450: Insider Tips On Finding The Best Factories And The Lowest Prices For Your Products With Kian Golzari

00:00
You’re listening to the My Wife, Quitter, Job podcast, the place where I bring on successful bootstrap business owners and delve deeply into the strategies they use to grow their businesses. Today I have my friend Kian Golzari on the show and Kian is one of the world’s leading sourcing experts and he sourced products for the NBA, the Olympics and other famous organizations. And in this episode, he’s gonna teach us the right way to source products in today’s environment. But before we begin, I wanna let you know that tickets for the 2023 Seller Summit

00:27
are going up in price this Saturday on April 1st over at SellersSummit.com. It is the conference that I hold every year that specifically targets e-commerce entrepreneurs selling physical products online. And you all probably know me well enough by now to know that my event has zero fluff. Every speaker I invite is deep in the trenches of their e-commerce business and not high-level guys who are overseeing their companies at 50,000 feet. Every year, we cut off ticket sales at around 200 people and everyone eats together and everyone parties together every single night.

00:57
I personally love smaller events and tickets always sell out. If you’re an e-commerce entrepreneur making over 250k or $1 million per year, we also offer a special mastermind experience where we break up into small groups, lock ourselves in a room, and help each other with our businesses. The Seller Summit is going to be held in Fort Lauderdale, Florida from May 23rd to May 25th. That’s S-E-L-L-E-R-S-S-U-M-M-I-T.com. I also want to thank Postscript for sponsoring this episode.

01:25
Postscript is my SMS or text messaging provider that I use for e-commerce and it’s crushing it for me. I never thought that people will want marketing text messages, but it works. In fact, my tiny SMS list is performing on par with my email list, which is easily 10x bigger. Postscript specializes in text message marketing for e-commerce and you can segment your audience just like email. It’s an inexpensive solution, converts like crazy, and you can try it for free over at postscript.io slash d-u.

01:53
That’s P-O-S-T-S-E-R-I-P-T.I-O slash Steve. And then finally, I wanted to mention my other podcast that I run with my partner, Tony. And unlike this one, where I interview successful entrepreneurs in e-commerce, the Profitable Audience podcast covers all things related to content creation and building an audience. No topic is off the table, and we tell it like how it is in a raw and entertaining way. So be sure to check out the Profitable Audience podcast on your favorite podcast app. Now onto the show.

02:27
Welcome to the My Wife Quitter Job podcast. Today I’m really excited to have Keon Golzari on the show. Now, Keon is someone who I met recently on an Alibaba panel with David Applegate and MetaWorldPeace, the NBA player. He is one of the world’s leading sourcing experts who has visited over 500 factories and sourced over 2,500 products. He specializes in product design and manufacturing, and he’s a wealth of knowledge when it comes to best practices. He’s made stuff for the NBA, the UN,

02:56
the Olympics and top athletes like Kobe Bryant. And he’s also mentored over 200 Amazon entrepreneurs as part of the Titan network. Today, we are going to talk about product sourcing and where to have stuff made. And without, welcome to show Keon. How are doing, man? Thanks so much for having me, man. It’s a pleasure to be here. And I’m just excited to drop some value and help out wherever I can. So how did you get into product sourcing? Because visiting 500 factories, that’s a lot of factories. I’ve visited

03:26
Maybe like 1 % of that. Yeah, no, I was really lucky to be honest, because I started off in a family business. Like my dad started a camping and outdoor brand called Highlander because I grew up in Scotland in the UK and he was really, really keen on the outdoors. So he just had a shop in the UK and then he would actually, he went to China about 35 years ago when it was just coming out of a communist rule and sort of private companies were allowed to have factories for themselves. And he would help them to say like, hey, this is how we make goods in the West and kind of like.

03:54
helped him out build and then as a result he had very very close ties with China so from a young age when I was four or five years old I was like this curiosity of like you know what goes on in China how come my dad keeps going there all the time and then like Chinese suppliers would also come and visit us in the UK they would bring their kids so I was like always around that as a child so when I graduated university my dad was like hey do you want to join a family business do you want to head up the supply chain stuff do you want to come to China with me I’ll show you how it is I was like yeah absolutely

04:20
So went to China for the first time in 2010 and what was supposed to be just a two or three week trip, I ended up staying for three months, then went back to Scotland, grabbed my things and then moved to China and I lived there for several years, set up an office there. I became obsessed with how products were made. so I would say I’m so lucky because I found my passion at such a young age, whereas I know it takes some people a long time to really figure out.

