Complete Fl Ship Creating & Editing Tutorial: Fill & Download for Free

Great question, because it leads to near-complete automation!But before you move to the beach villa or cruise-liner of your choice, you need to understand how to ship products to Amazon properly. Here’s everything step by step.INTRODUCTIONBefore shipping to Amazon from your Seller Central account, make sure you have this stuff:(1) Sourced product. Sourced a product and are prepared to ship it from the supplier’s factory, a third party warehouse, or your place of business. To boost your sourcing ability 10x, check this out. No lie. 10x.(2) UPC (universal product code). Every new product simply needs a universal product code, a UPC. You buy one and give it to Amazon to signify you’re bringing a new product to market. You could spend $1000’s chasing them down, or there’s Nationwide Barcode. They serve up GS1 compliant UPC/EAN/barcodes for $7 each, and they work perfectly. With each purchase of $7, you get everything you need to codify 1 product in Amazon’s system.(3) The number of units and cases. You need to plan how many units you want to send to Amazon, and how many different boxes they’ll be sent in (note: boxes over 50lb need to be marked “team lift” and no more than 150 units of product can be sent in a single box; if you’re sending more than 150 units you need multiple boxes).(4) Weight and size. The weight (in lb) and dimensions (in inches) of each box that you’ll be shipping. If you’re shipping directly from your supplier or from a warehouse, you’ll need to ask your supplier for this information.(5) Sending location. The location you’ll be shipping from and the carrier you’ll be using (this assumes you’re shipping by air with one of the big couriers like UPS, DHL, or FedEx)Got this info?Cool.Let’s go to Seller Central and tell Amazon what and how we’re shipping, and get special labels for our products and boxes.SHIPPING IN SELLER CENTRAL STEP BY STEPThis is the fun part.Keep this article open in another window as you’re filling out your shipping info on Amazon to avoid mistakes. If it’s your first few times doing this, this is crucial.Everything’s laid out here, so take a deep breath.The past is over; the future has yet to unfold. There’s only now.Kick back, relax, and take your time with it. Do it right the first time to avoid headaches down the line.Ready?(1) Go to Seller Central (Amazon Seller Central)(2) Go to “Inventory” and its 1st subheader “Manage Inventory”. You’ll see all of the products that you sell.(3) Once there, check the box on the far left that corresponds to the item you want to ship to Amazon for fulfillment.(4) The first thing we need to do is confirm that Amazon knows that this listing is FBA (Fulfilled by Amazon). If it’s a brand new product listing, the system automatically assumes that it’s FBM (Fulfilled by Merchant), not FBA. You can’t move to the beach doing Fulfilled by Merchant. You’ll be stuck at home printing shipping labels, which is no fun. So, we’ll need to change the listing to tell Amazon’s system that you want Amazon to fulfill the customer orders. So choose the action “Change to Fulfilled by Amazon” from the drop-down menu.It’ll give you the option to just Convert the inventory (meaning just switch the fulfillment method from FBM to FBA in general), or to Convert and also begin a shipping plan for the stock.Assuming that we’re already sourced the product and you and the supplier are ready to go, we’ll go straight into the shipping process by clicking “Convert & Send Inventory”.Alternatively, if you wanted to start the shipping plan at a different time you’d just go to Inventory > Manage Inventory > select the item > Send/Replenish inventory.(5) We are now on the doorstep of Amazon’s famous shipping plan. It’s time to give Amazon some basic details before we enter the shipping workflow.There are 3 basic bits of info:- Select “Create a new shipping plan”- Enter the address it’ll ship from on its way to Amazon (this will be your address or your supplier’s address depending on if you’re inspecting the products yourself or shipping directly from your supplier).- Also, select the packing type. For most private label products, they’ll be “Case Packed”, meaning that your products are all the same SKU and that they’ll be inside one larger box all together.Here’s Amazon’s official definition of Individual Products and Case-packed Products, just to sure that your items qualify as Case-Packed.Now, on the next screen you’ll see that Amazon’s put us on a sort of step-by-step process known as the “Shipping Workflow”. It’s basically a draft of what inventory you plan to ship, and how. You can fill out each area at your own pace. You won’t be penalized for creating a workflow and then waiting before shipping off the goods.Here’s what we’re working with: a 6-step shipping process.For the sake of this example, let’s say that we’re going to send 500 units to Amazon (because we’re launching with HonestFew, and will do an 100-unit promotion to get reviews and will sell the other 400 through organic keyword ranking at a cheaper introductory price and PPC).We’re shipping directly from our supplier in China. We’ve already talked to our supplier and agree that we’ll be doing 500 units at 4 boxes with 125 products in each box (4 boxes * 125 products each = 500 products sent to Amazon total).Keep in mind that Amazon has a limit of 150 units per case when it comes to case-packed products. We’re doing 125 units per case, so we’ll be just fine.Enter that information and click “Continue”.On to Prep.Generally, to make the process as seamless as possible, I usually ask the supplier to prepare the shipment so that Amazon can start selling it right out of the box (in this case, the supplier will print Amazon’s scannable barcode stickers and affix them to the packaging for me).So in answer to the question “Who preps?” I select “Merchant.” That is, our supplier on our behalf.If you’re shipping the product to your home or office for personal inspection and affixing the labels yourself, you’d also select “Merchant”. Basically, it’ll be “Merchant” unless you want to send the products in without scannable labels and have Amazon do it for you.Alright, Label Products. The Merchant (our supplier on our behalf) will label the products. And 500 will automatically be there based on the information we gave about our case-packed units.This is important.This is where you get the PDF with all 500 (in this case) units. There’s one for each box. You also get to choose the size of each of the labels. We prefer the size selection 27-up labels 63.5mm x 29.6mm on A4. Not too big, not too small. But every package is different. Get a ruler out and see which scannable barcode would be best for your package.Make sure that the sticker will be affixed to a flat surface on your product or package. Pick a size accordingly.Click “Print labels for this page” and a PDF of 500 (in this example) individual labels will begin to download. If you selected the “Merchant” labeling option earlier, it’s your responsibility to make sure these labels are printed and 1 label is affixed to each product so that Amazon can scan the inventory on arrival at the FBA fulfillment center.Once the PDF with your individual product package labels downloads, click Continue.It’s getting interesting now that we’re in the Review Shipments section.Here’s where Amazon assigns warehouses for you. In this example, Amazon has blessed us with 3 different warehouse locations for our 4 cases of product.Amazon has fulfillment centers across the USA, and assigns your shipping locations based on its data.Note that you can also pick where you’d like to