Selling via Fulfillment by Amazon (FBA) – Status update (Part 6)

You can read my previous post on Amazon FBA here (Part 5).

So basically all the 3 products are completed by the manufacturers.

 

1. Product 1 (5 cartons).

Well, the goods have reached Cincinnati, Ohio (US) and went beyond that… headed for Texas. I did not choose the 5 days air express option to save cost. So it would probably reach Texas near the end of the first week of Jan 2017.

Product aside, the representative from this company is the most proactive. I get to contact her via WhatsApp at almost any time. She is always very prompt in reply (if she wasn’t, she would typically explain why). I do respect her professionalism. And it has been a good working relationship so far.

Yes, she did screw up the first package design (and I had to pay for 1000 packages for nothing), but well, the subsequent working relationship has been ok so far.

 

2. Product 2 (2 cartons)

The cartons have also been shipped (collected by the courier, FedEx). I have fully paid the manufacturer for the shipment at the beginning. I reckon the manufacturer chose the slowest option.

I looked up the shipment records (using the tracking number given), and the cartons aren’t really moving.

Really wonder when they will reach the fulfillment center in Texas.

Working relationship wise, the manufacturer representative wasn’t as prompt in replying as the first (mentioned above). I guess I am just a small client to them.

 

3. Product 3 (12 cartons)

Ok, this is my least confident product and the most expensive. The products are done but are still with the manufacturer. At this time of the year, it is difficult contacting the manufacturer and freight forwarders.

My plan is to only ship portion of it after Chinese New Year (when shipping rates are lower), and store the remainder in a Freight Forwarder warehouse in Shenzhen. Storing in a China Warehouse is relatively cheap, and shipping rates are the lowest in May and June.

Like I said earlier, I am not confident in being able to sell so many items within 6 months (Amazon will raise storage fee after 6 months). So I will only send the remainder if the first batch can sell out.

Again, the manufacturer representative wasn’t as prompt in replying especially during this time of the year when most offices are closed. She did not always answer my questions (via email or Wechat). And right after the products are completed, she was unexpectedly hospitalized (with no one else whom I can contact).

 

 

My thoughts

Most people would want to ship all these goods as early as possible. After all, they are still paying the monthly fee for their professional accounts at Amazon, even if they have nothing there in the fulfillment centers. However, for me, there are several reasons why I did not opt to ship all of product 3 now.

Firstly, the shipping rates will keep increasing (and stay high) until Chinese New Year.

Second, I didn’t really want too many products at the start. I wanted to pace myself. Frankly, I really did not know what to expect. Doing Amazon FBA is capital intensive, especially at the beginning. Yes, if you have USD 40,000 to spare, you can scale very fast. However, not forgetting, if you make a mistake, you tend to repeat the same mistake for all the products.

Having said that, yes capital intensive at the beginning. Most people would think that the initial cost of doing the research, purchasing the product, and shipping it over would be just it…. However, for new sellers introducing a new brand and product, there are subsequent costs in promoting the product. This would include the cost of advertising, giving out discounted products, and increased storage fee (after 6 months) or disposal fee if you can’t sell most of your products (eg. failed products). This subsequent running cost is an unknown to me. So this is also part of the reason why I didn’t want to scale so fast.

Oh yeah, there is a lot of waiting… it takes typically 3 weeks to a month for the products to be manufactured. Shortly after I started in late Sept 2016, it was the golden week holiday in China (and none of the manufacturers were working). Then it was the new restriction by Amazon that disallows new sellers from shipping goods to their fulfillment centers from early Oct to 19 Dec 2016. After that, we have the Christmas holidays, new year holiday … apparently, some of the manufacturer staffs were on leave. The manufacturer representative for Product 3 is on leave until after CNY! It is definitely harder to coordinate during this period.

You need to spend time researching for the right product as well (cost study, study your competitors, study the market demand etc)….. Time needed to ship the product and slowly launch the product. They just don’t happen overnight. Definitely not passive at the beginning.

On hindsight, firstly, I did not really try hard to differentiate my products (from the competitors). I guess I am using these launches as a test to get myself familiarize with the system. I did spend time researching the price and doing a customized packaging, uploading new photos, and detailed descriptions.

Secondly, I should have opted for heavier items with a higher price range. This is taking a more contrarian position and would help to minimize the competitions from other new sellers. New sellers tend to go for lower price and lighter items. Yes – the starting out cost is less. However, given the Amazon fees and advertising cost, and the fierce competition, the chance of making any profit is lesser.

Well, I have managed to reach out to a few Amazon FBA Singaporean sellers. One of them is a 30-year-old guy (who is probably a real estate agent). He has also just joined Amazon in Oct 2016. He is going to launch 9000 items (15 SKUs). Actually, they are all similar products, but in 15 variations. And he has spent close to 6 figures for the launch. He seems pretty confident in getting sales (after having done his research). He intends to store most of his products in an LA warehouse and ship them to the Amazon fulfillment centers on his request. In comparison to him, I guess I was just taking baby steps.

For others, they have made some profits while one is hoping for profits in his next batch.

 

Tax

Yup, a serious and boring subject. I was quite worried about it and actually asked people on the seller central forum. There are a lot of conflicting views on non-US Citizens’ obligations on Sales Tax.

Tested out a few tax paying platforms. However, I guess these are not for non-US Citizens as they typically require a US Bank account with a US billing address.

Downloaded some of the forms such as 1040NR and Schedule C to familiarize me with them. Will try to contact accountants in Singapore if required in the future.

For the Singaporeans whom I have contacted, they are typically not aware of EIN, ITIN, 1040NR, Schedule C or Sales Tax. A few of them have been selling for a couple of years now.

I reckon the EIN and a registered agent (with a US address) would be critical if you are shipping via sea using a customs agent. eg. when you start shipping bigger and heavier items.

 

Moving forward

As for me, I do have other potential products lined up. 2 of them are variations of the above-mentioned products. One is a totally different product. However, I will only proceed if things turn out ok.. fingers crossed. Yeah, it is a slow process….

It has been a steep learning curve for me for the past two months. In theory, buying and selling online is relatively simple. However, there are really a lot of ‘moving parts’ in coordinating. And issues popped up unexpectedly.

Nevertheless, I will be moving on to the next phase of selling and promoting my products.

Don’t really want to spend much more for now. My overall net worth would have been much better for the end of 2016, if not for the amount I spent for the inventories (bound for Amazon USA).