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#53 China Sourcing for Amazon: Keep money safe, Quality Control and Freight – with Manuel Becvar of Import Dojo – Part 2 of 2

(Part 1 of this interview for more from Manuel)

#53 Manuel Becvar interview – part 2 of 2:

How do you keep your money safe?

When you place order, tell them you’ll send an inspection team when 80% of production is finished, you’ll have to redo the goods and pay for the reinspection, and you’re not getting the rest of the money until the inspection is passed.

So never do 100% upfront payments; always pay 30% upfront, 70% when the goods are passed. 

Even if you just order $1000, please get an inspection; there are companies that will do an inspection with a 20 page report for $100 for one man-day, eg Trigo  if it’s simple. They send someone to factory and send report. 

Others are more like $300 for one man day eg Asian inspection for difficult products like electronics. But no use for say a comb or a brush.

How do you approach Quality Control for electronics particularly? The advice famously is to avoid electronics from China. [I had about 10% defect rate]

Manuel has 17 years’ experience in electronics, knows what certificates are needed and which components to inspect. He doesn’t recommend it as 1st or 2nd product.
But just get certificates, experts in electronics inspection. There is a higher defect rate – Manuel’s is about 4%. Lots of customers just don’t know how to deal with electronics, so they often send it back even though it’s working perfectly.

Is there a way to reduce defect rates?
Take reviews and customer complaints – Speak to supplier – 5/10 of reviews have this issue, can you improve on this? Also speak to inspection company and have them focus on those issues in future inspections.  

But Manuel does all this and still has 4% defect rate. Anything below 5% is okay  in electronics. Above that, consider abandoning the product.

FREIGHT

Air freight vs air courier -what’s the difference?

Air courier means someone like DHL, UPS, Fedex etc. They have special customs clearance channel and they handle the whole process for you. So it’s more expensive. An “All in” solution – where to pick up, where to deliver.

Air freight is same process but it’s usually a logistics company that works with big airlines e.g. China Airlines. There is more paperwork involved and you need to be involved. You need a customs bond, you are the ultimate consignee. You need to know the process.

Manuel has had rates for air courier of $4 /kg and for air freight of $2.30/kg so it can be a $2 difference.

Simplest solution is to ask the supplier about air courier or freight. Or ask their freight forwarder. Give them USA/UK address, tell them you need duties/import taxes upfront.
If supplier has no Freight Forwarder, just look on Alibaba or Google.

If you have to do DDU [Delivered Duty Unpaid], how do you avoid problems?

Suppliers usually have no idea how to deal with freight etc. – they are experts at manufacturing. Manuel works with a Freight Forwarding company DDP [Delivered Duty Paid]-it’s all in. They pick up at factory, they ship it direct to Amazon. He doesn’t get involved in customers clearance or amazon pickup appointments.

In the beginning he had to explain how to book appointments with Amazon.

So you ship direct to Amazon?

Yes. Always directly from China to Amazon warehouse.

What do you do about damage to packaging from Air Freight?

It’s a small %age. Always put a label saying “Fragile, handle with care” – this helps.

How did you train your Freight Forwarder?
They are based in Shenzhen head office. They knew how to deliver to USA -but they had never delivered to Amazon. Manuel chose based on price and helpfulness but had to train them in delivering to Amazon.  He gave them a clear workflow. After 2nd order, no more hiccups. 

So you don’t want someone who doesn’t know about exporting to USA?

True. If you can find someone with great price and knows about delivery to Amazon, even better.  Manuel recommends Dolphin Logistics, based in Shenzhen. Reach out to Manuel if you want more info.

How did you get $2.30/kg air freight price?

$6 for air courier is average. Manuel gets good prices because he ships 28 m3 a month!

To make it simple, give your air freight forwarders a clear business process. Tell them they need to deal with Customs brokers and make appointments with Amazon.

They can set up a Vendor Express account with Amazon to set up appointments (they can’t just turn up at an Amazon warehouse!)

How do you send inventory direct to Amazon from China? I guess you save money with intermediate steps but what are the risks and how to you mitigate them?
Manuel thinks  it can all be done cheaper in China. Get them to put FNSKU barcode on inner packaging, prepare cartons according Amazon requirements e.g. size, send them the shipping labels from Amazon seller central and you’re good to go.

If you have more than 20 cartons, the supplier needs to palletise the boxes in China, otherwise Amazon will give you a hard time!  If you have fewer, it’s okay for Floor Loading.

How else can you speed up your supply chain?

Don’t take care of the details yourself. If you have 10-15 products and have customer service, taking photos, etc etc – outsource everything you can to inexpensive VAs.

Focus on growing your business:  

  • New products
  • Optimising listings. 
  • New eCommerce Channels
  • Retail! Go to local store and ask if they want say 50 units.

Tell us more about expanding business – selling to retailers

Manuel actually started own business selling to retailers (through his time in HK) because he just thought Amazon was another eBay. It’s easier to start on Amazon, built a brand, built a reputation for products then reach out to retailers, DIY stores etc etc to sell wholesale.

Any other tips on the best way to approach retailers?

Start locally. Look into smaller importers that set to big brands at an exhibition & approach local distributors. If you can’t go physically go to exhibitions, go to exhibition websites and check then names of companies that exhibit, check them out and email them!

“My name is X, this is my brand, I’m importing direct from China, are you interested in buying?”
  

Are there other ways other than unique products and high quality to protect your brand against competition?

One thing is to have Amazon brand registry. Other than that, be better in terms of quality. Don’t give the competition grounds to attack you – quality, customer service – try to be an awesome company. Even if first few months not highly profitable, eventually it will pay off.

What is your prediction for competition in the next year or two? How do we protect ourselves?
Manuel had 6 enquiries last month in his sourcing company for a product that everyone is selling! Nobody has any imagination, it seems!

Be unique, have expertise in your product and be creative. Yes, competition is increasing but so is the market – Amazon has 51% of the (USA) online sales. There will always be a customer for [good] products. The USA population is about 300 million people!

CONTACT

How can listeners find out more about you or learn more from you?

Go to importdojo.com – there is a contact us page – or email [email protected].