04:46
what they like and what they’re good at and luckily I was just kind of thrown into it and I loved it and I’ve never looked back. This is a great first question and do you speak the language? I can speak a little bit of Mandarin but the tough thing was that like so I sat up in office in Ningbo and Ningbo was very much like you know Chinese you had to speak a little bit to get around so to obviously respect the local culture like I could order food at a restaurant I could take a taxi and speak Mandarin no problem but when I moved to Shanghai

05:15
I call Shanghai like China light, like it’s not the real China. can kind of, everyone speaks English, you can, you know, go to a nice Italian restaurant. So if you like basketball, you can play for a team there. Like it’s not the real China, but as soon as we leave Shanghai, that’s the real China. But so when I moved there, like my, my Mandarin basically went away because everyone would reply to me in English. I, but the one thing I really do know is like numbers because I would always, when I was sitting in factories and stuff like that, I would pretend like I didn’t speak any.

05:40
Chinese and then the factory bosses and stuff they would be communicating amongst themselves and they’d be talking about the numbers when we’re negotiating price and stuff like that. So pretended like I don’t understand what they’re saying. I was just like doodling but I was actually figuring out what they were talking about. So I guess that helped a little bit. Well, it just goes to show anyone listening out there, you don’t need to be able to speak the language. And I actually have that problem too. Whenever I go there, I actually try to speak Chinese because I speak it maybe like a kindergarten level, but they always reply to me in English because my accent is so bad and…

06:09
they know an American right away. Totally, and that’s actually a really good point because a lot of people think, oh hey, when I go to China for the first time, do I need a translator or should I hire a before I start talking to this factory online? And we’re absolutely not, like they have very good sales assistants which are very geared up towards English. You might deal with a factory boss which doesn’t speak English, but that’s fine because you communicate with the sales assistant and then they communicate to the boss. And you can still have a means to communicate with the boss, but it’s absolutely not essential to speak any form of Chinese to

06:39
to do business with them. And I would say worst case you can write it down. They can read English quite well. Maybe not speak it as well, but everyone can read. mean, they study Chinese from an early, I mean, they study English from an early age over there. So absolutely can’t. Okay. Walk me through the process of sourcing like a pro. Let’s say I want to create something. What are your best practices to find the best factories and get the best prices?

07:05
Okay, cool. So let’s just imagine that we already have, we know the product that we want to source. sort of identified, we looked at the competition, we’ve made all our changes and all that sort of stuff. And now we’re like, okay, cool. Now we’re ready to find factory. Like where do we start? So I always like to start with alibaba.com. Just as a general, this is where I’m gonna begin my research in terms of, let me find the top five factories for this product. And a lot of people just go to alibaba.com, they type in their product, they search by price. And let’s take the example of like blue light blocking glasses, right?

07:34
We’ll look at, we’ll type in blue light blocking glasses and all of them look the same, right? The images, but some are $1.80, some are $5, some are $7.90. And we’re like, how is it that all these products look the same but they’re so wildly different in price? And this is where a lot of people fall down and they just end up going for the cheapest one but it’s terrible quality. So when I search on alibaba.com, I search by manufacturers, not by product because the goal of alibaba.com is to find the best suppliers. And once you find the best suppliers, then you can negotiate the price down. Don’t start by looking at the prices.

08:02
So to find those best suppliers, I’m looking at manufacturers that must be verified, meaning that a third party has gone in and validated the information they provide is true. So if they say they have 2000 workers, a third party has proven that. If they say they have these inspections, third parties have validated that. If they say they’re in this particular location, that’s been accepted. Quality, number of sewing machines, et cetera, et cetera. So I start with the verified factors. And then after that, I also select trade assurance to make sure your payment is protected. So you get absolutely what you say you’re gonna get if you order.

08:30
and blue light blocking glasses with a blue frame, but you get a red frame. Well, now you get a refund from alibaba.com. So those are given, but then I also like now go into the certifications as well. So you get certifications on the factory and get certifications on the product. On the factory, you might get things like BSCI ISO 9001 ISO 14001, which is like environmental standard, business compliance, quality control, all that sort of stuff. Can you describe what those are actually? Yeah, sure. So ISO 9001 is more of a quality standard.

08:58
and ISO 14001 is more of an environmental standard. it doesn’t mean that, and BSEI is your business social compliance initiative. And if your factory has these things and it’s a great bonus, meaning that they very much care about quality control, that they’ve hired a third party to go and validate that they have sound quality control measures. And if they don’t have it, it doesn’t mean that they’re not capable of passing, it just means that they haven’t applied for it. But I like to start my search off with here are the factories which have this level of certification.

