As if COVID-19 hadn’t caused enough shipping problems for Amazon FBA sellers importing from China, we now have to deal with the Brexit disaster and even some snowstorms to top it all off!
Any Amazon FBA seller who imports from China knows that 2020 saw some HUGE increases in shipping rates, with costs increasing by up to ten times. Typically, shipping a 40ft container would’ve cost between $1,500-$2,000 but we’re now seeing ocean freight rates of $10,000-$15,000 for the same 40ft container.
And that’s not all, my fellow Amazon FBAers! Consider you pay import VAT on the total amount of the goods you’re importing, including shipping, so the government adds insult to injury with your higher VAT bill, too.
It goes without saying that this has had a huge effect on margins and profitability and for many Amazon FBA sellers has meant having to increase their prices. The only saving grace is that this shipping nightmare affects everyone importing from China: not just you, but your competitors, too.
What’s causing these increases in shipping costs for Amazon FBA?
These increases were initially caused by carriers reducing capacity in the early stages of the Covid-19 pandemic last year by introducing “blank sailings”, which basically means a cancelled sailing. This can be the entire sailing being cancelled or the removal of certain ports on the route.
The outcome is that a lot of importers had their goods stranded and they had to find another free vessel with space so they could ship their products. And with this happening on a large scale, coupled with increasing ecommerce and Amazon FBA sales, demand for shipping containers skyrocketed globally and there simply wasn’t enough empty containers in China to meet this demand.
And as we all know, increased demand and decreased supply only means one thing – higher prices!
The issue worsened and worsened, reaching its worst point in Q4 last year when there were severe congestion problems at some of the major port hubs in Asia, which then spread to Europe and the UK, in particular Felixstowe port, which all saw severe delays.
I saw first hand the effect this had on businesses here with some Amazon Sharks members having their products stuck both at port and then again at Amazon FBA fulfilment centres as the delays caused a huge bottleneck. Despite all this they managed to hit their biggest Q4 sales ever, so just imagine what it would’ve been without the shipping problems!
Now I know what some of you may be thinking – “if there’s such high demand why not just produce more shipping containers?” Simple right?
Well sadly, no – it doesn’t work like that. For a variety of reasons, covid of course being no.1, container production in 2020 was actually down compared to 2019 (H1 2020 container production was 40% less than H1 2019). This decrease in production coupled with the sudden increase in demand has led to a significant drop in global container availability.
And this is really the problem at the moment – there’s simply not enough containers, along with congestion and delays caused by COVID-19 which is causing a number of further issues, including:
Delays in the return of containers to China.
Lower productivity at ports and terminals.
Take Felixstowe port, for example, which was hit particularly bad in the busy Christmas season last year. They’re currently moving 22-23 containers per hour, down from the usual 28-30.
That might not seem like a huge difference but these bottlenecks add up and cause more delays, exacerbating the problem further and further. And with the big 3rd wave of COVID-19, it’s really not a surprise – there were 250 staff off from covid at Felixstowe at one point, though this is now down to 130.
I’ve seen a few people online suggesting this and in theory it makes sense. After all nearly all factories are closed for most of February so there’s no production and no new shipments, which will allow the backlog to be cleared…
Won’t Chinese New Year clear the backlog and get everything back to normal for your Amazon FBA business?
Well, sadly, no. While there will be a drop in shipping volumes for a short while, March will see another big increase as all the delayed orders are shipped out. Sorry to be the bearer of bad news, but if anything I expect the problems to worsen after Chinese New Year.
What about shipping using other methods? Or ordering from suppliers in another country?
I’ve had a lot of people messaging me asking these questions and the short answer is it won’t really help.
While, yes, the problem is being caused by sea freight, this has spread and affected both air freight and even rail shipping from China. And it makes sense, because those who can switch to air freight have done so, thereby increasing demand and affecting pricing and services.
I would still suggest speaking to your freight forwarder about this option, because it could be the case that while sea freight costs for you have doubled, air freight is only 50% higher… so it might still be worthwhile switching.
Then in terms of ordering from other countries, by now this is a global issue with nearly all ports and hubs being affected, so that’s not really an option to save on shipping.
So that’s it? Are we stuck paying $15,000 for a 40ft container?
Well, no, and thankfully I can finally give some good news.
Speaking to Andy Ball, the Director of Trade for Asia for Woodland Global and he told me that the general feeling moving into 2021 is that “carriers operating ocean freight services have learned some harsh lessons since the outbreak of COVID 19 and in the main, the best lesson they have learned is that it’s no longer a race to the bottom in terms of rates. They are managing their utilisation much better and are limiting the amount of business they want to take on of lower rated contracts thus forcing the considerable surplus freight to move on higher rated spot contracts, meaning they don’t necessarily have to have their vessels full to make profit.
