Amazon FBA 101 – Finding A Supplier

Adam Amazon 4 Comments

So if your following along and getting in the game, then you are a big chunk of the way down the path to starting your Amazon business. If your new to the series, check out:

Now that you’ve done your research, evaluated the wide swathe of product options, picked one and determined the sales and competition are in line, it’s time to get to the exciting part of the journey. Let’s source and find your first product!

Budget

How much do you have to spend? I’d say if you are working with less than about $3,000-5,000 you are going to be in a tight spot to do a substantial first launch. Some people have asked me, why so much? To be perfectly frank, if you can’t scrape together $3,000 then launching an international importation and retail sales business might not be for you yet. Save up a bit. I would suggest trying out retail arbitrage and build up your bank account. It’s slower and often lower margin, but it’s a much safer game with a faster turn around.

Consider the basic math. 500 units x $2 = $1,000 plus $200-300 in photography, and another $100 or so in shipping to amazon and miscellaneous other things. It also provides enough money for something like Jungle Scout for research and Feedback Genius for email follow-up. These are MUST HAVE tools if your serious about this. This is still going to be $1,500-2,000 and that’s assuming a very low number of 500 units and a super cheap product at $2.00. Most items won’t be that low.

Can you do it with less money? Sure. There’s example of people literally starting with a single item off of AliExpress (which is much more expensive than Alibaba), selling it and doubling their money, buying 2, doing it again, and rinse and repeat in to 5 figure businesses. So if you want to, don’t let me stop you, but if you want to do a real launch, with a sufficient amount of inventory, you need a few thousand bucks.

The more you are able to bring to the table, the better menu of products become available and your ability to move in to more expensive product areas, competitive spaces, custom design or just launch with the right amount of inventory and do giveaways.

Alibaba

The sky is the limit when it comes to finding a supplier. They exist in the USA, Mexico, Asia, and a dozen other locations. You can go the harder route and go search out those places and manufacturers, but to be honest there’s really 1 place that 99% of the FBA sellers are headed: Alibaba

Why does everybody head to Alibaba? Because it’s comprehensive, online, and easy. Alibaba essentially gives you online access to the biggest manufacturing country on the planet. Not only that, it’s all online. Catalogs, photos, examples are everywhere. It’s as easy to search as Amazon itself. You will likely find dozens to hundreds of suppliers for any given product idea.

So let’s take a simple example – jump rope (I don’t suggest you sell this item, hugely competitive). There are 24,000 suppliers! Just the number one seller offers the product in 4 colors.

Clearly there are 2 many, so let’s try narrowing down your options. If you notice the boxes in the red below, you can choose 3 options – trade assurance, gold supplier, and assessed supplier.

Choosing these options aren’t magic. They won’t guarantee you a good product, but they do help eliminate a few of the shadiest or cheapest characters, because getting qualified for any of these options takes a bit of time and money.

Depending on your product area, you may have a huge number of potential suppliers or almost none. If your initial search has thousands or hundreds of options, I would click each box, see the change in suppliers and narrow down as far as possible.

amazon 1

 

Now what? It’s time to click around, find some suppliers that interest you, and reach out. What should you be looking for? Glancing at the image below you can see that the manufacturer estimates a cost per item of $2-4. You should check a variety of suppliers and see how they line up against each other as well as how those numbers work in your overall profitability calculation.

The list shows a minimum order quantity (MOQ) of 10 pieces, which is the absolute lowest number I’ve ever seen. Typically I see MOQ’s somewhere between 500 and several thousand. If that seems like too much, don’t assume it’s an immediate dealbreaker because while a lot of suppliers list high MOQ’s, once you contact them they’ll often drop it substantially for a slightly increased price (assuming you’re not customizing the product).

You can see where they ship from and more importantly what your options for payment are. This supplier has an unusually generous payment options, including paypal. Most often I see suppliers who will allow payment for a sample by paypal, but the large orders are typically T/T which is shorthand for a wire transfer. Suppliers prefer this because it’s no cost to them, while paypal and other services charge a fee. If you are afraid to send a large wire with a new supplier (since you’ll have no recourse), you can always offer to pay that fee for them.

At this point, I go through the top 100 hits at least and pick out what appears to be my favorite 10-20 suppliers and start hitting that contact button. For my particular niche I’ve created a simple form I can copy / paste with the bulk of my questions I would like answered. A bit more generic version to get your juices flowing is below:

INTRODUCTION


Dear XXX,

I am the purchasing manager for XXX company. We are currently a retailer of xx and looking to expand our product line with a new manufacturer. We are interested in working with you and have some questions, I’m hoping you could answer. If everything makes sense we would look to order a few samples. If the quality and price are agreeable, we plan to start with a test order of 500 units, with a quick follow-up of 1,000-2,000.

PRODUCT DESCRIPTION: If you are ordering a generic item the sell, this can be pretty brief. If you are customizing, provide as much detail as you possibly can. Make it painfully  painfully specific even on things you would assume any manufacturer would know. If possible provide pictures, dimensions, material requirements and anything else you can think of.

Also be sure to provide detailed information on your packaging expectations. These can move the needle depending on how custom your nice you want it to be.

