Amazon Product Sourcing Tips – How to Do Product Sourcing and Make Accounts with Clients for Amazon FBA?
What makes starting an e-commerce business a daunting task is not entirely the capital or allotment of budget. Starting an online store is, in fact, cheaper than launching a brick-and-mortar store. Instead, it’s deciding what products to sell and where to source those from that make starting an arduous task.
The salability of your products will neither solely come from your marketing efforts. Nor will it rely only on market trends.
It is also affected by the origin or manufacturer of the products you’re selling and all other processes that come with sourcing them. Simply put, your sales also depend on your suppliers and the fulfillment method used.
What is Product Sourcing?
Product sourcing is a vital step in setting up your business, whether you’re in a hybrid e-commerce and brick-and-mortar business or a purely digital one.
Sourcing products doesn’t only mean finding what products to and would sell. Beyond product research, it is also the method of finding legitimate and reliable suppliers that sell products at a profitable price.
Once you decide to set up your e-commerce store and sell on Amazon, you can source your products from the wholesalers and manufacturers selling on the platform.
You can also integrate your e-commerce store with other B2B marketplaces to buy bulk products from them.
As for shipping arrangements, you can offer a direct-to-customer fulfillment method or avail of Amazon FBA, Amazon’s fulfillment service.
A direct-to-customer fulfillment means that you find and arrange the logistics of the items needed to be shipped to customers to fulfill their orders.
If you’re in a dropshipping business, it’s either your supplier fulfills the orders of your customers, or you arrange for the products to be stored, packaged, and delivered by Amazon FBA to your customers.
How to Do Product Sourcing: Key Factors in Product Sourcing and Finding the Right Suppliers
- Product Demand
Demand, in simple terms, pertains to how many people can buy and are willing to buy your products. The more people seek and buy your products in the market, the higher is the demand for those products.
In choosing products to sell and where you’ll get them, it’s always important to consider the demand for the products. After all, it will tell you whether such products are well-received on the market or not.
However, too much demand also shows you vital things to consider in selling a particular product. For instance, a product with very high demand shows that more sellers are selling that product.
It implies that the market is saturated and the competition is high, making it hard for a startup like you to stand out from the competition.
- Profit Margins
A profit is the financial gain of your e-commerce business. It is the total sales less all business expenses. A profit margin, on the other hand, is the ratio of your business’ profit over its revenue.
To calculate the profit margin, divide your gross profit (sales subtracted with expenses) with the revenue. Then, multiply 100 to the quotient to get the profit percentage.
Products with high-profit margins show you how much potential revenue you can earn. When products have high-profit margins, you can exercise flexibility in your prices and create a competitive advantage.
When the demand for the products drops, you’ll have room to adjust the pricing and a safety net when the pricing falls.
- Level of Competition and Competitive Advantage
More sellers selling a particular product means more competition and a more saturated market. You need to check how many sellers are already selling the same products and if there are still unique factors in or of the product that the competition hasn’t utilized in their marketing yet.
You have to run a competitive analysis to know whether your competition is still profiting from the products you plan to sell. Lesser competition for your products means a higher profit margin. It will also help you gauge how best to position your products in the market.
- Credibility and Legitimacy of Supplier
Of course, in sourcing products, it is a must that a supplier is credible, legit, and reliable. But how do you know that a supplier is reputable? Well, it involves intensive research, time, and good negotiation skills.
To find reliable suppliers, you need to look into these criteria:
- Feedbacks and ratings of supplier’s store and products you plan to sell
- Return and refund policy of the supplier
- Logistics policies and partners and shipping times
- Business permit, product certifications, and ownership status
- Product sampling and prototype for quality and safety assessment
- Minimum Order Quantity (MOQ)
- Customer support and communication
- Scalability of products offerings
- Low product pricing and profit margin relative to competitors
- Low Cost of Goods Sold (CoGS)
The sourcing process with the supplier must be flexible so that when issues associated with product procurement arise, you have room for adjustments.
You also need to consider where you find your suppliers because they may follow different safety standards and procurement policies. For instance, a supplier from overseas will follow international standards as opposed to local suppliers.
Moreover, suppliers you find from an online B2B marketplace will be subjected to the rules and policies of that particular marketplace, whereas suppliers that come from trade shows and sourcing agents will more likely exercise independent policies and standards.
Furthermore, you also need to confirm whether or not your suppliers manufacture their products, store inventory on their warehouses, or source products from other wholesalers or manufacturers.
If you want to know more about sourcing products from China, read more on this blog: Understanding Product Sourcing from China: All You Need to Know
What is Amazon FBA?
Amazon FBA stands for Fulfillment by Amazon. It is the fulfillment service on the marketplace that caters to e-commerce sellers both in and outside Amazon. It is also one of the two fulfillment options offered by Amazon to its sellers, with one being Fulfillment by Merchant (FBM).
As a fulfillment program, Amazon FBA provides sellers with storage of their inventories through its fulfillment centers. Amazon, at present, has 185 fulfillment centers worldwide, and 110 of which are active and located in the US market.
Aside from providing a warehouse for your inventories, Amazon FBA also handles the picking, packaging, and shipping of your items to its rightful customers.
With Amazon FBA, you can choose to fully let go of the fulfillment process of your business and let Amazon handle it for you. You can just monitor the FBA process while diverting your energy and time to other areas of your business or your rest.
How Does Amazon FBA Works?
How Amazon FBA works is generally this sentence: You find, list, and sell your items, and Amazon ships them to customers.
