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.
Once again we have Antoni Watts on the show. Today he is going into detail about his Amazon seller software, Cashcow Pro.
We have a special guest today, Augustas Kilgys, to help up with seller optimization. Augustas is from Lithuania and Germany which gives him a unique insight into selling. He is also running the Seller Optimization Summit which is going to be going on very soon. If you are interest, please sign up to get more information.
It’s just a matter of contacting the brand when you find an ugly looking Amazon listing. It takes 60 seconds to do a Google search to find their contact information and send off an offer. It doesn’t make sense when people say that they’ve been eyeballing a company for two months and can’t decide whether or not to pull the trigger. Just contact them and move on. If there is something that you need to do that is causing you anxiety, just pull the trigger and do it.
Vendor Express is for everyone, anyone can sign up. Vendor Central is invite only. They are basically the same. Instead of sending inventory to Amazon and waiting for it to sell, Amazon will place purchase orders with you. As soon as they place the order and you ship it to them, it’s already sold. For some companies, especially bigger companies, it works better with their cash flow. This way their inventory only leaves their warehouse after they’ve been paid rather than sending off $40,000 worth of inventory and waiting three months to get the money.
Plus, once you’re in Vendor Central, it says your product is shipped and sold by Amazon. You get invited to Amazon marketing services that allows you to put videos in your listing. It allows you to make your listing an A+ listing where you get images in your description.
Some companies have negotiated it down to 30 days, but for the most part Amazon pays you every 60 days. Some of these old-school U.S. vendors still have 60 and 90 day payment terms. So if you can get one of these vendors, you can grow on vendor central forever. You can buy $100,000 worth of product from the distributor, sell it to Amazon for $130,000, then you don’t have to pay the vendor until you get paid from Amazon.
This works well for bigger, established companies that can have unpaid accounts. But if you’re small, not getting paid for 60 days can kill you.
Unlike Seller Central, you can’t edit your images and description whenever you want to. If it’s, something like 90 days old, you have to email them and ask them for permission to edit the listing. It’s annoying that you have to contact them to do stuff, but the plus side is that when you contact them, they are willing to do a lot more. If you’re on Vendor Central, then you’re seen as more of an established company rather than some random seller on Seller Central. They trust you more and that you’re trying to do what’s best for the company rather than trying to find loopholes.
They’ll combine duplicate listings, it’s easier to take down people that are selling bogus stuff. There was one company that had a cheap product for people to retail arbitrage. It had about 30 listings for the same product from all these different sellers. Will went to Amazon, had them combine all of them into one listing. It’s now the #1 listing in its category. It had 3,000+ reviews from all the different listings. Then they went and gated that listing, kicked off all the other sellers, and the company he’s working for is making a lot of money from this product, whereas before, they weren’t making anything.
You can make parent-child a lot easier on Vendor Central, if you have a high ranking product already. Or under one SKU, you can bundle together multiple ASINs. If you’re selling a fishing rod, and the parent-child, comes with different fishing lines. Those are two different ASINs, and they’ll actually combine those in Vendor Central. Whereas on Seller Central, you would be sitting there trying to do giveaways. Or I can take it seriously, wipe out the competition, add all the bestsellers to the number one listing, and really take this thing to the next level.
The one or two unit orders are just going to happen. Especially, if you have a small catalog with only one or two SKUs. If you have 1000 SKUs, then one or two units of each product isn’t that big of a deal. The main issue is price control because you don’t know what Amazon is going to sell at. With a lot of these brands, they want to know they their products are selling at the right price because they don’t want to screw over their brick-and-mortar stores. Whereas Amazon will sell it at whatever price they want, even below cost.
Another big issue Will had with a client, was that there was a hot seller in that category, and then they have Amazon basics, and they had the third best one, and Amazon quit placing purchase orders. They had someone in Vendor Central, and they had their AmazonBasics, they didn’t need another. Now that one listing, they also had on Seller Central. If Amazon doesn’t order it, then it’s not in stock. If it’s not in stock, then it can’t be prime. Then they can’t run PPC. Since it didn’t sell, Amazon wouldn’t order it. It was a vicious circle. To fix it, they had to kick-start it on Seller Central, generate some sales to remind Amazon that it actually does sell.
The best thing is to sign up immediately. Amazon wants a lot of SKUs, they don’t really care about the price. So if you have a catalog of SKUs, like 100, then Amazon will get a lot more excited than if you had just one.
Minimum number of suppliers. Good luck having 50 SKUs, from 50 different suppliers. However, if you have one supplier that has 50 SKUs, then they add 50 more. Will’s brother added a supplier with 10,000 SKUs. He put then on Vendor Central and Amazon order one of each. He sold 10,000 units that day.
