"Build" Guide - how to Build your Private Label Business
What are the major freight paperwork and how do we overcome those?
If you are using a courier or one of the freight professionals, they do all that for you. You don’t have to worry about the various paperwork, custom claims, etc. This is a skill these guys have been working on for years, they can do it better and more efficiently than you, so let them do it. UPS is around £11 per shipment for customs clearance. DHL is right around there as are most of the others. Since you’re importing the product, most of the paperwork is done by the exporter and you’ll end up with the VAT and the duty. Both of these are calculate off the commercial invoice.
One thing the Chinese like to do to be nice, is send the shipment as samples. If they are a sample, that’s fine. However, if you’re shipment is 500 units, that clearly isn’t a sample. At some point, the guys at HMRC are going to catch on and you may end up with penalties as well as your future shipments getting more scrutiny causing delays.
You have a proper business, so you want to make sure you do things by the book. It may cost you more in duties, but you want to build your business on solid ground.
Another they offer is to lower the cost of the invoice to stay under a certain value at which point things become more complicated. Is that something to avoid as well?
At the end of the day you’re evading taxes, which simply put, is wrong. Also, if you get caught you may end up getting put on a list which will further delay you in the future. If one of the customs officials gets to digging around and realizes your products are valued at more than what was declared, they will put you on a watchlist. Ongoing shipments will be inspected and paperwork will be scrutinized which will hold up your shipment.
Do you need to instruct your suppliers about commercial invoices or will that be checked by DHL or UPS?
A commercial invoice is just like any other invoice. It will detail the value of what your purchased, the goods you purchased, the delivery address, the importer on record’s address, and the commodity code. That is a global code that details what the product is classified as which you can find on the HMRC website. So when the shipment comes in they can charge import duties.
Is that something the Chinese supplier will automatically put on the invoice and get right?
Well… they’ll put it on the invoice. It may not always be right and there is no way of going back and saying this is wrong, so you’ll just have to double-check it and next time you order tell your supplier that they put the wrong commodity code on it. Which could save yourself some money since the import duties can vary depending on this code. It can range from 0-12% on top of VAT.
How is VAT calculated? Is it the value of the goods only? So if I have 500 units that cost $2 a piece, is VAT calculated on that $1000?
It is the commercial invoice value + freight + duty. VAT is calculated on the total of all three.
Is there anything else we need to get on the commercial invoice? Say I order a shipment, sent to your prep company, do I need to make sure all that is on the invoice and how do I communicate that to DHL or whoever?
It does need to be on there, but in Greg’s experience if doesn’t matter. It seems to be a daily battle with FedEx, or DHL trying to get the person on the commercial invoice or airway bill. It doesn’t matte who the consignee is, Greg seems to always get the bill sent to FBA Pep UK at his address. If you look at the paperwork that comes with it, it clearly states the correct customer but they seem to ignore that.
How do you handle that, when you get the invoice in stead of your customer?
It depends on the customer. Some will just pay it which is fine. Even though it’s FBA Prep UK on the bill, they can’t sort it out. The customer has to contact them and tell them that they will accept that invoice.
The biggest takeaway seems to be that it’s best to just use a freight forwarder or use your courier and make sure that your name and the company name is on the paperwork.
Those guys are the professionals. They are doing this day in and day out. Sure you can learn it, but that’s time better spend on your company and sourcing more profitable products.
Another thing you have to worry about is your EORI (Economic Operator Registration and Identification scheme) number. Which is a number supplied by the HMRC (Her Majesty’s Revenue and Customs). You can’t apply for one unless you have a shipment coming, and you can’t get your shipment into Europe until you have it. It takes about 3 or 4 days to get it, so as soon as your supplier gives you all the detail on when the shipment is coming from, where it’s going to land, the size of it, the vessel number, take that information and you can apply for your EORI number online.
Small samples should be ok, your couriers can take care of it. Once you start getting bigger shipments coming in, you’ll want to get your own number. It simply for statistical purposes of what come in and goes out of Europe.