OPTIONS: You would also ask here about their ability to do any customization you are interested in.

SAMPLES: Do you offer samples? What is the cost per sample? What is shipping per sample via DHL express shipping to zip code XXXXX? What would be the timeline to produce the sample?

PAYMENT: What are all the options for payment methods? Do you accept paypal? Do you accept Alibaba Escrow payments? If you do not accept these, would you consider using them if we paid your fee? What percent down (typically 30%) versus final payment? Does this include door to door shipping?

PRICING: Request pricing for the standard item and customized item for your smaller test order number (whatever that might be) as well as your larger follow-up order.


Blast that out to as many suppliers as you choose. I tend to think around 10-15 is probably what I would start with and expand further afield if you don’t find what you are looking for.

It will likely become clear quite quickly who you should speak with further. I find that about 30-40% of suppliers don’t answer at all or take weeks to do so. Toss them out. This is not a process for second chances.

Take the quality responses and evaluate a few things.

  • How good is their English? In almost every case it won’t be perfect, but good English is a good sign. This isn’t a rule. There are bad suppliers with good English and vice versa, but I find if their English is good, they’re usually experienced with dealing with Americans and are much more responsive.
  • How is their pricing?
  • How are their customization options?

Pick your top 5 and order samples. Hopefully this process is quick. The more custom, the longer those samples take and the more they may cost.

Once you’ve received them, you’re almost there. Evaluate your samples as carefully as possible. We screwed up badly on this front (more on that story in the future) and have paid for it with a lot of refunds, a few bad reviews, and the need to change suppliers, which was a giant pain and cost a good chunk of money.

If you’re not an expert on your products design, then go find an expert. For example, if your selling purses, you need to find a sewing expert to evaluate bag construction. If it’s a kitchen item, beat it to hell and show it to a real chef.  If you sell an electronics item, god help you.

Ordering

Now you are ready to place your final order. Send a final request to your manufacturer outlining all over again every single requirement you have, and ask for an invoice reflecting these details, including the payment method, down payment breakdown, and banking information. Do your best to eliminate any possibility of a misunderstanding. Now send payment, and get excited!

A word of caution, before sending the final payment (typically 70%), request as much visual evidence of your completed product as possible. If they’re available, do a skype or google hangout or facetime. If that’s not an option, get LOTS OF PHOTOs. Get close ups of all the details of your product, including packaging, and ensure everything looks good. In addition, get some shots of the bulk of the product in 1 shot, so you can be sure they didn’t just produce a handful for photo purposes.

Conclusion

You’re getting close to the finish line! The place most people get stuck is simply choosing a product. You’ve made it well past that stage and should be proud of yourself. Now it’s time to start doing all the prep you can head of your product arrival, so you can hit the ground running with sales. Tune in for more on that next time.

Are you selling on amazon or have started the process?

Anything I should add to the information above?

Let me know what you think.


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Comments 4

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      Author
  1. Adele Smith

    I have to laugh at these articles that give a BIG pitch saying how easy and inexpensive it is to start such and such a business, then they’re like, “Oh, by the way you will need $5,000 to $10,000 to really do it right.” Ha, ha ha! What a joke!

    1. Post
      Author
      Adam

      Adele, a couple of points:

      1. I never said it was easy and I didn’t make a big pitch. I’m not selling anything. I don’t have a course. I’m simply sharing what I’ve learned. In the first paragraph of this article, I said if you can’t come up with $3-5k then this may not be for you yet. So… I don’t know where you are getting this, “oh by the way”. We started with around $5,000.

      2. You can start at whatever amount of money you can afford. There are multiple examples of people starting with under $1,000 and turning it into a real business. To do it is going to take a LOT longer and a lot more hustle and ingenuity but it’s been done.

      3. If you can’t come up with $5,000 to start a business then I’m sorry, but you probably are going to fail even if I wrote you a check for double that. People who really want it find ways to get it done. You can bring on partners (I have one that I split the work and cost with so that’s only $2,500 each), you can sell your car, you can get a loan, or you can go slow and save from your day job or play the retail arbitrage game with a few hundred bucks until you build a bank roll to launch your own brand. If you really find it such a barrier, start a business that doesn’t involve physical products. This blog can be done for under $100. Nobody can eliminate the fact you need physical products for a product business. Sorry.

      4. It’s never been cheaper in the history of the world to start a retail business. Prior to the internet you needed tens of thousands of dollars (when that was a lot more money), a store-front, employees, insurance, utilities, etc… just to have a mom and pop store that probably did less per month that I do on amazon now (and we’re still small players). Once the internet came around, it still cost tens of thousands to get a good e-commerce store online up until the past few years, plus you needed a place to store your products and handle your shipping and logistics. Shopify, amazon, quickbooks, google analytics, adwords, etc… and other amazing software online has made it possible to run beautiful stores for under $100, use 3rd parties for shipping and logistics, keep zero employees, and still sell worldwide. IT’S NEVER BEEN EASIER AND YOU ARE WHINING AND COMPLAINING ABOUT HOW HARD IT IS. If you want to succeed go get it done. If you want to complain about coming up with $5k you weren’t going to make it anyway.

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