/iPod listeners – Grab your phone or device and go to the iTunes store and search “Amazing FBA”.

This will help you to download the free Podcasts App (produced by Apple) and then subscribe to the show from within that app.  Every time I produce a new episode, you’ll get it downloaded right away.

For podcast enthusiasts – If you already listen to podcasts and have a podcatcher that you prefer, the feed you’ll need to add is: http:// amazingfba.com/feed/podcast.

For those who don’t have a mobile device – You can always listen to the show by clicking the audio file at the top of this page.

If you have any queries, just go to www.amazingfba.com/ask

#46 Will Tjerlund on Suppliers & Amazon Future Part 2 of 2

Episode #46  Will Tjernlund Interview Part 2 of 2

Suppliers

Many people worry about getting ripped off by a Chinese supplier but it doesn’t make business sense – there is a lot more money to be made selling repeat orders!

What are your main tips for beginners on finding suppliers?

You can find them on Alibaba or via a China Sourcing Agent.
On Alibaba, just make sure they’re a gold supplier and so forth.
If you need peace of mind, Asia Inspection will do a factory inspection for $100.

Have them send pictures of the packaging and product while they are being produced.

Any main dos and don’ts for working with suppliers?

Choose a product that is as simple as possible – that way, it’s hard to mess up making it! A hunk of rubber, wood, plastic. So: very few moving parts, no electronics, hard to break, etc.

Keep it simple! That’s how Will is able to travel the world with a laptop!  Don’t follow weird passions like Robotic toys! Many people overcomplicate Amazon. Don’t try to make it as hard as possible; make it as easy as possible!

How do we make it as simple as possible?

Think of everything that can go wrong. If you can’t think of anything, that’s a good product choice!

Will likes to sell (mostly) to Needs not Wants, e.g., Polka Dot underwear vs. a bolt.

It’s not just about price.  If you sell a 10 inch bolt for $8 instead of $12, most people will buy it because all bolts look the same. They’re not saying “Some day I’m going to buy this 10 inch bolt”!

Also if you need to liquidate such a product, there’s a clear market for it, to reduce your risk.

How can you build profit into that for yourself?
Email the supplier and ask how much would it be for 1000 units of this product?

If they say, $1 a unit landed cost, do some quick math[s]: If selling for $8, paying $3.60 or $4.50 in  fees, so still making $3 each. So for every one dollar invested, he’s getting $3 back.

Do you have a minimum or max selling price?

No it’s more like a timespan to profit ratio. Also it’s about time you’re spending for what return. If you’re spending all day on something with a 15% return, that’s not  as good as something with a 33% return where you simply reorder every 3 months.   


So it comes back to cashflow?
If I gave you £10 million now, could you make $2 m back in a year? Yes! 
If I gave you $500K, could you? No. [But if you returned 20% every 2 months on it, you’d end up with $1.492 million – Michael]

So it’s all about getting cash back as fast as possible.

Compounding interest is the 8th wonder of the world, so you need to take advantage of it!

How do you deal with increasing competition in Amazon Private Label?

As competition grows in a niche, Will sends his products directly to Amazon, and Amazon gets nearly 100% of the Buy Box. The margins are lower but Will gets the sale nearly all the time.

Vendor Express (where you can apply) and Vendor Central (invitation only) are the places that Amazon will do that.

If you have some kind of sales history, Just go to Vendor Express, tell Amazon “I want to sell these items directly to you”, you offer a price, they tell you if they accept that or not-they often will. If they accept, they will start placing Purchase Orders and you sell directly to them.

You’ll have to keep some inventory to hand, [and you’ll have to accept getting paid 59 days in arrears!-Michael]. But if it’s a Private Label product, Amazon will outrank all others for the product for that keyword.

Is that open to everyone?

Vendor Express is – just google it and sign up!

Is that what you do when PL is not viable for profit any more?

It’s not normally a price war – it’s usually if someone else optimises their listing etc. (Private Label sellers) and does giveaways. Will has too many SKU’s to watch any individual listing.

How do you manage 2000 listings?

It’s manageable because Will has only about 20 suppliers. He uses software like Stitch Labs and Restock pro, which will alert him when (according to his presets like lead time) a product line needs restocking. When he has built up a big enough order of products from one supplier, he’ll go to the supplier. Will has good knowledge in his mind of  which suppliers have short or long lead times

Are you literally keeping it all in your head Like a chess game?

Often it’s triggered by writing a cheque. Or you can just go down a checklist by supplier. It doesn’t take long.

If you’re ordering 100 SKUs from one supplier, you can just order say 50 units of each and still fill a container.  So Will gets economies of scale but doesn’t risk much in any individual SKU. Also you’re turning that cash around quickly.  “Cashflow is everything”.

Where do you see the relationship between Amazon and Private Label sellers going over the next year or two?

Competition is growing but a lot of the time the competition are doing the same dumb things! So over the next 2 years, there will still be profit to be made.

Within 5-10 years, for anything that is a semi-commodity, China is just going to sell directly to Amazon. Amazon is opening training centres in China. So you’ll need to stay in low-competition niches and fly below the radar.

What sort of commodity products would that be?

Everything in the top 100 BSR that is not a real US brand name. Shopping on needs will be taken over by Amazon: eg silicon spatula – if Amazon can source it and sell it profitably for $2.99 and PL sellers have to sell at $9.99 to break even, Amazon will win the sale every time and therefore build massive numbers of listings. Amazon Basics is only going to get bigger and bigger.

How do you see yourself dealing with this increasing competition?

Will partly depends on the US brands to keep growing their businesses with their own marketing, product research and sourcing.

If you have 4 SKUs total and one gets de-ranked because a bunch of Chinese sellers come in, you’ve lost 25% of revenue.  Will has his risk much more diversified. Also he can see trends coming from a long way off via his many SKUs. He will be able to pivot at this point if needed.

Will follows the investment principles: Diversify and get cashflow.

How can  people who are starting out take advantage of this?

It’s not one size fits all! That’s why so many courses out there don’t make sense.

