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What is the need of pre shipment inspection? (Q & A Tuesday)

What is the need of pre shipment inspection?

Question from a Facebook Group member:

Hello! I would really appreciate some advice on Final Random Inspections [aka pre shipment inspection]

I’ve been quoted 299 USD for a one man-day inspection in China for 200 units of my product which cost around 6USD per unit. So this would add a significant cost per unit.

– What are the usual/acceptable costs for this service?
– Do you think it’s worth it? This is my first order of this product. [ie what is the need of pre shipment inspection?]
– Does anyone have any recommendations for good companies to use for product inspection?

Thank you!

Good questions. : 

“What are the usual/acceptable costs for this service?”

1. what exact kind of product is it? Obviously, you don’t have to reveal exact keywords but the more info, the better we can help you. 

2. The level of inspection expertise needs to be relative to the value and complexity of the product. If it’s pretty simple inspection, I’d expect to pay around $80-100 USD for a man day which should cover up to 500 units at AQL III (Highest quality level). 

I would only pay 299 USD for a very technical product. I generally avoid those personally, so I’ve only ever paid about $80-100 USD per man(person)-day. For a 6 USD product, I would *hope* that it’s not technically complex!

“Do you think it’s worth it? This is my first order of this product”

In other words “What is the need of pre shipment inspection?”

Let me say loud and clear:  a pre-shipment inspection  IS CRITICAL!!

NEVER send a product out of China without pre-shipment inspection. That goes double if it’s a new product line, and triple if it’s a new supplier. 

It’s 100% worth it. 

You are dealing with some of the world’s fussiest consumers at Amazon. Amazon themselves demand a sub 1% “defect” rate. The “defect rate” is an ORDER defect rate, not just about products, which can include negative feedback about the seller’s service even if the product itself is (and is seen to be) perfect. 

In this environment, you must not compromise on quality below a certain level. 

Your business model and unit economics (gross profit) must work with pre-shipment inspection included – otherwise, IMHO you shouldn’t be attempting to sell that product line on Amazon.


“Does anyone have any recommendations for good companies to use for product inspection?”

There are loads. I’ve personally used a couple of good companies and people. Happy to recommend one I’ve used if you can tell me what city and Province you’re talking about!

For lots more (free) info on sourcing, check out the sourcing category of the podcast. 

Too simple for you? For more interviews with Amazon experts for advanced sellers, go to 10kcollective.com and listen to our new 10K Collective Podcast.

326 Habit 3: First Things First – time management for ecommerce entrepreneurs (part 2)

Time Management for e-commerce is an absolutely critical skill area. Time management can be the single biggest block to even starting an e-commerce business. And for an established, busy e-commerce business owner,  managing time is just as critical.

In this episode, we focus on the learnings from the wonderful book (and also audiobook) –

“7 Habits of Highly Effective People” by Steven Covey

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325 New Trade Tariffs imposed by USA on Chinese Imports

New Trade Tariffs from USA imposed on China [Trade War News]

US Tariffs of 25% imposed on $234B worth of Chinese Imports

New Trade Tariffs have been imposed by the US government on imports from China.

President Donald Trump escalated the trade war with China on Friday, imposing new trade tariffs on $200 billion worth of Chinese goods, now at 25%, up from the previous 10% rate.

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187 Finding Chinese Manufacturers with Antoni Watts of Cashcow Pro Part 3 of 4

Antoni Watts got into the Amazon business after running his own sourcing company in China. He’s here to teach us how to find Chinese manufacturers for our Amazon products.

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#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

#68 Post Brexit thoughts for Amazon Sellers

Brexit has hit UK based entrepreneurs, like everyone else in the UK.

But I think it’s time to start reflecting quietly on what this means for your Amazon business. There will be threats and issues – but also opportunities.

First and foremost: Don’t panic. Don’t despair. Respond but don’t react! Assess everything with a cool business brain. Don’t be a Polyanna; don’t be pessimistic, either. Just be aware of events and stay aware of threats and opportunities. When you spot the latter, act decisively!

Threats & Solutions

The USD/Pound rate

  1. The pound now buys you about 15% less in USD (at time of writing) than before Brexit (about 1.30 USD).
    1. So now is not the time to start selling in pounds (UK) and buying in dollars from China (nor in fact in RMB, the Chinese currency, which has more or less tracked the dollar).
    2. If you are already selling in the USA, and are having funds paid into your UK account in pounds, set up a USD account in the UK Fast (I use Metrobank simply because it was so quick and easy to set up an account; others use HSBC with success) and set up a receiving account with a decent currency exchange (I use Currencies Direct, who are the most cost effective and quickest out of all solutions I’ve tried).
    3. If you already have dollars in reserve, I would be inclined to use them to get more dollars, ie sell in the USA.
    4. Having said all of which, always analyse each individual opportunity (market research) for profitability/cash needed. There will almost certainly be some amazing opportunities in the UK, just be very careful to analyse  the unit costs from China.

The USD/Euro exchange rate

1. For now, if you’re selling in Euros (if you have inventory in the UK or other European marketplaces) and are selling into  Germany, France, Spain, or Italy, again, get yourself a Euro account in the UK and set up Currencies Direct or similar to receive your payouts from Amazon. Euros are for now worth more than before Brexit.

2. However, I would say that medium term (who knows exactly but I guesstimate within 6-18 months or so), the Euro itself will be hit by crises and thus lose against the pound (worth less to you  if reconverted) and against the Dollar, which you need to pay Chinese suppliers (to an extent it has itself been hit by Brexit).

