Do you want to buy in China (perhaps on Alibaba.com) and resell it on Amazon?
This post will go through all the steps you need to know!
Amazon uses various criteria to determine whether a seller is trustworthy or not. Sellers who fail to achieve these goals are denied permission to trade on the platform. THE
Amazon's terms of service also state that sellers who have been deprived of selling privileges cannot open new trade accounts. To say that the stakes are high would be an understatement.
Whether or not you can achieve these goals directly depends on how you manage your purchasing strategy before, during and after production. Without a well-structured import strategy, your tenure on Amazon as a seller is likely to be very short.
What are the performance goals of the seller on Amazon?
Amazon takes into account three fundamental elements, as specified below:
"All sellers should work to achieve and maintain a level of customer service that meets the following seller performance objectives:
Percentage of order defect rate (ODR): <1%
Percentage of non-stock items sold on Amazon (pre-fulfilment cancellation rate) <2.5%
Late ship rate: <4%
Failure to comply with these objectives can lead to the cancellation of your privileges as a seller. "
In this article, we explain why you need to implement a comprehensive strategy to achieve these goals.
Percentage of orders with negative feedback (ODR)
"All Amazon sellers must strive to achieve and maintain a level of customer service that results in a percentage of orders with negative feedback of no more than 1%."
Amazon calculates the number of orders returned due to a visual or functional defect and divides it by the total number of orders. All Amazon sellers are required to ensure that no more than 1% of the total number of products will be returned due to some imperfection. If the defect rate exceeds this percentage, for an unspecified period of time, you may see your account suspended temporarily or permanently.
Keeping the defect rate below 1% is by no means easy, particularly when importing from China and other Asian countries. In China, it is not uncommon for the defect rate to exceed 2-3% when buying from a "reliable supplier".
If you are unable to implement a proper quality assurance strategy and make a selection of suppliers without having carried out previous research, you may receive batches of goods with a much higher defect rate. It is not uncommon to find defect rates of 40-60% and, in some cases, the entire lot is defective.
How to avoid sending Amazon a large number of defective items
Many importers ask their freight forwarders to transport the goods directly from the port of destination to an Amazon warehouse, without passing through the factory owned by the importer. This saves time and money. However, it follows that the importer is unable to check the goods before they are stored in an Amazon warehouse and, therefore, cannot eliminate the defective items.
If at this point, you fail to keep the order defect rate below 1%, you may see your account suspended. All of this puts enormous pressure on the importer who must ensure that he keeps this percentage below 1% before the goods are shipped from China.
Fortunately, there are numerous quality control firms here who are ready to send their inspectors to the supplier's manufacturing facility to check your products before they are shipped. At the very least, this dramatically reduces the risk of shipping too many defective products to an Amazon warehouse.
How to avoid defective items first
Quality control is not the solution to prevent such imperfections. Limiting the number of product defects to less than 1% implies firstly choosing a "qualified supplier" and, secondly, implementing a rigorous quality assurance procedure.
As you can guess from the name, the purpose of the quality assurance procedure is, first and foremost, to prevent the defect rate from increasing rapidly.
First step: Find a qualified supplier
The quality assurance process often proves useless if the supplier is unable to meet your quality requirements and comply with US or EU product regulations. It is a fact that, in China, most suppliers are unable to make products that comply with other nations' regulations.
Compliance with the regulations of the Consumer Product Safety Commission (CPSC) is required by law and refers to the General Conditions of Sale on Amazon. Failure to comply with all regulations applicable to the product will not only lead to the suspension of your account but will also result in large fines and the seizure of the goods.
The problem that importers face is that most Chinese suppliers are not even aware of US product regulations.
In many industrial sectors, no more than 5-10% of Chinese manufacturers and commercial enterprises are able, for various reasons, to comply with American and European product regulations and directives relating to substances and safety. For these reasons, verifying that the supplier has already made products compliant with regulations is the first and fundamental step in your quality assurance process.
This, of course, also applies if you are already aware of the directives that apply to your products. If not, you need to step back and confirm these regulations, or you need to hire a professional to do it on your behalf. Whichever path you choose, never rely on your supplier to know which regulations apply to your products.