If you have $500 [£342] to invest, flip stuff from AliExpress, drop ship or get a second job and save more cash. Will suggests find a successful Amazon seller and work for them for $15 an hour and learn how it works.

$5000 [£3422] to invest is on the border. Will says it’s hard to order just $2500 of stuff from China (you’ll need to keep $2500 in cash). Maybe you can find a small retailer or do some Retail Arbitrage or find a wholesaler who will allow you to drop ship their larger products – eg, a fireplace manufacturer (big, bulky stuff). It’s not quite enough to start a business! 

If you can go to AliExpress, lead times are so much quicker [than on Alibaba] -you can have a  product in your hands within 10 days. If you find something profitable on Alibaba, see if you can air freight it and still make a profit.

If you can invest say $3000 [£2,053] to make $700 back after a month or so, that is a very good start [23%return-Michael].

As you order more, the profit margins will only get bigger over time. The rich get richer on Amazon. The more you sell, the better you rank; the more you sell, the more you can buy, so the price you buy at gets lower and your profit margin gets bigger. As you grow, it gets easier.

$10,000 [£6843] to invest is enough to order from China [by sea]- a $5000 order will get you somewhere – you could Private Label or find a Mom and Pop shop that does say $10m a year in revenue or less (spend half of inventory and keep the cash back).

if you have $50K [£3,4216] to invest, you can just call up wholesalers off the bat and say you have £10K to invest.

Once you get bigger and bigger, it becomes ever more important to save money.  For example, if Will can increase profit by 1% by saving money, when turning over $10m a year, that’s $100,000 extra profit.

At a 20% margin, that would be extra sales of $500K a year to make that profit number up. So it’s a lot easier to make more profit by saving money than extra sales.    

Try to just sell as much as possible as the beginning, but at some point you will need to lower your costs. 

How can people find out more about you, Will?

Email: williamtjernlund@gmail.com

Twitter: @wtjern

Website: www.amzhelp.com

Facebook: www.facebook.com/tjernlund

What is your parting advice for someone wanting to get started?

Don’t go after your passion, go where the cash is. Don’t be afraid of making a mistake, more times than not you can liquidate and get your money back. Keep moving forward! 

HOW TO SUBSCRIBE TO THIS PODCAST

A podcast is a free downloadable audio show that enables you to learn while you’re on the go.  To subscribe to my podcast for free, you’ll need an app to listen to the show from.

For iPhone/iPad/iPod listeners – Grab your phone or device and go to the iTunes store and search “Amazing FBA”.

This will help you to download the free Podcasts App (produced by Apple) and then subscribe to the show from within that app.  Every time I produce a new episode, you’ll get it downloaded right on yt sentence.

For podcast enthusiasts – If you already listen to podcasts and have a podcatcher that you prefer, the feed you’ll need to add is: http:// amazingfba.com/feed/podcast.

For those who don’t have a mobile device – You can always listen to the show by clicking the audio file at the top of this page.

If you have any queries, just go to www.amazingfba.com/ask

 

1

#45 Amazon Master Seller Will Tjernlund Part 1 of 2

Episode #45 Show Notes: Will Tjernlund Interview Part 1 of 2

How did you get into Amazon Private Label Selling?

Will’s brother started selling on eBay around 2003 and ordering from Alibaba.  Will was 13 asking million Qs. Aged 16 he did different forms of RA selling on eBay using his dad’s CC! He started selling on Amazon Full Time about 3 years ago.

Where are you at today with Amazon Private Label?

Will has sold $10m in 3 years. He’s outsourced the part where he has to be there. He’s travelling and running his business from his laptop (like Greg Mercer! – see episode #42)

How did you do that?

Some wholesaling from US brands and Canadian brands and Private Label. If he can see a risk free dollar to invest for $1.20 in a couple of months, that’s where he’ll go. Basically he’ll follow the cash! 

How do you know where the cash is?
Two paths
1. People do a bunch of research for 2 months, order a sample, test it, brand it, get logos made, finally get nice packaging, get 2000 units into amazon, give away a few hundred units.

2 Will might call a US based brand, lots of products on Amazon, 100+ reviews but they’re not Prime.

He’ll call them, say, “Your account is not being well run,  so most of your customers have to pay for shipping. We can run it better.”
He’ll order lots of product. He can see if that they sell $50k, he can buy $5000 worth and flip it in 10 days and make $2500 while the other person is still doing their research!

Do you just go after individual keyword opportunities or build a brand?

If you see a wholesale company where say 10 of their 100 SKUs sell like crazy -Will often will Private Label one of those so as to offer the illusion of choice to the customer. But he will sell both the wholesale product and his Private Label product.

So it’s going after a microniche?

If you can take over all the listings on one page, it’s very valuable. Make all the listings individual rather than Parent-Child IF it is a low-competition keyword.

Do you just not bother with Parent-Child relationships?

P-C makes a lot of sense if you’re after a competitive keyword because you’re trying to drive all your sales to one listing. But if you have a low-competition keyword, it makes more sense to own the first page. 

Does that take a lot of capital to invest?

If Will sees that a brand sells $50k a month, the first order was still just $5K to return $7.5K. Then you reinvest for $11K and then keep doing that. Turn the cash around as fast as possible. Go after their hottest sellers and this is much easier. 

Example: One brand Will bought from recently had an average selling price of $150 for its products.

He ordered about 50 of their hottest selling products and sold those out within 5 days.  It’s all about turning your cash as fast as possible.

For those just starting on first product, how can you use this approach?

Fake it till you make it! Find products sold by a wholesaler that  are not being presented properly on Amazon. Make a free one week Shopify store, put in pictures of products and prices. “willsshovelstore.com” and an email.

Email them and say: “We’d love to sell your products. I’m looking to Place an order for $5000 right now. “ If it’s a $5m company,  that’s over 1% of revenue so you’re a salesman’s dream.

Then on to the next?

Yes! You cut so much BS out: creating the UPC, photos, listing creation etc. because they already exist! So you just accept products in, send them back out to Amazon and then move on to the next brand.

If Will calls the brand and spends 2 hours on the phone and ends up making $40,000 profit in a year, that’s $20,000 an hour income!

