How to source a product to sell on Amazon

To put it simply, product sourcing is the process of finding products that you can sell through your business. The source of products may be either domestic or international.  

Here’s everything you need to know about outsourcing your product!

“Alibaba is one of the best websites to connect with manufacturers in China.”  

Here’s a link to Alibaba homepage

About that list of Suppliers  

  • A simple list of attractive suppliers listing for the product  
  • A detailed spreadsheet is always recommended for listing along with price, link to the supplier listing, price quoted, MOQ (minimum order quantity) etc  
  • No research is required at this point  

Authentication of the shortlisted suppliers  

  • Authentic suppliers will have watermark on product images and videos of the factory  
  • Alibaba will mention if the supplier is a manufacturer or a trader  
  • Gold members are verified by Alibaba  
  • Assessed members are assessed by a third party and an assessment report will be available  

Confirmation prices and MOQ should be done manually as the ones listed can be misguiding!  

Contacting suppliers via Alibaba messaging system or chat option.  

Points to remember  

  • Not all suppliers reply on time  
  • The suppliers in China may be unable to communicate well in English  
  • Websites can appear funny  

None of the above means that the supplier listing is a scam.   

  • Suppliers with good communication skills are preferred as the products may need modifications.   
  • Traders and middlemen are to be avoided every though they offer low MOQ but will keep commission which will affect the product pricing.  
  • Middlemen also tend to change manufacturers to keep up with the pricing, but this may lead to quality issues.  

Best way is to keep it very short by asking one or two questions at a time. Preferable start is price and MOQ.  

Pricing  

  • Price should include shipping to the closest port (FOB)  
  • Doesn’t include shipping from China and/or duties and taxes  

Sampling  

  • Samples are generally free of cost  
  • Samples with customizations may not be free and could be expensive but that is okay  
  • Buyer bears the shipping which is minimal  
  • More samples mean more ideas and comparison  

Understanding the supplier is one of the hidden agenda in the entire communication process. Keen observations can alert of fake people, middlemen and the suppliers who may just be pleasant to get an order.  

NEGOTIATING IS NOT TO BE DONE AT THIS STAGE!

Costing  

  • Landed price is the net price of the product at the Amazon warehouse and it includes  
  1. Purchase price  
  2. Shipping  
  3. Taxes & duties  
  4. Fees of professionals  
  5. Conversion rates  
  6. Any other expense occurred  

The costing at this stage is not final. Suppliers negotiate prices and MOQ to a certain limit which is to be respected to keep quality in check!  

   

Profit (approximate idea)  

  • Basic price plus all net expenses less the selling price is the profit  
  • Amazon fees are to be deducted from the profit to get an idea of the profit margins  

EAN (applicable for sellers in UK)  

  • EAN means European Article Number and is issued by an organisation called GS1  
  • GS1 issues up to 1000 EAN per subscription  
  • EAN is issued along with a barcode  
  • Every single product, even with the slightest variation will require a seperate EAN  
  • Genuine EAN is required by Amazon before listing a product  
  • EAN is also manually verified by Amazon and purchases from re-sellers are prohibited and can lead to the suspension of the account  

Here’s a link to the GS1 website

   

FNSKU  

  • FNSKU means Fulfilment Network Stock Keeping Unit  
  • It is issued by Amazon and needs to be visibly printed on the product packaging  
  • Each seller gets a unique FNSKU even if the products being sold are the same  
  • Amazon does the printing for a price is can be expensive

Ways to pay the suppliers  

  • PayPal   
    • It is the best option as it provides a safety net to recall the payment made but is not accepted by all the suppliers  
    • Using credit card for PayPal provides an extra safety net  
    • Option to make part payments are possible
  • Alibaba Trade Assurance   
    • It is available with a single safety net to raise an issue and Alibaba will pay the mediator  
    • It is again advisable to use a credit card  
    • There are no options for part payments  
    • Accepted by all the suppliers  

“It is never advisable to make any payments to supplier via direct bank transfers also called TT (Telegraphic Transfers) initially”

Shipping options (not for samples)  

  • Courier  
    • Also knows as express  
    • The most expensive option available but is the fastest  
    • Chinese suppliers can arrange the dispatch at lesser rates  
    • Works with goods below 50 kilograms  
    • Shipping charges can be added in the invoice by the supplier  
  • Sea Freight  
    • Cheapest and the slowest option  
  • Air Freight  
    • Only viable for goods below 100 kilograms  
    • Packaging needs to be according to the specifications 
    • Quicker than Sea  

“There are hidden charges like loading/unloading and clearance which need to be added over the shipping charges provided”  

“No method is good or bad!”  

 

 

 

Negotiations  

  • Both MOQ and prices can be negotiated within a certain limit  
  • Trying to go overboard may force the manufacturer to supplier an inferior product  
  • Healthy negotiation can be around 10%  
  • Negotiation is to be done on the final product with all the customizations

Inspection  

  • Third party inspectors are available to verify the details of the manufacturer for a fee  
  • Manufacturer needs to be informed in advance to avoid hassle of the inspector being denied entry in the premises  
  • Third party inspectors are also available for per day wage to do the quality check of your goods before dispatch from the factory 

Supplier Verification  

  • Gold members are usually verified suppliers  
  • Onsite check by Alibaba indicates a manual verification done  
  • Assessed members are assessed by a third party and the assessment report is available  
  • Third party inspectors are also available to do the verification for a fee and can are trustworthy  
  • The supplier’s website should be checked for online presence but it may not be appealing which is okay  
  • Alibaba also shows the transaction levels which verifies the business done by the supplier  
  • Suppliers with various products in multiple category is an alert as they may be scam or middlemen  

Placing an order  

  • The order should be preferably placed through Alibaba Trade Assurance  
  • PayPal can provide a safety net to the buyer if the order is placed outside the Alibaba environment  
  • Purchase order should always have the smallest detail to conceal any loopholes for the supplier  
  • Purchase order should have a note about pre-shipping Quality Check to the buyer can be informed on time  
  • It should be mentioned that the supplier will have to pay for the QC in case of any major defect found  
  • Purchase order acts as a safety net for the buyer  

Pre-Shipment Inspection  

  • It is a mandatory practice till the buyer gains confidence over the supplier  
  • Inspectors should be hired on per person, per day contract  
  • Inspectors should have a detailed checklist along with the special instructions (if any)  
  • A thorough QC should be done for the first 3 to 5 orders to ensure that there is no foul play  
  • Inspectors can send the pictures of the packed/unpacked products to the buyer on special request  

Customs  

  • Professional freight forwarders and/or customs agents take care of this and should be hired as soon as the shipment is ready for dispatch w 
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