“How To Source Your Private Label Product In China, Without Getting Screwed By Alibaba Suppliers.”
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Importing from China [GUIDE] Sourcing Products from Chinese Suppliers Save Money Air Freighting Products from China
So you’ve decided to import products from China? Great. However, when it comes to sourcing products in China, getting the process right is more difficult than you might have thought.
While there are loads of guides for first time Amazon FBA Sellers, often they’re not step-by-step processes and don’t offer much substance. More frustratingly, the information isn’t always in a single place.
Don’t worry though. If it’s your goal to import products from China, you’ve come to the right place. Here is my definitive guide to importing from China and sourcing products from Chinese Suppliers
The lessons here have helped my source 1,000 Amazon products, and will bring some clarity to what is an incredibly difficult process for first timers.
Step 1: Understand Your Product
First, you need to make sure that you understand your product.
Before you can start getting quotes from suppliers, you need to know exactly what you’re looking to sell
You need to know all of these details about your product
- How many units do you need?
- What certifications does your chosen market require?
- What are the product’s most important features? This could be anything from color to material and size.
- Do you need customized branding
The easiest way to list all of this information down is on a Product Inquiry Sheet.
To get a my professional Product Inquiry Sheet template for free, sign up for the free Easy Peasy Sourcing Webclass today.
Step 2: Get Loads of Quotes
To find a good supplier and successfully import products from China, you need to get a lot of quotes
You can find Chinese suppliers on platform like Alibaba, 1688, have a look a the Yiwu Market, or consider working with a Sourcing Agent.
When looking you will need to have a list of between 20 to 50 potential suppliers. It may sound like a lot, but this is a corner that you unfortunately will not be able to skip.
Be professional when you contact new suppliers, using your Product Inquiry Sheet. This will get you more informative and productive responses than emailing alone.
Finally, when seeking quotes from suppliers, remember to always request a breakdown of product. This includes everything from the cost of the packaging, to the price of customizations and custom labeling, shipping and more.
It’s important that you get these figures because you will need them to calculate your margins.
Step 3: Calculate Your Margins
Remember, your product needs to make you a profit.
To ensure that your product is profitable, you will need to calculate your margins. If you’ve never done it before, here’s what you will need:
Margins: Figures You Need to Know
Start with the sales price. This is the price that you aim to sell each unit for. If you are looking to enter an existing product category, your research should have informed you how much your product is already selling for. Use this as a guide for a realistic sales price.
There is a chance that you won’t be able to sell your product for your desired sales price. Hence, if it’s a product that is worth your time investment, you will still need to be able to make a profit after its price has been reduced.
I always try to ensure that I can still make a profit on a product after a 30% price reduction.
Based on your quotes, work out the following:
- Product cost. This is how much the product costs to manufacture, including the cost of packaging, customization and branding.
- Shipping cost. The best way to get these costs are from a potential Supplier or Sourcing Agent.
- Import duties. These will be specific to your chosen market, whether you are selling in Australia, the US or Europe.
- Platform fee. Different platforms, including Amazon, eBay and Shopify charge specific fees for the sale of each product.
- Storage fee. If you’re using Amazon FBA, you’ll be charged a specific amount for every month your products are in the Amazon warehouse.
- Sales tax. For instance VAT in the UK.
- Estimated rate of returns. Sometimes people will return your product. I normally estimate that 1 out of 10 products will be returned.
- Marketing costs. Work out how much you are going to spend on advertising, whether it’s PPC or something else.
Once you know what all these costs are, subtract them from your sales price with 30% deducted. Remember to use total sales price (sales price x units sold) subtracting all costs, including total product cost (the product cost for all units).
It is also helpful to work out the landed cost. This is the sum of product cost, shipping cost and import duties.
Calculating Your Margins
To calculate your margins, use the following equation:
Profit = (Sales Price x 0.7) – Product Cost – Shipping Cost – Import Duties – Selling Platform Fee – Storage Fee – Sales Tax – Cost of Estimated Rate of Returns (0.1 x landed cost) – Marketing Cost
There are a whole lot of subtractions there. Unfortunately, that is the cost of business.
However, if you need to simplify it and work it out quickly, I’ve found that the following is a good rule of thumb:
Sales price = 5 x Landed Costs
If landed costs are around $5, your sales price should be $25.
However, I strongly recommend that work out whether your product is actually going to be profitable.
If landed costs indicate that you can’t sell it at the same price as existing competition, then cut your losses and start looking for a new product.
Step 4: Get Simple Samples
Before you commit to a relationship with a supplier, you need to know what they can do.
The only way you can assess the quality of their products is by reviewing one of their simple samples.
Now, this sounds easy enough, but I’ve seen a lot of people make a very costly mistake when getting their first samples. Instead of ordering simple samples, they order customized samples.
If you’re still settling on a supplier, you DO NOT need a customized sample. It’s expensive, takes a lot of time to arrange and is completely unnecessary.
To find a good supplier, you will need to consider between 20 and 50 samples. If you order 20 customized samples, I’m willing to bet that you’ll run out of money in no time.
Top Tip:Work with a Sourcing Agent to reduce the cost of reviewing simple samples. They can often get samples for free, and can bundle up all of your samples into one package, dramatically reducing your shipping costs.
Step 5: Choose the Right Supplier
Once you have received your samples, review them and develop a final shortlist of two to three suppliers.
You should shortlist your suppliers based on the quality of their simple samples and the price quoted for customized samples.
It’s much better to have a final shortlist of suppliers than a single final supplier. This helps ensure that you have a backup supplier in case anything goes wrong. It will give you the opportunity to assess the quality of more than one customized sample.
Step 6: Get Customized Samples
Now that you’ve developed a final shortlist of suppliers, it’s time to order customized samples.
Your customized sample should reflect your final product specifications, including any customization, logo prints, fancy packaging or other product criteria.
After you have reviewed the customized samples, pick the supplier that is best for you on quality and cost.
Remember, it’s always good practice to have a backup supplier, just in case you need one.
Step 7: Get Multiple Rounds of Samples
Unfortunately, settling on a supplier is not the final step.
Whenever your product specifications change, it’s vital that you order new samples.
This process takes a lot of time, which is why it’s not realistic for new customized samples to be sent directly to you if you are not based in China.
To make sure you have your product delivered on time, the only option is to have an agent check your new samples. For this you can either use a Sourcing Agent, or an Inspection Service like QIMA.
The Agent or Inspection Company will send you photographs, and accurate feedback on the new sample.
Repeat this process until you have a product that you are satisfied with.
Your Gateway to Sourcing Products from Chinese Suppliers
If you follow these steps carefully, you will successfully import your products from China, helping you start your Amazon FBA Business for real.
Once you’ve mastered these first seven steps, you can start being more ambitious with your Private Label Business.
What has been the hardest step when starting your Amazon FBA Business? Is there anything else important that you’d recommend to a first time China importer when sourcing their first product?
Help us all learn to be more effective in the comments below!