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Scaling up – Private Label Strategy (Step 9 of 10)

How to use the Data & Skills You’ve Learned…

We learned a ton by selling an off-the-shelf, generic design in ready-made packaging. Now we the same skills and processes to have our own private label product created.

  1. Niche research
  • Refine Customer avatar
  • Redo market research
  • Use reviews etc. to customise
  1. Sourcing
  • Bigger orders/$
  • Define product features
  • Print Logo
  • Custom packaging
  • Rigorous QC
  1. Launch

Listing

  • Excellent Pro Photos
  • Infographics
  • Pro copywriting

Launch Traffic

  • High Amazon Ad spend
  • Aggressive (low!) pricing
  • Possible external traffic

#80 How to prep for Amazon UK with Greg Jones – Part 2

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?

Facebook Group
Email: g[email protected]
FBAPrepUK.com

#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: [email protected]

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! 

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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.

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#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: [email protected]
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

 

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#35 Amazon Sourcing – Big Picture Strategies with Peter Zapf of Global Sources (interview part 2 of 2)

 Peter Zapf of Global Sources has 15 years’ experience of sourcing from his hot seat in the action in Hong Kong.  He spoke with me at the end of March about all things China Sourcing related. In Episode 34, he discusses tactics. But in this half of the interview, he discusses some big picture strategies with huge implications. Required listening for the ambitious Amazon Entrepreneur!

SHOW NOTES FOR EPISODE #35

1)      Product strategies: 

a.       commoditized light vs. differentiated heavy 

Many people are using the same Criteria for product selection,  e.g., light, small, can be air freighted, etc.

The problem is that if everyone uses the same product criteria, you end up with huge competition.  Yes, they’re easy products to start with, but the space ends up crowded.

There is  nothing wrong with starting with RA (retail Arbitrage)  or commoditized products – it’s a great way to learn about importing, working with Chinese suppliers, creating a product listing, PPC (Pay Per Click) advertising etc.  It just doesn’t seem like a long term business to Peter.

If for example you choose large, heavy products, you have to use ocean shipping, which means there currently is a lot less competition.

You’ll order need to place a larger order to make the logistics make sense.  So there is more capital needed upfront and it is tied up for longer sitting on the ocean.

These are problems to solve but they are also barriers to entry.

  Your own design is the next step as an even bigger barrier to entry.

In retail Arbitrage, you’re competing for the buy box with the exact same product.

With private labelling, at least you are not competing for the buy box. But If the supplier designs the product, you are competing for ranking with essentially a commoditised product that others can sell.

Your design will protect you more from the competition if it is harder to copy. For example, a longer or thicker yoga mat is not a very hard difference to copy.  Often this depends on the amount of money you have or are prepared to invest.

If you need for example to use a designer, get regulatory compliance checks done, use lawyers and legal contracts with manufacturer, the supplier needs to make a new mould…this all adds to the cost and complexity and makes it harder to duplicate.

This then becomes more about how to minimize your upfront risk. Say if you create 8 new products, how can you set things up such that you only need 4 to succeed to break even, rather than say 5?

There was a famous example of a company called “Quirky” which went out of business recently.  They spent $400,000 ( http://www.theverge.com/2015/4/24/8488531/quirky-invention-powered-by-quirky) designing a blue tooth speaker – and then sold 30 units!!

Trademarking and Patent protection can be complex.

But Trademarking is much easier, faster and cheaper than patents. It might be that you can get a U.S. trademark something for a few hundred dollars. Worth checking with a company like Legal Zoom

How to minimize your risk/reduce costs

Think about reducing supply chain costs:

  Logistics:  use ocean shipping to improve your price competitiveness (or have more margin to put into advertising).

How can you fill a container to make the max use of the space?

Can you spend $200 to have the pallets of goods delivered from US port to an Amazon warehouse in California rather than $hundreds to go across the US?

Reducing supply chain costs by removing a step:

Flexport recently explained to Peter there are two options:

Option 1: Have freight forwarder take freight all the way to a specific Amazon warehouse (so set up on Seller Central BEFORE setting up freight from CHina) or

Option 2: Freight Forwarder will usually have own warehouse, so get it sent there rather than FBA Inspection etc. then on to the various Amazon Warehouses.

Ocean shipping: If Amazon asks you to send products to say 3 different USA warehouses, if you set that up before finalising your freight/shipping, you can get your supplier to break it into the right number of pre-packed pallets. This means your consignment won’t need reworking inthe USA.

This saves a step/time but also reduces costs: Your supplier is likely to do this at no/low cost.

Order quantity: Order large enough quantities to get a reduced price per unit and economies of scale in the supply chain.

Packaging – can you reduce the costs?

3)      China Suppliers competing with you on Amazon:

There are manufacturers already selling on Amazon. That’s the bad news. The good news is that most of them don’t always want to commit a lot of money and energy to it because they are used to getting paid upfront; on Amazon, they have to wait a longer time for their money! Also, they are not usually so good at listing copy and photos, custom service and the other marketing functions.

HOWEVER there are a lot of domestic China Private Label Sellers (not manufacturers) selling from China.

Peter has talked to them and they say their disadvantage is that they don’t understand consumer needs.

BUT they are very good at commoditized products e.g. Power Banks for mobile/cell phones. So be wary of commoditized products!

Some are creating their own brands and competing on price.

You advantage is understanding your local (national) consumers better, so you know what product changes are needed. To the extent you can take advantage of that, you have an advantage.

Knowing your own customers helps greatly with product selection.

Also you have native speaker language skills, knowledge of good product listings, photography etc.

4)     Differentiating your  products: 

Basically you may need to make some kind of upfront investment to really differentiate your product (time and/or money). Then the key becomes mitigating risk.

Here’s a possible strategy:

1. Crowdfunding- get a design then post it up in Kickstarter or Indiegogo. This validates the idea and you can get the money upfront for an initial production run.

2. Make sales on Amazon to prove product acceptance, margins, sales volume and customer response (reviews)

3. Sell to brick and mortar retailers, leveraging feedback from Amazon volume, revenues and reviews to convince the retailer it’s a great product.

Retailers will also need to know you can replenish inventory within say two weeks. So you would need local warehousing (as your supplier would probably need about 3 months to manufacture and deliver a new consignment of product if you are shipping by ocean).

Parting words:

Don’t let setbacks hold you back. Learn from them, then move on.

For example, an “incorrect” product selection can be frustrating.

But  you’ve still learnt so many skills: product research and selection, finding suppliers, communicating with suppliers, setting up supply chain, creating Amazon listings, PPC marketing, keywords etc., etc., etc. So you can take those skills and move on to the next product.

If looking for products, try Global Sources!

For more help with the sourcing process: go to www.smartchinasourcing.com, which is another website run by  Global Sources.

Global Sources is also running a Smart China Sourcing Summit co-located with their Hong Kong trade shows.  Danny McMillan will also be speaking there.  Information at http://www.globalsources.com/summit

There are many guest posts – look at the links to the authors and follow them, to get more info on particular topics.

For actionable tactics from this first half of this interview, go to Episode 34.

To ask Questions for Peter for his follow-up interview,  go to our Facebook Group.

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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.

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.