Today, we have one of the giants in Amazon, Will Tjernlund. He’s a man that is always ahead of the curve and is always willing to help the rest of us catch up. This isn’t Will’s first time on the show, you can find his last interview in episode 45, and episode 46.
The big trend coming to 2017 will be selling to Amazon directly using Vendor Express, Vendor Seller, AMS, and all these other buzzwords we have to learn now.
Will says that it’s inevitable. Eventually, Amazon does want to source and sell themselves. If you can get ahead of the curve and get on their side early, it will only help you in the future. It’s one of those things that you know you’re going to do it three years from now, and you’re going to ramp up three years from now, why not go ahead and do it today. Will’s of the mindset that if you’re going to have to do it in three years, then do it now and be the expert in three years when everyone has to do it.
Because it’s their game plan. If you read The Everything Store, Jeff Bezos’ biography, he talks about it being the game plan to make it easier for third-party sellers to sell on their marketplace, take care of the annoying aspects like fulfillment, customer service, storage, and marketing.
Then, all they need is us third party sellers, essentially, glorified sourcing agents, to find the best SKUs and see what sells the best. Then they start from the top and decide if this product is easy enough to manufacture that they just want to come out with their own Amazon Basics version of it, or if they want to work with the biggest brands in that category and source their products directly.
So, if you’re not selling directly to Amazon, eventually they are just going to try to squeeze you out.
Third-party sales are becoming a bigger part of Amazon, something like 50% of sales were from third-party sellers this past Christmas season, but from the different advantages Vendor Seller gives you and the heads up if gives you, and also that it works better with Amazon’s business model, it’s for sure, the way of the future.
Right. Just think of a general catalogue, think of kitchen knives. Like a block with 10 knives in it for $29.99. Amazon can come out with that knife block for $29.99 and then there will be, like German manufacturers with brand names.
The customer has to decide if they want to get those cheap Amazon knives, do they want to get the expensive German knives, or something in between. That’s were you, as a third-party seller, has the advantage. You can offer that middle product that better than Amazon’s version, but not as expensive as the German brand. You make sure it’s good quality and all your packaging looks good, and Amazon buys directly from you because you’re filling a gap in the market.
It’s different for every category. For that category, that may be the best route taken. Also, think of it this way, when you jump on Vendor Express and get upgraded to Vendor Central in six months and you’re selling directly to Amazon, then everyone else who is selling those mid-level knives will get blown out of the water because yours are going to be shipped and sold by Amazon.
Two or three years down the line you’re going to have a lot more reviews than everyone because you’re shipped and sold by Amazon. They do different sales and they do different marketing things to push your products. Then, when these other mid-level sellers try to jump on Vendor Central, Amazon doesn’t want to work with them because you’ve got them covered.
Will’s been taking a roundabout way by looking for big brand names that have terrible accounts and I go and consult with those companies. He will offer to run their Amazon accounts. He will then optimize their listings, fix violations, and get everything back in stock. From their, he’s been using these big brand companies as his private label arm. He will suggest new products. If they’re selling a bunch of kitchen accessories, he will suggest another one, which is smart for them since they own their own factories. They then will fly to China to get samples, and then buy every product on the first page of Amazon as comparison.
Right now, Will is looking for niches of these companies that he is already consulting for, let them handle the research and development, and he looks for products that are within their wheelhouse, but not being manufactured yet.
Let’s say they sell 40 different types of ladles, he will suggest a slotted spoon. He’ll look up that product on Jungle Scout, and find their review-to-revenue ratio. Check the revenue to review ratio: Let’s say slotted spoons have 10,000 reviews and $100,000 revenue a month, so $100 revenue to review ratio is good. He takes that information to the company and shows them that there isn’t much competition, it has proven sales, and it’s in the category they are already selling in.
Will uses the review-to-revenue ratio as a way to quickly gauge the lifecycle of a product and it’s maturity. Determine if it’s easy to ship. If every listing on the first page is being sold by Amazon, then you’re probably too late. From there you look at every facet and see if will work, and if you can’t find anything wrong with it, it’s worth a shot.
Will likes to find products that you have to explain what it is. It’s that niched down.
It wouldn’t be unusual within the niche. For example, a little tool that is only used for cutting fly fishing rod lines. Yeah, it’s a weird product. It’s a small piece of metal with a blade. It’s costs $.50 to make and the guy is buying it for $10. Not much by the way of sales, but there’s no competition and it’s $8 profit.