ship. A fee applies, but if you do the math on your shipping fees and it makes more sense to ship to 1 location, then you should do that instead. To change these settings, head to the Seller Central main page and follow these four steps:Under Settings, click Fulfillment by Amazon.Under Inbound Settings, click Edit.Under Inventory Placement Option, click Inventory Placement Service.Click Update.Once you’ve found a mix of locations that works for you, hit “Approve Shipments” to move on.Now, we’re in the View Shipments section.You’ll see that you can “Work on Shipment” for each of the warehouse locations. We need to click that for each of our warehouse locations.So, go through and complete each one individually. It’s the same process for each, so we’re just going to do the first row (125 units going to TPA1 in Ruskin, FL) as the example here.When you go into “Work on shipment”, here’s what you see (section 1 isn’t included in the screenshot because there’s nothing to do there).You’ll want to select SPD, most likely (unless you’re shipping pallets) and the carrier that you’re using. UPS is Amazon’s preferred carrier, but DHL and others work just fine as well. It’s up to you.Carriers like UPS and DHL are licensed customs brokers, so they’ll be in charge of clearing your packages through customs on their way to Amazon. Make sure that you provide your phone number as the contact for the shipment, and it should go without a hitch.Back to Seller Central. In point #3, the Shipment Packaging, you’ll enter the number, weight, and dimensions of the box. “Box” here is our case. So what they want to know is how many boxes are being shipped to fulfillment center TPA1 (answer = 1 in this case) and the weight and dimensions of the box. This is optional. Ask your supplier for this information.And for sake of comparison, do you remember that Amazon told us to send 2 cases (250 units) to EWR4 in Robbinsville, NJ? Well, when we go in to work on that shipment, we’d enter the number of boxes as 2, instead of 1 as in the case of our TPA1 shipment.Also on this “Work on shipment” page, don’t forget to save your box shipping label (this is the label you’ll put on the outside of the big box that holds all of your individual product boxes in it). That will also download as a PDF. Then, hit “Complete Shipment”.Repeat this process for all 3 shipments, downloading each of the box labels as you go.At the end of this process, make 100% sure that you have downloaded:+ 1 PDF with 500 individual product package labels that Amazon will use to scan and receive the inventory. Each box should have 1 label affixed to it (the label should not be affixed over the box opening where the box is cut), and should be printed as-is (i.e. the files should not warped or manipulated to a different size). They should be out in the open and exposed, not under a layer of thick plastic or packaging. That could hamper visibility.+ 3 PDF’s with a total of 4 box labels (1 for TPA1, 2 for EWR4, 1 for ONT2) for the cases of product. Each one will be affixed to a case, so that Amazon can scan the big boxes when they arrive and know what’s inside.Send this series of documents to your supplier and have them print and prepare a sample unit with the barcode affixed. Have them send you a picture, just to make sure that you’re on the same page.Nothing confirms a mutual understanding quite like pictures.Once you’ve confirmed that your supplier can affix the product labels correctly, ship everything to Amazon using your selected carrier. The labels for the cases indicate where each box is headed, so there should be no ambiguity there. But just in case, make a list of all of the product quantities with warehouse names and locations for your supplier.In our example shipment, our “let me confirm this 100%” list of products and destinations would look like this:125 units (125 units in 1 box) to:Amazon DEDC LLC3350 Laurel Ridge Ave.Ruskin, FL 33570US (TPA1)250 units (125 units in 1st box, 125 in 2nd box) to:Amazon dedc LLC50 New Canton WayRobbinsville, NJ 08691–2350US (EWR4)125 units (125 units in 1 box) to:Golden State FC LLC1910 E Central AveSan Bernardino, CA 92408–0123US (ONT2)

The 3 most beautiful letters in the alphabet? FBA. Fulfillment by Amazon.In other words, sending your products to Amazon and letting them ship (fulfill) your customer orders for you.It’s what makes private labeling with Amazon so worthwhile. Picking, packing, shipping, warehousing… Amazon does it all for you. It’s near-complete automation! Now, just pick a winning product and you’re home free.Now, before you move to the beach villa or cruise-liner of your choice, you need to understand how to ship products to Amazon properly. Here’s everything step by step.INTRODUCTIONBefore shipping to Amazon from your Seller Central account, make sure you have this stuff:(1) Sourced product. Sourced a product and are prepared to ship it from the supplier’s factory, a third party warehouse, or your place of business. To boost your sourcing ability 10x, check this out. No lie. 10x.(2) UPC (universal product code). Every new product simply needs a universal product code, a UPC. You buy one and give it to Amazon to signify you’re bringing a new product to market. You could spend $1000’s chasing them down, but we recommend Nationwide Barcode. They serve up GS1 compliant UPC/EAN/barcodes for $7 each, and they work perfectly. With each purchase of $7, you get everything you need to codify 1 product in Amazon’s system. That’s an affiliate link, so you’d be supporting more useful content like this at no extra cost to you.(3) The number of units and cases. You need to plan how many units you want to send to Amazon, and how many different boxes they’ll be sent in (note: boxes over 50lb need to be marked “team lift” and no more than 150 units of product can be sent in a single box; if you’re sending more than 150 units you need multiple boxes).(4) Weight and size. The weight (in lb) and dimensions (in inches) of each box that you’ll be shipping. If you’re shipping directly from your supplier or from a warehouse, you’ll need to ask your supplier for this information.(5) Sending location. The location you’ll be shipping from and the carrier you’ll be using (this assumes you’re shipping by air with one of the big couriers like UPS, DHL, or FedEx)Got this info?Cool.Let’s go to Seller Central and tell Amazon what and how we’re shipping, and get special labels for our products and boxes.SHIPPING IN SELLER CENTRAL STEP BY STEPThis is the fun part.Keep this article open in another window as you’re filling out your shipping info on Amazon to avoid mistakes. If it’s your first few times doing this, this is crucial.Everything’s laid out here, so take a deep breath.The past is over; the future has yet to unfold. There’s only now.Kick back, relax, and take your time with it. Do it right the first time to avoid headaches down the line.Ready?(1) Go to Seller Central (Amazon Seller Central)(2) Go to “Inventory” and its 1st subheader “Manage Inventory”. You’ll see all of the products that you sell.(3) Once there, check the box on the far left that corresponds to the item you want to ship to Amazon for fulfillment.