Product Sourcing for Amazon Sellers — 7 Tips
Product sourcing for Amazon sellers is key to get a profitable business up and running. Here are 7 quick and smart tips for sourcing reliable products from China
This blog article was first published on www.sourcingallies.com
E-commerce sales are slated to pick up in the coming years and by 2023 they are anticipated to hit $6.54 trillion, according to Statista. This means that currently the time is prime for you to source reliable products from China to sell on Amazon.
If you are unsure of what your strategy should be to find reliable products in China, here are seven smart tips that can guide you.
Seven smart tips for sourcing reliable products in China
#1: Evaluate profitability
For every product that you are interested in selling on Amazon, evaluate if the cost of sourcing and shipping the items to Amazon is significantly lower than your Amazon selling price.
The rule of three is one of the tools you can apply to find out if a product is profitable. The sales proceeds can be broken up into three components: one-third of sales goes into fees, one third in landed costs and one third is the profit you make. For instance, if a product sells for $21, you should anticipate a profit margin of $7.
The landed costs refer to collective costs to manufacture and ship your product to the warehouse and includes:
- Cost of inventory
- Custom duties and taxes
- Inspection fees
The costs also include the referral fee, which is the “commission” that Amazon charges for each item sold on the e-commerce platform. The typical fee is 15 percent of the product’s selling price that you pay when a product is sold on Amazon. There is also a selling plan fee for professional Amazon sellers which is $39.99 while individual sellers who sell less than 40 units in a month need to pay $0.99 per item sold.
Fulfillment fee is a per-product fee that covers the costs related to Amazon FBA packaging and shipping. This cost varies depending on the volume or weight of the products. Additionally, there is also a storage fee that FBA sellers pay. This can be a long-term storage fee or a monthly payment.
Many experienced Amazon sellers recommend finding a product that has a retail price of $25 and not more than $50 USD. This price range enables sellers to recover direct costs that include Amazon fees and advertising costs. Products that cost more than $50 can mean a drop in conversion rate and the number of customers who view and buy the product.
It makes sense to choose reliable products that are not seasonal on Amazon. You can make optimum profit by selecting products that sell year round.
For top sellers, the number of reviews are under 100 while the best product niche to choose are those with reviews below 200.
#2: Evaluate if the product is easy to ship
When you are looking to source reliable products from China, a key factor to remember is that lightweight and small products are easier to ship, less susceptible to transit damage, and cost-effective. These products are also easier to ship through air freight which means they reach the warehouse in a quicker time, allowing you to start selling them immediately.
Ocean freight is typically needed when you are shipping large volumes or when the product is heavy or bulky. This can result in a delay in shipment, apart from raising the risk of the products getting damaged due to weather/humidity fluctuations.
#3: See if there is room for improvement
Suppose you source complex or very high value products from China and your customers’ feedback or reviews are not favorable. In that case, it may be impossible for you to get these products modified by the China manufacturer. Choose products that are malleable for improvement based on user reviews. You can read the reviews for products listed by your competitor in your niche to get a feel of what products are easy to modify/improve upon.
#4: Easy to produce
Extremely complex products, electronics, or glass can be difficult to manufacture, require a high level of technical expertise and may have manufacturing and quality control issues. When you start out as an Amazon seller, it is best to avoid such products that are not reliable.
#5: Demand for the product
The key component of a reliable product that you can sell on Amazon relates to its demand. Evaluating if there is a demand for the product on Amazon is the first step to determining what product to sell on Amazon and formulating your China sourcing strategy.
Research on whether people are looking for the product on Amazon and determine if it is in high demand from customers. The sales figures on Amazon can help you understand what type of products are in demand.
Some of the products that sell the most on Amazon are in these categories:
- Home and kitchen
- Toys and games
- Sports and outdoors
- Beauty and personal care products
- Baby care
- Household and health care
- Clothing, jewelry, and shoes
- Home improvement
- Garden equipment
There are many search tools available for Amazon sellers that can help them discover the best selling, reliable products on Amazon. One such tool is the Jungle Scout.
Many Amazon sellers use Jungle Scout that is available as a chrome extension for Google chrome users. Other users not on chrome can also use Jungle Scout as a web application. Jungle Scout provides a host of useful data and analytics tools that help Amazon sellers find the best products to sell on Amazon as well as refine their keyword strategy. With the Sales Analytics tool, you can also organize and track the sales, expenses, revenue, and other Amazon FBA metrics while viewing historical performance over time.
If you have a product concept in mind, you can use the extension to find out whether it is in demand and how well it sells on Amazon. You can also find high-converting keywords for the product listing you have in mind while also getting a sneak peak into your competitor’s keyword strategy. The extension also gives you the historic keyword performance trends over the last two years as well as quarterly and monthly data which helps you get a full picture of your product’s popularity and seasonality.
However, keep in mind that while Jungle Scout gives you a lot of data on products that do well on Amazon, the tool does not help you when it comes to knowing whether these are the right products to source from China. An experienced China sourcing agent can guide you on selecting products that not only sell well on Amazon but are manufactured by reliable suppliers in China.