He’s not wasting his time building a brand. Getting cash in, not spending 2 months to make a logo.

Michael made a similar mistake starting out, which took 5 months to go live. The competition goes crazy, you don’t know if it will sell out- it’s all risk, little reward. Will takes little risks and gets rewarded multiple times: the aim is to make 20% return 6 times a year[=around 300% annual ROI- Michael] instead of trying to find one home-run product that will make you a million a year. 

It’s a lot easier to sell  1000 products once a day than 1 product 1000 times a day.

Isn’t the downside of that getting cash tied up in inventory?

So just order a week’s worth of inventory. A lot of US brands will have just 3-10 day lead times. 

So a really different model than everyone is teaching?

It’s hard to teach Amazon in general because everyone has different education, cash, cash flow, they have different responsibilities in life…it’s hard to write one course that suits everyone.

Are you basically saying you would do wholesale first and Private Label afterwards?

More times than not, it’s super obvious. Say Will buys a product from a wholesaler for $40 and they want him to sell it for $150. If there’s that much margin, it must be bought from manufacturer for $10-15. Will goes Alibaba and confirms his suspicions. Then he’ll source it and sell a Private Label version for half the price. A lot of the time, customers want the half price product as much as the named brand version. So you’re selling it on price not brand.

For those just starting on first product, should they go for wholesale or Private Label (ie look on Alibaba etc.)?

Alibaba can be great, Will advises going after the lower-competition products. If you’re making $10 profit and selling 10 a day, that’s amazing, that’s $36K a year.

It’s so much easier to go after a lower competition product than after a product selling $50K a month. A lot of the time they are being sold by someone making a loss to keep the competition at bay. 

Will likes to see one listing with 300-400 reviews (shows demand) and lots of listing under it with 20-40 reviews (competition is low). With giveaways Will can get that number very fast and get the 2nd Place spot. The 2nd listing down can sell as many as the 1st. The 1st may just have been there longer.

What are the biggest problems you see with people launching their own Amazon business?

Just not getting started in the first Place! Analysis Paralysis on research.  Working on the business without making cash.

The other thing is cashflow. If they have $5K to invest, they order $5K of product, that means they don’t have enough cash to order new inventory before running out of stock. If they have a 30 day lead time, and invested all their cash in inventory, selling too much too quickly can be a problem.

What’s the solution?

The solution is to only put half of your investment cash into any order.

For example, Will and his brother ordered a container of knee scooters for $40K. That was 210 units.  The lead time was 60 days from ordering to in stock at Amazon.

On the first day, they sold 7 units. If you do the maths, that means 210 units would sell out in 30 days (no. units/units sold per day)  So they had to go back to the supplier that week and place another $40K order.

 If you only had $40K in the first Place, you’d have to wait until you’d sold ¾ of your inventory before placing an order, which means you would be out of stock for 2 months.  If you sell 20 units on the first day, do your multiplication!

While generally taking out a loan to start an Amazon business is not good, when you have proven sales, and you need to get back in stock, this is a good time to get a loan from family or friends.

Will has been talking to private equity firms who want to lend to Amazon businesses because they love proven cash-producing products because they are tired of investing billions in startups with no turnover!

What are the other big mistakes do people make when launching their products?

Not thinking through:

  1. How will you get on page 1?
  2. How will you stand out? What will make the customer buy your product over someone else’s?

Will will often do it via price but also it can be being differentiated. 

What are others tips on differentiation?
Size – if everyone is selling a 10” pan, sell a 6″ or 12” each

Colour – If everyone is selling a black product, sell a pink one. Even if the demand is lower.

Will sometimes stands over his mother’s  shoulder to observe her buying style.
She doesn’t really care about 3 vs 5 bullet points,  she doesn’t know about all the reviews- she’s not in an Amazon bubble! She takes about 2 seconds before hitting the one-click checkout button.

You need to stand out quickly via something visual – people aren’t interested in reading text. 

What other big mistakes do sellers make?

That’s about it. Either sellers  don’t have enough cash or they try to sell a product they can’t rank for. There are few other problems. Getting ripped off by a Chinese supplier is very very rare- but Will gets many emails saying “I sourced this super competitive product and I have 5000 units, what should I do?”

If you recognise you’ve got into an over-competitive product, there isn’t much you can do. You could try giving out lots of units and spiking the sales rank but otherwise, sell them as a job lot on eBay! 

You should have started smaller or tested demand some other way. So the mistake has already been made.

Be “Young Dumb and Stupid” – a lot of smart people try to over-complicate Amazon – just sell a good product at a good price, then move on to the next one.

The biggest things to differentiate yourself are product selection and good cashflow management. 

Will listens to no Amazon podcasts and instead reads general business books and applies general business principles to the Amazon model and it “turns out pretty decent” [$10m in sales!]

How can people contact you, Will?

Email: williamtjernlund@gmail.com
Twitter: @wtjern
Website: www.amzhelp.com
Facebook: www.facebook.com/tjernlund

HOW TO SUBSCRIBE TO THIS PODCAST

A podcast is a free downloadable audio show that enables you to learn while you’re on the go.  To subscribe to my podcast for free, you’ll need an app to listen to the show from.

For iPhone/iPad/iPod listeners – Grab your phone or device and go to the iTunes store and search “Amazing FBA”.

This will help you to download the free Podcasts App (produced by Apple) and then subscribe to the show from within that app.  Every time I produce a new episode, you’ll get it downloaded right on yt sentence.

For podcast enthusiasts – If you already listen to podcasts and have a podcatcher that you prefer, the feed you’ll need to add is: http:// amazingfba.com/feed/podcast.

For those who don’t have a mobile device – You can always listen to the show by clicking the audio file at the top of this page.

If you have any queries, just go to www.amazingfba.com/ask

 

1

#42 Amazon Product Research with Greg Mercer of Jungle Scout Part 1 of 2 [REPOST}

Episode #42: Greg Mercer of Jungle Scout Interview (Product Research – PART ONE)

(Note: all links to Jungle Scouts are affiliate links).

How did you come to be selling on Amazon? & Why Private Label?