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3

#51 Using Amazon Suppliers & Building Quality products with Manuel Becvar of Import Dojo – Part 1 of 2

   This episode, #51, is the first of two parts of the interview with Manuel Becvar of Import Dojo. Manuel has 11 years’ experience of sourcing in Hong Kong and China and also is an Amazon seller with several product lines live and selling well. 

EPISODE 51 SHOW NOTES

What took you to Hong Kong?

Went there for a 6 month internship  for an Austrian electronics firm in 2005. He was handling sourcing from suppliers. He fell in love with the city and a woman and never left!

He loved the drive and opportunities of Hong Kong. Very expensive but great place to live.

Do you also sell on Amazon?

Yes since August 2014. Also documented launching a whole brand. He currently has 7 products and 10 more coming in the next few months.

He’s focussed on getting after 3-5 categories in different categories. He launched then stopped a few more.  He has several businesses which were more of a priority till now.

What are they?

  1. Selling on amazon
  2. Sourcing company in hong kong for amazon sellers.
  3. A consulting and import course, step by step guide to import from china and sell on amazon but also sell to retail.

He started out with a consumer electronics brand, selling to retailers in Europe under own brand and their own brand, but also now on Amazon. Now Manuel is focussing on his own Amazon business as it is really picking up.

Tell me about stopping a product?

He used to sell smart phone accessories but then the prices got so low there was not much profit. Electronics can be very competitive.

What’s your process for selecting products? What are your selection criteria? Do you go by the numbers of individual products? Or build a brand in a niche?

Manuel is more old fashioned, doesn’t use Jungle Scout or ASIN inspection so much. He subscribes to relevant product websites. newsletters, goes to trade shows. Also looks at Kickstarter and Indigogo for product concepts.

Manuel doesn’t look into creating a huge brand in one category. Tries out one product in a niche e.g. coffee press. If that takes off, build into that niche. If not, don’t go into say grinders, filters etc. 

Coffee press now selling about 20 a day.

How do you  beat the competition?

you need to stand out to beat the competition.  Tries not to copy the competition. This is his approach. Will Tjernlund does copy the competition, but Manuel is more interested in creating unique products and building a brand.

How can we make a product unique in a simple way?

Example 1: Blue tooth speaker-

The sample looked bad, plastic finish, bad sound, packaging horrible. 

The finish rubber instead of plastic was 20 cents more but immediately looked better.  Then looked at components, sound was bad, different driver sounded much better and cost just 50 cents more.  Used photographer to get better photos. 

He turned a $10  product into a $30 product but only cost him $2 more.

Focus on finish, minor improvements etc.

Example 2 – Coffee Press

There are  lots of stainless steel finishes, but no copper finish.  So Manuel had that done and added in extra filters etc.

Look at the little things you can change.

Tell us about working with suppliers. What’s the best way to approach your supplier about this?

Introduce yourself including company presentation –

Create an excel file or word doc about the product- include bullet points, this is where it’s at, this is what i want instead. 

Also point out that if you improve the product, they will make more sales with other customers as well. so they are more willing to make changes with costs.

So you’re not trying to get an exclusive deal with them?

Amazon sellers are mostly a small part of a suppliers’ business. if Manuel does say $10,000 a year he’s a very small fish. that may be 0.5% of their turnover if you work with a big factory (this is true for his own coffee press. They also work with Tesco’s who order $1m a year)

How do you get an exclusive deal for amazon rights?

He has set up an agreement with the Purchase Order which says – “My plan is to order 10,000 units. Are you willing to give me exclusivity for a year. If I don’t reach 5000 units within 6 months, we can cancel this agreement. “

This give Manuel 6 months to figure out if he wants to place more orders and it means the supplier can make more profit too after 6 months. 

Manuel is okay with that because he would have a head start, maybe 100-200 reviews already. It’s okay to have competition. It’s not all about one item only.

Manuel is happy if he can do 6 months of excellent sales on one product. That repays the time and money invested already. 

Greg Mercer was saying if you get 6 months’ head start, you can defend your product against competition. So you agree with that?

Yes, that does work.

Where do you go to look for suppliers?

Manuel has collected over 1000 business cards for suppliers from previous job being a product manager, when he went to China every 2 weeks.

Manuel also works with a lot of trading companies. He will sometimes be willing to pay say 50 cents more and use a trading company, similar to agent. Some of them work as if you are working with factory, for example if factory doesn’t speak English, don’t know about country requirements eg CE (European Union), FCC (USA), FDA (Food & Drug Administration, USA) approval, doesn’t have experience exporting to a country, etc., etc.

So working with a trading company can make a lot of sense.

Alibaba and Global Sources Manuel does use if he can’t find anyone through his network – you can verify and vet the suppliers. You can still vet them by checking their certificates, asking who they work with,  Which markets they export to etc.

For example, If Manuel asks “where do you export to?” and they say, “Middle East” and you want to export to USA, don’t bother. He wants a supplier

It’s also good to know a few names in the industry eg small supermarket or worked with an Amazon seller before. Check business certificate.

What are the big does and don’ts for selecting a supplier? Assuming Alibaba, Global Sources or HKTDC and someone who is new to the process.

There is a lot of filtering you can do. e.g. a microwave on Alibaba, filter by Gold Supplier, trade assurance, 3rd party verification.

You can also filter by region – say 10 different provinces of China.

Let’s say Guangdong have 5000 suppliers and another has just 10. That shows you where the main factories are for this kind of product.

If a region specialises in making those products, they have the resources and the infrastructure.

Say in Jeijung province, with 10 supplier results, they probably don’t specialise in that.

There are many other filters you can use.

Send out enquiries to 10 suppliers. 3 or 4 get back to Manuel with and answer all his to Qs

Email out “vendor profile”,  asking for:

  • 2 customer references for customers
  • markets. Has he exported to this country before?
  • business certificates, and certificates for prods
  • no workers; when company established; annual turnover.
  • do they do R & D? Have their own engineers? how many product lines?

You get a gut feeling after a while.

This is included in import dojo ebook as a downloadable document.

Import Dojo is actually a 60-page book which is a bestseller on Amazon! It is free at the company’s site. 