On a side not, outsourcing is vital! It’s a waste of time trying to do everything yourself. Some of the simpler tasks, or task that need expertise can be outsourced freeing you up to focus on growing your business. Here is just one example:
This is a 15×15 grid of everything that needs to be done with products. This is why you shouldn’t order 15 different things from AliExpress and why you need help with prep.
For more ambitious sellers what are the biggest challenges when trying to scale up?
What about people who want to import a lot of one product?
Factoring time scales. If your coming by air now, you’re looking at 7-10 days from China to yours or your prep company’s hands. As you scale up you’ll have to start coming by sea which is about 35 days from China to the UK. Then the ship has to be unpacked which is another 5 days. It’s about 40 days from the time the supplier delivers it to the time you take delivery. Obviously, this is something you have to consider. If you’re doing you analysis to determine when you will need more product, you’ll have to add another 30-40 days onto that or risk running out by the time the ship arrives.
If you’re used to doing your own prep, as you scale up the deliveries will get bigger. You’ll start getting them in pallets rather than loose boxes. If you plan on continuing to do it at home, you have to consider how you’re going to offload the truck. It’s no longer going to be a van or small truck, it’ll be coming in artics so access becomes an issue. Also, you have to request a truck with a taillift if you don’t have a forklift. That will cost another £40.
What about those who want to go from a few SKUs to say 10 or 20 but not a huge quantity of each one?
This is common with things like pencils. Where you have one type of product, but 5 or 10 variations. i.e. different colors which Amazon treats as completely different products. Having the product description on the boxes is a huge help. That way if there is a problem with a particular SKU, it’s easier to identify which ones they are without having to open every box.
Whether you’re ordering 500 unit of one product, or 50 units of 10, the challenges are the same. Where the challenges would come and the cost would rise, is if your importing products from different suppliers. Now, there are services that will consolidate for you. You can have four or five different suppliers send everything to these consolidation warehouses. They will consolidate those and export them as one shipment saving you money.
What do you see coming up in the Prep side of Amazon as a problem?
Amazon will start requesting detailed contents of boxes. You can do it now, as an option, and in the US they have started requiring it. Usually if it happens in the US it will happen in the UK. So you will have to communicate that with your supplies to be more clear about what’s in each box especially of you ship directly. They will also requiring packing notes, so when they open the box, they know what’s in it to speed things up on their end.
Brexit will likely have an impact on shipping in Europe.
Amazon announce recently that they will have an air fleet of about 40 planes to ship products themselves. It’s unknown if freight will change much since it’s a fairly stable and established system. However, Amazon will likely try to takeover that.
How can people get hold of you?
Greg has sold on Amazon for about 2 ½ years now so he has quite a bit of experience with selling. Greg saw an opportunity while he was selling. He hated doing the prep work. It took a lot of time and kept him away from what actually made him money, sourcing and working with suppliers. So he started FBA Prep UK almost two years ago as a solution for Amazon sellers.
Why bother with prep at all? Why not just send directly from China or supplier to Amazon?
First of all, things happen to products. It’s more common with air, there’s a lot more handling and a lot more opportunity for packaging to be damaged. From the supplier not doing what their supposed to, then sending it to the plane, loading and unloading from the plane, then to the Amazon warehouse.
Sometimes the products show up without packaging. It may have been repackaged by the shipping company because it was in such bad shape. Amazon won’t accept that. They have very high standards for what they expect and if it arrives damaged, they will not accept it. It will either be removed or destroyed.
To avoid all this, you’ll want the products to be inspected before they go to the warehouse. You can do this yourself but you will soon realize how much time and effort it takes to go through everything.
So what prep do you need to do for Amazon?
Obviously, everything will have to have a scan-able barcode, i.e. EAN or UPC work fine. Most products that come from China do so in a poly-bad or a plain white box with no identification on it. Amazon cannot accept that. They are a massive operation that cannot deviate from their processes. Prep companies, being smaller and working with you directly, have the flexibility to ensure the products are packaged correctly before Amazon gets them.
