How to Find and Negotiate Exclusive Selling Arrangements for eBay & Amazon
The Online Seller's News March 2014 - Volume 14, Issue No. 4
Tips, Tools, News and Resources for eBay, Amazon and Independent Online Sellers
I usually publish twice monthly, and you may have noticed that you only got one newsletter in February. Karen and I took ten days off to spend in some warm weather and on the last day we both caught really rotten colds that would just not go away, so I just didn't have the time or energy. My apologies, but this month we are back to publishing twice monthly.
If you are a member of Online Selling Coach be sure and join our private Facebook group. This group replaces the forum and although we only have a few folks who have joined, there is a lot of activity and this is a great place to get advice and your questions answered by experts and other members. It's a great resource.
If you are one of my regular readers then you know I am a huge fan of wholesale trade shows as a place to find merchandise to sell online. Last week I got a look at a new book called Trade Show No Show by my good friend Jim Cockrum and Jim Peterson. Jim's co-author Jim Peterson is a million dollar a year seller on Amazon so he knows what he's talking about.
In the first half of the book it shows you how to find and register at trade shows and how to get the most out of them. But the second half is the genius part - the author shows you how to shop at trade shows from your home computer without actually attending the show. Check out Trade Show - No Show. You will not be disappointed and everything Jim Cockrum sells comes with a money-back guarantee if you are not happy.
Channel Advisor has published a free eBook, "Retailer's Guide to Selling on Online Marketplaces" - Best practices and tasks to stay on top of your e-commerce activities and prioritize what's important to succeed on any marketplace.
If any of you live near Chicago there is the International home and housewares show, which is big on kitchen stuff and gourmet food. The dates are March 15-18 at McCormick place. Here is the link for info and to register: http://www.housewares.org/show/ .
Unfortunately I can 't make it as I will be at ASD in Las Vegas where I am speaking this year.
Amazon is still putting their profits into long-term growth. In 2013, Amazon opened seven new warehouse/fulfillment centers and hired over 20,000 workers and is currently trying to hire another 2500. It plans to open several more fulfillment centers this year.
I have just written a new article called Amazon Third-party Tools and Resources. Here is a link where you can download the PDF for free.
Have you received your invitation from 11 Main Street? 11 Main Street is a new third party selling venue owned and started by Alibaba, the company that bought Auctiva and Vendio a few years ago. 11 Main will be an entirely 3rd party selling site and they plan to charge very low sales commissions rumored to be as low as 5%. Right now they are recruiting eBay and Amazon sellers to the platform. But so far they have been picky - only inviting large top rated sellers (I am still waiting for my invitation).
eBay is about to introduce what they claim will be an easier-to-use Seller Dashboard. In the coming weeks, eBay states "they will introduce a revamped Seller Dashboard that will show you-at a glance-how you can build your sales, deliver great service, and more." I can't wait!
Lets get started with this month’s articles:
I first wrote about this topic two years ago and again last year in connection with selling gourmet foods. But I keep getting email asking for it again so I thought it would be a good time to do an updated version.
The biggest advantage of negotiating and exclusive seller arrangement for eBay and/or Amazon is you have no competition and on Amazon this means you win the buy box every time.
So how do you find and negotiate these deals?
I usually find them at trade shows. This works mostly with small newer companies where you are dealing directly with the owner. These folks often exhibit at shows as a way of building their business. I also sell in the Grocery and Gourmet foods category and I tend to find these deals at local farmer's markets.
If you are at a show and find a new product that is not currently being sold on eBay or Amazon approach the vendor and tell them you are a professional eBay/Amazon seller. Its important to use that word professional as you start the conversation in such a way that the vendor know you are not a dilettante or hobbyist.
Most will say no they are not selling but some will say they don't want their products sold online. I will deal with that later. Lets talk about the ones who say they are not currently selling and have no objection. The next thing you do is go into your pitch. Here is what I typically say. Notice that my argument uses logic and appeals to the vendor's needs -not your needs. Don't try and memorize this - but study it until you understand it and can say it in your own words and style.
The first thing that I explain is many vendors are hesitant to sell on eBay or Amazon because the sellers start competing and cutting prices and this make them look bad with their brick and mortar retail accounts. So by having just one seller, I can guarantee to sell only at their MSRP or minimum advertised price (MAP). This way their retailers will not be upset.