Greg started with a day job as a civil engineer. About 3 years ago, he started buying items wholesale and sold them on Amazon. As that got more competitive, he switched to Private Label products.

What is difference between Private Label vs. Wholesale model? 

Wholesale: buy welk known brands from wholesaler, then sell on existing listings and rotate through the buy box, which is normally about the lowest price. 3 years ago that was okay, but it became very competitive.

With PL, you own the listing;  since it is your product, you can justify work getting reviews, nice photos etc. Greg never did the Retail Arbitrage (RA) model because it is not scalable. Greg was looking for a system, not exchanging hours for dollars

Why develop Jungle Scout?

The biggest bottle neck in Greg’s business was finding more products. At one point he had a team of 8 VAs in the Philippines who would look at ideas, fill out a spreadsheet. This is when he created the Jungle Scout Chrome extension is the same as the VAs – instead of 30 minutes, it takes 2 seconds.

Greg was trying to scale fast, so with a list of 200 keywords, one person (VA) could only get through 20 a day.

What is Jungle Scout and how do you use it?

Two tools: Chrome extension and Web App. (Chrome is a free browser you can download)

Extension integrates into browser – look on Amazon, click on JS button – pop gives you the relevant data to make decisions on products or sales. Data like price, how much you nett after fees.

Web App: Web based software that runs on the Jungle Scout website. It has several features – the most popular is the product Dat abase. It’s a rebuild of Amazon’s catalogue  for Sellers, rather than buyers (which is what Amazon.com is designed for), with filters  with your criteria -for example:

Sales: over 300 a month; and under 50 reviews; priced over $20, under 1 lb weight” .

What are your criteria for product selection?

This is for the USA store but a variation would work in UK etc. For example for keyword “Glass cups”-

Demand: 3000 units a month of demand [on page 1 of search results]. If doing manually, add up all the sales of “glass cups” (eliminate irrelevant results).

 That is a good number if you are aiming to sell 10 a day yourself (300 a month) – which is 10% of the total market. That’s easy to find but we want lower competition. 

Competition: 1 or 2 sellers in top 5 listings with under 50 reviews.  And in top 10 sellers, 3 or 4 listings with under 50 reviews.  This tells you it’s not too mature a niche. IF competition has hundreds of reviews, you’ll find it hard to compete.

Big picture: it’s a small %age of all listings on Amazon – but there are 100s of Millions of products on Amazon so that’s a lot of items!

Price: $20 or more. The smaller the simpler the better- easier for storage etc.

These are just rules of thumb – it can be good if it’s a bit less demand but a bit Less competition.

Every time I found a product I liked using the Product tracker, it looked hyper competitive.  How can I use the Chrome extension to find lower competition products?

The best tool is actually not the Extension, it’s best to use the Product Database on the Web App.

You can put in your criteria for products with under 50 reviews and min 3000 units sold a month.

You can do this with the Chrome Extension. Once you HAVE an idea, the Extension is the best tool to have.

But if you don’t already have product/ Keyword ideas, it’s not the best tool . 

In every category it looks like it’s good to PL. What are the other criteria for selection?

If every opportunity looks good, your criteria for competition is too lax. There are tons of opportunities with high demand but they have a lot of competition. Look for something with under 50 reviews in some of those top spots – easy to do with the Extension.

Only add up the demand for relevant listing results. Eliminate irrelevant searches.

What are the costs of the Chrome Extension  and Web App?

The Extension is for $90 or $150 (more features) one off costs

The Web App at the monthly $40 level is good for most people but goes up to $100 a month.  There is a free trial – and you can find lots of products.

Are there plans to make the Web App available in the UK?

The Extension already works in the UK.  The Web App will be built for UK in the near future.

But UK or Germany based sellers still use the Web App for the USA to get product ideas – you could then search in the UK store and verify that. A lot of the times you’ll find a good opportunity in the USA and it will be in the UK.

“There seem to be three schools of thought with product selection – 1. find & build a niche brand of related products so you can sell over and over to the same customers, 2. hunt for single superstars / hidden gems, 3. gut instinct. perhaps you find/invent a product you think would do great, or it’s selling in another venue and has no rep/history on amazon to give informed decisions.

Jungle Scout and tools like it seem to be targeted at product selection style 2 [Superstars], how can it best be used to help with styles 1[Niche] & 3 [Instinct], or indeed does Greg believe in these styles or have a different view entirely?”

For Greg, gut instinct is out because it’s risky- he likes to use the data. It might work for some people!

GM has about 3 dozen items – When Greg first started, he was advised to create a whole line of products to get better sales [cross sales]. Greg didn’t find that to be true. He did it start with but didn’t see increase in sales.

When people shop on Amazon, they are not looking for particular brand, they just want the best reviews at the best price. So now Greg just finds opportunities and sells them.

However, If you wanted to find products similar to your existing products, in the Web App, you could select the product category.

The marketplace has given feedback that “finding gems” has worked better than Niche market approach. Maybe in certain categories, brand Is more important; just not in Greg’s market.

People are searching for the item and then getting one of the top 3 depending on reviews and price.

How do you deal with the competition? Especially how do you avoid a price war?

Greg never competes on price – he always works on pictures, the listing; improvements to product. If his competitor lowers price, he doesn’t. When launching new products, get into area that isn’t too competitive. Then by the time competition comes in, secure the top spot with lots of reviews.

Lots of people think they are too late to the party. Not true. It’s still a great opportunity. Greg is still launching new products. BUT You just have to be good with product research. If you pick an item that’s in a very competitive niche, it’s very hard to get anywhere.

You can’t fix a product at the marketing stage if the product selection is wrong!

If sales volume is dropping, Instead of lowering your price, do some giveaways and keep sales rank and overall, it will make you more money.

BUT Product selection is so important that lots of people get hung up on it. How do get round the selection deadlock (Paralysis analysis)?

Use the criteria that Greg gave – it’s proven, including a case study 

Once you’ve done lots of research, you will have a better feel for a particular market.

If in doubt, if you’re worried and just beginning, just choose even lower competition product even if you just sell say 5 a day. And or place an order for fewer units.