Now that you have found one or more suppliers capable of demonstrating prior compliance with all applicable product regulations (e.g. CPSIA), you can begin to check whether they are capable of meeting your quality requirements. Not all suppliers are the same. There are technical limitations in the production area. Some suppliers are able to meet your quality requirements, while others cannot. The only way to verify this is to order product samples made to your specifications.
Second step: The quality assurance process
Now that you've found the right supplier, you can just sit back and wallow in the money. Not at all. Even if you manage to find "the right supplier", you still have to implement a rigorous quality control process.
Chinese suppliers are used to making items based on the buyer's product specifications. Vendors don't behave like design studios, nor do they offer free product development to potential buyers. Instead, they expect all specifications to be provided to them by the buyer.
Since your products will be manufactured to these specifications, it's important that you don't miss a thing. Nothing is too small or unimportant not to be mentioned in the desired specifications which, at a minimum, must state the following:
Project (for example, 3D design files))
Dimensions
Dimensional tolerances
Materials
Components
Functions
Layout / Graphics
There is no universal product specification model that applies to all merchandise. Of course, the specification of a wristwatch is completely different from the specification of an LED screen.
Drafting a comprehensive product specification is just the beginning. As already mentioned in this article, you must verify that the supplier is able to comply with it by ordering product samples.
It is normal for suppliers to fail to conform to one or more specifications. Some vendors succeed after a few reviews, while others simply can't. In the latter case, you have to move on to the next provider.
The product specifications, which define all aspects of your items, will then be confirmed by the supplier. The best way to achieve this is to have the supplier sign a Sales Agreement before production begins.
In addition, you will inform the supplier of future quality controls and laboratory tests, as all this makes them understand that you can check their compliance with both product regulations and quality requirements. Chinese suppliers are much more likely to accommodate your requests if they know that if not, they have something to lose.
Percentage of non-stock items sold on Amazon (pre-fulfillment cancellation rate)
”This is the number of orders cancelled by a seller before shipment confirmation divided by the number of orders placed in the period under consideration. When we calculate this parameter, we take into account all order cancellations made by the seller, regardless of the reason."
It is quite frustrating to buy an item only to have the order cancelled a day or two later because the seller is unable to keep enough of those items in stock. Having a certain quantity of products in stock might seem like a simple challenge, but it might not be if you make products for the domestic market.
Still, buying from China requires careful planning. The goal set by Amazon is only 2.5%. A delayed shipment could quickly lead to the cancellation rate being reached, going well beyond the target set. Read on and I'll explain why importing from China takes months rather than weeks.
Approximate delivery times
What you see on Alibaba.com and other B2B supplier lists are not mass-produced items ready to be shipped in 24 hours to customers around the world. What you see are the images of the previous products, made by the supplier for the various buyers. These are references that highlight a supplier's skills.
That said, in China, as in all countries, there are wholesalers, but mass-produced and wholesaled items are never produced in accordance with the CPSC and other US product regulations. On the contrary, these products are mainly made for the Chinese domestic market. As a result, buying in bulk is rarely a choice and especially not when it comes to electronics, toys and cosmetics.
1) Production (10 - 50 days)
When you pay the deposit, your products have yet to be made. In fact, it is very likely that your supplier has yet to purchase the materials and components from the subcontractors they turn to for the production of your items. Mass production takes from 10 to 50 days depending on the product, its complexity and numerical quantity. Keep in mind that it is rare for Chinese manufacturers to start production before having received the down payment (equal to 30%). In most cases, payment takes 3 to 5 business days before it reaches its destination.
2) Quality control and laboratory tests (from 2 to 14 days)
Once production is complete, it's time to send in a quality inspector. This will result in a delay of at least one or two business days, assuming that everything is fine and there is no need to remake or repair any items, in which case the shipment may be delayed for another month or two. You may also need to check that your merchandise complies with applicable product regulations.
To date, compliance cannot be verified by an on-site quality inspector. Instead, you or the inspector must submit samples of the batch to a product testing laboratory, such as the SGS or Bureau Veritas. It usually takes 7 to 12 days for test results to be delivered.
Please note that while checking the quality of your merchandise and its regulatory compliance, you cannot carry out the order, as the balance payment (70%) will not be made until compliance and the quality of the products will not be confirmed. If you have to pay the balance before the completion of this phase, you will take away from the supplier the interest in redoing the defective items in case they are not compliant.
