Selling on Amazon and private labeling products means sourcing and almost inevitably importing. Today we work on finding high quality suppliers via Alibaba to build and grow your business, including strategies, roadblocks and critical points to cover to ensure you don’t get burned. Your supplier is a critical piece of your FBA success, make sure you set your Amazon business up for success with a reputable, reliable supplier. Money time…
Product Sourcing and What You NEED To Know
- Ways to use Alibaba to find manufacturers all over the world
- How to find suppliers for your product idea
- What is the difference between a trade company and a factory and what are the advantages of each
- How to contact and verify suppliers before purchasing
- What Alibaba Gold Star suppliers really mean
- Alibaba Trade Assurance and why you should never send money via Western Union
- Strategies to get quotes with less effort in early stages
- Why you SHOULD get catalogs of existing designs – can they supply multiple products
- Talk to you supplier, use Skype – it’s fast, and builds a relationship
- How to get better prices on quotes, shipping and minimum order quantities
- What is a lead time and what is “good”?
- Getting samples and what you need to know
- How to avoid extra customs fees
- Why Rus does small product test runs on Amazon
- Why Matt buys larger inventory investments to sell hard
- What happens when you run out of inventory on Amazon
Tools and Resources Mentioned During the Show
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Rus: Nice. So we’re going to talk about a little place a lot nearer to you than me. China.
Matt: China. Alibaba, guys. We’re going there.
Matt: How do you get your products made? How do you find suppliers that rock?
Rus: Yup. So one of the hardest stages I guess… it’s really easy to sit and come up with product ideas from the safety and comfort of your own sofa in front of your laptop.
But the next step is sourcing those products, getting them private labeled so they’re carrying your own brand and then getting them sent to the Amazon warehouse.
And for the most part, if you’re finding good product opportunities, the chances are that those products would need to come from Alibaba in China.
Matt: And Alibaba, guys is like an Amazon mixed with Craigslist. So this is how you connect with factories over in China.
Matt: Most of them are on there and at Saguaro(?).
Rus: Yeah. So the website is www.alibaba.com. If you haven’t heard of it before, it’s basically a big portal/directory listing of all the manufacturers over – not just in China. There are loads from like Russia, Ukraine, Vietnam, all over the world.
So it’s a directory listing of manufacturers and all of the products they make. And it is amazing.
Matt: Yes, it is. But it also can be incredibly challenging. And that’s what we’re going to cover.
Matt: The good news, guys is this is the grunt work, this is the hard part. When you’re building an Amazon business, once you’ve got it going, it doesn’t take much to get it to keep going. So let’s get that going.
Rus: Yup. So once you’ve got your idea, I’m going to use something I’ve been looking at recently – cake boxes as an example.
So when you’ve got your idea, go over to Alibaba and there’s a product search box. So stick to the old cake box or whatever you’re after into it.
And you can see – Boom! Loads and loads of listings of people in China that make cake boxes all in different styles of pretty much every shape, color and description or private labeled one which is awesome.
Again, you’re going to have to do this. You’re going to actually have to browse through the product listings to find one you want.
So if you’re doing a can opener or a cake box, you’re going to be given lots of different options. Some might be exactly the same like quite a lot of manufacturers. Different manufacturers seem to make the same product.
Some of the people on there – they might be more wholesalers rather than manufacturers especially in some of the sporting niches.
I’ve noticed that a lot won’t actually make the product themselves. They will just wholesale it to you. And because of that, they will charge a bit more.
Matt: Always ask about this. Ask if they’re a trade company or an actual factory.
Now it’s not necessarily bad to work with a trade company – because typically, they’ll work with a lot of factories which means you could potentially use this one company as your supplier for an entire line of products.
But your pricing might not be as good. And it’s good to know who you’re working with. So you going to want to put that into your email when you’re talking to them.
Rus: Yeah, exactly. We were looking at sporting goods and it was like – “Oh, wow! We can see a list of this entire range of products from this one company.” That makes life a lot easier.
