By the end of this session it really felt like things were gearing up. Don't worry I am going to cover all of the details in this recap. But before we get to that, make sure you have caught up with the first two sessions, and if you missed it, last week I made a personal vlog whilst I was busy working on my Session #2 homework: view here!
In this weeks session it was time for me to recap my advanced product research where I revealed my top two product ideas. This was narrowed down from 43, to 5 and then the final 2 product ideas. We also announced which product that I am going to launch so if you do nothing else, make sure you check out the rest of this post to find out!
From there, and with Greg's expert guidance, we covered a lot of insightful stuff in this session, including:
Let's get started shall we?
Watch the replay here:
Here's the slides:
First up, Greg handed over to me to share some more of my Advanced Product Research findings for my top 5 products. In case you forgot, those were: cardboard boxes, full face snorkel, sleeping bag, baby sling & travel pillows.
I shared my top findings for each of these products and whether I felt they were in my top two as follows:
For these reasons, I decided not to shortlist this product idea for this product launch. However, the demand is still very high for UK marketplace standards, and I think it could definitely be a profitable idea with the right investigation and strategy.
Another great thing about this product was that it had very low seasonality. I was worried it would be a summer item but it's definitely not. Not only that, there were lots of suppliers showing on Alibaba and the initial cost of manufacturing looked very promising too.
This one made it to my top two product ideas!
I still think this is a great product idea but it would require further legal investigations to be on the safe and sure side. For that reason I decided not to shortlist it right now.
Again this is positive as I know we're going to go in strong with a great PPC strategy. This opens up an opportunity.
This item also has plenty of suppliers listed on Alibaba, the rough cost guide looks good, and it's super easy to bundle with things like ear plugs and eye masks.
Guess what – travel pillows made it to the top two!
Other than that it's vital stats looked good. Easy and cheap to manufacture with a good amount of existing suppliers on Alibaba, low seasonality. At an initial profitability glance it would be a strong product.
With all of that researched, it was time to start contacting suppliers for my top product ideas to get a better idea of the cost of manufacturing. This would ultimately help me to do some early profit calculations (which are explained further along in this post), and decide which product to launch.
First up, Greg gave some great over-arching insights into sourcing from China in general. Make sure you catch this in the replay if you are new to this. To give an overview, you do not need to speak Chinese as most factories will have English speaking sales reps. Although Chinese business culture can sometimes get a bad rep, it's actually very viable to develop long term business relationships, and you don't necessarily have to visit trade shows in China to do this.
When it comes to payments, most sellers will be using T/T wire transfers to pay. Following that there is also Alibaba's secure Escrow service, and less popular is PayPal, which is the more popular option for smaller payments (like for samples). We will cover all of this in more detail at a later date, as well as contracts and agreement templates. So if you are following along with us, make sure you stay up to date to cover these things in more detail when they become more relevant to the stage at which we are in our launch progress.
So now that we have alleviated some of the common questions before diving right into searching for suppliers to contact, here's a few tips and guidelines:
When sending out your email you want to make sure that it's not too long but includes all of the most pertinent information. Greg also advises to ask any questions in a numbered list, which increases the chances that each and every question will be responded to. If you hide questions in big blocks of text, they are easily missed.
Here's an example of one of the email templates I created:
> Get your hands on this template here <
As you can see, I introduce myself and the company and give some rough estimates of how many units I would be ordering. Remember that you want to look like a substantially large ecommerce seller, even if you are just starting out launching your first product. Don't worry if you don't get the estimates quite right.
From here I listed out the specifications for the product I am looking to manufacture, and then asked a numbered list of questions about things like adding logos, sample times and costs and if they are a manufacturer or a trading company.
Greg mentioned this useful piece of information which is that you want to ensure suppliers are manufacturers, and not a trading company.
What's the difference? A manufacturer actually products the product in their factory. Whereas a trading company buys it from another factory and sells it.
The reason for this is that you don't want to add another level of complexity, time and communication to your supply chain. It's always best to purchase directly from the manufacturer.
An easy way to find out whether a supplier is a trading company is to ask – usually you will get an honest response. Other routes include inspecting their Alibaba listing which will sometimes state it.
Or you can use the “common thread” test and take a look at what other products the supplier sells. If we are asking about travel pillows and a supplier sells lots of other products that are made with fabrics, other types of pillow etc. then it's more likely they are the manufacturer. Whereas if a supplier sells a wide range of products that require different machinery or processes to make, then it's likely they are buying in from manufacturers and selling as a trading company.