Amazon provides different services under the fulfillment process, like storing your inventories, picking up your items, labeling, packaging, and shipping them to your customers.
The Amazon team even handles the customer support that includes returns and refunds, so you don’t have to, and you can’t fully control the fulfillment side of your business.
Except for customer service, all the processes involved in Amazon FBA have their independent fees. Meaning, once you avail of storage for your inventory, you have to pay a storage fee.
Labeling your products entails another fee. So does packaging and shipping. All fees will be accounted for separately and will reflect in your billing statement.
As for sales profit, Amazon disburses payments every 7 days for individual sellers. However, they can withdraw their payments only after 14 days.
On the other hand, sellers under professional accounts get their pay every 14 days without hold.
Step-by-Step Guide in Making an Amazon Seller and Amazon FBA Accounts
Currently, there are no set eligibility criteria to enter the Amazon FBA program. An Amazon seller account, be it individual or professional, and the will to adhere to FBA policies and inventory requirements are all you need to enroll.
However, Amazon recently launched an FBA New Selection Program. It encourages experienced and new Amazon professional sellers to avail of the FBA service by providing limited-time offers and promotional perks. Assigned Inventory Performance Index (IPI) is also part of the eligibility requirement, which should be at least 400. The inventory and fulfillment fees depend on where the seller sells their items.
HOW TO MAKE AN AMAZON SELLER ACCOUNT:
- Go to Amazon’s website and click on Sell on the navigation panel. You can also create an account directly at this link: https://sell.amazon.com/?ref_=asus_soa_rd&
- If you click Sign Up button, you will automatically be prompted to create a professional account. If you plan to sell less than 40 items per month, an individual seller account is best for you. You can create an individual seller account by clicking the See pricing link below the Make money action button on the Sign Up page.
- Once you click the link, you’ll be directed to the selling plan page. Scroll down and find the Sign Up for Individual and Sign Up for Professional buttons. Click on what plan will work best for you.
- Enter your email or phone number and account password if you already have an Amazon account. Otherwise, go to the bottom of the Sign Up field and click on the button with Create your Amazon account text.
- Verify your account by entering the Amazon verification code or One Time Password (OTP) sent to your email. Then, click the Create your Amazon account button.
- Enter the following details and click Agree and Continue:
- Your business type
- Your business location
- If you are not a professional seller, enter Your Name
- Enter the following personal details on the next fields that follow:
- Business address or your address
- Government ID
- Tax Information
- Phone number
- Bank account information which bears your name or your business’ name
- Choose your marketplaces or where you plan to sell.
- Enter your billing information which includes chargeable credit card details and bank account.
- Provide product and store details such as UPC codes for your products and trademark registration.
- Confirm your address by clicking the Confirm button. Wait for a postcard containing a verification code which will be sent to your address.
- Enter the code when you receive the postcard and wait for your verification. Once verified, you can start listing your products.
HOW TO MAKE AN AMAZON FBA ACCOUNT:
- Go to the Amazon FBA page on your browser or click on this link: https://amzn.to/385LTT8
- Click on the Get Started button if you are an individual seller or scroll down and find the highlighted Limited Time Offer text. Clicking the Learn more link under the Limited Time Offer text will direct you to the FBA New Selection Program, which is eligible for professional sellers.
- Enter your email address and password and click the Register Now button.
- Choose the Amazon Fulfillment centers where you want to start your FBA business.
- Enter your business details. The business detail requirements will depend on the state where you plan to start your FBA business.
- Add your FBA account to your Amazon seller account and ship your products to Amazon’s fulfillment center or let your supplier send them to Amazon’s warehouse.
Frequently Asked Questions
Where can you find suppliers for your Amazon FBA business?
Online sourcing is one of the best and most convenient methods to use for FBA product sourcing. There are so many online marketplaces and sourcing platforms where you can find reliable suppliers. You can also use supplier directories. Going to trade shows and bazaars is also helpful in finding products and suppliers. You may also use sourcing agents to do the sourcing for you.
What are the business models supported by Amazon FBA?
The top three primary business models supported by Amazon FBA are brands, wholesale, and reseller. You can operate under retail arbitrage, private label, online arbitrage, manufacturing, and dropshipping. You can even use FBA as a dropshipping alternative.
What are the FBA sourcing platforms and tools you can use for your business?
Some of the best sourcing tools you can use for your FBA business are CamelCamelCamel, AMZScout, Helium10, Informed.co, and Amazooka. For sourcing platforms, you can use DHGate, Global Sources, and 1688. SaleHoo, Worldwide Brands, and Wholesale Central are also worth considering.
If you’re a new Amazon or e-commerce seller, for that matter, you’ll need time to adjust and figure out how everything in your business should work together. With so many aspects to oversee and so much to consider, you may need extra pair of hands to do some tasks for you.
Using the Amazon FBA service will lessen your load by worrying about the shipping and logistics for you. It will free up your time for fulfilling orders and will even handle shipping issues for you. However, you also need to consider the drawbacks.
Using FBA means having little to no control of your fulfillment processes. Therefore, if there are lost or damaged parcels, there’s a chance that you may not recover the loss because Amazon handles so many inventories. You also need to consider the cost and carefully plan your budget.
In deciding whether to use the service or not, consider its pros and cons for your business and carefully analyze the Amazon fulfillment process. Also, start small and regulate your inventory. FBA can help you gain profit and even scale when done right.