For the items that come in the poly-bag, can you repack those?
These bags are quite brittle and are too thin so they don’t meet Amazon standards. They have to be sealed or they have to have a suffocation warning label is the opening is more than 5 ½ inches. These aren’t Chinese regulations, so unless you specifiably request this, it won’t be done. Sometimes it won’t happen if you do specify it. Keep in mind that your supplier is likely not to comply with your instructions. There is very little chance of getting your money back should they mess up. Typically the only recourse is a discount on your next shipment.
If you hire an inspection company and everything checks out at the factory, what are some other things that can go wrong?
If it’s in a poly-bag, it’s pretty much ok. The problem starts if you have it in a box that gets thrown in to a shipping container. By sea is better because there is less handling. It doesn’t get handled much until it arrives gets put on a pallet.
Greg recommends contacting the supplier and having them ship extra boxes. Many times some of them will get hit by a forklift and the packaging gets messed up which will be rejected by Amazon. The products are fine but because the box is messed up it becomes unsaleable. If you don’t have extra boxes you have to contact the supplier after the fact. The supplier will likely not send you the extras until your next shipment which leaves you with 10-15% of your products sitting around until you’re ready to order again.
Greg’s standards are whether or not he would be happy to receive it. If he order an item off Amazon, would he be happy to receive it in that condition? If not, he would send it in until it gets repacked. This is also to protect you. Amazon shoppers are picky. They will rate a product low based on the packaging. Even if the product is great but the packaging was awful, they might leave a poor review. So it’s worth it to wait to send it in rather than risk a poor review.
So if you bother with prep, why use a Prep company?
It depends on your circumstances. Whether or not you have the space and means of handling them. Make sure to receive the samples at home so you have a change to inspect them before making a large purchase.
Some people don’t realize how large their orders are. So when you try to prep 100 or 150 units, you realize that you don’t want to be doing that for 500 or 1000. 1000 units, you’re probably looking at a pallet. You have to make sure you have a place to put a pallet.
Greg had a customer call him one time about 2000 piece order that was about to dock and he was told that it was going to be two maybe three pallets. He hadn’t realize how large it was going to be and was planning on fitting it in his two-bedroom flat on the 16th floor. This would not have been remotely possible to do on his own. He had to have the help of a prep company that has the means to handle such an order.
Also, this is almost required for some sellers that do it as a side gig and they have full-time jobs and they do their sourcing and dealing with suppliers in the evening. They have no time to be messing with prep work because they have their full-time job. It’s not feasible for them to do it on their own.
What are the main steps you go through to prepare for Amazon?
What are the biggest mistakes you’ve found sellers make with freight that you’ve come across?
The story before, about the guy that didn’t know what he was going to do when it arrived. There is a scam going around where the supplier offers you shipping terms. They offer FOB prices to the port in China and CIF prices Felixstowe.
To clarify some terms, FOB is “Freight on Board”. The Chinese will pay the expenses to get your goods from their factory to the port of departure. CIF, Carriage, insurance and freight, is the exact same thing to the UK ports. So they exported the products, put it on a boat, and it will arrive at the docks in Felixstowe or South Hampton. From dockside, you have to organize onward freight and customs clearance. In Greg’s experience he got the same price for FOB in China and the CIF in the UK. It got to the UK and it seemed like it was all a part of the service, but after talking to he Freight Forwarding partner he was told it was a scam.
When it gets to the UK, the handling agents have to pay the shipping charge. It’s not free, it just gets passed on the UK agents who then pass it on to you. You then, also have to pay your normal VAT import duties, and custom clearance duty fee. He has heard figures of £600-1000 just to release the product. If you don’t pay them, you don’t get your product. They then start charging you storage fees and the costs just start rising.
What are the warning signs to look out for?