 What’s next in your process?

Get a soft copy of any certificates needed – prove he has it!

IF that’s okay, then ask for a sample from at least 2-3 suppliers. Same process with all suppliers.  If all samples are equal, go with most responsive/proactive and helpful supplier, even if price is a little higher. Then place an order. 

So you’re okay with higher prices?

They need to make profit too, they work hard. The factory will be business partner, it should be a fair biz relationship. As long as profit is built into your price, it’s fine to pay a little bit more.

If you have individualised products and with good product price, you can afford
If you’re building a brand, if you squeeze in cheap products, it won’t help. 

I guess it depends on whether you have customised products vs. commoditised products sold en masse?

Yes, I’m building a brand, so selling cheap products to make a quick buck is not part of my strategy.

What is the best tip for negotiating on product price once you have verified that the quoted price is in the fair region? Should simple customisations really cost that much more?

There shouldn’t really be a big difference. Unless the supplier has to invest money into a new tool or a new mould. If it’s just a colour difference, it shouldn’t be much.

To find if it’s reasonable, ask at least 3 suppliers for a quote. IF one is way off on price, he’s either incompetent or trying to rip you off!

To contact Manuel, click here for the Import Dojo contact page.

NEXT EPISODE

In Episode #52, Manuel gives details on keeping your money safe, getting quality control for Electronic Products, simple ways to start with Freight, overall process and predictions for the future of Amazon. Stay tuned!

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#50 Product Process, Suppliers, Freight and Amazon Future with Anthony Lee Part 2

NEW PRODUCT PROCESS

So a product jumps out at you from the universe.

Can you talk us through your process with a new product (from selection to re-ordering)?
(from product selection, via supplier selection, freight/supply chain, getting products to Amazon, product launch)

What are your criteria/ numbers?

Look for main KW “The thing that it is” on page 1 – using Jungle Scout, Anthony wants to see at least 60% of sellers doing $15,000 sales each. He wants a handful under 250 reviews. They’ve probably been there under a year, so there’s room for AL to take some market share.

He’ll glance at BSR – a number between 2000-4000 =mid competition. Anthony is confident he can easily get on page 1.

80% of all factories in the world are in China – it has lots of real estate, dedicated to factories. Everything AL sources is located in China.

Next step is to find a supplier using Alibaba, Global Sources,. Global sources is his go to place. HK is an easy place to reach and many of their suppliers go to their trade show. HKDTC (never had much success so far) and Made in China as backups.

Criteria: Gold Supplier for 3 years – they have to pay for that. Make sure they take some kind of secure payment -they’re probably not trying to rip people off.

Send out your enquiry. Ask for samples first – if it’s crap, cost doesn’t matter! 3-4 samples generally.

You pare down – send emails. certain %age come back; ask for samples; certain %age respond.

Whittle down to highest quality then  pit them against each other for quotes.

“I really like your quality and I personally would like to work with you. But my partners would like to work with your rivals because of price.”

ALWAYS make custom modifications. Put logo on product not just package, have the product itself your brand colours. Better for brand and for hijackers etc.

Give them design specs, place a 30% deposit but have them send you a sample of your design.

Use that to check quality and for photos.

How do you deal with Quality control?

Have an inspection co. like Asianinspection or Richforth. Contract them for a man day (unless it’s electronic in which case you might need a week) 300 USD for one man day.

Have it set against a margin of error. So you know it’s good to go before you leave the factory.

You tell the factory they won’t get 70%

You can work with a sourcing agent. It’s just hard to find someone you can trust. Most of them are very much making a deal with the factory and you. Get paid on the front end and the back end. It turns out AL has 15 years’ experience as an importer and AL is now communicating with him. That will help with QC – they can check factory, batch inspection.

The real low tech way/cheap way to do it – find someone on Upwork to go to the factory and send a Skype video or pictures of the production line or products. Have them toggle switches etc.

What are the biggest issues you’ve met with suppliers? What are your best solutions?

AL has been “lucky” but that’s because he has a lot of hoops to jump through before he’l work with them. He’s heard the horror story e.g. sample quality not real quality or jack up prices last minute etc. Not experienced yet.

The best way is to very very thorough about selection process.

What other hoops do you make them jump through?

Communication. How responsive are they? If it takes 2 days to get an email back, am I a priority?

When we get to a certain point, what’s your Skype? how about your mobile/cell phone?

I have them send pictures of the production facility. Because

  1. see the factory. 2. How willing are they to do it?
    The factory is your biz partner – they’d better act like it! If you were gong into  biz with someone in your own country how you would you want them to act?

How do you handle freight? Supplier’s carrier?

How do you deal with inventory management?
It’s a big area of confusion! AL does not have a courier account with DHL etc. because he doesn’t do much air freight. He just uses supplier’s courier account for samples – he  even has a standard template for samples.

For everything else he uses sea freight as it is significantly less expensive. Generally he shipped LTL (Less than a Truckload /LCL (Less than a Container Load) although now mostly 20-40 foot containers.

Because the closest US coast to China is the West coast, and the most common port is Longbeach, he specifically looked for a Freight Forwarder in LA. So that is freighting by sea and delivered the shortest distance. Then he does LTL pickup by Amazon who picks up palletized and labelled units ready to go to Amazon.

SO you’re looking for a one-stop shop for warehousing and freight?

Yes, wanted to make process as easy as possible. They contract with a customs agent to handle the customs clearance. AL just gets an email with the bill. They make it really easy.

An alternative is to use Asia based Freight Forwarders – they get amazing deals on fast boats out of China. So you need to go through the same process.

Amazon decided that everything is going to Moreno CA so West Coast made sense. However, every time they have a strike, his products get stuck. The absolutely best way is to go out and get as many quotes from FF as possible. As lots of questions and get one that will take the time to educate you. One of them might say “Well our clients do it this way” and make a suggestion.

Tell us about inventory management – when a product is selling, what then?

What about “Killing off” products with low sales or low profit?

AL doesn’t yet use inventory management software – doing it manually is a pain. It’s tricky because you base reordering decisions on two weeks’ sales; then you get a spike in sales and you will run out of stock. The other danger is demand drops off instead and you buy too much inventory so you pay high warehousing fees. That’s when supply chain management evolves.