But the next stage after you’ve found some products in Alibaba you like, you then go to contact the supplier.
Alibaba itself – the strength and beauty of Alibaba is it will verify suppliers. Nothing against China – It’s a lovely place.
But sometimes factories pop up and they only exist for like 24 hours – just long enough to take your money. So that was why Alibaba was created.
Matt: Oh! Oh! Let me throw a caveat on that for the rest.
Matt: So Alibaba does verify some suppliers, but they’re sneaky about this. So these golds and star coins that you see – that has nothing to do with being verified by Alibaba.
That just means that the factory paid a set fee which is actually pretty large. I spent some time in China and had some friends opening factories.
They basically paid, bribed Alibaba to get that. Now if they were able to bribe Alibaba, that means they have the amount of money that it takes to at least run the business. But that’s something to keep in mind.
The other thing – I cannot quite remember what the other thing was. Oh! And trade assurance. That’s why I use Alibaba. I’m not sure about you, Rus.
But if you run a payment through Alibaba – Let’s say I’m buying something and my inventory is 10k. 50% upfront, 50% on payment or on delivery.
The 50% upfront – if you pay with Alibaba, they’re going to cover you. So if your supplier decides to [Inaudible][ 0:05:15.8] and something terrible happens, you’re going to get that money back.
Trade assurance. It’s definitely something that makes Alibaba incredibly powerful.
Rus: Yup, exactly. The trade assurance and the Escrow – that makes it work. That’s why I like to use it. Never ever send money via Western Union.
Matt: No. Never send it ever. Oh my God! I’ve been scammed so many times – that apartment in Germany.
Matt: We all make terrible mistakes.
Matt: And I know you got lucky with the wire transfer, Rus. You had some mistakes. But at the very least, if you’re in control of it, you’re able to get that money back eventually.
Rus: Yup. Not necessarily. I made a small mistake and wired $11,000 to… The big number was fine. All of the numbers were fine. The account number was fine. I got the beneficiary name wrong.
And that was enough to set me back for almost two months now. But that got sorted out today though.
Matt: You probably made someone… $11,000 just hit in the bank account.
Matt: And before we go any further with Alibaba…
Matt: That’s how Rus does it. I like to personally use buying requests. And this is a good way if you want to test out a lot of different products.
Let’s say you want to get the cake box, but you also want to have six toed socks and all sorts of other things.
You can search in buying requests on Alibaba and see what other people have been buying and hop on their listing in a sense where you can get quotes from suppliers for these type of products which are already existing without having to private contact them.
They’ll reach out to you. You’ll get a couple of people that are more or less rubbish, but you get your quotes a little bit faster and with a little less effort if you’re still in the earlier stages.
Rus: Yeah. I’ve tried that before and had mixed results. But if you’re really after a product, then doing both is the best way. That’s going to get you the most suppliers, the most quotes and you can…
The method might suggest that you can just sit there and wait for the quotes to roll in, rather than hunt them down and stuff.
Matt: Yeah, that waiting time could be a pain.
Rus: Yeah. Yesterday, I probably asked about 30 people for quotes and I think about seven got back to me today.
So that seven which I’m going to follow up shortly after we’ve had this talk about… That’s not 30. Not yet anyway. So I might take another week or so for all of them to roll back.
Matt: So start this process well and advance because it’s going to take a while to get your products to Amazon.
But let’s say you’re starting to reach out to Alibaba. How do you contact suppliers and make sure that you make things work?
Well, one thing – you’re dealing with people from another country. English isn’t first language. So you want to make sure that communication is spot on.
I like to send the pictures of exactly what I’m looking for, products on Amazon that I like and want to have something similar to and always try to get catalogues of their products.
If you’re going to work with a supplier, make sure that – “Oh, wow! We could do more than one product together.” That’s pretty cool and also to see what they offer.
So just ask them. “Hey. Can you shoot me over a catalogue of your existing designs? We’re potentially interested in private labeling more than one of your products.” And they typically love that.