I know the Pro Extension will give extra info like FBA Fees, FBA Fulfillment category (eg oversize), net price after fees and so on. Is this available for Amazon UK? 

Yes, it is!

How about .de (Germany) or other European marketplaces?

Not yet, but this summer (2016), it should be available.

HOW TO SUBSCRIBE TO THIS PODCAST

A podcast is a free downloadable audio show that enables you to learn while you’re on the go.  To subscribe to my podcast for free, you’ll need an app to listen to the show from.

For iPhone/iPad/iPod listeners – Grab your phone or device and go to the iTunes store and search “Amazing FBA”.

This will help you to download the free Podcasts App (produced by Apple) and then subscribe to the show from within that app.  Every time I produce a new episode, you’ll get it downloaded right on yt sentence.

For podcast enthusiasts – If you already listen to podcasts and have a podcatcher that you prefer, the feed you’ll need to add is: http:// amazingfba.com/feed/podcast.

For those who don’t have a mobile device – You can always listen to the show by clicking the audio file at the top of this page.

#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)

Suppliers

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. 

Parting Advice:
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!

HOW TO SUBSCRIBE TO THIS PODCAST

A podcast is a free downloadable audio show that enables you to learn while you’re on the go.  To subscribe to my podcast for free, you’ll need an app to listen to the show from.

For iPhone/iPad/iPod listeners – Grab your phone or device and go to the iTunes store and search “Amazing FBA”.

This will help you to download the free Podcasts App (produced by Apple) and then subscribe to the show from within that app.  Every time I produce a new episode, you’ll get it downloaded right on yt sentence.

For podcast enthusiasts – If you already listen to podcasts and have a podcatcher that you prefer, the feed you’ll need to add is: http:// amazingfba.com/feed/podcast.

For those who don’t have a mobile device – You can always listen to the show by clicking the audio file at the top of this page.

If you have any queries, just go to www.amazingfba.com/ask

 

1

#34 Amazon China Product Sourcing -Peter Zapf of Global Sources (part 1 of 2)

   This episode, #34, is the first of two parts of the interview with Peter Zapf of Global Sources. Peter has a huge background in working with Asian (mostly Chinese) suppliers and the whole supply chain. He has a fantastic ability to bring common sense and  simplicity to these complex issues.  

Show notes for Episode 34 (Tactics/Qs)

Peter has been working in Hong Kong for Global Sources for about 15 years.

Global sources has existed for about 40 years. It exists to help sellers/retailers find manufacturers and vice versa. They started off with magazines; since 1996, they have a website (http://www.globalsources.com); since the early 2000’s, they have run Trade shows twice a year (in April and October), in Hong Kong (http://www.globalsources.com/exhibitions).  They’re also running a Smart China Sourcing Summit for FBA sellers at their trade show (http://www.globalsources.com/summit)   

Tactical Qs (FB group) RECENT POLL/EMAIL & from recent FB group posts:

What are the pros and cons of using a sourcing agent?

The pros: often they will get you a lower price so they will pay for themselves.  And they provide feet on the ground.

Cons: Agents have a reputation for taking a cut from both sides – it could be an extra cost because you’re not going direct to factory.  Also, It’s an extra layer of communication which may be a hinderance, especially with a complex product.

Is travel to China, to source products, necessary to grow your business? 

Not really. Email and Skype work well for people starting out.

If you go Full time with your business, it’s very worth considering.

Travel “Lite” is to visit the Trade shows.

“Full” version is to go face to face and travel to meet the suppliers in the factory.

How do you work out what a “good” price is [for a product]?

The best thing is to get multiple quotes from different suppliers. Then go back to your preferred supplier and say “We’d love to work with you but can you match this price?”

However, low price is not the only factor! Consider also:

1. If you squeeze the price, the manufacturer will have to cut corners. This will lead to Quality Control (QC) issues. “You get what you pay for.”  Think about how you want to balance cost and quality. 

2. If you have say a 5% defect rate, that will lose any financial gains you make.

3.  If your product costs are about 25% of your Amazon selling price, a 10% rise in your buying costs only add about 2% to your selling price.

Other ways to save money than just product cost:

Ordering bigger quantities.

Going to directly to the factory vs. using an intermediary.

Using sea vs. air freight.

Shipping direct to Amazon warehouse vs. stopping somewhere in-between.

How your whole supply chain is set up is important for price.

How do you know if you are dealing with a factory rather than an intermediary?

Look at the Global Sources site and look at the Business Licence and see if it includes a word like “manufacturer”.  This works reasonably well in China.

But be aware they may manufacture some things but trade others!

The only way to really know if they manufacture your desired item, is to hire someone to visit the factory or do it yourself. (Compare name on business card, paperwork, factory itself, etc.)

Inspection and Quality Control (QC)- what are your basic recommendations?

It depends on the product but this works well for most categories.

1.    Get several samples. 

2.    Write down everything you don’t like about them.e.g. batteries don’t go in easily; doesn’t turn on; scratches, dents etc.

3. Make an objective list of QC criteria.

4.   Include this list with your Purchase Order. Your supplier may say “No, we can’t deliver at this level.” but it’s much better to know that up front!

5.   Make an initial payment of 30%. Never pay 100% at this point.

6.   Bring in a 3rd party inspector to do a Pre-Shipment Inspection. They should use your QC criteria from your Purchase Order (plus whatever you feel is also relevant).

7.  They will then send you an inspection report.

8. Only then, if you accept the shipment, do you release the remaining 70% of the funds.

By telling the supplier upfront that you’re having a 3rd party inspection done, you’ll get lower defects.  You are signaling to the supplier that you care about quality.

Inspection costs about 300 USD per man-day (for a 1st/2nd tier level Inspection company), and one man day is enough for a typical Amazon buyer shipment. 

How to set up the quality control level?

AQL (Acceptable Quality Limit) is the main [internationally standardised] way to set quality control level and the statistics depending on order size.

Define in your QC criteria if a  problem is =1. critical defect; or 2. major defect; or 3.  minor defect.

Minor=> customer won’t return product eg box folded wrong

Major=> product still works but customer may return

Critical=> product doesn’t really work.

