Selling on Amazon - Product Sourcing

Not every product seller is also a manufacturer, therefore you need to know the basics of getting your product ready from a trustworthy supplier who has a history of providing great quality product. Finding a reliable supplier is the key to your successful business, a supplier gets your product manufactured and also most of the time gets the order delivered to your warehouse. 

A successful product is what makes a good profit, not merely revenue. You need to focus on all those strategies that will increase your profit margin. Sourcing done right can maximize your profit margin by minimizing your landing cost and converting that extra money you were spending on sourcing to your profit.

 

WHICH PRODUCT SHOULD I START MY ONLINE JOURNEY WITH ?

Before starting your online business, you need to find a product that has fair profit margins. A product that is performing well and continues to do so. For that reason, you have to know the basic that will help you find a feasible product that will make your online business journey great.

A product having a profit margin of 25% or more is a product that can give you a handsome sum of profit. There are some costs that need to be optimized to reach the profit margin of desired level.

 

WHAT ARE THE FACTORS THAT EFFECT YOUR PROFIT MARGINS WHILE SOURCING ?

Some factors that decide your profit margins are:

  • Rate from your supplier
  • Mode of shipping and shipping cost
  • Taxes
  • Packaging (Weight and Dimension)
  • Custom packaging
  • Minimum Order Quantity
  • Marketplace
  • Country from where the product is being shipped to you

Let’s discuss these factors one by one to enlighten you more about an effective sourcing.

 

GETTING RATES FROM SUPPLIER :

The most important step while sourcing is getting quotation from a number of different suppliers. This is where you convert your sourcing budget in your profit and cut cost of manufacturing. Your bargaining skills really matter, and you will have to choose the supplier who offer you the best rates. For example, if you are a sourcing from Alibaba.com, you will contact at least 8-10 suppliers who are delivering products exactly like yours or at least in your niche.

 

Before finalizing you need to have full confidence in your supplier. For that purpose, you will need to see any certifications that he might have, since how many years he has been providing the service or any reviews that his previous customers have left.

 

MODE OF SHIPPING :

You select mode of shipping depending upon how fast you need to have your product arrived at amazon warehouse. The different modes of shipping are,

  • Air
  • Sea
  • Cargo Train
  • Truck

Air shipping being the most expensive one will cost you much and decrease your profit margins by a major amount. All the other 3 modes of shipping are much cheaper than air shipping and usually are the preferred choices as they give you advantage of rise in profit margins.

 

TAXES :

As a best practice ask your supplier for the DDP (Delivery duty paid) cost, which includes all the taxes paid and you just have to pay to the supplier instead of dealing with the things separately. Moreover, in your calculations you will include the Value-Added Tax also which account for almost 7.5% after having crossed a sale of 85,000 pounds. In UK market we collect VAT from the customer in the selling price of our product and hence is excluded from the profit margin.

 

If your customer doesn’t give you DDP rates then you will need to find a freight forwarder that will get your job done, as there are many companies which are providing trustworthy services.

 

PACKAGING (weight and dimensions):

It is one of the most important aspect of your sourcing as packaging can decrease your cost to a minimum, if done right. Amazon charges you a storage cost that depends on the weight and packaging dimensions of your product, which can be reduced to the minimum by just optimizing your packaging and decreasing the dimensions.

 

A product with less weight and optimal packaging design will boost your profit margins. So, you have to ask your supplier to keep the packaging dimensions to minimum.

 

Custom packaging will cost you more, for example if you want the supplier to put your company’s logo or any other modifications in the packaging such as bubble wrap for delicate products will definitely thin out your profit margins.

 

MINIMUM ORDER QUANTITY :

The greater the number of units ordered the lesser will be the price. Always start bargaining with a low MOQ and gradually increase the MOQ until you reach a fair price that is affordable for you.

MARKETPLACE :

Market place matters a lot when it comes to the shipping cost, for example your supplier might be offering a different rate for US and UK.

 

COUNTRY FROM WHERE THE PRODUCT IS BEING MANUFACTURED AND SHIPPED :

Country from where you are sourcing play a major role in your costs. The distance matter as well as the cost of production in the country matters. For example, in China the cost of production is quite low as there are a number of industries therefore, they offer you a reasonable price and can be even decreased after bargaining.

OUTSOURCE MORE :

Sourcing is a detailed work that requires experience and in-depth knowledge of how things are actually working. If you don’t have enough knowledge, then let an expert have this done for you as your whole online  business depends on sourcing.

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