Impossible to make a profit on Amazon importing from China?

[Ian Jordan]

Hi guys,

I'm trying to follow the Amazon private label, Jungle Scout style method and apply it to the U.K market. (In a nutshell, buy a niche product from Alibaba and sell it on Amazon).

But from my calculations, after carefully choosing several niche products it seems borderline impossible to make a profit.

Am I missing something? Are my calculations wrong?

It's either:

A) I’m being an idiot (likely) and these calculations are incorrect.

or

B) If the private label bootstrap jungle scout thing just doesn’t work in the U.K market.

While the example below is only for one product, I have tried it with 8 different carefully researched niche products, (decent demand, low competition) and produced similar results for all of them.

I should say my starting budget is $2,500. Which I know isn’t a lot, but I’ve read many a thread stating it can be done for under $1,000 so I figured (perhaps wrongly) it could be done.

Also, I’ve kept the costs in dollars due to some of the currency calculators I was using. I am from the UK.


Thanks,


Cost of niche product - $5

Number of pieces – 142 = $710

Selling price on Amazon - $18

Air shipping cost - $300

Insurance - $40

Customs Charges - $450

Tariff / Import Duty – 4.7% = $71

20% VAT = $220

Total postage cost to customers for all 142 pieces = $860 (seems most sellers offer free postage, so I’m adding this as an outgoing cost to me).

Total Amazon referral fee cost (for all items sold) = $383

Total Amazon per item sold fee (for all items sold) $142

Total Outgoing costs = 3194

Total Profit = -$638

 

[kulture]

Your competitors are either importing in bulk, and thus have a much lower goods cost, or are not correctly declaring the value on import and not paying the full import duty and VAT.

 

[Matt.WD]

What are the customs charges made up of? Is that based on value of the imports or a fixed charge?

You're being killed on that charge and the shipping, which as a % of total cost are probably a lot higher than they need to be to be competitive (I'm guessing, I'm not an expert)!

 

[bharris]

You will also need to make an allowance for customers claiming lost parcels, damage etc. Does your postage cost also allow for packing materials (this can be quite costly)?
Are you VAT registered, if not then you will not be able to claim back.

I would really look at your shipping/custom charges, they seem very high (without knowing what you are importing). Items we import from USA & Australia cost us a fraction of that cost. How heavy and big are each of the items, how many can you pack in a single box?

 

[Pish_Pash]

Air shipping cost - $300
Customs Charges - $450

What you likely need is slow boat from China instead of 'Air' ...I'm also figuring you aren't VAT registered & have included VAT charge in what you call 'customs Charges'....in which case, I don't think you stand a cat in hell's chance unless you ask you supplier to get creative with the valuation of your shipments....not that I'd condone, but it's the only way the numbers are going to work.

Selling price on Amazon - $18

To be sure...you need to compare apples with apples...is that selling price on Amazon from other UK based sellers ...or for that price, will the customer have to wait along time for the product to arrive from China? (I ask because you can charge more if you have a delivery edge over your competition.....nobody wants to wait nowadays ...& if the difference is only a quid or two, many customers will pull trigger at the higher asking price *if* it means a significant time saving wrt delivery)

 

[Ian Jordan]

I would really look at your shipping/custom charges, they seem very high

Thank you for all your advice. I'm kind of new to this so this is really useful to read. I just wondered, outside of directly asking suppliers, how do we find out if the shipping and custom charges are correct? Thanks

 

[fisicx]

Talk to Ron @MY OFFICE IN CHINA, he is a member here and will be able to help you with this - and probably cut your costs considerably.

 

[The Byre]

Bulk, best, beasting, branding.

Bulk. If you want to buy cheaply, you have to buy in bulk. The punter wants one garlic crusher, so has to pay $5. You buy a thousand and pay 50 cents each.

Best Price. So what's with China? I mean, everybody is banging on about China, as if that is the only place to buy anything! Roumania? Poland? Hungary? Russia? My daughter imports wooden toys from Poland at 20€ each and sells them into Germany for €120. I know a guy who buys truck-loads of wood-burning stoves in Roumania at between 100€ and 300€ each and sells them into the UK at £300-£600.

Beasting. Are the punters beasting the doors down to get this product? Is there really a demand? If you put one onto ebay at a low price, would it be ripped out of your hands? The market for garlic crushers is remarkably slow - but you try selling a good, used plough at a lowish price in an agricultural area and it will go in a few hours.

Branding. Selling some cheap, generic guff at a low price is a mug's game. You have to develop a brand and a story. A story of quality and good design.

 

[SamLH]

I think setting up a private label without understanding the market is a terrible idea, from experience and some education most Amazon users buy from brands they know.

I'm working with a company who has been selling on Amazon for 3 years and we usually buy £100,000 worth of stock at a time which we get manufactured in China, we sell own brand stuff and usually are cheapest in our niche but we get several customers a day calling and asking how we can be cheaper than the big brand competition, we try to get around there questions with we manufacture ourselves, we've got a promo on etc but they always want to know where its manufactured as soon as we say China they pretty much lose interest.

As for the bottom line yup, almost none existent.
Advertising costs, fulfilment costs, shipping costs, defect costs, return costs. When we sell just one item we make a terrible loss, when a customer buys two at a time we about break even. If they buy more than two at a time then we finaly get profit.

I don't know if people seriously think they can just set up an Amazon store and make money from it or are that desperate not to work the 9-5 they try anyway. There's too much competition for most people's capacity yet they still try making the market more competitive and drive down the prices even further, the guys who have been misled into thinking they can go alone keep losing and Amazon keeps winning.

 

[Paul Kelly ICHYB]

The only way to make money in that game is to set up a competitor to Jungle Scout!!

The second something goes on Alibaba, you have missed the boat.

As mentioned, why are you air freighting? Sea freight could save 50%+.

 

[Ian Jordan]

So what's with China? I mean, everybody is banging on about China, as if that is the only place to buy anything! Roumania? Poland? Hungary? Russia?

This is really useful. Is there a site like Alibaba for using suppliers in those countries or do you go directly to suppliers themselves?
Many thanks

 

[The Byre]

You have to go there, as well as going to all the international trade fairs. Some old furniture maker in Poland is not going to be on the Interweb.

The profit is not in selling. Anybody can sell anything at the right price. The difference between a proper import business and someone chancing their luck is buying - and you can only buy by understanding that product and the market thoroughly and by going to the suppliers and talking to them.

You also have to bring your cheque book and buy in realistic quantities.

 

[Mia @ Shippo]

Definitely look into sea freight!
I work at a freight forwarding company for sea freight and those charges are extortionate; customs charges definitely are not that high. If anything, the main cost would be UK Duty + VAT but you're not looking anywhere near that kind of price unless there's anti-dumping duty.
Contact a freight forwarder (doesn't have to be us) just to readjust your budget because these figures should not be correct.