Logistics Terms Guide for Opening Store in Amazon

1. Product competitiveness and market demand

   It is necessary evaluate the product objectively and see how competitive it is in the market. In addition, a preliminary survey on consumers’ demand must be conducted prior to selection. Selling undesired products could cause failure in opening a store on Amazon.

2. Product volume and weight

   The volume and weight of the product are the standard for calculating air/sea transportation costs, inland transportation costs, and FBA handling/storage fees, which are crucial factors in determining the profitability of entering Amazon. Products with small volume and light weight are advantageous in terms of logistics cost and fee. Therefore, if you are a seller who has not yet decided on a product to sell, select products that are small and light. If you are a seller with products in Korea, then try to make the products lighter and smaller. The shipping cost can be easily checked using Cello Square.

Selecting a product does not mean it can be sold immediately. Just as products must pass various authentications to sell in Korea, the regulation of the country for those particular products must be checked beforehand. This regulatory information can be identified through the HS-CODE. HS-CODE is a unique serial number assigned to a specific product for convenience in international trade and can be viewed on the ‘Customs Law Information Portal.’ If an HS-CODE is searched in the Customs Law Information Portal for a specific product group, the information on tariff rate and required authentication documents of the products can be viewed. Since the process of entering the HS-CODE is required in the process of air/sea transportation, the regulation of the country must be identified by searching the HS-CODE of the product before entering that product in Amazon.

1. Required documents: Export declaration certificate, certificate of origin, packing list, etc.

   After selecting the products to be sold on Amazon and completing product registration, a full-scale import and export business must be carried out. First, export documents such as export declaration certificate, certificate of origin, packing list, etc. must be prepared. These documents are provided by forwarding companies including Cello Square, which can be processed without difficulty.

1. The next step is to understand Amazon’s packaging regulations. Amazon provides clear rules for box size^[1] , including packaging materials, such as a ban on the use of styrofoam and a suffocation warning label attached to vinyl.^[2]In addition, Amazon box/packaging

   rules are also detailed on the Amazon Seller Central website, which must be inspected carefully before packing the product. Non-compliance may result in FBA charging an additional fee or a return may be processed. The labels that must be attached to the product are as follows.

1. This is the FNSKU barcode that must be affixed to each product.

1. The FBA label must be attached to the box with the Carrier label.

1. A warning label may be attached depending on the product. For example, there is a ‘suffocation warning.’

1. When the shipment is ready, the shipping will be carried out through a shipping company or express shipping company. In this process, it is necessary to confirm the setting of ‘Incoterms’ between the exporter and importer. Incoterms is a ‘condition’ that determines the scope of responsibility of the importer/exporter for the responsibility of the cargo and consists of a total of 7 conditions. In a typical export-import, Incoterms can be set variably according to bilateral negotiations. However, Incoterms must be set to ‘Delivered Duty Paid’ (DDP, Seller’s full responsibility) when sending products to Amazon. Amazon does not want to take responsibility for the seller’s cargo in the transportation stage, so it requires DDP conditions in the FBA warehousing process. If the product is shipped to Amazon under conditions other than DDP, then the product will be returned. Returns are still possible even when sent at ‘Delivered at Place Unloaded’ (DPU), the previous step of ‘Delivered Duty Paid’ (DDP). Check to see whether Incoterms is set to DDP before shipping products.

1. After preparing the export documents and packaging the product, it is now time to select the shipping method. There are two types of shipping: air and sea. Each has its pros and cons, so an optimal method of shipping for the product needs to be chosen.

1. Air shipping enables expedited FBA stocking (within 3 weeks) and simplified customs clearance depending on the total value of the product price. There are ‘list-clearance,’ where importers and tariffs are exempted for less than $800, and ‘informal entry,’ where importers are exempted from tariffs for less than $2,500. (Some items such as food, functional cosmetics, and pharmaceuticals must follow the official customs procedures regardless of price). However, air shipping has disadvantages in that the shipping cost is more expensive than sea shipping, and both the volume and weight of the product must be considered.

1. Ocean shipping is inexpensive and is specialized in sending large quantities of cargo. However, it takes a long time to arrive, and its stability is uncertain due to the recent increase in freight rates and congestion in logistics. According to SCFI and CCFI, which are indicators of maritime logistics costs, shipping rates have been on a downward trend since peaking in January and February 2022. However, a strike by the port union on the West Coast of the United States has become certain, and there is a possibility that freight rates will rise again. As such, the uncertainty of the current maritime shipping continues, and sellers, who have selected AMAZON U.S. as their main market, will need to keep a close watch on the sea freight indices such as SCFI and CCFI and other port-related news. If an increase in sea freight rates is expected, then it is recommended to reduce logistics costs by sending a large amount of cargo to the 3PL warehouse in advance.

1. In addition to the cost, if the shipment is not received by FBA within 90 days of creating a shipment in Seller Central, then the shipment will be canceled. If it is deemed that FBA stocking within 90 days is difficult, then an FBA shipment can be created when the cargo arrives at the 3PL warehouse. (However, the FBA box label must be attached at the local warehouse at an additional cost). If it is determined that Ocean shipping is difficult due to uncertainty even after reviewing the strategies, then air shipping should be used even at a higher cost. The cost trend of air shipping can be found in the Baltic Air Freight Indices (BAI).

1. Once the shipping method is selected, a shipment can be created, and the shipping steps can be tracked on the Seller Central page. By entering the tracking number, the shipment status can be checked. When the status is at Receiving in the FBA, then the products have been properly delivered to FBA.

1. A logistics strategy must be established to restock inventory according to the depletion trend of the initial quantity after the start of sales.

1. Kontactic is adopting a strategy to ship a large amount of cargo by sea, after receiving a small number of products swiftly through air shipping and then checking the response of the consumers. If the inventory sent by air shipping is quickly depleted, then the restocking of the inventory through air shipping is recommended prior to the arrival of the shipment by sea to prevent inventory from being out of stock.

2. If you have successfully settled in Amazon, then you now need to optimize your logistics to improve profitability. Customizing carton boxes for Amazon even before entering Amazon and making different packaging standards come as a significant burden. However, we recommend optimizing the carton box and packaging specifications for Amazon to improve profitability. This process allows more free price-setting and improved profitability with optimized specification and production of English packaging.