by Renaud Anjoran
Many small businesses plan to buy products in China and sell them on Amazon as a Third Party Seller. It can form the basis of a strong, profitable business. But there is very little tolerance for quality issues.
We did a simple simulation of the impact of a serious quality problem (50% of defective products) on the importer’s profitability.
This simulation is based on the assumption that you get the goods in your warehouse and that you check 100% of them.
However, most Amazon Third Party Sellers I have met told me they deliver the products directly to Amazon’s fulfilment centers. In this case, they can expect to receive this type of message from Amazon:
Hello from Amazon.
We are writing to let you know we have removed your selling privileges and placed a temporary hold on any funds in your seller account.
We took this action because your order defect rate (ODR) does not meet Amazon’s performance target of less than 1%. The ODR metric is based on A-to-z Guarantee claims, negative feedback, and chargebacks.
How to avoid such a situation?
Work with the right supplier
Depending on the size of your orders, you need to work with a certain type of factory:
- If you place small orders, you will probably have to work with a small workshop through a trading company that controls what happens. Make sure the trading company has processes and systems in place, and make sure they are specialized in your product category.
- If you place orders above 20,000 USD per SKU for non-customized products, you can certainly buy from a larger manufacturer that can communicate directly with you. In this case, make sure to audit the factory and then to inspect the goods. Many agencies, including ours, can help you with that.
- As a general rule of thumb, larger factories are more expensive, less flexible, and more reliable in terms of product quality.
- In China there are very few “level 4″ factories.
How to find out what type of factory you are in contact with? By auditing them. I strongly recommend to read How Factory Audits, Inspections, and Lab Tests Fit Together.