Amazon FBA Essentials
Why Your Should Always Quote FOB
Factors that can impact time
finding the optimal solution
Why FOB Shipping should be used when getting quotes with your supplier?
Case 1: Which incoterm should I choose?
As an experienced importer or a newbie Amazon FBA seller getting their first shipment to the distribution center, it’s vital to understand what the most favorable terms are for negotiation. In my experience, always choose FOB shipping when getting quotes from suppliers – yes multiple suppliers.
The simple reason is this: You will gain transparency in the real logistics/shipping costs and are more likely to reduce your total cost. This is both good for your bottom line and give you more control over the whole process. The catch – it takes work. Let’s get started!
Assuming you have done the initial research, Incoterms can be divided into 3 main categories.
- EXW – only the price of the actual value/price of the goods
- FOB – “the seller bears all costs and risks up to the point the goods are loaded on board the vessel” (wiki 2020)
- CFR, CIF, DAP, DDP – You pay the goods value, inland transportation cost, and sea/air freight cost, and anything else. Meaning, the supplier makes all arrangements and all shipping costs are included.
Top 3 Reasons for FOB
Freight cost is cheaper
FOB offers better logistics solutions
- FOB gives more control
Why you are charged more using other DDP and other Incoterms
1. Most suppliers mark up the freight cost as an additional “service” but it’s to increase their revenue.
This is very straight forward but worth mentioning
2 Suppliers will quote you higher to cover unforeseen costs that they may incur
The majority of suppliers in China use a made-to-order model. Since they need a couple weeks or even a month (sometimes longer), the price to ship could be much different than when they first quoted the price.
This leads to sometimes hundreds if not more being charged to hedge against any market changes in the supply chain.
3 Manufactures and suppliers take the easier softer way
Even in the rare case the supplier adds the logistics expenses at cost with no markup, they are most likely not going to spend time price shopping around on your behalf. If you use a professional agent in China that understands the carriers ’very well, you not only get a better price but better service, and less risk
The FOB Solution – Trusted China Local Forwarding Service
Take the time to find a good freight forwarding partner and you are more likely to get the best price and will be given more than one option. In addition, local knowledge you would not otherwise know to help you decide easily. And, if any issue arises, the response time will be much quicker compared to if you used the supplier or manufacturer to make all the arrangements.
When using your own freight forwarder, you get more transparency and better information. Finding a partner gives you the opportunity to have someone that works together with you for YOUR best interest.
EXW can be useful for sample orders or very small shipments. Even though, EXW gives max control of the process, it is not ideal in most cases. Hear some war stories of trucks arriving at the supplier’s location and they even have no binding obligation to loading it! Not to mention any customs complications around declarations at the port.
As a general rule: if you shipment is less than 400lbs or about less volume than 1 cbm, EXW/courier door-to-door is best. If you are a newbie Amazon FBA seller or China importer, FOB + to-door delivery for your small shipment. This will handle most the complexities of importing while giving you the benefits mentioned. Many experienced importers use FOB + to-port/airport or to-door delivery. Here, you can save both time & money.
Always use FOB if you have a good freight forwarding partner, when getting quotes from your supplier. No matter what type of goods your shipping, you will always have the greatest chance of success and a good price.
BJ BLACKBURN | DIGITAL
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