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123 Are your products beautiful?

Are your products beautiful?

If you are selling on Amazon, you are likely private labeling products, probably from China. Although, if you are in America then you might be looking at other alternatives in light of Trump’s plan to raise tariffs. For now, let’s assume you are importing from China. China makes some of the world’s worst products. China makes some of the greatest, such as the Apple iPhone. It’s equally possible to create terrible products as it is to create amazing ones since 80% of the world’s manufacturing happens there.

Have you got a design that is interesting? If not unique, is it at least beautiful? Are you sure you are really checking the quality of your manufacturing?

From the consumer stance, simply put, is your product beautiful? Does it work beautifully? Is it reliable? Is it amazing?

Today, I was out in London and came across the amazing building. It was once a school for choir boys that is now a youth hostel. What makes it truly beautiful is the detail. They put so much care into the details that it is immediately striking. When you really look at the detail, it is magical as well.

Now my question, is your product doing that for your customers? If not, you need to get on that. I am, by no means, an expert in product design, but my business partner and I have some products on their way from China and we are very excited about them. We order samples from about six suppliers and got eight samples from some suppliers. We went through a lot of trouble. We reviewed 60 suppliers! Some were dodgy and their prices came tumbling down from $15/unit to $3; some didn’t have solid business credentials, and we rejected them.

We have a whole complicated system that we use to check out a supplier thoroughly, and I can go into that later if you are interested, but the big thing is to get a sample! Check through different photos on Alibaba, or wherever. Get out of Alibaba, do some Googling, go out and get some samples in real life. Whatever you need to do to get a vision of what would be your perfect vision of you product.

Keep in mind what your market wants. I’m not saying to create something in a vacuum. Never do that! Do research. Look at demand. Look at demand depth. If here a lot of sales in training shoes, but 90% is Nike, forget it. If you want a company that you can sell down the line for two or three times yearly revenue. If, you want a brand that people are willing and excited to buy. When people see your product in their search results, they should immediately be drawn to it and want to click. If you want a product where people will be amazed when they scroll through your photos and want to buy it. They you have to work and sweat and make your product beautiful.

Don’t stint on samples!

I hear complaining all the time about how suppliers want to charge for samples and whether it’s worth paying for. Let me tell you, it is. If you are going down the private label route, you’re going to be spending thousands of pounds, tens of thousands, don’t be cheap about the research. Don’t go too far and get 20 products when you know the 10th is really really good, but take the time to find that 10th products that is really really good. If you can’t afford to get the proper samples, can you really afford to get into private label?

The room is not mass producing cheap crap, it’s being the Apple iPhone of your category. China is the kings of cheap products, but there are still manufacturers where the designs are fantastic and the quality controls are rigorous. Even if you don’t design your own products,at least you can pick one that is still good.

You either have to do research designing your own product, or you have to do research in looking for a great design. Regardless, you have to do the work. Warren Buffett used to say, “You can either create value, or find value.”

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

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

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

Read More
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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].

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.

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

 

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#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!

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.

#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

 

#36 Amazon currency conversion – Jenny Shao of Currencies Direct

Jenny Shao of Currencies Direct (affiliate link) has a deep background in the business of Foreign Currency Dealing. Handling Currencies is not a matter just for large firms or hedge funds – if you are UK based and sell in the USA or Europe,  it affects your Profits very directly and can make BIG differences!
Jenny talks us through the nuts & Bolts of saving money & time, and protecting yourself from currency fluctuations- or even benefitting from them. 

SHOW NOTES FOR EPISODE #36

Jenny Shao Interview:

What is Currencies Direct (affiliate link)? What do you do?

A Money service Provider.

What is a currency exchange as compared to a bank?

It’s very similar but more focusses on SME (Small and Medium Enterprises)

What are the main dangers/things to look for in currency exchanging?

Exchange rate inward and outward. To overcome these: 

-Use a collection account for inward payments

-Use a competitive rate for outward payments

Can you tell us more about collection accounts?

-Try to get a segregated account so your account is not put at risk if Amazon rejects other sellers

-You can autowithdraw regularly – but sometimes it’s best to leave the money in this account and convert it later to take advantage of FX movements

Is this okay with Amazon?
Yes Amazon, if pushed, will officially recommend Currencies Direct.

What are the main issues to look out for when paying Chinese suppliers?

In the time between when invoice is issued and payment due, exchange rate could have move significantly. To help, use forward contracts

What is a forward contract?
Lock in today’s exchange rate but do the actual payment at a later date.

What is Currency Direct’s Charging structure?

0.1% receiving fee, Conversion fee of 1-2%, and Transfer cost of £10.

How fast can you get payments from Amazon.com back to UK?

Next business day (click here for more details)

 How fast can you get USD from UK to Chinese suppliers?

Next business day from UK to US bank account. Then up to the bank to send the USD to Chinese suppliers.

Bigger picture questions:

What is the future for USD/GBP next 3-6 months?

The pound fell across the board yesterday, As it continued to fight an uphill battle against the impacts of a possible Brexit [British Exit from the European Union]. Whilst uncertainty about the outcome of the vote still lingers, the pound is struggling to find support, and continues to move lower. We can expect further volatility as we approach closer to the date.

How about the Euro?

Some may say that the pound was overvalued in 2015, particularly against the euro and to some extent the US dollar. The pound was driven up due to the complete lack of confidence in the euro zone and the decision by the Fed not to raise interest rates until late last year. This overvaluation caused UK exports to fall which in turn put pressure on the construction and manufacturing sectors. The Bank of England then had to change their stance and have been actively talking down the UK recovery, With the hope this would artificially drive standings value down and boost vast facet of our economy.

Jenny feels it is likely things will get worse before they get better and whilst the current trend won’t last forever, the key question is where we finally see the pound bottom out. Look to protect yourself against further losses

What is the Chinese economy outlook over the next year or so?

Beijing posted its slowest economic growth in a quarter century last year as it grappled with a tough transition away from dependence on heavy industries towards less labor intensive industries. This has benefited other countries such as Vietnam which has benefited from taking over low-level production from its giant neighbour.

The ADB’s flagship Asian development Outlook 2016 full full cost that China’s economy would grow at 6.5% this year and 6.3% next year.

As China focuses more on consumer driven growth they welcome sellers from abroad to provide buyers with more choices. This makes it even more important to manage your foreign exchange to better compete with domestic sellers [in China] and make the most of this growing market.

How do listeners find out more about Currencies Direct?

Just go to their website to set up a collection account: Currencies Direct (affiliate link)

Or email Jenny Direct: [email protected]

Do you have any parting words of advice?

Thinking of selling overseas? Have a look at your existing data [if any]. Use common sense – the advantages of the USA: same language and established buyers. Selling fashion? – try France!

Decide on country. Search their marketplaces like Amazon, eBay. How is the competition? Is their price very different from yours?  Are they providing a different variety of product?

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.