You need to look at warehousing deals so at some point you can bring in whole containers and bring  only a couple of pallets to Amazon.

Every product is seasonal. You need to be in the game before you learn that pattern for a particular product. A store manager might be your first hire – a necessary one if you’re going to have and grow a business based on importing.

When to let go of products?

A lot of people come in thinking they need to make lots of sales or it’s over. If the product is still making you a profit, you should maybe reconsider. Even if it’s only a small amount. If you get 5% return, it’s worthwhile.

What’s your approach to cashflow management?

Al is just starting that conversation – chances are you will run into this soon enough. The solution is not in the system itself. Cash injections become important.

AL’s short term solution has been credit. Will Tjernlund uses Amazon outside of PL to make cash faster – wholesaling ideas are fantastic. When you’re in this business, you’ll make a lot of connections. It could be someone in your local area who doesn’t have product on Amazon or it’s not selling well. You probably have more Amazon experience than they do. SO soft sell – let me help you with this – good way to make extra cash. AL has recently been working out profit share deals with people who want to

Leverage whatever skills you have. A lot of people want this skill but don’t have time to develop. A lot of retailers are on a 36 month contract and paying whether they make sales or not. You could come in with a solution  and make them extra money.

You can work out a wholesale deal. You can do consulting. Whatever comes your way.

Bigger picture

What’s working well right now in your business (that you can reveal)?

Finding great margin deals by establishing relationships with factories and suppliers. Then get on page 1 for main keywords.  AL has one  product only selling 2 a day which will kill it in Q4.

What are the most successful sellers you know doing right now?

One person is leveraging Facebook advertising for both Amazon and Shopify sales.

Either learn an avenue really well, or pay someone else who knows it really well.

Another friend takes advantage of every single offer. Every beta programme they do, she takes it. She’s got someone at amazon who answers her email. She is killing it!

Find an area where you can get visibility for your products and get really good at it.

What do you see coming in terms of changes that we should be thinking about adapting to… In the next year?

Predictions are mostly wrong! But a focus of unique products is coming – we’re in the middle of a Kickstarter crowdfunding craze. SO AL assumes that Amazon will get a lot more of untested unproven concepts coming out. This might be the next generation of sales. The marketplace has proven they like this kind of thing. There will be a lot less competition for those products.

If you have an idea, this will be growing, -there are prototyping companies out there, go for it.

In the next five years, there will be other marketplaces – whatever teenage girls are doing now will become big! App based – right now, teenage girls are buying products on App based programmes like Wish etc, which are basically like eBay

Do you have any parting words of advice?

The most important thing is: understand you are serving a marketplace, a niche, not just selling a product. Treat it like a business – it’s an investment – go at it with a calm pulse, understand that it takes time. The growth curve is never easy, it’s never in a straight line but stick with it.

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 away.

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.

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#47 Amazon Keyword Research, Amazon USA vs UK and Quality Control – Q & A Tuesday no 4

#47 Q and A Tuesday no. 4 SHOW NOTES

Q. 1 David G.

Merchant words vs KWI for accurate kW search volumes?

Danny :

Both use algorithms rather than qualified data from Amazon’s servers. Use as guidance rather than absolute numbers. The best data will be from your reports.

Michael: remember that all research numbers before you have product live are an approximate guide. If the numbers look good, go ahead and place an order, but just place a small one. You could go to AliExpress and make a really small order of say 20-50 units. Or go to a supplier on alibaba.com who will accept a small MOQ. Then launch the product with a few reviews and see if you can get sales at a reasonable price.

Either way, then you will get real data which you can then use to decide whether to place a full sized order.

Q2.  Kurt

Hi all, I am currently selling on co.uk and I am wanting to start selling on the .com market… do I need to create a brand new buyers account (with different email address) and then use that to create me .com sellers account?

Thanks

Hi Kurt, yes you do need a separate account. The advantage is that your business on amazon.com is separated from amazon.co.uk. So if there is a global issue (like account suspension) in one marketplace, you are safe in the other one.

You can link the reviews for a product between the two marketplaces as long as it is the same ASIN. This can be very helpful if you have for example a product that did well in the USA and you want to take advantage of the reviews in the UK. This is only going to work if it’s the exact same product.

Ruth B

Advice needed asap –

I have had long delays with my first order, the initial colour changes and gift box design took longer than expected and then it failed the inspection in China. 

My supplier said they would rework the problem items and with the canton fair happening, instead of the promised 3-4 days this took more like 3 weeks. 

I have had it reinspected and it still hasn’t passed – the previous major problem has been fixed but various other problems were found – all cosmetic – scuff marks, glue marks, slight gaps where the 2 materials meet (only a couple of these), damage to gift boxes. 

In total there were more defects found in the second inspection than the first (including major and minor defects). 

Where do I go from here in terms of negotiations/demands with my supplier?

I don’t really want to say goodbye to the product and lose my deposit plus all the time and effort that has gone into differentiating/designing etc, but i also don’t want to risk receiving an order of a defective product. 

The inspection pictures of the products without defects do look really good and the finish looks good quality but there do seem to be a number of defects which would result in returns. 

Having failed the first inspection my supplier agreed by email to replace (including shipping costs) any damaged items that might arrive in the UK, but how do I know they will actually stick to their promise as this is my first order with this supplier?

Nigel:

Ruth, sorry to hear that it’s a bit deflating and it happened to me with my 1st order last year. Our solution was

to have all our 1,000 items checked & pay for the ones that are ok & leave the others (after 3 inspections!)

This resulted in 203 out of 1,000 being passed &

given we paid 30% upfront we actually got a small refund.

Remember most inspections fail initially and you can accept or reject the order despite the result . Well done you though for having an inspection – many still don’t bizarrely & it’s saved you a big problem down the line.

In the end we had to change supplier for future orders.

Michael: Nigel’s advice is good.

#43: Amazon Supplier Negotiation & The Future of Amazon with Greg Mercer – PART 2 of 2)

Episode #43: Greg Mercer of Jungle Scout Interview  (Suppliers & Predictions – PART TWO)

Suppliers

Does negotiating on price ever work much with suppliers or do you have to increase the numbers to get the discount or try to add in extras to get lower prices per unit?