Set how many critical/major/minor defects are allowed:

AQL level Big Box retailers use is 0/2.5/4 (critical defects/major defects/minor defects)

Higher quality: 0/1/2.5

A lot of shipments actually do not pass inspection but the buyer still okays the shipment the buyer may be okay with the minor defects and request improvement for the next shipment. 

Get advice on these topics from your inspection company. 

Overview of the inspection process in this multi-part article (Part 2 is my favorite): http://www.smartchinasourcing.com/home/china-product-quality/2485-managing-qc-inspectors-part-1-the-hiring-process.html 

Description of AQL here: http://www.smartchinasourcing.com/home/china-product-quality/354-back-to-basics-what-is-the-aql.html

How do you set an appropriate quality level? 

If the customer isn’t going to return the product, give negative reviews or negative feedback, then it’s probably fine. So that’s probably the main criterion for rejecting or accepting a batch.

This is another reason for not beating the supplier down too high on price!

Ocean Shipping

Do you recommend shipping insurance?

Like all insurance, it’s easy to get cover but it’s hard to get a payout if needed!

The actual probability of a loss is mathematically low. It comes down to risk tolerance.

If you can afford to lose the money, it’s may not be necessary. If it would bankrupt the company, that’s when to get insurance!

What is the cost difference between ocean and air freight?

There was a recent study on a product that was medium small sized, and they calculated a cost per unit of $6 by air and about $1 by ocean.

There are fixed port costs either end. A very broad rule of thumb is that above 150 kg or 3 cubic metres, sea shipping makes more sense. Also very bulky items need to go by sea (because of volumetric weight)

Customs clearance

How do you handle customs clearance at a US port? (also: What is the cost of customs clearance for sea shipping? How do you select a customs clearance agent for SS?)

Answer to all of these: let your freight forwarder handle it! Peter has talked to the folks at Flexport (based in the USA), but the industry is fragmented and there are many, many freight forwarders.

The Freight Forwarder will ask :

1.    Do you want

a. EXW (Ex works) (pick up straight from factory gates?) or 

b. FOB (Free On Board) (the supplier will get the products on board ship then the Freight Forwarder takes over)?

2. Where do you want it delivered to?

3. What are the dimensions and weight of the product?

They’ll handle port fees and inland freight fees. And they may or my not include duty in the quote but if not included in quote, and they will bill you for it.  When Sea shipping, always use a freight forwarder!

Do you need a freight forwarder for air freight?

Be clear about the difference between Air Freight or Air Courier service.  Here is a good article: http://www.thesourcingblog.com/air-freight-from-china-explained/

The latter is eg DHL, Fedex, UPS. [You may get away without a freight forwarder for this. I have several times. But it’s not foolproof- I also got burnt once! – Michael]

For air freight proper, you probably need a freight forwarder.  If in doubt – ask a freight forwarder if you need to use them!

Do you need a separate customs broker?

The Freight Forwarder will usually either have that in-house or have a relationship with one. So basically they take care of it.

When making initial contact with Chinese suppliers, should I act as if [I am] the buyer and have to OK prices with my boss?                     Peter doesn’t recommend starting a relationship with “untruths”! Mostly the reason for this is for price negotiations. That leads back to price vs. quality trade off (plus the time and aggravation spent on negotiating for small price differences)

If you do want to negotiate on price, you can focus on getting multiple quotes and then compare. (Traditional retailers also figure out the costs of materials and labour and add on margin for the supplier, but this is more complex)

Is it true that Chinese factories generally give you a price that is close to the cost of production?

It can be. Chinese factories often get their profit margin from the VAT rebate of say 9-17%.  If you are getting a good quote, the price can be close to cost – depends on how good your price is!

Any advice on Sourcing from US, UK and European Manufacturers?

This is not something that Global Sources focusses on although the issues may be mostly the same.

Is using a gmail address OK for contacting suppliers? (because of spam from would-be suppliers)

Suppliers are also getting more sophisticated – they will often look up you and your company in eg Linked-In. Good suppliers are capacity constrained. The new suppliers and ones that will work with anybody may not be the ones you want to work with!

To convince the good suppliers to work with you, you want to come across as well as possible (although some of the buyers from the larger retailers do use Gmail to avoid spam).

Try to have a company domain, a company website. Give background about you that sells you as a legitimate and experienced buyer or at least an experienced business person. 

NEXT EPISODE

In Episode #35, Peter gives his strategic big-picture thinking about how to develop a long-term sustainable Product business. Amazing thinking that I have not heard anywhere else. Stay tuned!

NEXT EPISODE

In Episode #35, Peter gives his strategic big-picture thinking about how to develop a long-term sustainable Product business. Amazing thinking that I have not heard anywhere else. Stay tuned!

HOW TO SUBSCRIBE TO THIS PODCAST

A podcast is a free downloadable audio show that enables you to learn while you’re on the go.  To subscribe to my podcast for free, you’ll need an app to listen to the show from.

For iPhone/iPad/iPod listeners – Grab your phone or device and go to the iTunes store and search “Amazing FBA”.

This will help you to download the free Podcasts App (produced by Apple) and then subscribe to the show from within that app.  Every time I produce a new episode, you’ll get it downloaded right on your iDevice.

For Android listeners – Download the Stitcher Radio app (free) and search for “Amazing FBA Podcast.”  Or, if you have already downloaded a podcasting client, follow the directions in the next sentence.

For podcast enthusiasts – If you already listen to podcasts and have a podcatcher that you prefer, the feed you’ll need to add is: http:// amazingfba.com/feed/podcast.

For those who don’t have a mobile device – You can always listen to the show by clicking the audio file at the top of this page.

If you have any queries, just go to www.amazingfba.com/ask.

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#31 Amazon Ads Specialist Danny McMillan Interview – PART ONE

This Episode, #31, was prompted by our very own Facebook members! They said in a survey that Amazon Ads were the area they most wanted expert help with. Danny McMillan responded by giving many golden nuggets to our listeners.

This is the first of two episodes containing this interview.