(4) The first thing we need to do is confirm that Amazon knows that this listing is FBA (Fulfilled by Amazon). If it’s a brand new product listing, the system automatically assumes that it’s FBM (Fulfilled by Merchant), not FBA. You can’t move to the beach doing Fulfilled by Merchant. You’ll be stuck at home printing shipping labels, which is no fun. So, we’ll need to change the listing to tell Amazon’s system that you want Amazon to fulfill the customer orders. So choose the action “Change to Fulfilled by Amazon” from the drop-down menu.It’ll give you the option to just Convert the inventory (meaning just switch the fulfillment method from FBM to FBA in general), or to Convert and also begin a shipping plan for the stock.Assuming that we’re already sourced the product and you and the supplier are ready to go, we’ll go straight into the shipping process by clicking “Convert & Send Inventory”.Alternatively, if you wanted to start the shipping plan at a different time you’d just go to Inventory > Manage Inventory > select the item > Send/Replenish inventory.(5) We are now on the doorstep of Amazon’s famous shipping plan. It’s time to give Amazon some basic details before we enter the shipping workflow.There are 3 basic bits of info:– Select “Create a new shipping plan”– Enter the address it’ll ship from on its way to Amazon (this will be your address or your supplier’s address depending on if you’re inspecting the products yourself or shipping directly from your supplier).– Also, select the packing type. For most private label products, they’ll be “Case Packed”, meaning that your products are all the same SKU and that they’ll be inside one larger box all together.Here’s Amazon’s official definition of Individual Products and Case-packed Products, just to sure that your items qualify as Case-Packed.Now, on the next screen you’ll see that Amazon’s put us on a sort of step-by-step process known as the “Shipping Workflow”. It’s basically a draft of what inventory you plan to ship, and how. You can fill out each area at your own pace. You won’t be penalized for creating a workflow and then waiting before shipping off the goods.Here’s what we’re working with: a 6-step shipping process.For the sake of this example, let’s say that we’re going to send 500 units to Amazon (because we’re launching with HonestFew, and will do an 100-unit promotion to get reviews and will sell the other 400 through organic keyword ranking at a cheaper introductory price and PPC).We’re shipping directly from our supplier in China. We’ve already talked to our supplier and agree that we’ll be doing 500 units at 4 boxes with 125 products in each box (4 boxes * 125 products each = 500 products sent to Amazon total).Keep in mind that Amazon has a limit of 150 units per case when it comes to case-packed products. We’re doing 125 units per case, so we’ll be just fine.Enter that information and click “Continue”.On to Prep.Generally, to make the process as seamless as possible, I usually ask the supplier to prepare the shipment so that Amazon can start selling it right out of the box (in this case, the supplier will print Amazon’s scannable barcode stickers and affix them to the packaging for me).So in answer to the question “Who preps?” I select “Merchant.” That is, our supplier on our behalf.If you’re shipping the product to your home or office for personal inspection and affixing the labels yourself, you’d also select “Merchant”. Basically, it’ll be “Merchant” unless you want to send the products in without scannable labels and have Amazon do it for you.Alright, Label Products. The Merchant (our supplier on our behalf) will label the products. And 500 will automatically be there based on the information we gave about our case-packed units.This is important.This is where you get the PDF with all 500 (in this case) units. There’s one for each box. You also get to choose the size of each of the labels. We prefer the size selection 27-up labels 63.5mm x 29.6mm on A4. Not too big, not too small. But every package is different. Get a ruler out and see which scannable barcode would be best for your package.Make sure that the sticker will be affixed to a flat surface on your product or package. Pick a size accordingly.Click “Print labels for this page” and a PDF of 500 (in this example) individual labels will begin to download. If you selected the “Merchant” labeling option earlier, it’s your responsibility to make sure these labels are printed and 1 label is affixed to each product so that Amazon can scan the inventory on arrival at the FBA fulfillment center.Once the PDF with your individual product package labels downloads, click Continue.It’s getting interesting now that we’re in the Review Shipments section.Here’s where Amazon assigns warehouses for you. In this example, Amazon has blessed us with 3 different warehouse locations for our 4 cases of product.Amazon has fulfillment centers across the USA, and assigns your shipping locations based on its data.Note that you can also pick where you’d like to ship. A fee applies, but if you do the math on your shipping fees and it makes more sense to ship to 1 location, then you should do that instead. To change these settings, head to the Seller Central main page and follow these four steps:Under Settings, click Fulfillment by Amazon.Under Inbound Settings, click Edit.Under Inventory Placement Option, click Inventory Placement Service.Click Update.Once you’ve found a mix of locations that works for you, hit “Approve Shipments” to move on.Now, we’re in the View Shipments section.You’ll see that you can “Work on Shipment” for each of the warehouse locations. We need to click that for each of our warehouse locations.So, go through and complete each one individually. It’s the same process for each, so we’re just going to do the first row (125 units going to TPA1 in Ruskin, FL) as the example here.When you go into “Work on shipment”, here’s what you see (section 1 isn’t included in the screenshot because there’s nothing to do there).You’ll want to select SPD, most likely (unless you’re shipping pallets) and the carrier that you’re using. UPS is Amazon’s preferred carrier, but DHL and others work just fine as well. It’s up to you.Carriers like UPS and DHL are licensed customs brokers, so they’ll be in charge of clearing your packages through customs on their way to Amazon. Make sure that you provide your phone number as the contact for the shipment, and it should go without a hitch.Back to Seller Central. In point #3, the Shipment Packaging, you’ll enter the number, weight, and dimensions of the box. “Box” here is our case. So what they want to know is how many boxes are being shipped to fulfillment center TPA1 (answer = 1 in this case) and the weight and dimensions of the box. This is optional. Ask your supplier for this information.And for sake of comparison, do you remember that Amazon told us to send 2 cases (250 units) to EWR4 in Robbinsville, NJ? Well, when we go in to work on that shipment, we’d enter the number of boxes as 2, instead of 1 as in the case of our TPA1 shipment.Also on this “Work on shipment” page, don’t forget to save your box shipping label (this is the label you’ll put on the outside of the big box that holds all of your individual product boxes in it). That will also download as a PDF. Then, hit “Complete Shipment”.Repeat this process for all 3 shipments, downloading each of the box labels as you go.At the end of this process, make 100% sure that you have downloaded:+ 1 PDF with 500 individual product package labels that Amazon will use to scan and receive the inventory. Each box should have 1 label affixed to it (the label should not be affixed over the box opening where the box is cut), and should be printed as-is (i.e. the files should not warped or manipulated to a different size). They should be out in the open and exposed, not under a layer of thick plastic or packaging. That could hamper visibility.+ 3 PDF’s with a total of 4 box labels (1 for TPA1, 2 for EWR4, 1 for ONT2) for the cases of product. Each one will be affixed to a case, so that Amazon can scan the big boxes when they arrive and know what’s inside.Send this series of documents to your supplier and have them print and prepare a sample unit with the barcode affixed. Have them send you a picture, just to make sure that you’re on the same page.Nothing confirms a mutual understanding quite like pictures.Once you’ve confirmed that your supplier can affix the product labels correctly, ship everything to Amazon using your selected carrier. The labels for the cases indicate where each box is headed, so there should be no ambiguity there. But just in case, make a list of all of the product quantities with warehouse names and locations for your supplier.In our example shipment, our “let me confirm this 100%” list of products and destinations would look like this:125 units (125 units in 1 box) to:Amazon DEDC LLC3350 Laurel Ridge Ave.Ruskin, FL 33570US (TPA1)250 units (125 units in 1st box, 125 in 2nd box) to:Amazon DEDC LLC50 New Canton WayRobbinsville, NJ 08691-2350US (EWR4)125 units (125 units in 1 box) to:Golden State FC LLC1910 E Central AveSan Bernardino, CA 92408-0123US (ONT2)