I almost guarantee a crisis, if nothing else, because of the Greek debt situation. I’m no expert but it’s pretty obvious that if they couldn’t pay their debts last two crises,   next time (when they will have expanded), they will simply have to be written off to a degree (in a “haircut”). The markets are going to hate this and they will punish the Euro.  It will probably bounce back, I suspect, but that is way harder to predict.

3. Of course, one way to mitigate Euro currency risk is to sell in wealthy Euro countries on Amazon (eg in Germany) AND buy in Euros from lower-cost countries (eg Estonia). This is something I’ve been exploring in depth but I’ve no practical experience yet.

Opportunities:

Simply put, tough times thin out the herd. We aren’t in a recession yet, but for people converting pounds to USD, their dollar costs just rose 15%. That may drive some people out of the whole business model.

If there is too much competition for your liking on Amazon UK, or from UK sellers on Amazon, this is one way that it will get reduced. It may indeed be the right decision for you and your business to shut up shop. Assess objectively if you can. But equally, if you can ride it out, you will have less competition at the end of the process.

If you sell and buy in dollars, you are effectively outside the UK economy and outside the pound’s relationship to other currencies. Congratulations! You still have to deal with the intense competition on Amazon.com but if you can handle that, there is money to be made.

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#63 Q & A Tuesday No. 9 – Amazon Inspection & Amazon Price Testing

Q. 1 Mounir

Hey guys,

I had a great news today: Top seller on my sub category after less than a month 🙂

In order to keep delivering good product, I now need to do inspection before products leave China. I already paid 30% of my new order which will be ready next week and I’m looking for inspection companies to insure the quality.

– What is the best practice: Should I pay for the 70% left before sending the product to inspection or after ?

– Are inspection companies fast enough to process the order or it will take them sometime ? days, weeks ..?

– According to your experience: Could a 250 items – 80g each take more than an inspection workday ? the product is very simple and has very few moving parts.

– Any experience with asiainspection, fbasourcingchina, topwininspection.. ?

Thanks in advance !

Normally an inspection company would visit your factory so you wouldn’t normally “send” your  z  products anywhere.

So normal process

1. Products inspected after completion and before packing for shipping (Pre shipment inspection) according to your inspection and or testing criteria.

2. Report sent to you by inspection company.

3. You either accept or reject the batch.

4. Then if you accept at that point you transfer the remaining 70% to supplier.

If you are struggling with details like this, chances are you need more than just a Facebook Group – you need a peer group and some input from others who have hit your problem and solved it. 

Best thing is a mastermind – there are many options, including the one I run ( more details here) – pick one and go for it, just be sure that you will get real input into your business though.

If mine is full (we have two places left at time of writing), find one to support you, but don’t suffer in isolation!

DEFECTS

Quality control revolves around the concept of 3 levels of defects:

  1. Critical defect – this would be something that endangers the user or others,e.g., product could cut someone or cause a fire.
  2. Major defect – this stops the product performing its main function, e.g., silicon spatula that does
  3. Minor defect – this includes all other defects, e.g., bumps on the surface that should be smooth; discolouration;

When you define tests or inspection points, you need to define whether any defects related are critical, major or minor.

Inspection Level – AQL  – Acceptable Quality Limit – see here for explanation

AQL basically defines the overall quality level of a batch of a product.i.e. the %age of critical, major and minor. There are 3 levels, AQL I (low severity) AQL II (normal severity), AQL III (high severity i.e. highest quality threshold).

AQL II is considered standard for most consumer products. However, I would consider AQL III, since Amazon customers are very fussy buyers and have a weapon in product reviews to instantly damage your reputation.

Inspection Criteria

I would use in order of importance

  1. Feedback from your actual consumers. Feedback in the sense of all info e.g. negative reviews, email or phone complaints etc.
  2. Negative reviews from related products on Amazon (or even eBay etc if needed)
  3. Your own use of your product sample(s) and/or your own experience using similar products.

You probably will have between about 10-20 points for a straightforward product.

I think 250 items if inspected at highest level would be less than one man day

If it is a simple product, I would use someone like www.trigo.com, which I haven’t used personally but some of our guests on the podcast have.

Q. 2

David

EBAY: Anybody use Ebay as a pricing model? For example, take the average selling prices people are using to re-sell your product on Ebay and test this as your selling price on Amazon. If I do this, I could likely dramatically increase my net profit. Just having re-sellers on Ebay tells me my price may be too low. Any thoughts?

My immediate thoughts: Just because someone has listed your product on eBay, doesn’t mean they have made any sales. And if they make sales, we don’t know if the sales volume is significant (and therefore overall profit per week/month etc.)

HOWEVER…the only way to really know is to TEST!

Use splitly.com (which I’ve used) or cashcowpro.com (which I intend to check out) or similar split testing software for Amazon (these are both only valid in the USA at the time of writing)  – you can probably test the price specifically with the criterion of which maximises your profit. Certain splitly can do this. Then you will have some objective data to give you a much more reliable answer.

If you do this, please let us all know, I’d be fascinated by the result!

#62 How to do The Canton Fair with Danny McMillan – Part 2 of 2

Danny’s recent article on the Canton Fair for www.webretailer is here

What are the 5 biggest mistakes people make attending the fair for the first time?

When people don’t plan at all and they get lost and lose their time. Once a phase is over, it’s over. So if you don’t plan out where you need to be you very well may end up missing out on what you went there for. By taking 10 minutes to plan out where you need to be at what time, you can save yourself hours.

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#61 The Canton Fair – Lessons Learned – with Danny McMillan – Part 1 of 2

Danny – remind us of your background in 2 minutes or fewer!

Danny first got his start in the music industry selling vinyls years ago. That where he first got to work with products and marketing and all that. In 2008 he began working online with different startups which led him to Amazon last year. He was able to consolidate the knowledge he gained from those two industries and put them to use with FBA.

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