Rus: Yeah. Don’t be afraid to actually talk to them. I always follow up with mine on Skype – whether it’s via an actual real-time call or just a real-time chat.
Just because sending emails to [Inaudible][0:08:49.3] can be a really slow process. And they also are aware of this. So they’ve always been quite happy to have Skype chats with me.
Matt: And it makes it a lot more personal too. Does it?
Rus: Oh, yeah definitely.
Matt: The more personality you can put into this relationship, the better – because they have a lot of clients and you don’t just want to be a number. If you can have…
Matt: My suppliers taught me about a little hellhole races they’ve had to do. Apparently, they’re picking up a video game project.
The more you can get on their good side, the more you can, the more you win, the more they win.
Rus: Yeah, yeah. There are so many birks(?) out there specifically tailored to how to work with Chinese companies due to the cultural difference.
One of the guys I was speaking to recently – I think he was from Canada as well. They had a certain type of spirit in Canada.
And as he was dealing with these Chinese suppliers, he’d always send them really expensive presents to say how grateful he was.
And then one year, he got tired of sending them a really expensive present and just asked them what is it they wanted.
And apparently, there’s some dirt cheap $20 a bottle [Inaudible][0:10:00.5] in Canada which they wanted way more than any of these $200 to $300 presents he was sending them before.
So the Chinese are really interested in cultures outside their borders. So don’t be afraid to actually start talking to them properly.
Matt: And it’ll pay off.
Rus: Getting engaged.
Matt: If you win, they win. And when they win, you win.
Matt: You want to make sure that you’re building this up as a long-term thing. This isn’t a one night stand for your business so make sure that you focus on that.
Matt: But at the same time, realize that you’re both in business. So you are both (in essence) trying to screw each other a little where they both win.
So they’re going to give you prices that aren’t necessarily the best quotes. I personally always ask.
“So we have quotes from some of your competition. Is this your best price? – Because they’re offering is slightly better.” Things along those lines. You almost always get better prices – better prices on shipping and quite a bit of things along those lines as well.
Rus: Don’t be afraid to haggle because they’re going to come at you with the highest price they can to begin with or their minimum order quantity might be – “Oh, yeah. We can only do at least 5,000 units” when you’re after a 100 unit sample or something.
So they will be flexible if you push them.
Matt: China is a haggling culture.
Matt: And with those sample sizes, one thing that’s nice is as you start to order more, (not just re-orders, but larger sizes) you can typically get price breaks as well.
So working with the supplier – they make money on the unit margins. So the more that they can push out, the better it’s going to be for them, the better the price they can give you.
This typically affects lead time though. What do you look for, for lead times, Rus?
Rus: Lead times. Well…
Matt: What is a lead time for people that don’t know?
Rus: Okay. The lead time is the length of the time it takes from your order being received to being manufactured, made. Some people also add delivery time onto that as well.
So if it’s being manufactured in China, you then got to get it shipped into America. And depending on how you’re doing the shipping, you might have to get it shipped again from a US port into the Amazon warehouse.
So the complete lead time would involve… the start date would be when you send your order to the manufacturer. And the very end date would be the day it arrives in Amazon.
Now with China, your lead time could be anything from one month to three months.
In very rare cases, you can get it maybe down to one to two weeks if private labeling isn’t too hard – they’re very small, very cheap items that you can get, send them via DHL air freights over to the US.
And you might be able to break it down into two weeks. But in general, if your lead time is a month, that’s a good lead time.
Matt: And that’s really important to think about. So you’re not just thinking about – now you’ve got to plan this out in the future – managing inventory and cash flow.
That’s a nightmare. We’re not going to get into that yet. But that’s definitely something to consider when you’re looking at lead times.
Matt: Always ask if they can do better because typically, they can. And they’re just giving you their worst case number so that they don’t accidentally miss it.
But the faster, the better and the more that you communicate that to them, the more they’ll be able to work with you on that.