Since this answer has reach 250 up-votes & is over 28-pages - It's available for purchase on Fail-Harder.com - Average Profit Margin in Apparel Retail & E-Commerce ==> for $10 you can have super-cool pdf to print and read at your leisure. Think about it like buying a beer for good ol' Carroll to chat about e-commerce!-------------------------------------------------------------------------------------------Let’s get some definitions dialed in prior to launching into a deeper investigation of your question.Background & Overview: This section will give you a quick background how Distributors, Retailers, and Brand Direct E-Commerce work as businesses and their corresponding relationship to the brand who makes the products available for retail.Distributor:A distributor is an entity that engages into a formal business relationship with a brand for the rights to serve as local representation and (most of the time) to be the exclusive purveyor for the brand’s products. In fashion, distributors are generally the international partners lending their relationships, understanding of the intricacies of the local market, and financial resources to effectively capitalize on a brand’s market opportunity. Therefore, distributors are primarily involved in B2B relationships - they purchase a large quantity of goods (a min. # set by the brand in order to grant distributor status pricing discounts) and primarily sell to retailers in the local market. However, distributors are increasingly capitalizing on the e-commerce by managing the local e-commerce presence for the brand in that territory.An example of one of best international distributors in the world for fashion startups is Jack of all Trades (JOAT) Co for Japan. I have worked with JOAT over the years with several companies and one clear value propositions for their organization is Lloyd Seino. Lloyd is a Biz Dev / Brand Manager (as we would call it in the US) and truly has one of the best eye’s for a fledgling brand’s market potential in the crowded Japanese fashion industry. JOAT is also regarded as one of the leading companies for identifying and building a brand into a Japanese powerhouse (as Lloyd has done with dozens of brands).[ Note: You can generally find any brand’s distributor by going to brandxyz.com -> Contact & look for International. This section will have the names of the international companies that distribute the brand’s products. ]In other industries there are domestic local distributors that have regional territories - a two good examples are food and alcohol. Due to the large geography of the US, food was most commonly broken down into regional distribution because of the large number of customers per region and difficulty in coordinating the logistics of food delivery. Let’s take the example of a buddy’s health bar company that he purchase 2009:1. In 2009, Ryan, my buddy, purchased the rights for Southern California to distribute energy bars to local and national chains in that region.2. By purchasing the rights to Southern California, Ryan could purchase the energy bars at a special distributor price3. Ryan could focus on building deep market insight into Southern California, developing great relationships with retailers, and maximizing the effectiveness of his advertising spend in based on what’s going on there (i.e. He could setup a booth at a local music festival to sell his energy bars while the kids are dancing in the perpetual summer sun of Los Angeles - where this festival would fall under the radar of the national marketing goals of this company)Retailer:[ Note: I have written an extremely in-depth analysis of the relationship between Retailers & Brands and how this dichotomy drives retail prices that you see online and in-store - How do designers set prices for dresses and why do dresses often cost more on a designer's website than on purchase through an online retailer? ]This is a vendor, generally within the home market for the brand, who purchases goods at wholesale (about 52 - 55% below what you see at retail for). The retailer issues a purchase order (a legally binding document to purchase X # of goods at Y price to be delivered at a specified time frame) to a brand. The brand takes all of the POs and goes to production for deliveries roughly about 4 - 6 months after the PO was issued. Upon completion the brand ships the goods from their warehouse or factory (depending on the size of the retailer).This is what the stages look like from the Brand’s perspective:The Retailer's job is to focus:Building brand equity with the customer to be a shopping resource.Create a customer experience that derives long term value from investments in customer mindshare (i.e. ‘I think that I am going to stop by Bloomingdale's after work,’ said the proverbial customer)Develop extensive local customer insights that enables the retailer to optimize their merchandising assortment to reflect the local trends, fashion, and personality of a store’s retail presenceUnderstand local advertising mediums & methods to maximize the effectiveness of Advertising dollars based on how local trends (i.e. San Francisco may work extremely well with clever Facebook (product) Posts while West Texas can do well sponsoring a High School Football team)Let’s take a look at how this process looks for a single retail store or a simple model:When we are talking about a major retailer like Nordstrom (company), this model gets a little more complex. Since the retailer has to manage inventory between multiple stores, the retailer will often have a brand’s shipments delivered to their warehouse. At the warehouse, the shipment will be broken down and allocated to each store based on demand forecast. Additionally, you will see that a certain allotment will be held back in the warehouse to cost effectively manage fill-in orders.