Amazon FBA selling is a great way for entrepreneurs, inventors, and startups to get their products in front of a vast audience. But what are the three major supply chain risks facing FBA sellers?
What are the supply chain issues for FBA sellers who import products from China?
Amazon provides prospective vendors with a relatively low barrier to entry to getting your products for sale online with multiple benefits such as fairly low fees for processing, packing, and postage, fulfilment by Amazon and not yourself, and no need for an online store of your own.
However, we see the same supply chain issues coming back again and again to haunt FBA sellers. Here are the 3 most common sources of supply chain failures negatively affecting vendors on Amazon:
Let’s go through them one by one.
1. Poor product quality
- Products that were manufactured at an inferior standard — note that this is quite common, even when the buyer received a perfect pre-production sample.
- Products that got damaged during transportation.
2. Inappropriate labeling and packing
- Wrong labelling (e.g. FBA vendors are required to use a unique UPC code and Amazon labelling).
- Weak export cartons, or inappropriate individual product packing.
- Oversized export cartons — for example, each carton should not exceed 50lb. and 25” on the side, not to mention product-specific requirements for jewellery and other categories.
3. Using the wrong logistics provider
- Delayed deliveries with little or opaque information from the freight-forwarder.
- High custom duty fees (impacting the margin dramatically).
- Some ‘sensitive’ products such as batteries or scissors are refused by most shippers.
Bonus issue: Poor management of inventory
- Too much stock being stored in Amazon’s warehouse – this could lead to storage of up to around 1,000 USD per cubic meter of long term storage fees.
- Amazon having too little stock to keep up with sales – not only do you lose revenue from being out of stock, but Amazon may move competitors who consistently keep stock levels right ahead of you in their listings, thereby losing you even more revenue when your products are back on sale as they’re less visible.
What is the impact of these problems?
- Customer complaints and product replacement costs.
- Bad reviews from customers, leading to lower sales.
- Your Amazon account gets suspended if average defective rate is over 1%.
Ultimately, all of these problems will either affect your revenue or get your account suspended.
Both are bad for business, and reinstating a suspended account can take weeks to go through the appeals process with Amazon’s reseller department. Can your business handle weeks of no sales and having any stock and earnings held on ice by Amazon?
How can small businesses control and prevent those risks?
You need to control your supply chain from A to Z if you want to avoid these risks for FBA sellers. Some FBA sellers to this:
- Ship the goods directly from the factory to their home
- Inspect 100% of the goods by themselves
- Repack and stick Amazon labels
- Ship goods from home to Amazon warehouse(s)
However, this is not realistic if you have a small team and you want to spend most of your time finding new products to sell, marketing, and doing after-sale service.
As a result, more and more China-based sourcing agents have targeted FBA sellers. The objective is to simplify your logistics by combining quality control, logistics and fulfilment directly from your supplier to FBA warehouses.
Many FBA sellers try to find a Chinese sourcing agent for this — the reasoning is that few Chinese have the marketing skills to succeed on Amazon, so there is little chance they can become a competitor.
The problem with those sourcing agents is that many of them still take an undisclosed commission from the factory’s side. And their QC inspections are seldom professional.
They may also use domestic FBA prep services, but this is likely to be a waste of money.
Be careful who you work with…
Did you know that Sofeast provides FBA sellers with experienced project managers in China who deal with your suppliers, quality assurance, and logistics to offer you peace of mind?
>> Check out our Amazon FBA seller support solution <<
Editor’s note: This post is on QualityInspection.org as How To Cooperate With Your Chinese Supplier, Part 19: The 3 Major Risks for Amazon FBA Sellers in China and has been edited and added to for Sofeast readers.
If quality is on your mind, you will find our free webinar useful.
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