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#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

 

#40 Amazon Marketing Mastery Mini-Series: Niche Market (Part 1 of 7)

Show notes for Episode #40

Master Marketing Principles Mini Series: Part 1 of 7

Principle ONE: NICHE MARKET

Market=Buyers (Demand) and sellers (Supply)

They work in a Marketplace like Amazon

First thing is to find DEMAND

Understand the Buyers=Shoppers=Potential Customers

You need to define a PERSON and a PAIN (or PROBLEM)

PERSON implies Demographics eg age, gender, geography

PAIN implies Psychographics eg Personal Values, Motivation to Buy, Like Quality; Value low price etc.etc.

For example A 40-year old man who live in London

He wants to see clearly at night and not have to find batteries;

high Value: time, safety.

Competition (Sellers)

Look at competition through shoppers’ eyes –

They are looking for BENEFITS eg you can see clearly at night

Not FEATURES eg special lens on your light

So translate Features into Benefit

For example:

“Special NightVision (TM) Lens  – so you can see really clearly at nigh!

Rechargeable Battery XYZ type – so it will last for longer.

No more hunting for AAA batteries!”

Be a member of your target market if possible.

But then Ask  people (e.g., in person; survey; etc) to build up a picture of your ideal customer:
WHO are they? (PERSON) WHAT do they want? (PAIN)

Remember:

“Whoever understands your marketplace best, wins.”

 (Andre Chaperon of Autoresponder Madness)

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

 

3

#15 Planning for your Amazon FBA Business

This Episode, #15,  deals with a big area: Planning for your Amazon FBA business. It’s not as sexy a topic as some, but it’s a must if you want to develop momentum and hit big, exciting goals.

**STOP PRESS** 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 #15

See below Shownotes for Your Free downloadable Excel spreadsheet for Quarterly planning! 

    1. Overview
      1. Targets (money in) & Resources (money out)
      2. Approach/Mindset
        1. “Planning is indispensable; Plans are worthless”
    2. TARGETS/ Needs
        1. Financial
          1. sales targets -$/units/mo
          2. gross profit
          3. net profit
          4. free cashflow
        2. Exit strategy?
          1. timeframe
          2. value/money
          3. marketplace?
        3. time
          1. time to x sales/month
          2. time available (hours/week/month)
        4. contacts/prospects/customers  (if any yet)
          1. existing lists (if any yet)
          2. JVs (joint ventures – if you have industry contacts)
        5. Products
          1. Amazon Top Level category?
          2. no. products
          3. no units sold (inventory)
        6. skills areas to develop
          1. business building!
            1. mindset
            2. skills
            3. business structure (blueprint)
            4. planning
          2. product research
          3. sourcing
          4. marketing Channels
            1. Amazon PPC
            2. Email list building
              1. Lead Pages
              2. aWeber
              3. inserts
              4. FB marketing?
            3. Social media
              1. FB
              2. Youtube
              3. Twitter
          5. marketing calendar – depending on your market…
            1. Halloween
            2. Thanksgiving
            3. Christmas
            4. Mother’s day
            5. Father’s day
            6. Valentine’s day
            7.  4 July
          6. customer service
          7. financial planning
        1. professsionals/outsourcing
          1. photographer
          2. designer
          3. sourcing agent
          4. book-keeper/accountant
          5. Social media/blog VA
          6. customer service?
        2. mentors/peers

Your Free downloadable Excel spreadsheet for Quarterly planning! This is roughly the process I use but it is something of a first draft, so let me know how you would like this improved.

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.

8

#8 Amazon Sourcing From China 3/4

This is Episode #8. It is also  part 3/4 of the episodes focussing step by step on Amazon Sourcing From China.  AND It is also part 6 of the “Amazing FBA Startup System”!

QUALITY CONTROL

CORRECTIONS From Episodes #6 and #7

alibaba.com “assessed” not “verified” supplier (It’s correct in the show notes)

DDU  Delivered Duty Unpaid doesn’t really exist.But some suppliers use the term.  The correct term is  DAP – Delivered At Place. This means you are paying the supplier to freight products from Factory gates to your chosen place (in our case probably a warehouse in the USA). It just doesn’t include Duty or other customs costs.  