The next thing I explain is that I will work to protect their brand by only using professional images and descriptions and if they want I will even agree to run the descriptions by them first for approval (they rarely take me up on this).
Then I explain the economics of selling on eBay and Amazon in that there is only so much demand for any given product. Depending on what the product is the demand might be one, two, three of ten units a week. It doesn't matter if there is just one seller -or ten sellers, that doesn't increase the demand. I explain that I won't know that demand until we test the product, but once we know does he really want to deal with one seller who will place larger orders, or several small sellers who will place small orders.
The last thing I explain is that I will continually monitor his brand for any mentions on the web or anyone selling it or describing it improperly. (You do this by setting up a Google Alert for the product).
Now, in all honesty this only works some of the time. But that is OK. When I use to run a sale force in the corporate world we had a slogan: "Some will -some won't. Next!" My personal experience is about a 30% success rate doing this, so for every ten times I make my pitch I find three more vendors.
Now, how do you handle the person who says: "I don't want my products selling on eBay or Amazon?" (They will often say this more about eBay than Amazon, when that happens, I don't fight it and just make my pitch for Amazon only).
The way I handle this is by agreeing with them -that's right, agree! Here is how I do this:
"You know - I couldn't agree with you more. The trouble with allowing your product on eBay is you may get one or two professional sellers, but you will also be dealing with a lot of amateurs who only know how to sell a product by misrepresenting it or cutting prices. And that upsets your retailers when they see your products selling online for less than they get in their stores." Then I go into my pitch but I start it this way:
"The way we work is by negotiating exclusive seller arrangements with manufacturers. As part of that we agree to only sell at MSRP or MAP pricing. We also work to protect your brand." And then I give the rest of the argument stated above.
Now this works even less often than with vendors who don't object, but I have done this successfully twice. One time was for a line of jewelry that we set up two and a half years ago and so far we have sold over $70,000 worth of just that one line. And earlier this year I was at the Seattle Gift show and met a couple making their own line of jewelry here in the USA. They had the same attitude about eBay and Amazon, but we made a deal. So far they have not been a huge seller, but they are starting to sell and best of all it's a product I can mark up 3X, so it's really profitable.
One question I get from readers is "What kind of contract or agreement do you sign?" On most of these deals its nothing more than a handshake or exchange of emails. The large jewelry company had a lawyer draw up an agreement that included I have to purchase a minimum of $10,000 (wholesale price) worth of product per year. But that is no problem because I am currently buying about double that.
Another question I get is how do you (or the vendor) enforce the agreements. I just tell the vendor to write into his standard purchasing terms that the may not sell on eBay or Amazon and if I see someone I report it to them and they send the seller an email telling them to desist. I have only had one instance where this was breached and the seller kept selling and the dealer kept sending him merchandise because he was a good customer, but he did agree to keep his prices at MAP which is where I sell so in this case I now have a semi-exclusive and we both sell quite a bit of the product.
Importing can be fraught with danger if you don't do it right, but if you are careful it can be insanely profitable. I have two lines of jewelry I am importing direct from China and Thailand that I am marking up 600% and they have an excellent sales rank. I also have two private label products I am having made for me. Both of them have competitors, but my cost is so low I can mark these up 300% and still be the lowest price.
Here is just one of the jewelry items I sell. My landed cost on this item is just under $6 and I am selling them for $23.97. They don't sell that fast (about two per week), but when they do sell, the profit is just insane.
1. Take care picking your product - Remember that shipping is a cost so think in terms of lighter weigh products that will not cost a fortune to ship. (Avoid brand names and brand name knock offs -these will only get you banned from eBay and Amazon -and that is a permanent lifetime ban -not a suspension). Also make sure you are buying in a category that you are approved to sell in.
There are three good places to find and research products:
You need to be a little careful on these sites, as some of the sellers are not real manufacturers, but middlemen. Both Alibaba and Global Sources have a category of supplier called Gold Supplier. These are real companies that they have checked out. The other thing I learned is you really need your own agent who will look after you. I have an agent who receives my goods, checks them to make sure the quality is good and I got what I ordered, and then he arranges for shipment.
