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With the global pandemic, there has never been a better time to be an online seller. Global e-commerce sales are projected to top $6.54 trillion by 2023, with more and more people switching to online shopping for it’s ease, convenience, and after the coronavirus epidemic, safety.
While having a multi-channel approach is one of the primary ways to gain success in e-commerce, the key to sales is selling a product that resonates with consumers. Here’s our guide to help you plan the best way to get started with product sourcing as an Amazon FBA seller.
When you source your products, your primary goal is to find a direct source. Your secondary goal is to minimize the risks inherent in sourcing. Your business will benefit from lower costs and higher profit margins if you use the most effective overseas sourcing method for your specific product. You as the buyer can risk having very little control working with a manufacturer you find from a marketplace.
One of the most common challenges buyers face is determining the authenticity of reviews. Sometimes the manufacturers with the most reviews and product pictures are the ones that end up wasting your time and money. Due process looks like your best friend but acts as your worst enemy as it steals hours and hours of your time. You can have greater control over your manufacturing process if you source locally, and there are many product sourcing marketplaces that connect buyers to local factories. However, in gaining more control you may suffer from a lower profit margin.
More money and time is what you sacrifice to find your supplier at a trade show. In order to get to the trade show you have to go through a long registration process and apply for a visa. Once you get to the show you’ll talk to so many suppliers you won’t know what to do with all your options. That’s even if you’re able to talk to them. To make the most of your trade show experience, preparation is key.
The benefit of attending a trade show overseas is the opportunity to connect with suppliers that aren’t already working with so many other US businesses. If you’re looking for a long-term supplier, a trade show is a great place to set the foundation for a solid relationship with a supplier. The biggest problem buyers face working with middlemen is the first point: you may be overpaying for production. If you don’t work directly with manufacturers, your production costs will be higher. In order to decide if this method is right for you, you must consider whether your margins are high enough to cover the extra incurred cost from working with a middleman. If you can pay the costs and still maintain a high profit margin, it may be worth it to let another company handle the production details. This way you can focus on the front end of your business. At the end of the day, this method of product sourcing doesn’t give you the opportunity to form a relationship with a manufacturer.
For example, at Honu we have tariff experts who can help you slash some unnecessary import expenses, saving you thousands on each order while our freight negotiators ensure that you’re paying a good price for getting your product shipped to you. Product sourcing as a whole is a complicated venture—investing in sourcing consultants ends up saving you more money in the future.
If you’re thinking long-term, it’s better to work directly with a manufacturer. As the years pass you’ll develop a strong relationship and become a priority client while all the time having control over your backend. By eliminating the middlemen and getting connected to the overseas manufacturers directly, you don’t have to pay more for production. You also get the benefit of developing a relationship with your manufacturer which will be valuable as the business continues to grow over the years.
As opposed to a product sourcing marketplace, an online platform makes the production process visible to you so you don’t have to wonder or worry about the backend of your business. It’s important to have a clear idea of what your end product looks like. It’s even more important to have this clear idea in an easy-to-understand written or drawn layout to give your manufacturer when you start product sourcing.
Design details like dimensions, materials, and colors are crucial for the production of your vision. The collection of these details is known as your product specifications. Any manufacturer will ask for your “product specs” before agreeing to a production run. The sample sets the standard for future bulk orders from your manufacturer. If you’re unhappy with the first sample because the design is a little off, make tweaks and request a second. If you’re unhappy with the first sample because the quality is low, this is a red flag. You should move on to a different manufacturer to avoid any quality issues in future orders. All that time and effort preparing for production has finally paid off. You found a great manufacturer overseas to produce high quality samples. You’ve set yourself up for a smooth production run. You can practically see your product in the market now.
Other factors like product development are a little out of your control. Sometimes unexpected issues can come up during production that causes the process to lag. This is why the pre-production steps are so important. Clear specs and molds will help reduce the possibility of problems occurring. In the midst of production, maintaining constant communication with your manufacturer is a more proactive way to minimize your lead time.
The best shipping method for product sourcing is dependent on your shipment order, location, and time requirements. There are several different freight forwarding options offering shipping solutions. A freight forwarder is the middleman between the shippers and the carriers. If you’re producing several thousand units of your product, a software driven approach will make it easier to manage your shipment. There are other things to consider when choosing a fulfillment partner since this is an important part of your supply chain! If your products don’t make it to your buyers, you have no business. Remember you don’t need to be a large business to seek out a fulfillment partner. There’s a common misconception that only high growing companies need the help of a third party.
Some products don’t have a specific duty rate. Instead you pay an ad valorem duty on your imported items based on the total market value of your products. An ad valorem duty is more flexible because it allows an item to be levied at a price based upon its changing value. Since the duty is based on the price of your product, the duty will increase as your product price increases. Fluctuations in your product price are something to keep in mind during product sourcing.
Many people think that to succeed as an online reseller, you have to create your own website. Even if they know a little about how Amazon works, they believe that they must be starting their own Amazon store. That’s actually not how it works. When you sell on Amazon, you are the owner of an online retail store, except your store is just part of the Amazon.com site. The reason this works is because Amazon allows Third-Party Sellers to sell on their site. You see, not everything sold on Amazon is sold by Amazon. Being able to list on Amazon gives third-party sellers a chance to run their own Amazon businesses.
Amazon does sell a lot of items on Amazon.com as the seller. This is really important because if you choose this, then your item will be available for sale immediately. So, if someone bought it, you would have to ship it to the customer right away, which is really time consuming and can be more expensive. The other important part here is choosing your price. You’ll generally be matching the lowest price of other sellers who are also using the Fulfilled by Amazon program. Other Prime sellers are your main competition. Luckily, it’s easy for you to edit your price at any time. So you can always put one price in now while you list and then go back and reprise your inventory after it arrives at Amazon. You can gain insight into the demand and opportunity for any product idea by simply looking at the sales of similar products on Amazon.
Norman Farrar – is a serial entrepreneur who provides online marketing and managed eCommerce solutions for brands. He has worked with Fortune 500 companies such as Coca-Cola, Mercedes-Benz and 20th Century Fox. Since the early 1990s, Norman has focused on helping entrepreneurs optimize their operations and unlock their business’s potential.
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Norman Farrar – is a serial entrepreneur who provides online marketing and managed eCommerce solutions for brands. He has worked with Fortune 500 companies such as Coca-Cola, Mercedes-Benz and 20th Century Fox. Since the early 1990s, Norman has focused on helping entrepreneurs optimize their operations and unlock their business’s potential.