Greg doesn’t worry so much about this now. 10 cents off doesn’t add much to your profit.

But if you keep asking for lower price, the Chinese person at the other end feels more inclined to cut corners, e.g., use worse materials, leading to Quality issues. Or it will get put to back of the queue etc. etc.  If you get moved back to the back of the line so you’re out of stock for several weeks, you could be losing $100 a day in lost profit! This doesn’t compare to 10 cents a unit!

Don’t get hung up on low price if it’s profitable. If there’s something left in it for the factory, they’ll be more inclined to be helpful.  (This ties in with Peter Zapf’s advice – Global Sources).

Actually factories do have rising costs. Going out there has given Greg a perspective.  Your suppliers are a crucial part of your business so treat them well. 

Apart from Chinese new year are there any other times of the year that slow down the manufacturing rate such as the Canton Fair?

Gearing up to 4th quarter in Sept, Oct means longer queues. Seasonal items like patio products would be even worse because that involves Chinese New Year.

Just say to your supplier, I’m planning the year out (and they will like this!) so can you let me know when you will need longer to manufacture? This actually sends great signals: a. you’re organised b. you are planning to order regularly.

Is there any way of ensuring that once you have differentiated a product from a supplier (by colour or design) that the supplier won’t then send your differentiated product out to other customers as samples and then they will just order the same differentiated product (just with their logo on it)?

Short answer: not really! You can try to work with your supplier on this – you can try to get them to sign something which could possibly work. But if you tore them apart about saving 6 cents on something, they probably won’t do it! Talk to them about it. You have the most negotiating power BEFORE you place your first order. Or first large order.

However, even if your factory does that, there are probably 7 other factories making the same product. Don’t get too hung up on that.

So how do you build a defensive wall around your products?

It’s almost impossible to do fully with a private Label product. But if you go into a newish market or you are the first into a market with a modification, you can use the time that buys you (say 3-6 months) to build reviews and sales rank to get a solid head start on the competition.

 An example from Greg: first person to sell a product with metal instead of plastic buckles. For 6 months he was the only one; now there are 15 others doing it.  even though there is tons of competition, he has top rank, 400 reviews, the best pictures etc. So he hasn’t really seen sales decrease.

When I looked on Aliexpress at getting just a few items of the product I was interested in, they seemed quite expensive (like the same amount as similar products were selling for on amazon) and I would be making quite a big loss once I included import duties and FBA fees.

Do people just take this loss to test if a product sells or is there any negotiating on price on aliexpress rather than alibaba?

Greg has never used AliExpress – but it is bound to more expensive because there are no economies of scale! Just treat it is as a market and supplier test. Or to be more cost effective,  you could just place an order for say 100 units with an Alibaba supplier. 

Would Greg recommend going the route of getting an agent to source products from different suppliers, rather than contacting different suppliers individually through something like Alibaba?  If so what is the best way of finding a trustworthy Agent?

Greg for the first year or so just went direct to suppliers. He found an agent as someone he already worked with at a factory. Everyone Greg knows who uses an agent met them through an established relationship. [Same is true for Michael]. In China it’s all about relationships anyway.

There are small advantages to having an agent, such as factories not on Alibaba,  but you do have to pay them a cut!  It’s really  more about outsourcing than money saving.  

How do people find out more about you and Jungle Scout?

Greg writes a solid blog post each week. There’s a cool product case study (“Jungle Stix”). Just comment on the blog or Tweet: @mercer_greg

What are your views and thoughts on trends you see happening on Amazon? What are the most successful sellers doing right now?

One thing successful sellers have in common: if you can make a small improvement on a product, it works really well. Find a product with mostly 3 star reviews. Read the 1 and 2 star reviews; if it’s something simple you can fix, make the improvement they ask for. You can both take away sales and charge a premium for it. 

For example the product with metal buckle vs plastic buckles – Greg sold his for $29 and the competition was selling for $14.95 , and the cost difference to Greg was about 50 cents!

Also larger/oversized items, although there are still opportunities with smaller, unmodified products.

What’s new and what do you see coming in terms of changes that we should be thinking about adapting to?

If looking at 2016, & probably 2017, there will still be lots of good opportunities in the .com store especially with modifications and larger/oversized items. Realistically it probably will start  to get really competitive by say 2018. By then a lot of other marketplaces like UK, Germany, Japan and India will be maturing with more demand, which Greg will be entering in due course. 

Parting Advice:
If you’ve been listening to the podcast and researching for a while, it’s time to get started. A lot of people seem to be worrying about things they don’t need to worry about. You’ll hit little roadblocks but it’s important to keep pushing forward, get your 1st product up for sale. It’s probably not as complex as you think!

HOW TO SUBSCRIBE TO THIS PODCAST

A podcast is a free downloadable audio show that enables you to learn while you’re on the go.  To subscribe to my podcast for free, you’ll need an app to listen to the show from.

For iPhone/iPad/iPod listeners – Grab your phone or device and go to the iTunes store and search “Amazing FBA”.

This will help you to download the free Podcasts App (produced by Apple) and then subscribe to the show from within that app.  Every time I produce a new episode, you’ll get it downloaded right on yt sentence.

For podcast enthusiasts – If you already listen to podcasts and have a podcatcher that you prefer, the feed you’ll need to add is: http:// amazingfba.com/feed/podcast.

For those who don’t have a mobile device – You can always listen to the show by clicking the audio file at the top of this page.

If you have any queries, just go to www.amazingfba.com/ask

 

#41 Amazon Q & A Tuesday 2 – US Inspection, VAT Registration and Separating Old & New Stock

#41 Q&A Tuesday No 2: Facebook Group Questions

Q1: When you import your products to Amazon from China do you get your products inspected in the USA before sending them to Amazon or do you just send them directly from China to Amazon ?

I would get them inspected in China (Pre Shipment Inspection=PSI) and then in the USA when they land (Post-Shipment Inspection). Don’t forget to put in 10% minimum spare packaging with your product so any damaged packaging can be replaced. Don’t send products in to Amazon with damaged packaging.