*This is what the retail logistics / retail distribution process looks like:* The San Jose store runs out of a medium green t-shirt, it’s more cost effective for Nordstrom (company)'s to combine that medium green t-shirt in addition to all the other orders routing through the regional distribution center. This is in contrast to the San Francisco store pulling the out of stock size & shipping the one unit to the San Jose store.E-Commerce:There is little difference fundamental difference between a Retailer & an E-Commerce relationship. Both are responsible for creating an engaging Retail Experience, building defensible customer relationships, gathering customer insights to guide merchandising decisions, and manage demand generation & advertising investments. However they differ in three main ways:Digital Medium: Obviously the biggest difference is the fact that retailers sell products via a website while retailers deal with physical stores.Zero Transportation Costs: Purchasing online is a much easier experience due to the fact that you don’t need to get in a car, drive to the store, fight for parking, deal with sales staff that hates their jobs, wait in a checkout line, and then get home.Deeper Customer Insights: Shopping online enables retailers with much deeper customer insights on purchasing patterns & products at the individual customer level - where brick & mortar retailers must make a concerted effort at checkout to gather billing zip code at checkout.E-Commerce retailers leverage two huge advantages:Massive Population: Obviously the biggest difference is the fact that retailers sell products via internet to the entire country (technically the world, but that’s another whole can of worms) while brick & mortar retailers are limited by the customers geographically in a given store’s territory. As of 2012 there is an estimated 154.6 million people that will purchase something online in 2012.Targeted Demand Generation: If an online retailer have slow moving inventory that you need to sell (commonly referred to as turn), then they can send a target email to your customer base of highly targeted people that have purchased a complimentary product (i.e. a jacket that would go great with that shirt). Alternatively, an online retailer can level the power of Google to increase their keyword spend to drive up their paid position on the brand’s keywords to generate sales.---------------------------------------------------------------------------------------------Section 2Understanding the Cost Basis---------------------------------------------------------------------------------------------Brands traditionally employ a “Cost X” model that takes the loaded costs for producing, landing, and fulfilling their goods & services by a multiple - commonly referred to as a Keystone markup. One of the biggest mistakes you can make in pricing is not having an educated idea of what your cost basis will be. If you don’t have an idea - then it’s easy to misprice an item and kill your business because you’re not making enough money on each unit to finance your operating expenses.Keystone Markup is a pricing methodology that multiples the cost basis by a factor of two (sometimes can be up to 5x in the case of jewelry) to dictate the price for next rung in the value chain. Keystone markup arose as the simplest way to universally markup goods across the retailer to a profitable level. Generally speaking, it is logistically impossible to uniquely price each product (from 100s or even 1,000s in a given retail location) to reflect market conditions and retail demographics. The theory being that retailer profitability was more of a function of units sold versus maximizing each product’s price. Subsequently, this approach normalized prices across the marketplace (i.e. everyone is pricing a shirt at $100).What does the costing build look like for a typical brand:Landed Cost: The represents the total cost of paying for the item, shipping to the US, tax & Import Duties, receiving in the warehouse, and getting on the shelves ready to sell.Fulfilled Cost: This is the cost basis that I generally like to always keep in my head because it represents the fully-loaded cost basis of selling an item & gives me a better idea of how much cash I will have at the end of the day.Wholesale Price: The Wholesale Price of a product is the revenue in one channel for the brand, but it’s the cost basis for the retailer who purchased it from the brand. For retailers like Urban Outfitters (retail brand), Finish Line, Journeys, or Amazon.com (product) the Wholesale Price is the baseline inventory cost for them.This is quick graphic to show you how this relationship works:To put this all together into a graphic of a real product with real world pricing, let’s take a look at the pricing of one of the old boots from one of my old brand’s, VÆL Project:---------------------------------------------------------------------------------------------Section 3Distributor Margin Analysis---------------------------------------------------------------------------------------------A distributor is an entity that enters into a legal relationship with a brand to provideThis explanation (obviously) gets more complicated as the company grows - but let’s keep it simple. There are two models than create the pricing landscape (once we know what the distributor is charged product, we can more acutely understand how they charge for it). There are two predominate pricing models:“Cost +” ModelDistributor Price = FOB + x%“Wholesale -” ModelDistributor Price = Wholesale - x%Cost + ModelFOB is the cost to the Brand to produce the good or service. This represents the baseline cost to the brand to produce good and is the starting point for analyzing the revenue model to the brand and thus do Margin analysis. When you are growing a fashion brand, the typical range for the markup % or the “+” in the model is anywhere from 25% - 40%. After working a lot of brands and speaking with loads distributors, you end up starting at FOB + 35% and progressively this % gets smaller as the brand does more business. The logic is as follows:Volume of units to the distributor will be small in the beginning and the brand needs to 35% to boost contribution Margin to OpEx as the burn rate is particularly high for startup brands (you just need a lot of people to do all of the stuff required to build a brand properly).As the brand grows the cost/unit (FOB) is driven down. Therefore, the margin $ value of the contribution margin is driven down also.The realization of scale is good for the brand and good for the distributor so this model incentives the distributor to help grow the brand in the particular country in a responsible manner.The logic is that you demonstrate transparency by showing your Cost Basis in efforts to build a partnership where the distributor & the brand benefit by realizing scale economies. However - BE CAREFUL - if you don’t choose the right partner they can screw you over by virtue of your honesty.Important qualifications about this perspective:1. FOB means that the distributor is responsible for coordinating logistics from FOB Destination (most likely Hong Kong) to their host country. FOB is an old legal term for “Free On Board” meaning that ownership of the product changes once the product is delivered to the shipping carrier - make sure that you get paid T/T Advance (a fancy way of say a “wire”) prior to shipping. If you don’t get paid first, they legally own the goods and have fun trying to collect from a company in Japan or UK.2. Tax, Duty, and Quota is a very tricky art that should be the responsibility of the distributor. Japan has horrendously high tariffs and their Quota system requires intimate understanding of the inner workings of the system along with the experience to account for the screw ups.This is why you want to work closely with your Distributor to figure out the right pricing for the brand for that particular market. This will require the brand to spend time over there and figure out the market (what products are priced where & what’s the market feeling). However, this doesn’t mean that you don’t need a distributor to enter a country - there are an insane amount of factors that require you have someone with relationships to the retailers and their pulse on the culture to nail down properly.Wholesale - ModelThe Wholesale - Model is more common with larger brands like K2 or Patagonia (I reference these two brands specifically