Of those three companies, I use AliExpress a lot. I can buy in small quantities and test the product, and then if it sells I have my agent contact the company and negotiate a better price for a larger quantity and arrange payment and shipment.
When you find a product you would like to sell first check that it is not already selling on eBay and/or Amazon. A couple of years ago our brilliant legislators in Washington DC came up with a program that allows merchants in China to ship goods to the US very cheaply and its subsidized by our money losing US Post Office. When this occurred a lot of Chinese manufacturers started selling their goods directly on Amazon at the same price they sell them to you wholesale. Whenever you see this there is just no way to compete head to head. So just look around for another product -or use this next strategy.
Think in terms of bundles. I was looking at some small hand tools on Alibaba the other day and I ordered three items that I will sell as a jewelry making kit. Each piece in the kit costs under $3.00 with shipping and I plan to sell the kits for $24.95.
2. Find a good agent, freight forwarder and customs broker .
An agent is someone who works for you. They are different types and provide a number of services that can range from researching and finding product to receiving product, inspecting product and making arrangements for shipping with your freight forwarder.
A Freight Forwarder is a logistic company that will arrange shipment for you. They typically act like a broker. Once they know the details of the shipment (which either the manufacturer or your agent supplies), which consists of value, size and weight and number of cartons, the Freight Forwarder will shop around to find the lowest shipping rate. You will have to furnish them with an address to ship to that is set up to receive pallets as that is the common way to ship. Most mailbox places cannot do this, so I use my local storage locker place. When the goods arrive I go down and break up the pallet, take some of the goods home to ship and store the rest until I need it.
A custom's Broker is a company that receives and clears your shipment through customs. They pay the duty (which they charge to you). Many of the larger Freight Forwarders also perform this service, but if yours does not then you will need to find a customs broker.
You can find both freight forwarders and customs brokers by Goggling the term. It doesn't matter so much where the freight forwarder is located as long as they have offices here in the US (be careful as many of them don't). As for a customs' broker you want to find one fairly close to you as they will often receive the shipment and arrange shipment by truck to you. If you are on the East coast and your broker's warehouse is on the West coast you will be paying for truck shipment clear across the country.
I use a company called Universal Cargo for my freight forwarder and they have always provided excellent service. They have offices on both the east and west coast and in all major port cities around the world. They are a really large company and most of their clients are also large importers and shippers, but they give me the same service even though I only do two or three shipments a year. And best of all they are also a customs broker so I don't have to work with a separate company.
Finding a Far East agent is somewhat more problematic. I would give you the name of my agent, but he has so much work he is no longer taking on new clients. In Asia, Agents are called Trading Companies. There are three types. I will call them type A, type B and type C.
Type A is the type of company I use. They do not represent any single manufacturer but work with any company that can produce products for their customers. A business enterprise like this has a commercial office with staff, warehousing and value-add services. In my agent's case, he has a partner and a staff of 30. He has two engineers and a designer on staff to help develop products and packaging for his clients. (His designer created the packaging for two private label products I am now selling.) He can warehouse for us and drop ship to our customers if needed. These type of companies regularly exhibit at the big trade shows in Hong Kong.
Type B Trading Companies are set up to represent a single manufacturer but sometimes sell other manufacturer's products. Usually there is no clear alignment with the parent manufacturer because these type of trading companies pretend they are independent. This allows them more access into other manufacturers & competitor's business (read "industrial espionage") but their primary mandate is to sell goods of the company they have a relationship with.
Type C Trading Companies are just Trading Companies in name only. They are usually a one-man show and are really just "digital brokers" of niche products they don't own or even have samples of. They usually promote their products through unsolicited emails directly into your inbox instead of promoting through one of the major exchange platforms mentioned above.
Basically they are a one-man show likely working from their home. They are individual sellers acting like a manufacturer or a trading company but act alone. That is not to say they are all bad. Sometimes when you find a small entrepreneur they are really out to prove themselves and will go to great lengths to service you. But be careful as some of these folks are just scammers.
So how do you find these companies? The best way is to actually attend one of the large trade shows. These are advertised on GlobalSources.com. They are held twice yearly at the large convention center located near the Hong Kong airport. I know that sounds like quite an investment but if you are serious its well worth it as you can meet the people in person so you can evaluate them and their services. Also you would be amazed at how cheap airfare from the west coast to Hong Kong is. I have seen some deals that are as low as $700 round trip. And hotels in Hong Kong are very reasonably priced.
