There is an old saying in China – The first step is always the hardest. When you are importing from China, you’ll make lots of mistakes in the beginning. This applies to all of us, the differences are how many mistakes you’re going to make?
Making mistakes doesn’t shame, in the other side it can teach you a lesson, so you will never make it again and you know how to do it better next time when you face the same problem.
But, what if you know these mistakes in advance?
To help you better start in the beginning and not to follow the same old disastrous road, we have revealed some of the most common mistakes Amazon sellers make when importing from China.
Let’s dive right in!
Gentle reminder: If you don’t know how to start the Amazon FBA business, you might want to check our another post “5 Safe And Practical Ways To Start Amazon FBA Business“. It will guide you how to start Amazon FBA safely and at minimal risk.
Where are you find the suppliers mostly, Alibaba, right? So when you’ve screened out the suppliers and start to contact them, how are you going to introduce yourself? For example, if you start your email like this: I am the CEO of XXX company… Any experienced Alibaba suppliers they will immediately tell this is one person game, because any decent-sized company will have functional departments, such as purchasing, marketing, product development.
So, even if you are the CEO of company, position yourself as a buyer, as a purchasing agent, senior buyer, even purchasing manager is fine. Down the road, you can always use this arrangement, you can use your CEO as leverage to negotiate with the suppliers.
Quantity price break is a tiered pricing structure. The higher your quote volume, the lower your price. You should always ask your supplier to quote at the higher quantity and use it to negotiate your lower quantity buy.
But don’t go too far for this. The mistake a lot of people make is to ask for an irrelevant high quantity.
For example, if your monthly projected sales quantity is 500 units and your supplier quote you 8 dollars per unit. To get a better price, you’ll ask for a quote for 10,000 units, as you wish, they quote you 5.5 dollars. You might think, Oh great, I am saving 25,000 dollars. But wait, let me point out the problem with the 10,000 units quote.
- The 10,000 unit is like 2 years inventory if you’re selling 500 a month, are you going to buy 2 years inventory a month? Probably not.
- At 8 dollars per unit, your profit margin probably at 15% – 20%, you may feel that is a little too tight, may not be a good product. But at 5.5 dollars your profit margin could join at 35 – 40%, this creates an illusion for your margin analysis.
- When you’re ready to cut the purchase order, if your purchase order quantity is much lower than the 10,000 units, you might create a disappointment and distrust with your supplier, which is not good.
Therefore, keep yourself grounded when you are asking for the quantity price break, ask a relevant quantity price break.
Remember this, a well sold out RFQ will be more likely to give you a good quality response. The mistake a lot of beginners make is like: can you pls give me a quote for this product, and that’s it, without any further specification.
Do you need a customized logo? Do you need to change the design or shape? What if changing the design and shape will involve tooling modifications? You need to be clear at the front.
I understand that you may not have a lot of specification ready when you are doing the product research. The easiest way to do this is to go out to Amazon, find a product that is close to the product you want to customize, copy the image and copy the specification inside the listing and send it with your RFQ.
The RFQ due date not only makes your quote look more professional, it also serves two other purposes.
One is it calls out the attention to detail from your suppliers, the other is it helps to eliminate some of the middlemen. The direct manufacturers should be able to respond to your quote within 1-2 days, but a middleman will have to run around and find your product.
Depending on your product complexity, you should always put a due date on your RFQ. The due date also helps you to organize your quote and put a cut-off date for your quote analysis.
How can you commit sourcing money without knowing your total landed cost?
Before you launch a product, you should always do the cost scenarios because your buying quantity could be different. What is your worst case scenario? How could you even sell a product without knowing your worst case scenario? Some people do that and quickly they find out their selling price is very transparent, it’s public information, everybody can find out from Alibaba, Aliexpress or 1688, etc. The only mystery that they didn’t solve is the total landed costs.
So, don’t make that mistake. You need to do your homework, you need to do your analysis, making sure you know your true landed costs. The landed costs are easy to get, check with your sourcing agent or freight forwarder, they will give you a clear view.
Besides, the product quote you get from your suppliers is not your total landed costs, you need to think through every cost elements, you need to include all of them into your calculation.
A quick tip here: After you know your total landed costs, you will negotiate better because you know your bottom line.
What does 10 cents could do for us? Not much, it’s just a dime. But, if you multiply this 10 cents with 10,000, 100,000, this 10 cents become thousands of dollars. What I am saying here is the 10 cents could be a very expensive mistake for those big sellers who are already scaling up selling thousands of dollars because their costs are higher. Instead, they could have saved thousands of dollars if they have negotiated the 10 cents dime at the beginning.
For those of you who are just starting out, I don’t want you to make that mistake. For example, your product cost is at $4.60, if you know you’re going to continue to order, negotiate down for $4.50 and save that 10 cents. Otherwise, you’re leaving a lot of profits on the table.
So, if you want to grow, and you’re determined to make a lot of money, always try to negotiate with your suppliers for a better quote. This change of money, your profit may just start from this little 10 cents.
My supplier sucks, I hear this lot actually. Well, I agree. A bad supplier can cause a lot of stress, a lot of headaches, a lot of follow-ups, a lot of losing sleep, and sometimes they cost us a lot of money if they are loading late or they have poor quality.
The question is, why did you choose this supplier to begin with? I have to say, choosing a good supplier is just as important as choosing a good product, sometimes even more. When you choose a good product, at least there is no money involved yet. When you choose a supplier, there are thousands of dollars at risk.
When we choose a supplier, there are people involved. When there are people involved, you know, things tend to get complicated. That’s why not only we need to know how to qualify the suppliers, screen the bad apples out. We also need to know how to write up the terms and conditions to prevent bad things from happening. Otherwise, we will leave the doors wide open hoping that things are going to turn out to be good.
That’s why I say it’s a mistake to blame the suppliers when things go wrong. Instead, we could take better control of the situation to prevent the supplier from costing us thousands of dollars.
I know there are many people, they are brilliant, they got a great product pick out, they are hard-working. But they seem to be perpetually stuck at the beginning stage of sourcing, they couldn’t make any commitment.
3 months pass by, 6 months pass by, 9 months are gone, nothing is happening. You do know that this indecision is costing these smart people thousands of dollars if they have launched the products. I hope you’re not one of those smart people who are having a hard time deciding to move forward. We all know that the market is moving, opportunities are moving, market and opportunities never wait for indecisive people.
I am saying these not to push you off the cliff. That’s why I am here share with you the best sourcing knowledge to empower you. If your indecisiveness is because of your fear of not knowing the complete picture of sourcing. You can find a sourcing agent to guide you through and help you import from China. How to find a qualified sourcing agent? There are 5 things you need to know before choosing a sourcing company.
Regardless what you decide to do, don’t let the indecisiveness stop you from making progress, because we need to continue to grow and make money. 6 months from now we need to be at a different place.
The 8 mistakes we listed above are from our years of sourcing experience, and we hope that you can learn from it and avoid it when contacting the suppliers or negotiating with them.
Of course, there are other mistakes that Amazon sellers will make when importing from China, we will review it and write in the next post. If you’re importing from China and you’ve got the problems or you are suffering from the suppliers, leave your comments below, we will discuss it for you.