Q2. I’m being told you have to be VAT registered to do FBA in the UK. Is that true?

Ian: No you don’t, [if you are UK based] unless you are getting sales totalling £82,000 per year! I found one wholesaler who won’t let me register on their website because I don’t have a VAT number, but it’s probably their loss.

NOTE Michael]: This is different if your business is located outside the UK (eg the USA)

Q3: Kieran: Is it possible to get a new shipment sent to FBA and have them hold the new one until all the the old stock is sold out? Basically I have rebranded and want to clear out the stock before starting to sell the new ones

Rob Sleath: Yes you can do it. Here’s how:

1. New stock and old stock must have different SKUs. If you’ve got the FNSKU printed directly on the packaging, either change it there or have your prep company re-label.

2. Set the new stock SKU at some silly price so nobody buys. £999 or something. As soon as the stock hits the warehouse, do a fulfilment order on it and set it to hold for 2 weeks. you won’t be charged and it will make the inventory unavailable to purchase.

3. Sell through the old SKU. Keep refreshing the fulfilment hold every 2 weeks as required.

4. When old stock sells through, change the listing with the rebrand information/photos etc. then cancel the fulfilment hold and set the price to the proper level. Et voilà

Kieran Will that keep my reviews?

Rob Sleath: Yes.  The product reviews are on the ASIN and the seller reviews are for you as a seller. Neither change if you use a different SKU.

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

#38 Amazon FBA Q & A Tuesday No. 1

Show Notes for #38 Q&A Tuesday No. 1

This is a brand new part of the Podcast, dedicated to answering questions raised in the Amazing FBA Facebook Group

Q1: Packaging your products

A1: Always ask your supplier to reinforce (priority order)

1. corners (where 3 sides meet) 2. edges  (where 2 sides meet) (3. sides is a bonus)

They won’t charge much more but won’t do it unless you ask. They work on wafer-thin margins but you shouldn’t!

Also ask for minimum 10% replacement packaging (to replace damaged packaging) to be sent along with your products to your warehouse in USA or to your home/office/warehouse in the UK (eg 500 units order, add 50 spare packaging boxes). 15%-20% is safer.

Q2: Has anyone used AMZTracker for reviews? How many reviews can I get from 50 coupons given away? How fast do reviews come?

A2: I’ve tried Snagshout (several promos), Tomoson (2 or 3 times) and AMZTracker (maybe 10-15 times!). I must say, AMZT is the cheapest/easiest and mostly the best. I’m wary of Amazon review clubs, so haven’t used them.

The simple answer is about 66%-70% so probably about 35 reviews from 50 giveaways.

Generally reviews should be mostly done within 2 weeks – many within a week.

Don’t get too obsessed with Review NUMBERS only; pay attention to the AVERAGE review (e.g. 4.8 stars) and the quality of individual reviews: plenty of detail is important now. Photos are good. Videos even better. AMZTracker seems to give good detailed reviews but the reviewers can be critical.

To ask your own question, join the Amazing FBA Facebook Group

Q3: Anyone fulfilling from the US to the UK?

A3: Broadly speaking – don’t! Get the Chinese (or US) suppliers to send directly to Amazon USA.

If you have inventory in the UK and want to send it to the USA as a test order, I’d use DHL or UPS.

BUT Air freight is often similar to or more than actual manufacture costs. Then you have duty, warehousing costs and Amazon inbound shipping to pay. So for anything over say 10-40 units (depending on size and weight of course), it’s probably cheaper and easier to go back to your Chinese supplier.

Q4: Is it worth using FBA Inspection’s photography service or is it better to use a proper professional photographer?

A4: I would personally use my product sample with the best pro photographer you can afford. I use Brian Cottam (and so have several members of this group, with great results).

I haven’t used FBA Inspection for product shots so I can’t speak from experience, but I would stick to using FBAI to just photograph any flaws with the product.

Also I would suggest getting someone in the same time zone or even similar area. A relationship with a great photographer is a crucial asset in your business. If you get a chance to meet them physically at least once, it’s a great bonus.

Q5: Do I need to be registered as a company or sole trader to set up my Amazon seller account? Do I need a reg business number?

A5: You can set up on Seller Central and change over from Sole Trader to company pretty easily.

I did this myself (although it was about 18 months ago or so).

The simplest path is to start off as a sole trader. If you don’t have much time or business experience, I recommend it.

However, setting up a company is simple and quick. I used Companies Made Simple  (as recommended by my accountant, Penny Lowe).

 The 3 bits of paperwork you’ll need to deal with after about 12-18 months are:

1. Annual Return (5 minute job max – easy)

2. Corporate tax return (involved- get an accountant to help)

3. Annual accounts (with Companies House) (also use an accountant).

This is more work than a personal tax return. However, you’ll probably need to use an accountant either way. AND you will be able to separate your business and personal tax situation, which is HIGHLY advisable!

This can wait till you’ve proven the market so don’t get stuck on this. But if you’re more serious/have more time/are putting more money in, I’d advise this route.

To ask your own question, join the Amazing FBA Facebook Group

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

1

#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.

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.

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.

1

#34 Amazon China Product Sourcing -Peter Zapf of Global Sources (part 1 of 2)

   This episode, #34, is the first of two parts of the interview with Peter Zapf of Global Sources. Peter has a huge background in working with Asian (mostly Chinese) suppliers and the whole supply chain. He has a fantastic ability to bring common sense and  simplicity to these complex issues.  

Show notes for Episode 34 (Tactics/Qs)

Peter has been working in Hong Kong for Global Sources for about 15 years.

Global sources has existed for about 40 years. It exists to help sellers/retailers find manufacturers and vice versa. They started off with magazines; since 1996, they have a website (http://www.globalsources.com); since the early 2000’s, they have run Trade shows twice a year (in April and October), in Hong Kong (http://www.globalsources.com/exhibitions).  They’re also running a Smart China Sourcing Summit for FBA sellers at their trade show (http://www.globalsources.com/summit)   

Tactical Qs (FB group) RECENT POLL/EMAIL & from recent FB group posts:

What are the pros and cons of using a sourcing agent?

