The Seller Abroad

Using FBA to sell on Amazon from abroad… can't be that hard!

Category: Market Research

Questions – Part 2

Questions & Answers – Part 2

Welcome to the second post where I will share some questions and answers that have eventuated from the “Question?..Contact Me” form on this blog. There are some great questions that have come through and I believe the answers to these will be useful to the whole community. So let’s get into the Questions & Answers.Questions

Question 1

A question from the USA:

So I received a quote from the supplier in China, not realizing it was an FOB quote. With the customs fees and transportation costs how does one possibly turn a profit while doing this? Any advice or information would be greatly appreciated, it all seems next to impossible with the doubling of the COG’s just in transportation. Thanks for your blog, and all your information.

Answer 1:

I think this is something we can all relate to. I went through this exercise for a few products before I found one that would be profitable. I think it is important to realise that the freight portion of the cost is going to be much higher on your first ‘test’ batch of product due to the small ‘test’ quantity ordered. The freight ratio will get better on larger orders as freight per unit cost will reduce. That said, the key is to find a product where the numbers work. There are two general paths that seem to work. Number 1, you can try looking for a very small/light product to reduce transport cost; or number 2, look for a premium product that can be sold at over 3 times the cost of manufacture (FOB cost). A third option that I am yet to try myself is to source the product locally to avoid shipping and customs charges.  My first two lines of product fit into the number 2 and 1 category (in that order) and are turning a healthy profit.

I myself found this the biggest challenge in starting to sell a product. This is also why not every story is a success story. There is a fair element of risk. That said, nothing ventured nothing gained. I recommend taking the leap if you can afford the risk.

Question 2

This question is from the neighbour, Canada:

I read your cheat sheet for both shipping and tax id and have a question. When is it necessary to get an EIN? Would I be able to get away with not having one for shipping by courier such as UPS/FedEx? From what I’ve heard, they don’t really require EIN if shipment value is less than $2500, is this correct? Have you shipped smaller amount before using courier companies? What is the process with that? Do they basically take care of customs/duties and just charge you for that service?

Answer 2

To answer the question, you don’t need an EIN before importing product using UPS/FedEx. In my experience, the only time I required the EIN was when I had to collect sales tax for the items that were being sold on Amazon. My first shipment value was more than double the $2500 value and I did not require an EIN to get the product through customs.

I’d love to hear from anyone that might have had a different experience to mine. Please feel free to leave a comment with your thoughts.

Question 3:

Here is one from the UK:

I have a question regarding getting approval (un-gating) in certain categories in the US. I am based in the UK, and am looking to sell in the health and personal care category (although my product won’t actually be sold in that category, Amazon has told me I still need approval in this category). It seems Amazon will only accept invoices from wholesalers on their approved list and it turns out my China-based supplier is probably not on this list and so my applications keep getting disapproved. I was wondering if you’d come across anything similar.

For people based in the US it seems like all they have to do is buy a few random products from US based wholesalers and send in these invoices, and once they are un-gated, they can go on to sell anything in that category. But being based in the UK, I don’t think that will work as US wholesalers aren’t likely to send products to the UK, and UK documentation may not be valid for them.
Another difficulty of selling in the US from abroad!

Answer 3:

This is an interesting one. In my initial research into potential products I found that products in the health and personal care category were trending and ticked all the boxes in terms of being small, light and easy to ship as well as having the ability to sustain a healthy mark-up. That said, the complications highlighted in your question are the very reason I did not go down this path.

I’m afraid I cannot answer this question directly. The one idea that did come to mind is to have a US manufacturer package and send product to Amazon directly (not via the UK) in order to get approval. Once you have gotten approval, you can bring in product from abroad that meet all the required approval specifications.   

If anyone has experienced this issue and has a way of making it work please share your experience on the comments for this page. It would really help out a fellow seller abroad from the UK.

Finding a Product that is Niche Enough

How to Find a Niche Market Product

I’m going to briefly take you through what you should consider when identifying a niche market product to sell on Amazon in the USA.

Now I’m not going to harp on about this part too much as there is plenty of information out there already. I recommend listening to podcasts such as Smart Passive Income, Freedom Fastlane or The Amazing Seller. These podcasts are great for giving your product hunt some real direction. Finding the correct or almost correct product is a long and tedious process and it is super important to take your time with this. I decided to do this the budget way without using any available research tools. It took me about 2 months of research to find a product I was happy with. The key for me was that the product had to meet the following conditions:

  • It was a product I wanted or would want
  • At least 3 of the top 5 products must have less than 500 reviews, preferable less than 200 (Indicates there is room in the market for new entrants)
  • Product must have a gross margin of over $20. Gross margin = Sell price – Cost of goods sold (Indicates the product is profitable)
  • At least 2 of the top 5 products must have a Best Seller Ranking (BSR) number higher than 8,000 (Indicates that the market is not dominated by big sellers)
  • At least 3 or 4 of the top 5 products have a 4 or 4.5 star rating (Indicates that there is room to improve on existing products)
  • There is a gap in the market (the niche market I picked had the super-premium and the low cost offering with no value for money option in between)

There are a couple of other points that some recommend. I know a few people say to stick to a small product. I didn’t listen to this and went through a lot of pain with the logistics side of things. That said, picking a larger product does mean it is less likely other private label sellers will go to the trouble of entering that niche market. I consider this a barrier to entry.

NicheI stumbled on my product after a couple of months of research because I was in the market for one myself and couldn’t find a product that met all my requirements. I strongly recommend picking a product that is differentiated from current offerings in some way so that you can charge a premium for it.

All that said, do your research, take your time and make your own decisions as to what dictates your product choice. Like I mentioned earlier, there is a wealth of information out there and there is no full proof right and wrong way. A little bit of luck is always required however adequate research will increase your chances of success.

Research Tools

You can do the research for a niche product the manual way, scouring through Amazon and running numbers through excel… kind like I did.  Alternatively you can use one of the few good tools out there such as AmaSuite 4.0 which is a paid product that can compress your research time from months to a week. This tool is great at quickly crunching important statistics from Amazon to identify good niche products. There is also a bunch of helpful tutorials and tips for included in the product for selling through FBA. You can check this software out here. Again, weigh up your time’s value and make your own decision on which way to go (clearly I didn’t value my time much). I can’t speak from direct experience, however the guys I learned from rave on about this software!

Crunch the Numbers

Another quick tip (this is the engineer in me); run a few simple Excel models using some quick pricing from a manufacturer, freight to a FBA warehouse, marketing and expected sell price to ensure you will make a good enough profit to justify the investment. Don’t forget to account for any applicable taxes, additional Amazon charges for premium features such as premium placement (where you get to pick your FBA warehouse), a healthy product return rate and so forth. Trust me, you will be sick of Excel spread sheets when you are done with this!

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