The supplier will offer you terms that look remarkably good. “If it looks too good to be true, it probably is.” Ask for prices from other freight forwarders. Even if it just to give you an indication of what the cost might be and if the Chinese guys stack up and looks about the same, you should be fine. But if it’s considerably cheaper, then at least you know what prices you can expect.
What are some basic dos and don’ts of working with a prep company?
The biggest thing is trust. At the end of the day, you’re sending a large investment, thousands of pounds worth of product, to someone you don’t know. You don’t know if they exist. As an entity, they could just be a website and an email address and you end up sending your stuff to them. Make sure your happy with them, call them up, look for social proof. Just make sure you’re real.
Keep in mind they are an extension of you, they’re not the importer on record. They don’t have importing responsibilities, they are simply a delivery point for you. You need to tell your supplier that. Greg has gotten invoices coming in with his name on them. Then DHL, or whichever shipping company will send him an invoice for the duties. He will send that on to the customer, but the invoice is in his name. So that makes it difficult for the customer to put it in their accounts.
Even if you’re out of the country, they will be your delivery point. So it will be your name, your company, at their address. So the invoice will go to the prep company who will then forward it to you. If it’s been agreed, they will pay the duties.
Tell them it coming. As ridiculous as it sounds, inform them of it’s arrival. The worst thing for Greg is to receive six pallets of products and have no idea who it belongs to. All they have is his name on the invoice.
Q 1 Corinne
First, I am not an American but want to sell [on] Amazon.com
I have sent a few small packages to Amazon FBA.
There was no issue at all until I started sending 15 cartons.
When I sent this 15 cartons, I don’t have Federal tax ID number.
Thereby I needed to spend US$ 500 to have freight forwarder to help me.
Then I tried 8 cartons through DHL which declared $1200 for the customs. However, it is still got rejected by the customs.
It seems FEIN is required if i want to ship my inventory to FBA.
I am not trying to escape any tax issues, but to get a FEIN number, I would need a legal address in US. I am not in US.
How do you guys deal with this?
A freight forwarder isn’t the same as a Customs Broker in the USA. Some companies do both, like Western Overseas Corporation. But it sounds like what you need is a Customs Broker.
You shouldn’t need a US address to get an EIN as a foreign entity (person or company). But if you need one (you do need a returns address for amazon or should at least have one), google. I used myaddressus.com – pretty cheap.
If you send in goods over the value of $2500, it’s a formal import so you’ll need a customs bond etc. At that point, I would use a Customs Broker, at least for the first time. That’s not the case here, but worth flagging up for future reference.
Here is my newbie experience post #3. So I’ve been selling for about 3 weeks in the UK. Where am I?
I picked a great product. It’s flying off the cyber-shelves. I am about ½ way up page 1 for all my main keywords. I told myself to be ‘happy’ with 5 units a day. I was averaging 10-12 units per day, but have increased my price and now average 7-8 units per day. I have had days of 10+ including a day of 16 units. These are not giveaways, all giveaways were done in the first week. So why did I increase the price?
This first ‘test run’ was 500 units. At the current rate, I’m going to run out quickly. So I’m trying to find the balance between maintaining sales, and not running out of inventory. Am still undercutting some competitors at the current price, but also more expensive than some others.
I believe the reasons it’s going well so far are:
1. Branding. My brand is easily one of the coolest, and as I expand I’ll grow as a brand, rather than as “Bob’s generic stuff” which several of my competitors are doing
2. Social media. Many ‘gurus’ say – avoid social media until you are well established on Amazon. This is not a good move, in my opinion. I have an active twitter and Instagram account, and a new facebook page. OK I haven’t got many followers, but t’s growing and I’m getting a bit of engagement.
3. Branding. I said it again because it’s so important. Branding is everything. Cool brands get bought. Generic crap doesn’t.
Alex You are doing well, but don’t talk about brand building. People don’t care. You drive them in your page and they just see information, reviews and price. Just set Ppc automatic. If doesn’t work move on.
