My FBA Project: Part 2 – Finding a Supplier to Production

MichaelEducation, How to, Making Money, Misc, Side Hustles17 Comments

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FBA Project

*This is Part 2  of My FBA Project – If you missed Part 1, you can find it here.

Finding a Supplier

finding a supplier

So, finding a Chinese supplier sounded pretty simple to me (in theory at least).

Use Alibaba to source a few different suppliers, get quotes, get samples, and narrow it down to the best one.

In my particular case, my product is made by many different suppliers.  In fact, there were so many potential suppliers, I had to sift through a lot of noise just to find some that could communicate clearly enough.

You can definitely use email to communicate with them, or you can use the Alibaba portal’s messaging system.  At some point, they may even ask you for your instant messenger contact information (i.e. Skype, AIM, etc.).  I chose to keep communications within the Alibaba portal initially, and eventually transitioned to email.

There was a bit of a language barrier with some of the suppliers.  I decided early on, I wanted to deal with a supplier that I could communicate with moderately.  What does that mean?  Well, if I have to re-explain myself more than twice, or couldn’t understand what they were trying to say, I’d simply move on.

Getting Samples

Part of this process is identifying suppliers that will provide you samples of your product.  This is provided for “free” sometimes, and other times, not.  I took this on a case by case basis, but typically, “free” doesn’t include the shipping fee since it’s coming from China.  On average, I paid about $50 per sample.

Most of the suppliers will ship this via AIR, such as FedEx or UPS.  Most of the samples arrived within a few days which was nice.

Buy Your Competitor’s Product

About the same time as you’re queuing up your samples (or even a little before), you should purchase your competitor’s product to evaluate their quality, packaging, etc.

Samples Inspection

When your samples arrive, this will tell you a ton of information about the supplier.  Did it arrive on time?  How is the quality?  Since the samples are products the supplier is able to hand choose, you will hope they are close to flawless.  Otherwise, what does it say about their craftsmanship and attention to detail?

Sadly, the majority of the samples that came weren’t better than the product I purchased from the leader in my category.

Settling on a Supplier

This process took me close to 3 months.  Why so long?  Well, I wasn’t completely happy with the suppliers.  After I narrowed the supplier pool to 3, there still wasn’t one that was a clear runaway.  They each had their quirks with the product, price, or execution.

Ultimately I settled on the one that had the best product, communication, and the quality was decent overall.  Production cost was okay, but the shipping was super expensive.

COGS – Cost Of Goods

One of the biggest factors when selecting a product is to examine your cost of goods sold, aka. COGS.  COGS is understanding what your full production costs are.

The shipping cost alone was more than the physical production because I was only purchasing 600 pieces in total.  These pieces were then bundled into a 6-pack for a total of 100 units.  If I were ready to make a larger purchase, I could have saved some costs by shipping via sea freight.

Lessons from My First Order

I learned a lot from my first order.

I didn’t hire an inspection company because I only had $1200 into the whole opportunity.  So, I went out on a leap of faith.

They were pretty accommodating and were willing to add a suffocation warning label onto my plastic bags.  Additionally, I asked them to add a product label with two colors and they were happy to oblige without additional fees.

The biggest challenge when it arrived was the way it was packed.

There were thousands of tiny bits of styrofoam that broke off from the packing material.  Also, the shrink-wrap they used was sort of cheap and was damaged on some of them.  (Any guesses what my product is?)

This was a rookie mistake, to be honest.  You see Amazon will never accept styrofoam packaging, so I should have briefed the supplier and instructed them to only use air pillows, foam, or crushed paper.

Lesson learned.

A Comedy of Slaps in the Face

I forgot to mention during this entire process, Amazon decided to change their terms of service and completely wiped out incentivized reviews.  That meant, no more giving away free product in exchange for reviews.  This was a big blow to new sellers like me, but I forged on anyway.

So, back to my initial order of 100 units.  They arrived with all this styrofoam debris and it was going to take forever to clean it up and then repackage everything the proper way before shipping it off to Amazon.

I had already conceded to clean these up and send them in when I experienced the next slap!  Lo and behold, Amazon decided to change their terms of service again and no longer taking inventory from new buyers!  This was apparently to curb the rush of holiday inventory cluttering up their warehouses.

I can understand their rationale, but that knocked me back 3+ months AND I missed the deadline by only a few days… argghhh.