3) Shipping and customs clearance (7 to 50 days)
The main factor related to the timing of transport is, of course, the mode of transport itself. Air freight is the fastest way to move goods from China to the United States and the EU. However, when you're importing more than one or two cubic meters of cargo, air freight is rarely an economical option. On the contrary, it is very likely that you will have to ship the cargo by sea
The cost of transport per unit is lower, but it takes much longer to arrive at your destination. The transport times from Shanghai, or from Hong Kong, to Los Angeles are approximately 21 days. Add another 10 to 17 day time frame if you are shipping to the east coast.
Then you must also consider the transit time at both the port of embarkation in China and the port of destination in the United States. Loading and unloading the goods, checking them and clearing them through customs can take another period of time ranging from 3 to 7 days. All this happens at the port of shipment and the destination of the goods, so you have to multiply this number by two.
Overall, you need between 19 and 114 days from the day you place an order before the products are in stock and ready to ship to Amazon.com customers. These are the timelines, assuming no delays whatsoever occur.
Potential delays
Talk to any experienced importer and you'll quickly realize that when buying from China, delays are the rule rather than the exception. Delays are a serious risk that could lead to the elimination of your privileges as an Amazon seller. Let's look at the most common causes of delays in China below.
1) Quality issues (10 to 50 days)
Quality problems are the most common and disastrous waste of time. These problems are widespread in China, especially when they affect inexperienced importers who fail to implement a comprehensive quality assurance process.
There are various types of defects. They can be aesthetic defects (for example, scratches) or functional (for example, dead pixels). If the quality inspector of your choice finds that the defect rate is above 1%, which is set by Amazon's ODR, the supplier must repair or remake the products.
This process can involve an indeterminate period of time ranging from a couple of days to one or two months if the defect rate is severe. If there are communication problems between you and the supplier, the entire batch could be defective, thus forcing production to start all over again.
Assuming your products failed to pass the lab tests for compliance, you would be faced with a situation where production has to start from scratch, resulting in huge delays. It is very rare to be able to repair or, by any other means, "make" a compliant product, since product regulations often refer to certain substances (for example lead, cadmium and phthalates) that cannot be extracted from a product finished.
The only way to reduce the risk of quality problems is to implement a rigorous quality control process. In many cases, it is the lack of communication between the importer and the supplier that is the main cause of quality problems, rather than the supplier's attempt to save as much as possible (although this is also not uncommon).
2) Chinese holidays (10 to 30 days)
Chinese New Year is a cheerful time when both immigrant workers and so-called white-collar workers spend time with their families. For some of them, this is the only time of the year to meet and greet longtime family and friends, sometimes even their own children.
For importers, the Chinese New Year is a time of anguish and missed deadlines.
Chinese suppliers often suspend acceptance of orders at the end of December. It is very likely that an order placed in January will not be completed until the end of March or even April. The Chinese New Year isn't the only holiday you should watch out for. There are numerous other minor holidays throughout the year, including "National Week" during which no one works during the first week of October.
3) Product development (1 to 12 months)
Product development is always required when making a change to an item. Regardless of whether you want to test a whole new design, or change a colour or logo, you should always have new samples made.
There may also be a need for new equipment. The supplier may also need to make some changes before sampling new products. What I am trying to explain is that product development takes time and it is very difficult to set a specific deadline.
Changes to your existing projects are made separately from the order flow, as you can never be sure if a project or modification will take a month or more to make. Many importers try to set fictitious deadlines, which often turns out to be useless. Product development takes time and, as mentioned, never let this interfere with the smooth flow of products.
Late shipment rate
“This is the number of orders with unconfirmed shipments from the expected shipment date divided by the number of orders in the period under review. Orders whose delivery is confirmed late can lead to increased contacts with customers and have a negative impact on the level of customer satisfaction."
The delay rate during shipping is related to the order cancellation rate. Amazon is more tolerant when it comes to late shipments, allowing for a 4% rate. Still, you may quickly exceed this limit due to delays attributable to your Chinese supplier.
As you already know, Amazon has become, even in Italy, the most important platform for working in the world of e-commerce.
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