because I have worked with them in the past). Elements of the Wholesale - Model:Pricing for the product is indexed to US Wholesale (which is the largest revenue source for most brands) thereby obfuscating the true cost basis (think Apple & COGS).You generally see a range of Wholesale - 30% to start with. As the distributor achieves the performance hurdles of the “distribution agreement” they will realize greater discounts (duh!).If you have the clout to be able to employ this model - you should do it. But most likely you will get beaten up so badly in the beginning that this model is prohibitively challenging for most new brands (anything younger than 3 years).This a real world example of a pair of shoes & the margin from one of my old distributor relationships from VÆL Project.Distributor Revenue & Margin AnalysisMargin from the distributor’s perspective is rather complicated. For small brands, you want to allow the distributor to set pricing - however, you need to make sure that their distribution timeline is both aggressive, yet prudent. You won’t build any “staying power” in a foreign country’s fashion scene if you don’t have clean & controlled distribution. Many of you can relate to Ed Hardy from the early-00s when it was moderately cool - now it is literally trash.Distributors’ negotiate exclusive rights to sell a brand in a country because it creates an exclusive value proposition that ensures the highest possible price that they can charge for this cool “American” Brand. When you have exclusivity you reduce the ability to price check for comparable goods and thereby stronger positioned to be a price setter rather than a price taker (ie empower consumers).In the beginning, you will see that prices are fairly inelastic for cool brands (however, these barriers are falling rather quickly in the globalization of fashion) - pricing models trend on 2.7x to 3.5x Landed Cost.Distributor Pricing Model for Men's Shoes in Japan under Wholesale - ModelCheck - If a standard 2x markup on Wholesale in a foreign country is employed a $100 Shoe US can be as high as $300 in Japan. Remember a 63% duty rate for imported goods from China.This pricing can vary immensely by the deal & by the country - what are the tariffs that the distributor is responsible for? What does the market command? There are brands here that are “meh!” but are gold overseas - this can often float a brand in between fashion cycles.---------------------------------------------------------------------------------------------Section 4Retail Margin Analysis---------------------------------------------------------------------------------------------Retail Price: This is the price that the ultimate consumer of the product pays when you purchase a product from Urban Outfitters (retail brand), Bloomingdale's, Finish Line, or Amazon.com (product). This price is also generally “keystone” or Wholesale Distribution Price times 2. For Example:[NOTE: Keystone is the general rule, but certainly Wholesale Price can be 2.1x Landed or Retail could be 2.2x Wholesale. This all depends on the retailers pricing power, brand positioning, and market position to be able to make these tweaks.]For purposes of moving forward, I am going to assume that you understand what Gross Margin is (Gross Profit / Revenue) or the % of each $ of Revenue that drops down to fund OpEx. Let’s run through a quick example, from the Retailer’s Perspective:This is an oversimplified margin analysis. Let’s take it one step further to account for the realities of life. Two items that can be used to better exemplify try margins are the Credit Card Fees (you can push CC fees into OpEx under Bank Fees, but we won’t go there) & Shipping & Fulfillment costing.CC Fees: Credit Card Processing Fees are pretty straight forward as they are a % of Gross Sales that the CC processor charges to the Retailer for use of a CC or Debit Card. They range from roughly 1.65% - 5.4% (for a small retailer processing an American Express (company) or Discover Card - now you know why a lot of bars / convenience stores in SF & NYC don’t accept cards?)*** This may not seem like a big deal, but a 2% reduction in Gross Sales is a BIG Deal. Assume that a retailer sells 1,000 units/week & there are 52 weeks/year.One of the more interesting aspects that you should take into account is the shipping & fulfillment analysis for this margin analysis.Shipping + Credit Card Fees: One of the more interesting aspects that you should take into account is the shipping & fulfillment analysis for this margin analysis.Assumptions:The shipment will be sent FedEx Products and Services Ground from Zone 1 to Zone 5 (CA to NYC) @ a rate of $24/carton or $2/unit (footwear is the unit - shoes take up a lot of space). (Remember this shipment is going directly from the brand’s warehouse to the individual Retail Location)2.0% Credit Card Fee for easy math(Remember this shipment is going directly from the brand’s warehouse to the individual Retail Location)*** This may not seem like a big deal, but a 2% reduction in Gross Sales is a BIG Deal. Assume that a retailer sells 1,000 units/week & there are 52 weeks/year.Shipping truly is an industry of scale economies and this new world of lean inventories requires major retailers (like Nordstrom) to leverage these cost efficiencies by having brand shipments routed to their hub & then ship individual stores (driving costs down by having one bulk shipment to each individual store, of demand forecasted product compositions).Detailed Breakdown of Retail MarginsThis is a breakdown of the components of a simple brick & mortar store structure where the products are purchased from a brand and fulfilled directly to the store.In the example illustrated above, the costs in the ‘Costs of Goods Sold’ section are broken down sequentially as they are incurred in the product’s sales cycle. This is what each component means:Wholesale Price: This is the price for the product paid to the brand for the product (cost to retailer is revenue to the brand). Generally speaking the retail price is about 40 – 50% of the retail price (if we look at this as based on how this looks from the consumer’s point of view). The logic is that the retailer receives this price because they are purchasing in volume – think kind of like buying from Costco except selling for B2B.Inbound Freight / Shipping Fee: This is price to pull together all the items in a retailer’s order, put it all into cartons, and ship it via FedEx or UPS. When working with independent boutiques, the shipping is generally handled by the brand since convenience for the brand outweighs the retailers. However, when it comes to working with majors like Nordstrom or Urban Outfitters they have strict shipping instructions with stiff financial penalties for breaking them. In the case of the major retailers, they are shipping so much volume that it makes sense for them to manage the logistics themselves – which means that this costs becomes more complicated in those cases.Inbound Fee: Once United Parcel Service (company) (UPS) has delivered the product to the store, the shipment needs to be ‘received’, which means unpacking the shipping cartons, checking each item against the shipping manifest, reconciling the shipment with the invoice (to ensure proper payment), and stocking the product in the warehouse, store room, or sales floor for selling. This fee is the same as the receiving charge for a Third-Party Logistics for simplicity sake, but can be calculated by taking the workers monthly salaries who are involved in receiving divided by the time spent receiving and then dividing that number by the # of units.Storage Fee: This is the cost