SHOW NOTES FOR EPISODE #31

WHERE TO CATCH DANNY

Doing a presentation in Hong Kong after the Canton Fair. 

Www.dannymcmillan.com

To connect with Danny, click on these links:

 Linkedin;

Twitter: @dannymac1000 

Facebook: Facebook

Danny’s background 

Had been looking at eBay. 

Realised Amazon FBA had everything he wanted in a business. 

Radio show on Kiss FM for 2 years at the turn of the noughties. 

Ran own record labels late ’90s/early 2000s. Creating an Amazon business has many similarities including working in a team.

In 2008, left music biz. Become MD of a tech startup for 2 years. Shut down in 2010 after £500K in investment. 

2012 head of digital at a ticketing company which had an exit. He used PPC to increase business and gain investor confidence. 

Danny’s specialist skills that he brings to  Amazon:

On page optimisation and SEO for ASIN

PPC/Amazon ads

Import/Export processes 

Why Amazon? 

You can bootstrap but it is easily scalable. 

In most start up companies; it’s about how fast you can resolve the customer’s problem before you run out of investor cash. This is a lot easier to do with just one web page (such as an Amazon product listing) and building out scale from there

There are various specialist roles in an amazon business. Danny was attracted to the marketing and SEO/Adwords side. 

Why are Amazon ads important?

Instant visibility esp when you have no sales history, no conversion history. 

It also helps ranking on Amazon for organic sales as a conversion history is built. 

Common issues

A lot of people do something like:

  1. Run an auto campaign 
  2. Give up on that
  3. Run manual campaign 
  4. Tweak something every day in an unstructured way. 
  5. Then they are basically lost! 

You need a clear strategy. 

LINKS TO DANNY’S SPREADSHEETS: click here

SEE DANNY’S DETAILED NOTES HERE

DANNY’s RECOMMENDED SIMPLEST ACTION SUMMARY:

Week 1. 

Create first auto campaign. 

End week 1: Cut and paste keywords into Amazon and check for relevance ;add negative exact keywords to the campaign that don’t fit your product criteria. 

If needed, tweak product page (title and back end keywords) but be mindful that wholesale changes can / will affect rankings

Week 2: 

add second auto campaign with higher bids

Week 3: 

create a bridge to manual campaign. 

Weeks 4+:

Use 3rd party tools to gradually add keywords:

DETAILS ON SETTING UP AMAZON ADS

WEEK ONE

Set up your first auto campaign. Aim: tuning or validating your listing and showing your listing to Amazon. 

Guidelines: £10 a day budget, 40 p per click bid. This varies by product category so only a starting point. You need / can define this yourself, be an experimenter….

If you get no impressions after two days, up the bid per click. 

After one week, run a keyword report. If you find irrelevant words, add them to your auto campaign as “negative exact match” keywords, which means they won’t bring up your advert. 

The aim of starting out with PPC is a “clean out” process. Basically you are finding the converting words and getting rid of irrelevant ones that waste clicks and money. It is NOT to get sales at first, although that is a good side effect!  The goal here is to play it long and reap the benefits.

WEEK TWO

if you are getting a lot of unrelated keywords showing up in the auto campaign, tune your listing. 

Tweak the title if needed. 

Careful with changing this later too much as it affects organic ranking. But at the beginning you haven’t much to lose. 

Also the back end Search Term Field (keywords; which are in the final tab in the product editing part of seller central). You usually have 5 fields for this, each 50 characters so total 250 characters. In some categories Amazon has rolled out 1000 chars to play with in the top line, we are still testing the effects of lines 2,3,4,5.

WEEK TWO

We are still just using auto campaigns. 

Danny has European auto campaigns in France, Spain and Italy and the ACoS is below 15% so it can work really well. But… Patience is the key here as you have to rough it out sometimes to get it under control.

Create a Second auto campaign for same product but with higher bids (far enough away to avoid the algorithm getting confused) . 

This may have some impact on first auto campaign. 

Bring  over exact match negative keywords from the first auto campaign. 

Aim: guide amazon’s algorithm to “get” your listing. 

Run your auto campaigns for about a month. 

Patience is important. 

More details in Part Two – next Episode!

LINKS TO DANNY’S SPREADSHEETS: click here

SEE DANNY’S DETAILED NOTES HERE

WHERE TO CATCH DANNY

Doing a presentation in Hong Kong after the Canton Fair. 

Www.dannymcmillan.com

To connect with Danny, click on these links:

 Linkedin;

Twitter: @dannymac1000 

Facebook: Facebook

HOW TO SUBSCRIBE TO THIS PODCAST

A podcast is a free downloadable audio show that enables you to learn while you’re on the go.  To subscribe to my podcast for free, you’ll need an app to listen to the show from.

For iPhone/iPad/iPod listeners – Grab your phone or device and go to the iTunes store and search “Amazing FBA”.

This will help you to download the free Podcasts App (produced by Apple) and then subscribe to the show from within that app.  Every time I produce a new episode, you’ll get it downloaded right on your iDevice.

For Android listeners – Download the Stitcher Radio app (free) and search for “Amazing FBA Podcast.”  Or, if you have already downloaded a podcasting client, follow the directions in the next sentence.

For podcast enthusiasts – If you already listen to podcasts and have a podcatcher that you prefer, the feed you’ll need to add is: http:// amazingfba.com/feed/podcast.

For those who don’t have a mobile device – You can always listen to the show by clicking the audio file at the top of this page.

If you have any queries, just go to www.amazingfba.com/ask.

#19 Amazon FBA Seller Interview with David Aggiss

This Episode, #19,  is a very exciting first for the Podcast: our first interview!

David Aggiss was one of the first to join our Facebook community and has been a very active member, including taking the initiative to reach out to me and meet up in person at a conference.

David took some great training, and has been very committed to working his business. As you would hope, that has resulted in some very quick successes. Here, David shares his journey, what worked, what challenges he has had to overcome.

** REVIEWS CONTEST!**

The first 25 people to review the show on iTunes will be entered into a draw. The winner will receive a £50 Amazon Voucher from Amazing FBA!
Head over to iTunes now and leave your review! If you haven’t  already, you can also subscribe through iTunes to get all the info you need to start your own successful Amazon business!