Suzi I love to hear that you are growing a strong brand, and that you understand and appreciate how important it is. I cringe so hard when I hear people say your branding doesn’t matter…nothing can be further from the truth. Have you had any issues with counterfeits hopping on your listing(s)?
My response: it depends!
If you just want to make sales on Amazon short-term (say next 6 months), I think it’s true that brand doesn’t matter much. Initially, customers will not have heard of your brand yet, and they mostly go with good images and price. Also, it is not realistic to expect Amazon to cross-sell your products even if they are in the same niche.
However, if you want to create a defensible business to later sell, you definitely need to create a brand. Also, even if you’re never planning to sell, if you want to create a Shopify store, to diversify and lower the risk of Amazon controlling your business, you will need to develop a focussed suite of products. If you have multiple niches, you can develop multiple brand sites, but each one needs some unity for credibility.
Also if you do well, medium term even on Amazon, people can start searching for your brand or pay slightly higher prices for it, as long as you have lots of reviews by that stage.
EMAIL OPTIMIZATION: Hey Everyone…just a quick question regarding your post-purchase email autoresponder sequences. I am currently getting 8% and 9% conversion rates for feedback and reviews, respectively. I would like to increase this and was thinking of shortening each email to make more mobile friendly. Have any of you tested the length of copy an how this alters conversions? Thanks!
First of all, if you’re getting 8-9% conversion, you’re doing well. Average for most people I’ve spoken to about this (which was a while ago) was 5%, as it was for me last time I checked.
Regarding testing, I don’t know whether for example Feedback Genius or Salesbacker will do this for you automatically. I use a different system so I don’t think I have that option.
If you want to do it manually, then make sure you test a significantly statistically meaningful number. So I would be inclined to run three variations, one shorter and one longer, and I would try each of them for about 100 sales each.
Re. email follow-up sequences more broadly, I use three emails. Currently the 1st only offers help and a PDF and says thanks/please get in touch if any issues although Kevin King asks “why did you buy the product” which I may change to going forward.
The 2nd, after ben Cummings’s approach, asks the buyer to just hit REPLY and let me know why s/he bought the product. Similar to Kevin King but after the product has arrived. Only a small %age do but you do get replies in my experience.
THe 3rd then asks for Seller Feedback, which I can then follow up on and ask to be changed to review if it ends up being about the product. It’s a filtering mechanism.
THe point of the 2nd email is that if someone replies to that, they feel more obliged to follow through after the 3rd and actually write a review.
In David’s case, I’d be inclined not to mess with what is working too much but tweak it eg longer/shorter.
Or you could change the 1st email in the sequence. Or the 3rd. Test both variations and let us know!
PRICE TESTING: Hi Guys! I have been doing a lot of price testing. Does anybody know if the price changes in the shopping cart? For example, if somebody added my product to their shopping cart as price X, but did not check out. Then, I change to price Y. Does the product, in the shopping cart, change to price Y or does it remain at the original price X as it was when it was added to the cart? Things that make you go Hmm!!!
Michael Veazey David, interesting question. I admit I don’t know the answer.
However I wouldn’t recommend changing price that swiftly or often! I’ve been guilty in the past. Problem is that you can’t make objective statistically significant measurements of the effects of price changes.
Michael Veazey I’ve recently been testing out www.amzsplit.com
Www.Cashcowpro.com also looks promising although I’ve not used it yet. It also does profit calculations to some degree. Hello profit may be better for the latter.
I am tracking down the creators of all of these things for the podcast…
So… I went on Jungle Scout to find the niche product
Started with Home & Kitchen -> Kitchen and Dining -> Kitchen utensils -> Cooking utensils:
A lot of Silicone spatulas came up as you would expect but what JS ran was a completely different story.
