My Three Biggest Fails As An Amazon FBA Private Label Seller

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

3 shocked people looking at laptop

This post is by the author of the Garlic Press Seller blog, and is written anonymously to protect their business.

I have been an Amazon FBA seller for three years now. I am a big believer in sharing knowledge, and that you can learn everything you need to start selling online from freely available articles.

Based on that perspective I started my web blog and in this post, I want to tell you about my three biggest FBA fails. Hopefully people can learn from my errors and it might even prevent you from making the same mistakes that I made.

Fail #1: Customs seized my shipment!

This was definitely my biggest loss ever in my FBA career. I lost a whole container load of 5,000 units and had to stop selling two of my best products! This is how it happened.

I used to sell these magnetic drawing boards:

Magnetic drawing board

Normally I don’t reveal my products to other FBA sellers. But since I don’t sell this product anymore, I am happy to show you. This was one of the first products I started selling and things were going great.

I started pretty small with only 1,000 units and was increasing the order quantity with every re-order. I even added another variation of this product to my range, and I was feeling good about my FBA business.

My fourth order for these products, for 5,000 units in total, was in progress when my freight forwarder notified me that there was a delay. After a bit of research, I figured this could be a normal routine check and that it was nothing to worry about. That was until I received the following email from U.S. customs:

Dear XXX,

I am a Compliance Officer with the U.S. Consumer Product Safety Commission (CPSC). I am contacting you in regards to entry number XXX which entered the port of XXXX, WA on XXX. The Importer of Record is listed as XXX and the Ultimate Consignee is listed as X. Your name was provided to CPSC staff by your Importer Broker, XXX.

CPSC staff collected samples on XXX to determine compliance with CPSC’s mandatory standards for children’s products. A CPSC sample number was assigned to the following products:

  1. CPSC sample number XXX
  2. CPSC sample number XXX

CPSC staff has evaluated the products and age graded them for under three years of age (19 – 35 months). This means the products meet the requirements for small parts testing. As the product is received, the magnet attachments qualify for the definition of small parts, and therefore the products are in violation of small parts for children’s products under the age of three. In addition, after use and abuse testing, small parts of plastic break off which also qualify for the definition of small parts. The test reports are attached for you to review. More information on small parts and the requirements may be found here.

Due to the violations outlined above, CPSC staff requests that you forfeit the products that were sampled to Customs Border and Patrol (CBP) and agree to seizure. Were these items previously imported?

They were seizing all my products! The problem was that I was selling a product with small parts. If you are selling a product with small parts you are not allowed to target small kids under three years, and you should have this sticker on your packaging:

Choking hazard label

I had that sticker, but I made the mistake of having a small kid on my packaging that was clearly younger than three years. Because of this, U.S. customs thought I was targeting kids under three years and they seized my whole shipment!

Fail #2: Getting screwed by my supplier

Ordering from China can be very intimidating. I was definitely hesitant when ordering from China for the first time. I was handing over a huge sum of money to someone I had never met, hoping they would manufacture the product I wanted. There are so many things that could go wrong, but I had to learn the hard way.

Not too long ago I had a successful launch for one of my products. I started with 1,000 units for the first order. But it was a huge hit and soon I realized I needed to re-order because I would run out of stock in about 4 months. The product already had around 15 reviews with a 4.6 average, so I had a good feeling about this product and was confident enough to order 3000 units for the second order. Of course, since I was doing a larger volume I wanted a better price.

After a bit of negotiating, I was able to get the price down from $2.67 to $2.19 per unit. Everything looked perfect. My product was a hit and I was able to save $1440 by driving a hard bargain.

Now the real horror starts when this second batch hits the FBA warehouse. All of a sudden I started getting loads of bad reviews and returns. Most customers mentioned the product was very flimsy, but I had never seen this complaint with the first batch. So I decided to ship twenty units to my house to confirm what I was now suspecting:

  • The second batch was made out of thinner plastic.
  • From the twenty products, 11 were missing parts.

My supplier had screwed me.

Because of this, my review rating dropped to a three-star average, sales slowed dramatically and it took me forever to sell the remaining 3,000 units at break-even. This pretty much killed my successful product.

I believe the supplier used a cheaper material and saved as much as he could on production. Maybe he did this because I negotiated a lower price, or he was planning to do it all along. The thing is, he got away with it because I never inspected the goods.

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

Fail #3: Wrong product selection

This is probably the most common failure and loads of FBA sellers will make this mistake. In my opinion, product selection is the most important part of your FBA business. It doesn’t really matter how good you are at marketing, PPC or other aspects – if you pick the wrong product, you will fail.

I have these requirements that I use when doing my product research:

  • $15 + sale price
  • High demand: At least $3,000 revenue per month for competitors in my niche.
  • Healthy profit margin: Profit margin should be at least 33% of the sales price, so I can make at least $1,000 per month on this product.
  • Easy to manufacture
  • Weak competition: The competition should have around 50 reviews or less.

From my experience, you will have the biggest chance of your product becoming a success if you stick to these requirements, especially as a new seller.

After selling for about 2 years, I was feeling confident and thought that I could move away from these requirements. I found a product that ticked all the boxes except one: it was definitely not easy to manufacture!

It was an inflatable pool toy. And after reading the negative reviews of my competitors, I found out it was notoriously difficult to manufacture a pool toy that won’t break after a couple of uses.

Giant inflatable unicorn

Despite this, I still decided to go through with this product. I figured I had enough experience ordering from China and having inspections done, that I was ready to order a “hard to manufacture product”. Well, it turns out that I wasn’t ready.

I went with a premium supplier who offered to use the thickest type of plastic, and had inspections both during production and after production, but I still received a subpar product. Soon after launching, the negative reviews started coming in about how the product would leak air, even after a couple of uses.

So yeah, I learned the hard way that I should stick to my product research requirements and not try to manufacture difficult products. The same can be said about any electronic products, which are also notoriously hard to make!

Fail not!

These were my biggest FBA fails. I hope this was useful, and that I was able to prevent at least one person from making the same mistakes that I made. Check out my blog for more case studies, guides and FBA tool reviews.

Cheers!

This post was by the author of the Garlic Press Seller blog, and was written anonymously to protect their business.

4 comments on “My Three Biggest Fails As An Amazon FBA Private Label Seller

  1. “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.?

  2. 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.

    1. 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

  3. 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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