QUALITY CONTROL

Supplier themselves – IFE – Initial Factory Evaluation

Product Quality Control 

Pre-Production (processes, equipment, raw materials)

During Production Inspection (DPI) — Catch issues as early as possible and point them to the manufacturer. And take samples at random for laboratory tests, in case you need to comply with strict regulatory standards.

*Final Random Inspection (FRI)* — Confirm the average quality of a product batch, a few days before the goods are shipped out. The audit is based on a statistically valid sample. It is the most common type of inspection. 

Pre-Shipment Inspection (PSI) = pretty much the same thing, but should include notes on and photographs of outer cases, which is useful to monitor as they protect the inner cases ie products in their individual packaging. THIS IS THE ONE I HIGHLY RECOMMEND GETTING 

Packing & Loading Supervision (PLS) — Record the quantity and check the packing    method. And supervise the loading method.

AQL – Acceptable Quality Limit – Renaud does an excellent job of explaining this in detail here at QualityInspection.org. 

I strongly recommend you read that whole webpage and digest it. It’s very important to be clear in your own mind about this so you can be equally clear with your Chinese Supplier.

He also runs or is part of a business that does inspection and testing in China called Sofeast.com.  I have not yet used his business but I am in talks with him about a new shipment so I’ll let you know if I use it, how it is.

defect rates <1%=AQL I

Amazon defect limits are also set <1% and their definition of defects includes Customer returns as well as any defective units they find in their warehouse. So Amazon is (as usual) very stringent in their quality requirements. 

However,  usual consumer goods level = AQL II, ie <2.5% major defect rate. This is not good enough for Amazon- don’t accept it!

Chinese supplier mentality re QC –  higher level of quality =higher costs to them so higher to you.  

If they refuse inspection/testing, walk away!

Make payment of final balance dependent on passing QC. And make this clear in all final communications (Skype chat, email etc.) and put it in the Purchase Order!

PAYMENTS

Fraud prevention – escrow

Ease/Speed & some protection – Paypal

Most liked by suppliers – T/T Bank or Exchange experts

30/70 split


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.

7

#3 – Amazon Product Research

This episode is where the rubber really hits the road:

Part 1 of a 7 Part Series:

“The Amazing FBA Amazon Business Launch System “

This  System describes the step-by-step process of how I got from zero to $20,000 in sales within 6 months with Amazon FBA and private labelling – and how you can do the same, faster & more efficiently than I did, by learning from my mistakes and successes!

Part 1:  Basic Research Process:

1. MINDSET. Before you start research, bear in mind:

-You’re looking for a Market of Customers not one Product. So choose 2-3 categories first & browse within those.

-Although we avoid too much of it, expect some  competition. Absence of competition usually means there is no profit to be made.

-Have clear goals, including Sales (number of units sold and $sales)

-Plan for the long term. Delay making profit;  Focus on gaining market share from the competition, & building a customer base & a brand.

2. CRITERIA

a. DEMAND: sales of 10 units/day=300 per month.

Best Seller Rank (BSR) probably therefore 500-2000, depending on your chosen category.

b. COMPETITION: no more than 500 reviews (pref 300) for the no.1 product on page 1; and no more than 100 reviews for the “slot” you are targetting on page 1 (for example 6th position) for your main keyword

c. PRICE- between $15 & $40.

d. PROFITABILITY – 30-50% gross profit.

For 33% profit margin, source product (Total Landed Cost) at 1/3 of selling price. For 50%, source product at 1/4 of selling price.

e. WEIGHT & SIZE

Weight under 2 lbs, preferably 1 lb.

Size: longest size under 18 inches (ca. 45 cm)

3. RESOURCES MENTIONED

a. Jungle Scout (Chrome browser plugin). It exists in 2 versions now:  $87 basic version (what I bought originally) and for $147, a Pro level which includes extra features: (just click Jungle Scout see these). I suggest if budget permits, get the Pro level, otherwise stick to the basic level for now.

b. Google Trends (Silicone Spatula example) (for seeing seasonal variation in product demand)

c. Alibaba.com (for quick profitability check)

As ever, if you have any questions, Click here & ask the questions, & I promise I’ll try to answer them in the next podcast!

To catch the next Episodes in the 10 part “Amazing FBA Startup System”, subscribe to the podcast – here are the instructions on how to do that:

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.