Matt: A couple of more things on Alibaba. So getting samples. Hopefully by now, you guys are starting to look at some products. Maybe you have products already or you’re already running an FBA business.
Samples are really important for checking product quality. Some factories suck and some factories can be incredible.
What do you do in terms of getting samples, Rus? What’s your process?
Rus: The process we’ve had in the past is – I’ve made PayPal payments to them. Basically, we’ve had the discussion. They’re up for sending me a sample.
When I’m looking for a sample, I want something that’s representative of what I’m going to be getting.
So now I ask if they’re selling these products on Amazon private labeled for anyone else. And generally, the answer they’ve always come back with is yes.
So it’s like – Can they send me a sample of one of these products with a private label on it?
Let’s say you’re ordering one of those cross fit stretchy bands that everyone uses to do assisted pull-ups and stuff. So let’s just say a big green piece of rubber that people private label it by having a stamp on it.
You don’t want just a big green band to turn up. You want a big green band with someone’s label on it to turn up. So not only can you assess the quality of the product itself, but assess the quality of the private labeling that’s being done.
So the first thing you want to do is express that to them. Then depending on how they work, they might either just accept a quick PayPal payment and then get it DHL air freight it over to you which can take a couple of days.
But I’ve often had suppliers point me towards Ali-Express – Alibaba’s sister site where they’re selling the same stuff. And I’ve had to buy it from Ali-Express instead.
And one guy was even just like – “Well, this is on Amazon. Why don’t you just buy it from Amazon?” I wasn’t too pleased with that as an answer.
Matt: That’s interesting. I’ve never gotten anything like that. I’ve always gotten either PayPal or they’ll be like – “You could wire or transfer to me.” And I’ll be like – “Okay. So we can do PayPal or I’ll find something else.”
Rus: Right. Yeah. It’s been even across all three options really. My favorite way would be – I think just PayPalling them rather than buying it on Ali-Express. PayPal has a 30 day refund complaint thing anyway.
I was looking at samples for bamboo breadboards at one time. And their guy was like – It’s going to cost me $300 for him to send me a sample of a bamboo breadboard.
And it was like – “Are we just going to stop talking now? – Because I know that obviously, you don’t want me to waste your time. But you must also appreciate that I don’t want you to waste my time.”
He must’ve been new or something because there’s no way in hell I’m paying $300 for a sample of a bamboo breadboard.
Matt: Absolutely. Here’s a lesson that I’ve learned as well.
Rus: Yeah. That was…
Matt: Go ahead, Rus.
Rus: That was the only option he presented me as well. If he was selling on Amazon, he could’ve pointed at one of his Amazon ones, but no.
Matt: Oh, that sucks.
Matt: One thing you should definitely keep in mind is import taxes.
So for instance, I’ve had suppliers send me samples. And if they mark that off as the product has value i.e. it’s like a real transaction, then you’re going to get double whammied on the shipping and you’re also going to have to pay whatever their customs fees and tariffs are.
So I’ve had shipping fees basically doubled on samples because of that. So ask your supplier to say to sample with no retail value and you can get around a lot of the hassles with that.
Rus: Yeah. I had lots of samples shipped to me when I was in Thailand. And also, my business partner is in the UK and we’ve managed to get around most of the vat and import duty problems for saying exactly the same thing. It’s a sample with no commercial value. That can save you a little money.
Matt: Which is very important when you’re getting started because you’re going to want to try a lot of samples, typically.
Matt: That was one of the beautiful things about being in China while I was there – was you get a sample in the mail, two days, totally free.
Matt: So potentially, check out China. But that’s not what we’re talking about right now. We’re talking about Alibaba.
Rus: Yup. Yeah. One of the other things, a huge concern is – you’ve got your single product sample. You’ve tested it. You like it. If it’s a can opener, it can open cans and it’s made out of muscle and you love it.
So the next step is you want to test this on Amazon. You don’t want to buy 10,000 units of something for your first order up on Amazon and hope that the stars have aligned, all of the decisions you’ve made so far have been spot on and perfect and it will sell. That’s a bit of a gamble for your very first product.