The general feeling is that rates will come down at some point this year as the current levels simply cannot be sustained but they will not return to the levels that have previously been enjoyed with the general consensus being that 40ft/HC rates settling around USD 5000-6000 mark but again there is no timeframe as to when this will happen and it’s only a feeling being shared amongst forwarders.”
So there you have it. If nothing further goes wrong, rates should start to settle and while we won’t enjoy the same prices as before, we also won’t have to pay the current exorbitant fees.
What should Amazon FBA sellers do?
I’ve spoken in depth to a number of Amazon Sharks members to try and help them navigate through this and my answer is really that it depends on your induvial business and there’s no one blanket suggestion that will apply to everyone.
This is the plan of action I would suggest:
Speak to your supplier / freight forwarder about alternate shipping options and see what they say. Compare air freight and sea freight quotes and see what makes sense for your business. You will always pay more for air freight, but it does offer a number of benefits to Amazon FBA sellers, such as much faster shipping times (especially important now when sales are up) and decreased storage costs as you don’t have to hold as much stock, either yourself or with Amazon.
Re-asses your margins and pricing.
Again, this is very specific to each individual business as it depends on how much your shipping costs have increased, your margins before and after, your competitors and whether they’ve increased their pricing etc.
But you have to make sure you know all these numbers! Please don’t be one of those sellers who blindly charge the same amount while their costs have increased, not even knowing their margins and net profit. Work it all out and then make the best decision for your business.
One final piece of advice is that now, more than ever, it’s so important that you work with a good freight forwarder. And my suggestion is Woodland Global.
I’ve recommended them countless times on this blog and to my Amazon Sharks members and I’ll continue to do so as their service is always fantastic. They’re sending out a lot of emails keeping us all up to date and you can also check their page here for more info: https://www.woodlandgroup.com/news/news/global-shipping-update/
Last but not least for today’s post, I do want to point out that it’s not all doom and gloom!
Yes COVID-19 has meant much higher shipping costs but it’s also meant much higher demand for ecommerce and Amazon FBA goods! Many of my students hit new sales records in November without spending a penny on PPC. That resulted in big jumps in NET PROFIT in one month, so the opportunities for Amazon FBA sellers really are bigger than ever.
Oh boy, I wish I didn’t have to make this post… EVER! But it’s so sad watching people getting scammed on Alibaba on a daily basis that I have no choice but to sound like an old record and repeat stuff I have already covered in my previous Alibaba Scam posts.
You would think that in 2020 people would be a little wiser to these things, right? You would think that all the “cleaning” Alibaba has done over the years, the Trade Assurance platform, the safe payment methods and everything else would completely eliminate scams, right?
Unfortunately, that’s not the case. I do believe that there have been some improvements over the years, BUT I’m still getting emails from people EVERY WEEK who are looking for help because they have been scammed by someone on Alibaba.
Sourcing products from China is a risky game, let’s admit it. Essentially, you’re sending money to a supplier in another country who you have never met, so there’s always a possibility that something could go wrong. I have discussed Alibaba Scams on my blog in the past, but if you ask me, scams are NOT the biggest issue you face when sourcing goods for your Amazon FBA business.
In fact, if you’re sourcing unbranded, everyday goods and you do proper research and use safe payment methods, the chances of you getting scammed on Alibaba are very low.
Believe it or not, over the last five years, I haven’t received a single email from someone who has sourced goods using my guidelines claiming they were scammed by a supplier on Alibaba. And by a “scam”, I mean a scenario where money was sent and the goods were never received.
However, I do get emails every week from people who failed to follow my guidelines and, as a result, have been scammed on Alibaba.
It sucks, but it’s always 100% their fault. They try to source branded goods, electronics and phones for unbelievably low prices from very shady suppliers, and then they are surprised when it turns out to be a scam. This is something I have warned people about over and over again. You CAN’T source branded goods from Alibaba, so just don’t do it!
I have put a lot of time and effort into this blog, and over the last ten years, I have constantly reminded everyone that Alibaba is NOT the place to go if you’re looking for branded goods. I have explained in detail how Alibaba scams work and what the top ten most popular scams are, and my number one rule always comes down to:
Stay away from branded goods! If you do, the chances of you getting scammed on Alibaba is reduced by 99%!
Scammers like to “work” with branded goods because there is a high demand for them from uneducated people! These people continuously fall for crazy deals like “buy three PS4 consoles and get three free!” and other similar nonsense. That’s why scammers mostly stick with branded goods—it’s the easiest and most lucrative niche for them to be in!
Now, when I talk about branded goods and Alibaba, I’m always talking specifically about Western brands, such as:
When you first start importing goods from China, you will face many new terms that you haven’t heard of before, like various shipping terms (DDP, FOB, etc.), payment methods, contract rules, etc. One of the questions I am often asked is about shipping marks—what are they and what information should we put in them? Let’s find out!