The pros: often they will get you a lower price so they will pay for themselves.  And they provide feet on the ground.

Cons: Agents have a reputation for taking a cut from both sides – it could be an extra cost because you’re not going direct to factory.  Also, It’s an extra layer of communication which may be a hinderance, especially with a complex product.

Is travel to China, to source products, necessary to grow your business? 

Not really. Email and Skype work well for people starting out.

If you go Full time with your business, it’s very worth considering.

Travel “Lite” is to visit the Trade shows.

“Full” version is to go face to face and travel to meet the suppliers in the factory.

How do you work out what a “good” price is [for a product]?

The best thing is to get multiple quotes from different suppliers. Then go back to your preferred supplier and say “We’d love to work with you but can you match this price?”

However, low price is not the only factor! Consider also:

1. If you squeeze the price, the manufacturer will have to cut corners. This will lead to Quality Control (QC) issues. “You get what you pay for.”  Think about how you want to balance cost and quality. 

2. If you have say a 5% defect rate, that will lose any financial gains you make.

3.  If your product costs are about 25% of your Amazon selling price, a 10% rise in your buying costs only add about 2% to your selling price.

Other ways to save money than just product cost:

Ordering bigger quantities.

Going to directly to the factory vs. using an intermediary.

Using sea vs. air freight.

Shipping direct to Amazon warehouse vs. stopping somewhere in-between.

How your whole supply chain is set up is important for price.

How do you know if you are dealing with a factory rather than an intermediary?

Look at the Global Sources site and look at the Business Licence and see if it includes a word like “manufacturer”.  This works reasonably well in China.

But be aware they may manufacture some things but trade others!

The only way to really know if they manufacture your desired item, is to hire someone to visit the factory or do it yourself. (Compare name on business card, paperwork, factory itself, etc.)

Inspection and Quality Control (QC)- what are your basic recommendations?

It depends on the product but this works well for most categories.

1.    Get several samples. 

2.    Write down everything you don’t like about them.e.g. batteries don’t go in easily; doesn’t turn on; scratches, dents etc.

3. Make an objective list of QC criteria.

4.   Include this list with your Purchase Order. Your supplier may say “No, we can’t deliver at this level.” but it’s much better to know that up front!

5.   Make an initial payment of 30%. Never pay 100% at this point.

6.   Bring in a 3rd party inspector to do a Pre-Shipment Inspection. They should use your QC criteria from your Purchase Order (plus whatever you feel is also relevant).

7.  They will then send you an inspection report.

8. Only then, if you accept the shipment, do you release the remaining 70% of the funds.

By telling the supplier upfront that you’re having a 3rd party inspection done, you’ll get lower defects.  You are signaling to the supplier that you care about quality.

Inspection costs about 300 USD per man-day (for a 1st/2nd tier level Inspection company), and one man day is enough for a typical Amazon buyer shipment. 

How to set up the quality control level?

AQL (Acceptable Quality Limit) is the main [internationally standardised] way to set quality control level and the statistics depending on order size.

Define in your QC criteria if a  problem is =1. critical defect; or 2. major defect; or 3.  minor defect.

Minor=> customer won’t return product eg box folded wrong

Major=> product still works but customer may return

Critical=> product doesn’t really work.

Set how many critical/major/minor defects are allowed:

AQL level Big Box retailers use is 0/2.5/4 (critical defects/major defects/minor defects)

Higher quality: 0/1/2.5

A lot of shipments actually do not pass inspection but the buyer still okays the shipment the buyer may be okay with the minor defects and request improvement for the next shipment. 

Get advice on these topics from your inspection company. 

Overview of the inspection process in this multi-part article (Part 2 is my favorite): http://www.smartchinasourcing.com/home/china-product-quality/2485-managing-qc-inspectors-part-1-the-hiring-process.html 

Description of AQL here: http://www.smartchinasourcing.com/home/china-product-quality/354-back-to-basics-what-is-the-aql.html

How do you set an appropriate quality level? 

If the customer isn’t going to return the product, give negative reviews or negative feedback, then it’s probably fine. So that’s probably the main criterion for rejecting or accepting a batch.

This is another reason for not beating the supplier down too high on price!

Ocean Shipping

Do you recommend shipping insurance?

Like all insurance, it’s easy to get cover but it’s hard to get a payout if needed!

The actual probability of a loss is mathematically low. It comes down to risk tolerance.

If you can afford to lose the money, it’s may not be necessary. If it would bankrupt the company, that’s when to get insurance!

What is the cost difference between ocean and air freight?

There was a recent study on a product that was medium small sized, and they calculated a cost per unit of $6 by air and about $1 by ocean.

There are fixed port costs either end. A very broad rule of thumb is that above 150 kg or 3 cubic metres, sea shipping makes more sense. Also very bulky items need to go by sea (because of volumetric weight)

Customs clearance

How do you handle customs clearance at a US port? (also: What is the cost of customs clearance for sea shipping? How do you select a customs clearance agent for SS?)

Answer to all of these: let your freight forwarder handle it! Peter has talked to the folks at Flexport (based in the USA), but the industry is fragmented and there are many, many freight forwarders.

The Freight Forwarder will ask :

1.    Do you want

a. EXW (Ex works) (pick up straight from factory gates?) or 

b. FOB (Free On Board) (the supplier will get the products on board ship then the Freight Forwarder takes over)?

2. Where do you want it delivered to?

3. What are the dimensions and weight of the product?

They’ll handle port fees and inland freight fees. And they may or my not include duty in the quote but if not included in quote, and they will bill you for it.  When Sea shipping, always use a freight forwarder!

Do you need a freight forwarder for air freight?

Be clear about the difference between Air Freight or Air Courier service.  Here is a good article: http://www.thesourcingblog.com/air-freight-from-china-explained/

The latter is eg DHL, Fedex, UPS. [You may get away without a freight forwarder for this. I have several times. But it’s not foolproof- I also got burnt once! – Michael]

For air freight proper, you probably need a freight forwarder.  If in doubt – ask a freight forwarder if you need to use them!

Do you need a separate customs broker?