Matt: So you go… This is the exact opposite.
Matt: Let’s talk about this a little because I think we can get into a little bit of a debate here. So what’s your process for this, Rus?
Rus: It depends on where I’m ordering the product from, how much it costs, what the lead time is.
For my first order, I ordered a sample of 500 units and we sold out within a month or two I think. And then for our next order, we ordered 1,000 units. And then for our next order after that, I think we went to 2,000 units of that product.
But for sample sizes, I generally try to keep it to around 500 units or maybe $2,000 on the first order to test it – depending on what that gets me.
I’m currently looking to source six new products from China and I’m after minimum order quantities of 100 for those samples.
Rus: So that’s quite low.
Matt: Okay. So I come at this from…
Rus: But you know…
Matt: Go ahead.
Rus: Its low, but you can always order more.
Matt: You can always order more. I know some of your lead times are a little bit shorter as well.
Matt: But for myself, I actually went the exact opposite route. So we can talk about that a little bit.
Matt: I knew I wanted to get into this. I am very much a data and go all the way kind of guy. So I put a lot of effort into product research – seeing what would work.
And then I had a lot of experienced FBA sellers telling me – “Get at least 2,000 units so that you can really market the heck out of this thing.”
You want to make sure you’re running with it – because running out of inventory, you get a decent size hand slap. It’s what everyone seems to recognize.
So I wanted to make sure I could go hard, sell hard and to be able to re-order in time.
I went straight to 2,000 units. It was a pretty big initial investment for me. But I think that’s a big part of the reason why my Amazon business has taken off as quickly as it has is.
Some of the marketing and extra hard pushes that you’re able to do with a higher inventory upfront, I think a lot of that is going to depend on your personal risk level though, and what kind of cash you’ve got. Because if you don’t have the money to really go hard at it, you might have to start with smaller inventory orders and just scale a little bit slower.
Rus: Yup. One of the big things when selling on Amazon is – you have this perpetual problem of I guess it’s to a certain extent, cash flow combined with the lead time.
Amazon will send you a payment every two weeks and then maybe you’ve got a month or two month lead time on a product and so you get your first product.
Let’s go at my small example of 500 units. If your lead time for another order is six weeks and then you realize that you’re going to sell out of all 500 units in two weeks’ time, you’ve got to start all over again.
Your best seller rank will drop. Other people will capitalize on the fact that you’ve got no stock and you’ll just be sat there wiggling your thumbs on the four weeks whilst you’re out of stock and you’re waiting up your new product to be delivered.
So there is definitely a lot to be said for large order volumes.
Matt: The number two guy who was in my market when I came in – he’s gone. He ran out of inventory and he’s not on the first two pages anymore.
Matt: It can be competitive. You want a – Momentum breathes momentum. Winning breathes winning. You can spend more on ads, you can keep rolling.
Moral of the story – Look at what you’re able to do and then do the best you can do, I think.
I think we’ve pretty much butchered this Amazon topic. You got anything else, Rus?
Rus: Yup, exactly. Not really. Just take action. Go out there and actually do this because if you will not, someone else is.
Rus: They might be running with you…
Matt: Guys, crush it. I was talking to a friend earlier and he wasn’t sure. He has an Amazon business. He wasn’t sure if he should make the upfront shop on his own to launch a new one.
His first one wasn’t doing so well. He had the research done. I’m like – “Come one! Just do it! Shoot the emails out. Go for it if you think it’s going to work. If you don’t bet on yourself, who is going to?”
Rus: Yeah. Just get out there, do it and be thorough. And don’t be afraid to talk to the Chinese sales reps on Skype or by the phone because they are nice people.
Their English will be better than our Chinese for the most part. And that will be an adventure in itself – crossing the language barrier. But if you don’t do it, then you don’t have a business.
Until you’ve started that conversation and started making orders, you’re still just doing nothing. So get on it.
Matt: 1% seems to make it happen. So let’s be the 1%, I guess.