It would seem that there still is market for those wishing to sell Silicone Spatula…
Or am I reading the data wrong
According to Greg Mercer’s guidance:
1st 5 listing have under 50/100 reviews (Further down a few names dominate)
And the revenue for is good for all the top sellers and very high volume of sales
Wade I might be wrong, but I’ve always been sorting the results by rank, and then those are my top 10 ones to look at and assess. Please someone tell me if I am wrong!
Michael Veazey Well, this is the first phase or first filter of any sensible product picking system.
First of all quite a few results are for steel tongs so those need to be eliminated as irrelevant.
Then you need to be aware of giveaways.
Look at the top ranked seller.
With just 23 reviews, I don’t believe they are doing 3000 organic sales a month in this market.
Next and most important, price. At $6.49, you have to wonder what the profit is.
let’s look at ad costs which are frightening with a very competitive keyword.
If we guesstimate PPC costs per click on such a competitive keyword at say $2 per click, and if we are optimistic and say 33% conversion, that gives a cost of $6 as cost per ad driven sale.
Even if say 1/2 of sales are organic that would give an overall average ad cost of $3 per sale.
That leaves $3.49.
I don’t know what the fulfilment fees are but let’s say $1. Referal fee is $0.97 so basically $1.
So that leaves $1.53 to:
1. buy your unit, 2. inspection, 3. freight, 4. duty and customs costs 5. Receiving warehouse in USA 6. Amazon inbound shipping.
Sales can be achieved if you drop the price, spend a lot on giveaways and spend aggressively on PPC.
That’s a good set of launch tactics.
The issue is whether after that, there is profit to be made.
Hello Amazing FBAers!
How do you pay your freight forwarder to ship your goods to Amazon USA? Do you pay 100% directly before shipping?
I have been trying to get freight forwarders to use Escrow or to pay them 30%/70% through Alibaba’s Trade Assurance but they won’t agree to it….
Is there a way how I can be safe? Because if you pay them 100% of the sum at the beginning, then you are at their mercy and they will not put a lot of effort because they have already been paid
Btw Michael, keep up the good job, one of the best podcasts out there!
Peter Zapf I’ve usually seen the bill/invoice issued right when goods are about to get delivered (this would be US freight forwarders shipping into the US). Not up front before goods are even picked up.
But this is also different than the 30/70 for suppliers. For suppliers, the 70% is the hammer to make sure you get the quality you need, which is why you should do a pre-shipment inspection. I’ve never seen anything like 30/70 for freight forwarders.
Michael Veazey Hi Sergei,
I assume your freight forwarders are in China, is that right?
Are they are very small firm or are they an established large one? Is there a particular reason you feel worried about fraud with them?
Michael Veazey So Sergei, are these FF based in China? And where are you shipping to? US? U.K.? Europe?
I’ve not heard of anyone doing a 30/70 split with a FF. If you’re really worried then I’d suggest
1. Get one in the USA If that is where you are importing to. Or UK or wherever you are based.
2. Find one who will talk through the process on the phone and generally help you avoid newbie mistakes.
Hi Guys – I’m new to this group! I am in the process of arranging shipping from china to FBAI by air express (arranged by the supplier), however after reading a few posts could air freight be an option? I will exceed the $2500 customs threshold so will have to engage a customs broker anyway so will it make more sense/cost effective to go air freight? This is my first shipment so a bit unsure about the whole thing but trying to work my way through it! Additionally when you say door to door (in this case does that mean to FBAI instead of having to engage a FF to move from port to FBAI). Thanks 🙂
Yes air freight could well be an option. If it’s a small consignment it probably won’t save you much over air express but The thing to do is to get some quotes then you can work on hard data.
Air Courier is nearly always the simplest option. Ask for DDP =Delivered Duty Paid. If you get DAP=Delivered At Place (sometimes called DDU Delivered Duty Unpaid which is not technically an INcoterm) you can in theory just have the courier invoice you for the Duty but it is wise to use a customs broker at least first time out.
Ask your supplier what they can get from their air express guys. Then get quotes from several freight forwarders and compare.