The silver lining was I had additional time to clean up my 100 units!

The Clean Up

I finally realized the best way to clean this up was using our Dyson vacuum.  That sucker can suck!

It was the best solution and cleaned out 90% of the bits, but there were still some that hid inside the packaging which I couldn’t do anything about.

Eventually (post-Xmas), I was able to clean, re-pack, and drive the shipment over to UPS.

Shipping

So here’s the good news about shipping to Amazon’s warehouses.  It’s relatively cheap because you’re piggybacking off Amazon’s shipping power.

They had me send a third of my units to three different warehouses around the U.S.

Dropping off was pretty easy since I just went to my local UPS store and used their pre-pay labels.

After tracking it, most of them arrived within a few days and the Amazon portal was updated with a receipt confirmation and manual inspection.

Next Update

For my next FBA post, I’ll talk about Amazon’s seller interface and PPC (pay-per-click) advertising and whether or not this is going to be a profitable venture!

Readers, what’s the last thing you purchased on Amazon?  Have you ever considered sourcing a product on your own to sell?

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Michael

Hi, I have been blessed to take an early retirement in my mid-30's so I can focus on becoming a better father, blogger, and investor.

My goal is to help you find your personal path to financial freedom, and to enjoy the entire journey.

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17 Comments on “My FBA Project: Part 2 – Finding a Supplier to Production”

  1. Wow I really liked this post. Seeing how others have been successful with this business model makes me want to test it out for myself.

    It’s great to know what steps you take and whether they work. I’d love to learn from your experience and to see your product one day. Thanks for sharing!

    1. Ms. FAF, it’s definitely been an eye-opening experience to work on this project. There were a ton of details I encountered along the way that I wasn’t prepared for, but it’s given me a huge appreciation for those who have well oiled FBA businesses today. I’ll give you a hint about my product. It’s either doing phenomenally well or phenomenally horrible. Guess you’ll have to wait and see! 😉

  2. I’m looking into FBA but the supply-chain of the whole process is crazy (silly/fun/not sure what to call it). Once you can perfect the supply-chain, then it will be very nice.

    Thanks for sharing your experience, looking forward to your 3rd update!

  3. Its cool to hear the process, but I don’t think I’m interested in doing FBA. There are just too many other businesses I’m interested in creating, this falls farther down the list because I don’t think the work would be fun and there is a lack of control.

    I would potentially be interested in making a physical product someday, but that is different than how most people do FBA. Most FBA are tiny things that exist already and you package / brand / market a different way. They could be a completely new product, but those often take more time and investment. Those are the ones you see more on Kickstarter.

    1. Brian, it’s definitely not for everyone. You are certainly correct that there’s a ton of work that goes into this that you can’t completely anticipate – until you do it! 🙂

  4. Very interesting project Michael. As with most businesses, it’s often harder than it looks.

    What exactly is the product there? Seems like some kind of plastic case.

    I’ll be interested in seeing the financial results when they come in. Keep it up!

  5. I totally understand. No need to reveal it now. You have done a lot of hard work researching a potential product, and keeping it a secret is a perfectly smart move at this point. I wish you best of luck with the launch and can’t wait until your next post on this topic! 🙂

  6. Interesting to see your process behind the scenes. First time getting anything going has got to be a pain, but at least your learning a lot of interesting stuff. What kind of margin are you targeting for your units?

    Good luck with the sales!

    1. Thanks, Mr. CK! So, my initial margins I was targeting was ~40%. I will tell you though that those get eaten up quickly if you’re not careful. 😉

  7. Ah oh how I know the struggles you have gone through with this. Im really glad to hear you are keeping up with it and it seems to be going well.

    If i ever decide to get back in the amazon game, I will have to find a supplier that is not on alibaba. I think there is just too much darn competition out there and alibaba suppliers are too easy to find. You know what i mean?

    If you can find a supplier with a unique product that is hard to find, that seems like it would be golden!

    1. Dude, could you imagine what would have happened if we had happened to launch in on the fidget spinners last year!? Ah well, it’s nice to dream sometimes.

  8. It is very interesting to hear the whole process you followed in the project. Mainly to compete with the competitors knowing well about the competitors is important. For that you have brought their products and analyzed them. Other thing is your concentration on packing, which matters the most in first look.

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