The Freight Forwarder will usually either have that in-house or have a relationship with one. So basically they take care of it.

When making initial contact with Chinese suppliers, should I act as if [I am] the buyer and have to OK prices with my boss?                     Peter doesn’t recommend starting a relationship with “untruths”! Mostly the reason for this is for price negotiations. That leads back to price vs. quality trade off (plus the time and aggravation spent on negotiating for small price differences)

If you do want to negotiate on price, you can focus on getting multiple quotes and then compare. (Traditional retailers also figure out the costs of materials and labour and add on margin for the supplier, but this is more complex)

Is it true that Chinese factories generally give you a price that is close to the cost of production?

It can be. Chinese factories often get their profit margin from the VAT rebate of say 9-17%.  If you are getting a good quote, the price can be close to cost – depends on how good your price is!

Any advice on Sourcing from US, UK and European Manufacturers?

This is not something that Global Sources focusses on although the issues may be mostly the same.

Is using a gmail address OK for contacting suppliers? (because of spam from would-be suppliers)

Suppliers are also getting more sophisticated – they will often look up you and your company in eg Linked-In. Good suppliers are capacity constrained. The new suppliers and ones that will work with anybody may not be the ones you want to work with!

To convince the good suppliers to work with you, you want to come across as well as possible (although some of the buyers from the larger retailers do use Gmail to avoid spam).

Try to have a company domain, a company website. Give background about you that sells you as a legitimate and experienced buyer or at least an experienced business person. 

NEXT EPISODE

In Episode #35, Peter gives his strategic big-picture thinking about how to develop a long-term sustainable Product business. Amazing thinking that I have not heard anywhere else. Stay tuned!

NEXT EPISODE

In Episode #35, Peter gives his strategic big-picture thinking about how to develop a long-term sustainable Product business. Amazing thinking that I have not heard anywhere else. Stay tuned!

HOW TO SUBSCRIBE TO THIS PODCAST

A podcast is a free downloadable audio show that enables you to learn while you’re on the go.  To subscribe to my podcast for free, you’ll need an app to listen to the show from.

For iPhone/iPad/iPod listeners – Grab your phone or device and go to the iTunes store and search “Amazing FBA”.

This will help you to download the free Podcasts App (produced by Apple) and then subscribe to the show from within that app.  Every time I produce a new episode, you’ll get it downloaded right on your iDevice.

For Android listeners – Download the Stitcher Radio app (free) and search for “Amazing FBA Podcast.”  Or, if you have already downloaded a podcasting client, follow the directions in the next sentence.

For podcast enthusiasts – If you already listen to podcasts and have a podcatcher that you prefer, the feed you’ll need to add is: http:// amazingfba.com/feed/podcast.

For those who don’t have a mobile device – You can always listen to the show by clicking the audio file at the top of this page.

If you have any queries, just go to www.amazingfba.com/ask.

2

#20 Amazon Private Label Sourcing Mistakes – Part 2 of 2

This Episode, #20 ,  is continuation from episode #18 of my personal Sourcing Mistakes and the solutions I’ve found.

Choosing Suppliers, Communication, handling Financial Arrangements, and  Quality Control and Freight/US Customs can be some of the scariest things for a newcomer to a product-based business. They are also  the source of many of the frustrations and blocks to progress for any Amazon FBA business owner, however experienced.

Here I continue to share with you all the mistakes I personally have made, and the solutions I had to find!

If you have similar stories to tell, please share them with your fellow Amazon sellers, either here, or in our Facebook Group. Let’s help each other!

For a detailed step by step guide to the  sourcing process, listen to Episodes #6-#10, which  are part of the 10-step Amazing FBA Startup System.

SHOW NOTES FOR EPISODE #20 -Sourcing Mistakes

            1. Going to the same place as everyone else to find suppliers
              1. HKTDC
        1. Getting exactly  the same kind of product!
        2. Not verifying supplier hard enough- solutions- checklist
        3. Not checking about details of product
        4. Not getting samples
        5. Not ordering exact model (eg blue vs. black colour) with total clarity
        6. Address errors (continent!!)
        7. Over-long or native-speaker only english
        8. Having only one possible supplier ready to go
        9. Letting supplier change carrier to non-standard.
        10. Not allowing for random delays eg typhoon, suppliers’ supplier (boxes!) delay, customs, supplier gets big order from big customer, hazmat
        11. Picking a product needing or including batteries!
          1. not understanding the technical info for batteries
          2. not getting technical info from supplier upfront
        12. Not getting products inspected in China
              1. At the very least, get them inpsected in the USA
              2. NEVER send in uninspected products to Amazon!
        13. HAZMAT (“Hazardous Material”) or other Amazon technical delays
          1. Not preparing MSDS exemption doc
          2. Not allowing for Hazmat delays
        14. Not allowing for delays by Amazon in receiving goods or Hazmat issues
        15. Not moving other parts of the business forward when sourcing isn’t going to plan
        16. Expecting the Chinese to give a straight answer to a confrontational question
        17. Getting angry about things outside your control. Remember the ideal:

The Serenity (calm) to accept the things you cannot change; The Courage to change the things you can; and The Wisdom to know the difference.

HOW TO SUBSCRIBE TO THIS PODCAST

A podcast is a free downloadable audio show that enables you to learn while you’re on the go.  To subscribe to my podcast for free, you’ll need an app to listen to the show from.

For iPhone/iPad/iPod listeners – Grab your phone or device and go to the iTunes store and search “Amazing FBA”.

This will help you to download the free Podcasts App (produced by Apple) and then subscribe to the show from within that app.  Every time I produce a new episode, you’ll get it downloaded right on your iDevice.

For Android listeners – Download the Stitcher Radio app (free) and search for “Amazing FBA Podcast.”  Or, if you have already downloaded a podcasting client, follow the directions in the next sentence.

For podcast enthusiasts – If you already listen to podcasts and have a podcatcher that you prefer, the feed you’ll need to add is: http:// amazingfba.com/feed/podcast.

For those who don’t have a mobile device – You can always listen to the show by clicking the audio file at the top of this page.

If you have any queries, just go to www.amazingfba.com/ask.