Amazon FBA – Chapter Five

Chapter 5

How to Source a Product

Alibaba


There are many ways to source a product. The most commonly used site is Alibaba.com, a China-based company that connects factories to buyers on a global level. It’s not only factories in China on this site. You’ll find factories and suppliers from all over the world.

Navigating Alibaba

Contact more than three suppliers as not all of them will respond. You’ll want to find a supplier with experience. If this is an older product, you’ll find factories with more than 10 years of experience. If you look into tech products, you may find some with less than three years experience.

Here’s a picture of how the Alibaba layout appears when you search for a product such as “toothbrush”. You can quickly scan through these suppliers based on the picture of their products, response rate, and the years they’ve been on Alibaba.


Click onto the listing and check whether they have these three badges.


A —  Trade Assurance: This tells you whether the factory will protect your order from payment to delivery of your goods.
B — Supplier Assessment: A third-party company that provides inspections and certifications which helps buyers identify quality factories.
C — Factory Check: Alibaba uses a third party to verify that the factory indeed exists. These factors are important because at times you may be dealing with middlemen who source products for cheap, mark them up, and pretend they are a factory.

Tip

Click into the Company Profile tab, highlight “Trade Assurance” at the top right to see how much coverage the company offers. Picture below.


Reach out to the suppliers and keep track of their response times, answers, and whether they follow directions. We reached out to 17 suppliers, 12 responded, eight who followed directions in e-mailing us, but only four provided detailed information. We continued the conversation with four of the suppliers and even chose one with less years over a factory with nine because they were the least professional.

Having more than one factory allows you to compare samples and negotiate against pricing. Once you know the quality and feel of the product, negotiate with the factories to get the best rates.


If you look at Column F, you’ll see there are different prices. When we evaluated this product, they had two styles with different price ranges. We were willing to pay more if the quality of the products were clearly better than the others. This is why we pulled samples from the cheapest at $7.80 to the most expensive at $17.19.

Tip

Go onto 1688.com to also get an idea on pricing. The site is all in Chinese so I only use it to gauge the range of pricing. Fun fact: In Chinese 1688 is pronounced ee-liu-ba-ba. Sounds familiar right? This is the Chinese version of Alibaba where companies in China use this instead to contact suppliers.

Factory terms

Here are a few terms you’ll start to encounter when you have conversations with manufacturers and suppliers.

What is MOQ?
MOQ stands for Minimum Order Quantity which is the lowest number of units you can order for the price they give you. The more you order, the more room you have for negotiation.
What is FOB?
FOB stands for Freight on Board which is where the seller (factory) is responsible for getting the product to its nearest shipping port. The buyer (you) is then responsible to get the product to your final destination.
What is EXW?
Ex Work is when the buyer (you) incurs the risks for bringing the goods to the final destination. Example, from factory to your warehouse or Amazon warehouse.
What is OEM?
OEM stands for Original Equipment Manufacture. This is also known as private labeling if you want to have your label put on the product you are sourcing.
Private Labeling
Private labeling is when your logo and information is printed on a product that was mass produced by another company. This product is then sold as your company’s product. This is for companies who want to build a brand. Here are a few examples of popular private label products. Yoga mats, garlic press, and hammocks.

Your factory will give you quotes in these terms, so you can negotiate to get your products to you. Some factories will require a higher MOQ to do OEM/private labeling of your product.

Tip

When negotiating with your factory, you can ask for a better rate on your future orders. Remember your product needs to scale in the first batch, so when it’s ranked up, you can lock in better rates for your second order and so forth. Factories are willing to do this because it means you’re invested in a longer term partnership.
When you buy EXW your price per unit is $20/unit.
When you buy FOB, your price per unit is $25/unit.
The correct way for FOB price is separated. $20/unit and $5/unit transportation cost.
Be sure to view your invoice if you’re quoted FOB prices, as US Government doesn’t tax transportation costs.