Amazon FBA Essentials

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Why Your Should Always Quote FOB

Making the right choice when starting to import from China for your Amazon FBA or online business can get complicated and especially if you are not very familiar with Incoterms when getting quotes.  We often opt for the easiest and, what looks like, the “cheapest” option. 
 
However, looking at a total costs analysis of getting your good from supplier to Amazon’s dock includes much more than just the quote from the supplier.  For instance, one option could get your product on the “shelves” weeks before another and although it might be “cheaper” than another logistical route, it could be generating sales sooner.  And, we all know that can be better for the bottom line in the long run.

Factors that can impact time

Savannah Port how to import from China

 

can be customs (certain importing options and 
items are less likely to get hung up in customs), the “last mile” which in FBA would be the final leg of the journey when it arrives to the dock at Amazon facility, some ports are more efficient than others, some are closer to more consumers, so on and so on. I think some answers helped simplify this where first is determining if your shipment is LCL or FCL 
(less than a full container/full container load). That should guide your next decision in 

finding the optimal solution

One of the biggest impacts on time can be customs.  Certain importing options and items are less likely to get hung up in customs.  Some options like using Bonded warehouses and Free Trade Zones and signficantly reduce the time it takes for your goods to get through the port.

The "last mile" which in Amazon FBA would be the final leg of the journey when it arrives to the dock at Amazon.  Some ports are more efficient than others, some are closer to more consumers, etc.

Some questions must be answered to help simplify this.  First is determining if your shipment is LCL or FCL (less than a full container/full container load). That should guide your next decision in finding the optimal solution.  Once you have the figured out, proceed!

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

  1. Freight cost is cheaper

  2. FOB offers better logistics solutions

  3. FOB gives more control
Common Incoterms

The most common incoterms you will see when getting quotes form China

  • EXW
  • FOB
  • CFR or CIF
  • DAP
  • DDP

.

Why you are charged more using other DDP and other Incoterms

Three cases.

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.

Conclusion

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.

 

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