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My Three Biggest Fails As An Amazon FBA Private Label Seller

By Garlic Press Seller

Learn from one seller's mistakes made selecting, sourcing and importing products from China, to sell on the Amazon marketplace.

My Three Biggest Fails As An Amazon FBA Private Label Seller

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Ay Jay

“My key takeaway from this fail: ALWAYS inspect your goods before paying 70% to your supplier!”

How? Should we put down 30% deposit then have someone inspect it before paying the outstanding 70%…?

Also where should the product be inspected, at the suppliers warehouse? At the port if its FOB?

And who do we get to inspect the product? Should we hire a 3rd party company.?

Mark Hetherington

This is my advice for anybody doing something similar. The key takeaway from this is not to think you have an instant business just because you can throw money at it. It takes years, and lots of mistakes, to get things right to the point where you don’t have to worry about it.

In fact retailers that have been around for decades are failing for all sorts of reasons, from buying the wrong products, following the wrong trends, even failing online because they’re not used to it. There are countless High Street stores in this final bracket because quite simply, they’re out of their comfort zone and don’t know what they’re doing.

I don’t mean to be insulting, but there’s so much wrong with this I don’t know where to begin. For one thing, starting “small” isn’t buying 1000 units. It’s buying half a dozen. If they sell, buy another 30 – half a dozen from 5 different suppliers.

Buying enough for 4 months? That’s commercial suicide online. You only need someone to come along who got a better deal and can undercut you, or one of the hundreds of thousands that think they can survive and prosper on 5% profit because they’re so cheap that everybody is going to buy from them – and there are a lot that do it. As soon as they fail and disappear another one comes along.

Then there are changes in trends, or in policies. Amazon could decide at any moment they’re not going to allow that product any more and you’re screwed, and they often do it with a popular product because they see that it’s something they can make a profit on themselves and the way they do it is to ban everybody else from selling it. It happened to me on more than one occasion.

Fail #2 – Getting screwed. Welcome to the real world. There is a little more professionalism from Chinese suppliers than there was a few years ago a many have woken up to the fact that regular business is more profitable than screwing customers once and disappearing. My opinion is this used to happen a lot more than it does now, but it still happens.

I’ve always been a big believer in “you get what you pay for” though, so if you’re trying to get stuff done on the cheap you’re going to get cheap stuff. I don’t really need to add much more to that.

Fail #3.

Be careful here:

I never used to touch anything under $20, but at a time when I was struggling to sell much of anything during a quiet spell I bought in a number of what I call “complimentary products”, accessories relating to what I was selling. I chose items that sold for around $10-$15 and many of them started to sell extremely well, and usually with 50%+ net margin.

Takeaway = 3 items selling for $10 each is better than one for $30 that isn’t selling.

Demand: $3000 a month for one competitor means only $1500 a month if another one joins in. 3 sellers splits that to $1000 a month and so on.

The same applies to profit margin, the more sellers start selling the product (or similar), the more the price, and profit, will come down. So you can’t rely on these factors.

Easy to manufacture: Should not matter unless you’re the one manufacturing them. A good quality product is more important in my view, and easy to make products are likely to have more competition from firms making similar items.

Weak competition: Again fine to start with but as soon as you start selling them and doing well somebody else will come along and start selling something similar for less.

So what’s the answer? There isn’t one. Because if there were, somebody would have come along and cleaned up. My recommendation, based on 30+ years of sales and 16+ online, is diversify. Don’t search for one killer product unless you think you’ve invented the next iPhone and have backers who will pay for your gamble, but sell as many different products as you can comfortably handle and keep on updating and changing your catalogue.

This is what all the major retailers do, and have done for decades, because it works. The advantages are you don’t need to buy as many of each product so you can start smaller and build it, and if a product goes stale you can get rid of it and replace it with something new.

Yes, it’s harder work but there’s no such thing as a golden egg and if you’re not prepared to work at it you won’t make it.

Alex

Replying to Mark Hetherington

Hello Mark, thank you for sharing your experience. I have a quick question, which I wouldn’t post publicly. Can you write me at alex @ bindwise [dot] com

ScarfKing

I appreciate this poster’s candor and helpfulness, and will respond in-kind.

I’ve been importing from South America and Asia since 1984.

I NEVER negotiate prices. I will say, “I can’t sell it at that price,” and then leave it to them to decide whether to lower the price or not, but that’s only if it’s true and I’m giving them a heads up. My feeling is that they gave me a price that works for them, and that’s it. Nobody can work for free, and it’s not to my long-term advantage to have them making little profit.

In the first instance, when he negotiated the price downward from $2.67 to $2.19, he basically took away all his supplier’s profit after the supplier had made a low-margin, low volume order for him to develop the business. That told the supplier that only one of them was going to increase their profits as business increased, and that supplier was no longer willing to invest in the relationship.

I view my supplier relationships as partnerships. Some last 30 years. I’ve seen their kids grow up and take over the business. If I’m making money and they’re making money, that’s a good thing. I never try to take money out of their pocket. Suppliers have a million ways of helping you or hurting you. They can make extra effort to deliver on time, or they can let it ride. They can get you good deals on shipping, or they can just go with whatever agent is most convenient for them. They can do a below-MOQ order as a favor, or just say “Sorry, that’s below our minimum.” And they have a million ways to hurt you if they feel like it, as is shown in the example given. You can save a buck on the purchase price and have it cost you $5 in extra freight, late shipment or quality control issues. And your supplier can say that none of it was their fault.

PRODUCT SELECTION: It’s really hard to stay disciplined when you’re sure that new product is a can’t-miss slam-dunk, especially when the minimum is just a little bit higher than you feel comfortable with. Based on continuing experience, though, it CAN miss and that slam dunk can go bouncing off the rim and leave you with a whole bunch of units in your warehouse. This happens even with huge multinational corporations with armies of focus groups and market researchers. I still make this mistake, but less often, and hopefully smaller scale. Hard to balance between wanting to expand your business and yet not taking big risks.

In all, I view my supplier relationships as a primary asset, and not as interchangeable cogs in a machine. Especially in China, where personal relationships are central to business. Life is short: I want to enjoy the people that I partner with and feel that they value me as a person. That’s human nature. Especially if you are a small client, rather than Walmart. Relationships with people from other cultures and countries enrich lives on both sides, and I’ve always felt that they also improved business.

Good luck!

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