holding the product by the retailer until the product can be sold. Since we are looking at this from the perspective of a Brick and Mortar Retailer, I kicked up the cost to $1.50 because of the much higher costs of retail real estate.Credit Card Fee: This is the fee charged by the credit card company for processing the transaction for the customer.Why no sales tax? We are not including sales tax in this analysis because it’s not a profit contributor. Although the line item appears on a receipt, it is a balance sheet item that increases a special withholding account that you are “supposed” to keep for your customers’ transactions and pay quarterly to the state. Since this is a null transaction where the money goes in and cannot be spent - we don’t include it in this analysis.Active Margin Management:One of the more interesting things that I began to do was implement a proactive management strategy for retail distribution in the US. Generally, a brand let’s it’s sales reps control most of the communication with the people that the brand is selling to. This really didn’t make a whole lot of sense because if I am running the bloody company - I need to actively know how the product is performing at retail for small boutiques. Boutiques are your leading indicator for pricing & sizing (two hugely important aspects).Every two weeks, I would call every independent boutique that I worked with - that was about 117 doors in the US. I focused primarily on the top 30% that I found were the most interesting.After chatting with all of them, I would build maps of what I was seeing. I would hear that a certain product was not performing well in Baton Rouge, LA at $210 retail but was absolutely killing it at $240 retail in Colombus, OH. In addition, retailers would actively express their frustrations with heavy product positions on say Nike Dunks in that same Baton Rouge, LA shop - but the shop in Orlando, FL was drying to get some but http://Nike.net (nike’s wholesale management system wouldn’t hook them up with an allocation).Based on this feedback, I would build full pricing analyses for each of the biggest bell-weather retailers - generally 10 - 12 every 2 weeks (Generally, I did this at night from 12 - 2:30am which is my last conference call of the day 2:30am PST is 5:30pm in China end of work day).In the above example, I would have the Baton Rouge, LA retailer reduce price of $195 from $210 but structure increases in other products to compensate for Margin Reductions. Basically testing price sensitivity to create an optimal margin structure for the retailer.In addition, I would use the credit that I extended Baton Rouge, LA store & the different Orlando, FL (My relationship with them is the only common factor between these two guys and they both owed me $$) and shift Baton Rouge store’s Nike Dunks (that he was long on) and get them to the Orlando guy.What did I gain:Boosted Cash Conversion (If I spent that much time caring about their business, who the hell do you think that they are going to pay first?)Increased Rev/Account (I have multiple touch points with my customer and I gave them something that no one else really could give them - they are of course going to give me a larger merchandise location at their store)Deep market insight ( simply just knew more than anyone else about market dynamics and could apply that knowledge throughout all aspects of the organization - thereby building the human capital endemic to the organization).---------------------------------------------------------------------------------------------Section 5E-Commerce Margin Analysis---------------------------------------------------------------------------------------------Now let’s get to the fun part - online retail is near & dear to my heart and this is the part that I really wanted to answer. E-Commerce is an incredible channel because you have the ability to:Create the Retail Environment: Being online means that retailers have the power to design the retail narrative that visually communicates the retailer’s story. Think about it - a brick and mortar retailer will maybe remodel the story once every five to seven years. With an online store - you can dynamically change the homepage, create a new theme for the season, add “sub-shops” for designs/styles, or with a little html & CSS you can tell a totally different story.For a more in-depth version of this story, check out: How Retailers Can Replicate the 'Magic' of the Apple Store... Online (I am really proud of that piece)Tell the Story: Being online provides the retailer with the ability to tell the product’s story to bring the customer in the world of the retailer. Online Retailers can add “looks” to augment the retail experience - the story enables online retailers to tell a story that would be challenging for a brick & mortar. Did the sales associate get busy and forget the brands background? Were they too busy and didn’t get a chance to connect with the customer? Online gives the retailer to tell the story that gives the customer a reason to buy stuff.Deeper Customer Insight: The luxury of E-Commerce is that we have an incredible number of tools to track & analyze user behavior in ways that brick & mortar would only dream of. Although it’s challenging to nail down your e-commerce analytics - it’s extremely powerful to have a detailed customer profile to tweak your merchandising & promotion strategies.Regular Engagement: The era of using Facebook & Twitter to simply promote your products is dead. Modern E-Commerce social strategies involve crafting a narrative that makes your fans want to engage by NOT talking about yourself. For example, a music blog will use a new mix to engage fans & readers & then subsequently sell tickets to the show after they are on the page.This all leads up to the point of analyzing the costs of the costs of E-Commerce and gather some insight on the associated margins of online retailers. We are going to look at the margin for e-commerce from two different perspectives:1. Traditional E-Commerce: A traditional online retailer is a store that purchases products from brands at wholesale and then sells the product to customers at retail. Online retailers that employ this model are Nordstrom, Urban Outfitters, Huckberry, and Tobi. The foundation of this business is based on the retailer choosing selecting the best pieces from brands to put together the right assortment of pieces that will most strongly resonate with their audience. The additional benefit of this model is that the retailer can use Paid Search to bring in new customers searching for the brands they retail – so the popularity of the brands they retail become a source of customer acquisition.2. Brand Direct E-Commerce: This is the uber-popular model championed by Bonobos and Warby Parker that exploded onto the e-commerce landscape in 2011. This model was enabled primarily by the major foundational trends that I outlined in - What is the next wave of innovation in e-commerce after flash sales and private sales? Based on the massive assimilation of Facebook (product) as a daily tool for navigating the web, brands were finally able to gain access to an audience that enabled them to gain a critical mass of fans in order to build a stable customer base. By designing and producing the products themselves, these vertically integrated E-Commerce startups are able to earn significantly more money per item than traditional online retailers (remember in the traditional approach two different companies need to make enough margin to support operations & growth).Traditional E-Commerce Margin AnalysisWe are going to look at this first from the perspective of a ‘typical’ online retailer like Nordstrom (company) or Urban Outfitters (retail brand).We are going to look at this first from the perspective of a ‘typical’ online retailer like Nordstrom (company) or Urban Outfitters (retail brand).This is a breakdown of what each line item expense is:Wholesale Price: This is the price of the product paid by the retailer to the brand for the product – the product is purchased at Wholesale Price which can be thought of as a 50% discount from the retail price in exchange for volume (i.e. 500 units per style).Inbound Warehouse Fee: This is the cost of receiving the goods from the UPS carrier at the warehouse, checking the items against the shipping manifest, and putting them on the warehouse shelves for quick fulfillment. As warehouses adjust to working with more E-Commerce retailers, they are quickly adopting unit pricing for receiving these items. This fee was taken from actual fees that I paid in 2009 for my old bran VÆL Project.Storage Fee: When an item is received, it is not immediately fulfilled to the customer (like is the case for a Private Sale site – when an order is immediately ‘burned & turned’, it is received and immediately packaged for fulfillment to the customer), the product is shelved until an order is placed. This number is calculated by a daily rate multiplied by the average days in inventory or the average of the storage expense divided by the number of items in inventory.Outbound Warehouse Fee: When an order comes in, the items in the order must be picked from the warehouse shelves and packed in shipping cartons (hence the term ‘Pick & Pack’). This fee is usually a per order charge + a fee per unit of the order, which covers the cost of having a person pick the order and the packaging requirements of the order.Outbound Shipping Fee: This is the fee paid to the shipping carrier to transport the item from the retailer’s warehouse to the customer. For purposes of this explanation, we are assuming that the retailer is using U.S. Postal Service Flat Rate boxes that cover nationwide transportation of the product for a set price. The carrier of choice for E-Commerce is usually UPS where something like 6% of the US Gross Domestic Product is moving through their system on any given day.You might be wondering why the costs of shipping & fulfillment must be included in the Cost of Goods Sold - well that’s a good question. Most retailers have to offer free Shipping as a normal course of competing online today. The IRS says that when a promotional expense is a standard practice (i.e. free shipping on all orders) it must be calculated as a Cost of Goods Sold expense. Here is a little graph that shows you the prevalence of free shipping as a norm in online retail:Therefore, when an online retailer utilizes free shipping it must be allocated to COGS.In Financial Modeling: Where can web startups learn about financial modeling that accounts for the important metrics and costs? I take you through the costing build of Customer Acquisition costs. But here is a quick summary:Customer Acquisition Costs: This is the price paid to Google for Paid Search when using this as a demand generation technique. In the summary of this methodology, we said that the value of using the traditional e-commerce model is that you can capture the search traffic from customers looking for a particular brand. For purposes of this analysis we assumed that the most that we would pay for a customer is 7.5% of the retail price:CC Fees: Credit Card Fees are pretty straight forward as they are a % of Gross Sales that the CC processor charges to the Retailer for use of a CC or Debit Card. They range from roughly 1.65% - 5.4% (for a small retailer processing an AMEX or Discover card).Brand Direct E-Commerce Profit Margin AnalysisWith all of the advantages of selling to major e-commerce retailers, you might be wondering why would a brand want to sell consumer direct – the answer is that it is a far more profitable transaction for the brand:As the iPhones (product) integrated itself into the daily lives of the US population and Facebook (product) drove the majority of Americans to interact with the web, e-commerce was primed for explosion. In late-2010, we saw that new startups were bursting onto the scene to change the world.Two of the most significant consumer direct e-commerce startups from the boom cycle are Bonobos & Warby Parker. This e-commerce boom period can pretty much be traced back to the $18.5m investment by Lightspeed Venture Partners (venture capital firm) & Accel (global venture capital firm) in Bonobos in Nov ’10. This is what they saw in the deal:Here are the definitions as to what each term means:First Cost: This is the price paid to the factory in China for the product. This term refers to the final, fully assembled number for the product that will be delivered to the brand at the Port of Hong Kong. First Cost means that ownership of the product changes once the shipper picks up the product so the brand owns the product while it’s on the ocean.Ocean Freight: All of the products will need to be “containerized” – which means put into those big shipping containers in one of 3 sizes: 20’ ft, 40 ft’, or 45ft. If you don’t have enough product to fill a full container, you will work with a freight consolidator that takes your shipment & puts it together with another shipment to make one large shipment that’s more cost effective to transport. Generally, you logistics firm will include insurance, bond, and other fees here.Tax & Duty: The US has an incredibly complex set of taxes called the US Harmonized Tariff Schedule that calculates the tax rate that your products are subject to based on your investment in lobbying. This fee is paid directly to the treasury.Drayage: This is the cost of transporting your shipment from the Port of Los angeles to your warehouse. This fee can be very small if your warehouse is in Los Angeles and you have only a single container. However, if your warehouse is in Massachusetts, like Bonobos, then this will need to be routed by train or semi to the appropriate destination.Warehouses Inbound: These are the costs to receive your shipment at the warehouse, physically count the product, and putting them on the warehouse shelves for quick fulfillment. As warehouses adjust to working with more E-Commerce retailers, they are quickly adopting unit pricing for receiving these items.Storage Fee: This is the cost holding the product by the retailer until the product can be sold.Outbound Shipping Fee: This is the fee paid to the shipping carrier to transport the item from the retailer’s warehouse to the customer. For purposes of this explanation, we are assuming that the retailer is using USPS Flat Rate boxes that cover nationwide transportation of the product for a set price. The carrier of choice for e-commerce is usually UPS where something like 6% of the US GDP is moving through their system on any given day.Customer Acquisition Costs: This is the price paid to Google (company) for Paid Search when using this as a demand generation technique. In the summary of this methodology, we said that the value of using the traditional e-commerce model is that you can capture the search traffic from customers looking for a particular brand. For purposes of this analysis we assumed that the most that we would pay for a customer is 7.5% of the retail price:CC Fees: Credit Card Fees are pretty straight forward as they are a % of Gross Sales that the CC processor charges to the Retailer for use of a CC or Debit Card. They range from roughly 1.65% - 5.4% (for a small retailer processing an AMEX or Discover card).For Google Search Matt Carroll - Google+