It also has to have a very specific keyword that the customer searches for. A woman recently came up to Will talking about her product that was a wireless bluetooth headset that you can sleep in. When asked how a customer would search for that, she replied with “bluetooth sleeping headphones that are wireless.” The problem with that is it’s too specific, no one will search for that, and you can’t rank with “bluetooth headphones” or with “wireless headphones” as as that’s too general/generic. Since she didn’t have a keyword in mind, she could even do a revenue-to-review ratio because she did know where to start.
Exactly. Will recently started climbing and there is a tool called a grigri. Now, no ones knows what a grigri is, but if you’re in mountain climbing, everyone know what it is. Plus, how easy is it to rank for this very specific word, grigri? No one else is going for it. Anyone who searches for it, knows what it is and wants to buy, and if someone doesn’t know what it is, they wouldn’t need it anyway. Also, if no one know to search for it, then there isn’t any private labelers nipping at my ankles, looking it up on Jungle Scout.
Yep, and it works really well with US brands. Will contacts these climbing brands that have been in the niche for years, and they’re selling these harnesses for $140 when they sell them wholesale for $40 because they have this established brand. So, no one knows who Black Diamond Climbing is, but every mountain climber knows who they are. So when someone searches for them on Amazon, they are astounded that they can get the entire cataloge because no one else carries as much. From Will’s perspective, it’s amazing. There is high demand, he doesn’t have to do any research and development, and he can still make huge margins, and he only has to place an order once a month with a U.S. based distributor.
Many of these distributors have very small minimum-order quantities. One particular company said their average yearly order volume from one of their distributors is $2500.
Will finds them by searching through Amazon. As he’s looking for climbing stuff, he notices that these major brands have three of the five bullet points filled out, their out of stock, or they have one of the five images. All sorts of these red flags exist and they tell you that these Amazon accounts are being managed poorly and they don’t understand the Amazon ecosystem.
It’s easy enough to contact these companies, become a distributor, and send them a message. Tell them who you are and that you were looking to buy one of their products on Amazon and saw that it was a mess. Let them know about the issues you found and that you can help them get their account in order. Ask them to make you the only distributor on Amazon, you won’t screw over the brick-and-mortar store by selling their product too low, you’ll pay up front, and keep their product in stock. All the things you can promise them that their distributors can’t promise them. These other sellers are only using them and not adding any value whereas you can actually add value to their company. You can be this A+ consultant, but you’re paying them instead of them paying you.
Another selling point is that it’s in their best interest to work exclusively with you. You can make sure to keep their listing looking good and their prices at the right level. They wouldn’t let big-box stores carry their products if they didn’t know who was selling it, at what price, or what the packaging looked like.
Imagine you’re a big mountain climbing company that specializes in making the best carabiner. You have been in business since 1975, you have 10 people working in manufacturing, 1 person in accounting, 1 person in HR, and 5 people in sales. Each salesperson has their region in the U.S. and they call up local shops asking if they want to place an order. Their whole job is to get as many accounts under their belt as possible. Then, all of these distributors start selling out the backdoor, and now they have 40 people selling on Amazon. This puts the company in a tough situation. They told these stores that they can only sell in the store. They can’t cut them off because they have been doing business for 40 years and they want as many accounts as possible. However, the Amazon market is hurting their brand.
These old-school companies will gladly sell to you because they still have the mentality of “sell to everyone,” but some will question the sale if you are selling it on Amazon because of this issue.
A lot of these companies don’t know the first thing about Amazon. They will contact seller support and demand they stop sellers from selling their products.
There are some gated brands like Nike or Louis Vuitton, and there is no way you can sell their stuff on Amazon. You can go onto Amazon and gate your brand. If you explain that customers are getting hurt by counterfeits, then they will likely approve it. Make sure to put in the customer first mentality and use the word counterfeit and you’ll have a better chance.
It depends on the company. When Will calls up these companies, he just feels them out on how they want to go about it. They might just want him to be a distributor, that’s fine. Or they might want him to be a distributor only if he can keep the price high, that’s a different conversation. Or they might want him to run their Amazon account, but it’s all going to be under their brand. Each time a company will ask for something different, and usually he will say yes because they are simple things. You just have to feel the company out.
If they’re making $20 million in sales on Amazon, then they’re making enough money to go and hire a whole team. Until they get to that point, it’s better to hire a someone like Will to handle it. It’s not worth it to take six months to hire and train a team when they don’t even know what to train them on.
Exactly. Amazon is like this big scary monster in retail. Instead of them trying to deal with it, Will is like the band-aid on the wound. They are sick of dealing with it, it’s not working with their business model. Just hand over that part of the business to an expert that will take care of everything. All they have to do is deposit a check.
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.
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
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.
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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Q. 1 Mounir
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!
Quality control revolves around the concept of 3 levels of defects:
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.
I would use in order of importance
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.
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!