As you can see in my example email template, I created some specifications for my sleeping bag product idea. I just wanted to share a few insights of how I did this, and hopefully you can repeat the same processes to spec out your own product ideas.
I'm definitely not a sleeping bag expert, despite working in camping store as a student for a time, I never really got into any depth on what makes a good sleeping bag 😉
I was using all of the information from those three tips above to come up with my ideas. I may still tweak the specifications yet as this was just my initial outreach to get an idea of cost.
Overall, reading reviews really helped me make a lot of decisions. For example, for sleeping bags a lot the negatives were about them being too cold, damp, or the wrong size. An easy win for that is to do a couple of sizes for different sized humans, and make sure the sleeping bag material is warm, suitable for more than one season, and has water resistant properties.
I also saw a few neat ideas like having double anti-snag zippers, an internal pocket for valuables and drawstrings on the hood for a mummy sleeping bag to keep the warmth in.
This was the most time consuming part of my supplier outreach at this stage. Finding and sending out the emails once I'd got my template nailed down was actually really simple.
Greg gave some extra advice on actually carrying out the outreach as follows:
He also advised using a dedicated email address for sourcing. Greg still uses Gmail for his own Amazon business and has never had a problem so don't worry about getting a business email. Once you start outreach you will be contacted by Alibaba and suppliers alike for eternity about all manner of things. It's really not ideal to have all of this coming into your primary email – trust us!
So now we've got this far we are at the stage where we can calculate profits for our top product ideas and make that exciting final decision.
We *are* still going to make some assumptions at this stage. For example, we will get a much better idea of the true cost of shipping and customs later down the line when negotiating with suppliers and other third parties. But these guidelines that Greg shared gave some good rough indications that we can use to help us decide which product is going to be most profitable.
Get your calculators ready!
We want to figure out how much profit we will make per unit that we sell, and to do that we need to take into account our FBA fees, the landed cost of the product, VAT as we are selling in Europe, and ongoing marketing costs with Amazon PPC. Here's what Greg worked out:
If you are struggling to figure out your FBA fees you can use Amazon's FBA calculator – check out this useful page which explains how to use to tool, with links to FBA calculators across marketplaces.
Greg also got an idea of the cost of duties using the UK government website. The shipping estimates are rough, but this gives us some numbers to work with at this earlier stage of selecting a product.
VAT in the UK is 20% and we have accounted for 5% for PPC and marketing costs, which is playing it safe and allowing for extra spend.
Using the above guidelines and calculations, we can start to figure out how profitable our top product ideas will be. Here's a working example using the sleeping bags:
As you can see, this results in a healthy profit margin of £8.35 and a ROI on Landed Cost of 125%. Greg shared in the webinar that he always aims for 100% ROI on landed cost, so this is a good start.
I have updated these figures slightly from those shown in the webinar, as the VAT calculation was slightly off.
VAT is 20% in the UK, and this is of the subtotal of the product, not the full RRP. So if we wanted to sell this product for £26.99, then the subtotal would be £22.49, and the customer would also pay £4.50 VAT. Here's a useful calculator tool to calculate your VAT ‘backwards' – handy for when you have a final retail price to aim for, and need to know how much VAT is.
We will definitely go through the relevant steps to set up your business to sell in Europe and VAT requirements at a later date. At the moment we are still in the product research and sourcing phase. Once we select a supplier, there will be a ~2 month buffer period for us to get all of this stuff sorted out before any inventory lands in the UK.
Sleeping Bags!
This decision was made based on a balanced view of all of the product research criteria we have been investigating these past three weeks, including demand, competition, how easy it should be to source and most importantly, how profitable the product will be.
I mentioned this in this weeks session but it really is a case of balancing all of these criteria and more out against your other product ideas and deciding which works best for you. Everything single product idea will come with it's own benefits and challenges and you also need to weigh this in when making your decision. For example, some first time sellers go for less risky products, or cheaper items that require a smaller initial investment.
Greg seemed happy with my decision and I am excited to see this through. We will be launching with a sleeping bag product – that is unless we run into any issues that I haven't already spotted.
As I mentioned above, you can access the email outreach template in this week's homework file. There is also a tab for you to log all of your supplier responses so that you can easily assess which ones to communicate with further, and another tab to log your profit calculations for your top ideas.
So your homework for this week is, you guessed it, to start your supplier outreach, do your product profit calculations and come back for Session #4 next week having selected which product you would like to launch.
From here, we're going to dig a little deeper into how to assess your Alibaba responses, how to find the right supplier and what common mistakes to look out for. By the end of next week we want to be ready to order some samples!