The other way to find them is to Google "trading companies." You will get tons of results and you will have to email dozens of companies and ask them questions to determine if they are the type of trading company you want. Obviously you want a Type A company, but I would not totally dismiss the other two, as they may be able to provide the services you need. Mostly be sure and ask questions as to how big their staff is, what services they provide, and if they are free to work with any company. Also a lot of trading companies are listed on Alibaba.com. But most of them tend to be the Type B outfits and may actually be owned by a manufacturer.
3. Test - Evaluate - Test again
It pays to continually stay on top of things. Keep good records of costs and time it took for delivery. When you find a product that sells well, don't assume that will always be the case. I had one product that sold out a large supply within 6 months. So I re-ordered another large quantity and when they got here sales really slowed down and I had to lower the price. Had I checked there was evidence of the slow down starting just before I reordered, but because I didn't dig in that deep, I just jumped to the conclusion sale would continue.
When you get a new product, try listing it several ways. Test pricing, test photos, test descriptions -test everything. Here is an example. These are both the same product, but presented in two totally different ways.
It is really important to know how long it takes to order, produce and ship a product so you can control your inventory. There is nothing more frustrating than running out of supply of a hot selling product then having to wait a month or longer to get more.
There are millions of bead hobbyists in the United States and Canada (and the rest of the world for that matter). Beads, bead making supplies and tools are a great niche. When I attended the last eBay Live in Chicago we were invited to the Platinum PowerSeller party (even though I have never been a platinum seller).
During dinner I was seated with a very young Asian-American couple from San Francisco. We chatted and I learned that they were Platinum PowerSellers. Their only business was beads. I was stunned because I know that most beads sell for very low prices and assumed you would have to do thousands of orders to reach that level. But he explained that most of his orders are for hundreds of beads at a time, and that his average selling price was in the neighborhood of $25 per order. He also explained that beads were quite profitable as his average markup was 3X with some items commanding 4X or even 5X.
Finding beads to sell is not difficult. At the ASD trade show in Las Vegas last year I saw over 20 vendors selling beads, findings, string, supplies and tools. And last summer even our local Seattle Gift show had three wholesale bead vendors. You can even buy beads on eBay. There are several sellers who sell beads in 1000 bead lots. You can buy these and repackage in 50 beads lots and realize a 3X markup. There are also several wholesale bead companies that sell online. One for example is Halstead that sells both beads and findings. Another is The jewelry Supply Company.
Findings are another profitable area. A finding is the jewelry term for chains, clasps, earring findings, spacers and so on.
And then there are tools and bead making kits. The best way to assemble these is to buy the tools individually and put together your own tool kit. Some of the small jewelry tools cost as little as 50 each but a kit of four tools can sell for over $15.00.
Myco Imports sells virtually any kind of small tool you can imagine from tweezers, forceps, dental tools, jewelry making tools, tools for beaders, small pliers, 50 different types of scissors and more. They sell all their tools individually, so this is a great opportunity to put kits together for various hobbies such as jewelry making, beaders, and so on.
Here are some eBay and Amazon listings for beads and supplies to give you an idea of what sells.
One negative about this market is that there are so many people selling beads and supplies that the sell through rate is not that good, but it is acceptable and if you were to set up an eBay Store and promote it, you could drive lots of repeat traffic and buyers.
I first wrote about this over two years ago when I was hearing some pretty good rumors from folks within eBay that eBay was considering doing this. Well the rumors are now not only coming from eBay they are circulating in Wall Street.
You may have read that mega-investor Carl Icahn has a large position in eBay stock and he is pressing eBay to sell off PayPal. ( Click here to read the story on CNN Money). News of that drove eBay shares up over 7% in one day.
Since PayPal is responsible for the majority of eBay's profits the board does not want to do this. But if Icahn were successful, selling off the auction business would be the next logical step.
Fixed Price sales of new merchandise now account for over 70% of eBay sales (FMV) and over 30% of that comes from mobile devices and grows every quarter. Most mobile device sales are for new fixed price goods, as the mobile devices do not lend themselves to the auction format that well. They do work, just not as easily as they do for FP sales.