#6: Compliance with country standards
Before starting the search for reliable products to source from China, check if there are specific standards in the U.S. and/or the E.U. that your product has to comply with. These can include safety standards, patent or intellectual property conflicts, quality benchmark and any other legal requirements in the country that you are selling the products.
If you are looking to sell complex products such as electronics, there may be specific safety and technical requirements that the manufacturer has to meet. Testing these in China can be difficult and experience and expertise in the field may be necessary.
#7: Find a reliable China manufacturer
Once you have done your research on the best selling, profitable and reliable products on Amazon, you can shortlist or narrow down your product lists. The next step is to look for a reliable manufacturer for your product in China.
Some of the places you can begin your search include:
Alibaba: Alibaba, known as the Amazon of the east, is typically the first place that most Amazon sellers begin their search. As the biggest marketplace in China, Alibaba lists thousands of sellers and traders.
You can begin your search by going to Alibaba.com and creating your account. The next step is to start your search by entering a keyword for your product, selecting from the drop down menu the option of “Suppliers” and then clicking on “Search”.
While Alibaba displays thousands of results, many of them are not going to be relevant to your product category. It is also important to know the difference between manufacturers, resellers and traders. Traders and resellers may pose as manufacturers, which is why, one of the first things to ask the supplier is whether they are resellers or manufacturers. You can also look at their product portfolio and ask for further details on their factory or the product specifications. While a manufacturer can answer all your questions on the product technicalities, factory layout or processes, a reseller may either avoid the question or take time to answer.
You can also fill in the details of your product in the form that Alibaba provides and let interested suppliers in China contact you.
Another aspect to look for in Alibaba when choosing reliable suppliers in China is to check for ‘Gold membership’ status. Alibaba provides a Gold membership status to suppliers who pay an annual membership fee and may have undergone a basic vetting process. Although not indicative of the supplier’s quality or reliability, it is one of the useful criteria for your search.
If you come across suppliers who you think might meet your requirements, go to their company profile and read the details carefully. See when the company was established, what product categories they specialize in, their certifications, licenses and business registration details. You can shortlist the suppliers that possibly meet your criteria and add them to the favorites list on Alibaba.
Global Sources — Another good website where you can find reliable suppliers is Global Sources. The Hong Kong based marketplace is similar to Alibaba but is generally believed to be more reliable. The marketplace has a more stringent process of vetting suppliers and also offers supplier capability assessment and credit-check services. You can get information on the product quality, production capabilities and company status as well.
Trade Fairs — One of the best ways of finding a reliable supplier in China is to visit trade fairs in person and interact with suppliers. This is important as all business transactions in China involve establishing ‘Guanxi’ or a personal rapport. The Canton Fair is the biggest trade fair organized in Guangzhou twice a year where you will find suppliers of different product categories. The East China Fair is held in Shanghai once a year and features a good variety of exhibits and traders.
When you visit the trade fair, you can also find out if the supplier is reliable by checking the samples, visiting the factory and verifying their credentials.
A reliable supplier is one who has the following qualities:
- Experience in your product niche
- Production capabilities to make your product in required quantities and to scale up as required
- Established quality standards and certifications such as ISO 9001
- Is enthusiastic to enter into a partnership
- Produces all relevant certificates, licenses and registration details
- Offers a good deal
- Willing to send you samples
- Willing to allow on site inspection
Some of the red flags can be:
- Not in business for long
- Lack of experience in your product niche
- Very low pricing
- Not responsive
- Cannot produce certificates or licenses
- Not okay with factory inspection
For most Amazon sellers, visiting the trade fairs in person can be an expensive and difficult undertaking. Another key challenge involves communication. Many sales representatives or manufacturers in China do know transactional English but may not be fully versed in English. This can lead to problems when it comes to conveying the product specifications and other details, particularly as the measurements and units differ between the Western countries and China. Communication barriers can also make it difficult for you to establish Guanxi.
Amazon sellers can overcome these challenges by partnering with an experienced and reputable China sourcing agent. Select a sourcing agent who has decades of experience in helping Amazon sellers source from China and who has a physical presence in China. Ideally, the agent also has an established manufacturer network which can help you find a reliable supplier in quicker time instead of going through the laborious process of searching for China manufacturers.
The reliable sourcing agent not only helps you find the right products to source from Amazon but can negotiate with the suppliers for a competitive price. They also visit the factory and inspect goods to assure quality. By creating a backup plan, they can also quickly suggest another supplier in case something goes wrong with the first one that you have chosen. Another advantage of working with a sourcing agent is that they are well versed in all aspects of shipping and transporting from China to Amazon FBA. They effectively guide you on the various documents and certifications you need to produce at customs and for the freight forwarder to avoid any shipping delays.
While sourcing and selling a reliable product on Amazon can be a challenging process, partnering with the right China sourcing agent is the proven way to overcome these challenges.