CONTEST EXTENDED to the end of November or 1st 25 reviews, whichever comes first !

SHOW NOTES FOR EPISODE #19 David Aggiss Interview

  • David’s Background: got into property as an investor then moved into mortgage broking.
  • Was drawn to Amazon FBA private labelling model because it offered Passive Income.
  • Passive Income is important to him as a way to get to spend time with his young family and to escape office culture.
  • Also it can be as hands-on or hands-off as you like (Amazon handles sales and can do customer service – you can outsource a lot as well)
  • David started with Amazon training in April this year and his first product went live in September.

GIVEAWAYS and REVIEWS

  • He allocated 200 units to dollar giveaways, targeting 100 reviews (because of the psychology of triple digits of reviews, and because biggest direct competitor has 200+ reviews)
  • Aim was to give away 10 units a day for two weeks
  • Put in three batches of 50 codes to AMZTracker
  • Turned on PPC Amazon Ads after about 20-30 reviews
  • He actually gave away just 150 units, for about 100-110 reviews (so about 66% converted to reviews) as he was running out of stock and had hit his target no. of reviews.
  • David was able to be selective as his product was popular, so he tried to select reviewers who had reviewed similar products, had given a few video reviews and gave decent length reviews [i.e., not just one short sentence!]

SALES

  • Sales got quickly to 10 a day, then went up to 15, then 20, then up to 25 sales/day
  • Sales: Month 1: including $1 giveaways, $5000
  • Month 2: $6000 but that includes running out of stock!
  • PRODUCT SELECTION:
  • Don’t overanalyse
  • Avoided oversize items because of upfront costs and cost of Amazon fulfilment
  • Went for something that could be bought for about $2 a unit
  • Did due diligence and made sure the numbers stack up
  • Not too competitive
  • Happy to go for 10 sales/day

SOURCING AND FIRST ORDER

  • Manufacturer’s MOQ was 1000  to have his logo on product plus customised packaging
  • David negotiated down to 700 units only with custom packaging (no logo on product)
  • But then after firming up the order, he said to supplier he was going to be ordering more, so negotiated including logo on product on the 700 unit order

CAPITAL and CASHFLOW

  • David has only used his capital for stock ordering. Other costs e.g. Amazon Ads etc. are on the Credit Card for cashflow reasons.
  • He needed about £2000-3000 upfront to order inventory and launch the product

AMAZON ADS

  • David turned these on after about 2 weeks and about 20-30 reviews
  • He ran a manual and auto campaign alongside each other at the start
  • He put a $20 daily budget to Manual and $10 to Auto
  • The auto campaign only produced 1-2 sales and those were for a Keyword he knew already was important
  • He then paused the auto campaign
  • He launched with bids of about $3 a click to get onto page one with ads while product was on page 14 or so of organic search results
  • He then gradually reduced the costs per click over time.
  • ACoS (Advertising Cost of Sales)  started off over 100%; then it went down to about 65%; last month it was around 45%.

BIGGEST CHALLENGES AND HOW DAVID OVERCAME THEM

1. Stock management

  • running out of stock happened because he didn’t expect sales to take off so fast
  • The solution is that he will over-order (now has 1500 units in transit either in China or in the USA) and have 3-4 months worth of stock of his first product so he can focus on buying and launching product no. 2

2. Quality issues

  • These weren’t so terrible but there were higher returns than David wanted.
  • He is having the returned units shipped to him in the UK
  • He will then inspect these and then ship some on to China
  • David uses Viabox to receive returns, which gives a free USA Address. They’ll also store packages for up to 30-60 days and arrange shipping pretty cheaply.
  • David’s shipping 18 units for $40 (1.6 oz weight/unit). I make that 1.8 pounds in weight, so that’s about $22 a pound of weight or £14.75/lb (or about $49 a kg=about £33)

3. Reseller on his listing

  • One of David’s buyers for $1 (giveaway for reviews) listed his product for sale.
  • David had saved the URLs of the profiles of all of his reviewers
  • So he was able to track down the reseller and sent them a stern email
  • The reseller on his listing disappeared!
  • David had been prepared to just buy the product to get rid of the reseller anyway.

4. Time management

  • During the set-up phase, because of doing the Amazon business on top of having a full-time job and a young family, David was having to work evenings and weekends, sometimes 2-3 hours late evenings.
  • His solution is to commit to the business, and to try to fit in an hour whenever it’s possible, even if that’s 11 pm after a full day of work and family life!

BEST THINGS ABOUT THE AMAZON FBA BUSINESS MODEL

  • It can take off very fast
  • It requires very little input to maintain once set up
  • The money to be made is very substantial

ADVICE FOR NEWCOMERS TO THE BUSINESS

  • “Jump in and get going!”
  • Don’t over-analyse. For example, in his first batch of products, David had no inserts and no instructions. He’s just sorted both out for his last (2nd) batch.
  • If start-up capital is an issue, you can do what David did and use capital for stock but put the recurring costs on a credit card.
  • Have enough stock to not run out if you can!

HOW TO SUBSCRIBE TO THIS PODCAST

A podcast is a free downloadable audio show that enables you to learn while you’re on the go.  To subscribe to my podcast for free, you’ll need an app to listen to the show from.

For iPhone/iPad/iPod listeners – Grab your phone or device and go to the iTunes store and search “Amazing FBA”.

This will help you to download the free Podcasts App (produced by Apple) and then subscribe to the show from within that app.  Every time I produce a new episode, you’ll get it downloaded right on your iDevice.

For Android listeners – Download the Stitcher Radio app (free) and search for “Amazing FBA Podcast.”  Or, if you have already downloaded a podcasting client, follow the directions in the next sentence.

For podcast enthusiasts – If you already listen to podcasts and have a podcatcher that you prefer, the feed you’ll need to add is: http:// amazingfba.com/feed/podcast.

For those who don’t have a mobile device – You can always listen to the show by clicking the audio file at the top of this page.

If you have any queries, just go to www.amazingfba.com/ask.

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