So selling off the auction business makes good business sense and I suspect that if Icahn is successful getting eBay to divest themselves of PayPal, that would be the next logical move to focus the company on the part of the market that is more profitable and growing. But who would buy it?
There are no obvious suitors with the money to make that happen. Its just not a good fit for the mega companies with deep pockets like Google, Microsoft, Yahoo or Amazon. One choice might be Alibaba who now owns Vendio, Auctiva and is starting 11 Main Street. Alibaba is experienced in the venue, as they own the largest online auction company in China. Another option might be Rakuten, formerly Buy.com.
A better deal would be for a group of venture capitalists to arrange a leveraged employee buyout of the company. The way this works is the venture capitalists put up some capital and borrow the rest. The company then sets up an ESOP - Employee Stock Ownership Plan, whereby a deduction is made from every employee's paycheck to purchase a small amount of stock each month and that money is used to pay off the bank loan. I don't know if they are still employee-owned but Avis Rent-a-Car did this over 25 years ago. And there are hundreds of large and successful employee-owned companies including some well known names such as Graybar, Food Giant, Brookshire Brothers, landmark Education, Full Sail Brewing Co. and parsons Construction.
There is some overlap in some eBay positions between the auction and fixed price side of the company, but there are hundreds of employees that specialize in the auction side of the business that would make up a core group of folks who know how to run the company.
My Inventory Team has set up a new website and is offering new services. My Inventory Team buys only new liquidation goods direct from manufacturers - not shelf pulls or returns and sells them to eBay and Amazon sellers. They have recently relocated to a larger warehouse that will allow them to offer new services. These include, having your merchandise sent to them and they will label it and ship it to Amazon for you. Since this saves you the extra shipping cost and their warehouse is closer to most of the Amazon warehouses in the east, their fees are easily offset by the savings to you. And they will also label and ship any liquidation goods you buy from them.
The Rainbow Trading Company sells a wide range of household goods and fashion accessories. They have showrooms in Atlanta, Dallas, New York and Seattle where you can see and order the goods. Just email them for the address.
Duck River Textiles sell high-end home fashions at surprisingly low price points. They sell a broad line of home textiles including items for bed, bath, table and living rooms.
Chef Craft sells a wide line of kitchen gadgets. Most of their items are low cost, but they are great for creating unique product bundles.
The Genmert Company sells a really nice line of tableware and kitchen products. You will need to register at the website to get access to the products and pricing.
Brabantia is a large wholesale supplier of kitchen gadgets, tools and cutlery.
Siskiyou Gifts is a leading manufacturer of licensed sports merchandise and originally designed gifts. They have over 10,000 products in an extensive catalog.
Woll Cookware is a very high-end line of cookware from Germany. You can email them at email@example.com. Let them know where you are located and they will send you a contact for a sales rep in your area.
LNBF is a Canadian apparel company based in Toronto that sells into the US market. Use the contact link on the website to get wholesale information.
The Red and White Kitchen Company produces retro, vintage-inspired kitchen textiles including flour sack towels, printed cotton napkins and tablecloths, red gingham luncheon sets with napkins, souvenir state towels, vintage-look souvenir aprons, state totes, pillows, and tablecloths, plus a collection of cotton basic towels.
Maharani Imports sells a line of whimsical handmade bells, bell hangings, chimes, mobiles, gifts and more.
Glass Eye Studio manufactures and designs handmade art glass giftware, including ornaments, vases, bowls and paperweights.
Pixie Mood is an animal-friendly accessories brand launched in 2010. that strives to provide cruelty-free accessories to those who love animals. All of our products are made with vegan materials ensuring nothing is harmed in making the products.
Accessories Palace, Inc . is a wholesale supplier of fashion accessories, novelties and general merchandise to retailers, and gift shops. They stock over 3,500 of the hot selling products at up to 90% off retail prices, including, jewelry, hair accessories, gifts, novelties, holiday, theme and spiritual items.
That’s it for now. See you again in a couple of weeks.
P.S. If you missed the last issue, click here to read it.
© 1999- Harry McGrath, Inc., DBA Skip McGrath, Auction Seller's Resource and Vision-One Marketing. All Rights Reserved.
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