With over 2.5 million current sellers actively selling on the platform, Amazon has emerged as the leading marketplace. In the U.S., the Amazon shopping portal enjoys immense popularity, with more than 150 million users. More than 50% of sales in Amazon are from third-party sellers. Recent statistics show that over 49% of top sellers in Amazon.com are based in China.
China continues to be the premier manufacturing location for Amazon sellers despite recent trade tensions and rising labor costs. Although Amazon sellers have been sourcing from China for years, there are many challenges they face when it comes to Chinese suppliers. Many misconceptions exist on how to source and effectively manage the product quality of Chinese products.
Most misjudgements and mistakes that Amazon sellers make with Chinese suppliers can be traced to poor communication, poor preparation, and unclear requirements.
Here are the top five mistakes Amazon sellers make when it comes to sourcing from China and steps to take to avoid them:
The top five mistakes and how to avoid them
#1: Not sourcing the right products
The first question Amazon sellers are faced with relates to the type of products that can be sourced from China. While there are many suppliers who offer a wide range of products, one of the top mistakes sellers make is to source the wrong product. Some products are not suitable for e-commerce, while some suppliers may not have experience in a particular product that you wish to sell.
Amazon sellers who are inexperienced should particularly avoid sourcing these types of products from China:
Complex products: One of the first mistakes Amazon sellers make is to source a complex product from China. The reason why such products are unsuitable for e-commerce is that it is more difficult to maintain quality standards for such complex products. These can include high-value items such as watches, jewelry, or consumer electronics. These products often require sourcing of multiple materials and parts from different sub-suppliers. Even when the Chinese supplier sources all the parts, there may be limited or zero transparency on where these materials or parts are sourced from. The margin of error is higher when sourcing complex products and the supplier can misunderstand product specifications, production processes, or how the product is used. These misunderstandings can lead to poor quality and inconsistencies in finished products.
Products that are labor-intensive (unless you have boots on the ground to monitor them): Luxury goods, shoes, garments, and handcrafted products are some examples of products that are labor-intensive. These products will not only have higher labor costs, but the potential for quality issues is also higher. Products that are made using automated processes tend to be more consistent and have fewer human errors. Excessive glue on shoes, untrimmed threads in a garment are just some examples of product quality inconsistencies in labor-intensive products. With minimum wages rising to $348 per month, the higher labor costs can eat into the profits of sellers.
Counterfeit products: Sourcing counterfeit products can translate to legal risks, not to mention repercussions from customs officials and Amazon itself.
Steps to take to avoid sourcing the wrong type of products:
Always research the customer base, the intended market, and the product. You should determine if the product is made using an automated process or if it is labor-intensive before sourcing it from a Chinese supplier. You can also consider a test order to evaluate how the product sells prior to making a decision. The Anti-Counterfeiting Alliance of Alibaba has resulted in shutting down 524 manufacturing locations while Amazon uses machine learning to remove counterfeits.
#2: Placing orders without evaluating the supplier
Once you decide the products you want to source from China, the next step is to find the right supplier for the goods. Most Amazon sellers turn to B2B marketplaces in China, such as Alibaba, Made in China, and Global Sources for sourcing products.
However, being impulsive and rushing to place an order with the very first supplier you find on your internet search is a big mistake.
Paying upfront for an order without first evaluating and vetting the supplier in China exposes your business to wide-ranging risks such as fraud, supplier bankruptcy, and poor quality of goods. Even Amazon sellers with budget constraints can still perform an informal background check to know more about the supplier before going ahead with the purchase order.
Here are some of the steps you can take to ensure you are sourcing from a genuine supplier:
- Beware of suppliers who ask for 100% upfront payment.
- A supplier can be a wholesaler, manufacturer, or a drop-shipper. It is important to know the difference between these terms to determine your purchase strategy. A manufacturer makes goods for resale and has higher MOQ (minimum order quantities) requirements while the prices are low. A wholesaler purchases goods and resells the same to retailers. Dropshipping enables sellers to buy small quantities of items for a higher price.
- B2B marketplaces typically display business information and relevant details of Chinese suppliers. Browse the product catalogs of suppliers and evaluate if they specialize in a particular product or make a range of products. If the supplier only makes the product that you wish to sell on Amazon, the chances are higher that the supplier has the expertise and experience in supplying a good quality product.
- Evaluate the verification provided by the marketplaces. For instance, Alibaba provides different verification levels for suppliers. The ‘Gold Supplier’ badge is given to companies that have a valid business license and are legally registered. These are suppliers that have cleared the authentication and inspection process of Alibaba.
- Evaluate the documents the supplier can provide to authenticate and verify their operations. ISO certificates, business licenses, and test reports are some documents that can demonstrate proof of the legitimacy of the supplier. The issuing body can also be contacted to verify certificates.
- Look into the possibility of auditing the facility of the supplier. Even if you have no intention of following through, if the supplier refuses the audit, that should be a signal that they have something to hide.
See if it is possible to review the product sample before placing an order. Reviewing the product sample is a reliable way of verifying the supplier’s quality standards and production capabilities.