Basically, shipping marks are the details your supplier will put on the outer cartons/boxes that your goods are packed in. With bigger orders, this information can be printed on the boxes, while with smaller orders, suppliers usually use labels. In many cases, suppliers won’t even ask you about these shipping marks, but sometimes they will. If that happens, you will need to provide information to them.
Legally, you’re not obligated to put any information on these boxes. The supplier can send them to you completely blank, without any shipping marks. But that approach may not be the best, especially if your order is small and sent as an LCL shipment (less than container load).
Imagine that there are orders from twenty, thirty or more suppliers all in one container. Someone is responsible for unloading and sorting those goods at the port. Make their life easier and minimise the chances of your goods getting mixed up or lost by at least putting some basic information on your boxes.
I have previously discussed factory inspections in China on my blog, but today I want to specifically delve into the pre-shipment inspection, which is the inspection you do when your goods are finished and ready for dispatch. Do you really have to spend all that money on a FULL inspection, or you can get away with a PARTIAL inspection? Let’s find out!
1) Alibaba’s service team, which costs $48. This is not really a pre-shipment inspection service as all they check is carton quantity (whether or not it is correct), one item for visual defects and one carton for packaging and shipping marks. I don’t recommend you use this at all, as it won’t tell you anything about the quality of the goods in your order.
If you’re an eBay or Amazon seller who has just recently started importing from China, you know there are LOTS of things to learn! You need to know everything from how to filter out scams on sites like Alibaba to the best ways to order product samples, as well as all kinds of specific, previously unknown business terms and abbreviations.
And it’s not like you can just ignore these new terms and abbreviations. Having your price or shipping terms wrong can turn your first order into a massive disaster! You can easily incur unexpected charges that you never accounted for, which can totally ruin your projected margins and chances of being profitable on eBay or Amazon.
CNF, CIF, DDP, FOB, Ex-Works—what do they all mean? And, most importantly, which of these shipping methods is the most cost-effective? Which one is the best for your situation?
“Alibaba is a SCAM” – you’ll find this written everywhere online! The truth is, yes, it is possible that you may get scammed on Alibaba.com IF you don’t know what you’re doing. However, with the information you learn in this blog post, the chances of you getting scammed on Alibaba will be very slim.
Just to be clear: Alibaba itself is not a scam. In fact, it’s one of the largest companies in the world, with a market value of tens of billions of dollars. Alibaba.com is simply a platform where buyers and sellers meet. Yes, there are some scammers on Alibaba, just like any other online platform, but that doesn’t mean Alibaba itself is a scam. By that logic, you can say that eBay, Amazon and Gumtree are scams because you can find MANY unscrupulous businesses on those websites, too.
The biggest problem that this “Alibaba scam” myth creates is that it makes people who are new to importing too afraid to even start their research process. They have that one line repeating in their minds “Alibaba is a scam, Alibaba is a scam, Alibaba is a scam….” and that’s why, with today’s blog post, I want to clear the air once and for all. I will give you a step-by-step filtering system that you can use to avoid 99% of scams on Alibaba and unlock the potential of one of the world’s biggest online marketplaces.
DDP: Delivered Duty Paid! It sounds like a dream come true for so many Amazon sellers importing products from China! Isn’t it great that you can pay a slightly higher price for the product and get it delivered to you with all taxes already paid for? Perfect! Or… is it?
I’m afraid that when it comes to offers like these, we always come back to the age-old truth that if it looks too good to be true, it probably is. And DDP is no exception.
If you’re importing goods from China using Alibaba.com to sell on Amazon, eBay or anywhere else, you should read this article very carefully, because the chances are you’re currently breaching the law and could be facing severe problems due to tax evasion.
Sounds terrifying? I agree. So, let’s clear the air once and for all and learn about DDP Incoterms and how you CAN and CAN’T use it in your importing business.
Chinese New Year is around the corner, and you have to act fast to get your goods dispatched before your supplier switches off for several weeks.
I’m pleased to see that more and more people are following my advice on doing pre-shipment inspections in China. Ten years ago no one was doing this for small-scale orders as we didn’t have such cheap and accessible inspection services available like we have now. Today, when you can have an inspector to work for you for one whole day for just $100, it’s utterly stupid not to use this opportunity and check goods quality before they leave supplier.
Speaking of quality of the goods coming from China – please do understand that there are various standards in manufacturing and it’s not that Chinese manufacturers have problem manufacturing products up to highest standards. They can! At least most of them can.
The problem is that most people always try to negotiate the lowest possible price with the supplier, which results in a product of substantial quality where the supplier has cut cost on materials, labour, quality check or testing.
To avoid problems, you need to communicate with the supplier from DAY ONE that you’re after the highest quality/grade product they can offer. Inform them clearly, before placing the order, that you will be doing pre-shipment quality control inspection and goods with defects won’t be accepted.
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