09:27
So I’m working with a certain standard. It might mean that, okay, they supply retailers in the US, they supply big customers. So if you supply Disney or if you supply Walmart, Walmart will ask you, hey, you have to take this audit for us to supply you. Like when I supplied the Olympics, every single factory which I purchased from had to be audited by Intratech. And then had to upload the report to the Olympic portal and then I would get permission to buy from that factory, even though I selected that factory myself. But like a lot of these big brands, they don’t want any bad press or bad.

09:56
bad publicity to be like, the factory that made these garments, the workers were making under minimum wage or anything like that. So those sort of audits validate all your sort of legals at the factory is a very sound place to work with. then- So actually a common question I get asked that I don’t have a good answer for is how do I know that the workers are not being abused? Which one of those certifications covers that? So I can tell you firsthand, right, from my experience, like from visiting over 500 factories,

10:24
probably seen one factory where there’s been like child labor or where there’s not been good working practices. And it’s a massive misconception in China that like, oh, hey, this is unfair labor. This is like, don’t get, they get forced to work overtime. They get forced to work every day. They don’t get paid fairly. And honestly, it’s just not true. Like, know, factory workers actually get paid more than what someone in Starbucks gets paid because they have in China like an aging workforce, right? So when I first went to China in 2010,

10:52
all the factories were at the major port cities. like your major cities like, know, Shanghai and Ningbo and Hangzhou, Fuzhou, all these places, all the factories were there. But then as a result of this growth in the middle class in China, right, it starts to make a lot more of a disposable income. So they start to desire Western goods. So they start to pop up like KFC, Starbucks, Pizza Hut, nightclubs, bars, restaurants, coffee shops. So now you had that young workforce that used to go into the factory and now you’re like, well, you know what?

11:18
let me just go work in Starbucks and make coffee and play on my phone all day and have conversations rather than work in a factory. It’s much easier work. So the factories had to move more and more inland. So now when I get on a plane to China, I need to go like four hours on a train into the countryside. And then as a result, they have to pay those workers more to want to work in a factory because there’s jobs available to work in other places. So you would never get away with, you know, paying like underage labor or low wages and stuff like that. But to your question in terms of like what certifications check all that, I would always ask your factory.

11:48
what factory audits have you got? And there’s many different types of audits. know, it could be the ISO 9001, it could be the BSEI, it could be an organization called SEDEX. And whatever they send you, if you don’t understand any of it, just Google these certifications just to make sure that they’re validated. But going back to alibaba.com, well, the good thing is if you select a verified factory and they say right here is our Intertech report for the ISO 9001 quality certificate, and that means that that report is…

12:16
actually correct and has been verified. It’s not like, we just made this report up and we uploaded it. It’s like, no, a third party has gone in and validated that this report is correct and all the information that we’ve said here is true. So that’s why I love it because it’s kind of like your eyes and ears inside the factory and not to change topics. But a lot of people ask about, well, what about sourcing in Mexico and all those other places? And like, well, that’s great, but you don’t have that like verification that you know who you’re working with. They can just say whoever they are and you have to kind of take their word for it.

12:43
but at least with alababa.com, you have lot of transparency and visibility in the factory. And then, to further that in terms of, how do I know if this is true and stuff like that? I always talk in my content in terms of building a relationship with your factory using either WeChat or alababa.com, like chat feature on the app. talking about, hey, where you guys up to on the weekend? What are you having for dinner? How do you celebrate Chinese New Year? Just informal conversation. But then you can video call them. So let’s say your goods are ready on the 1st of April.

13:13
and you’re now at the end of March and you know the inspection’s happening, you can literally call them on the app to be like, hey, can you take me down to the factory floor? Can you show me what the inspectors are looking at? Can you show me that all the production pieces are finished before I make this payment? So you’ve got eyes and ears inside the factory because of that verification process, right? And building that relationship and chatting on the features. my mind just goes in different tangents, so I probably answered a few different questions. what you’re saying from what I’m interpreting from what you’re saying.

13:40
If you choose verified and they have those intertech reports, chances are there’s not child abuse going on in that factory. Yeah, absolutely not. And you’ll have the certificate to back it up. let’s say, for example, anyone ever quizzes you about it. Let’s say, for example, a particular big customer wants to a large order and they’re like, can you prove to me that you don’t have underage labor here? Then you just ask the factory to send the certification. Now, an important thing is that I always ask the factory to send me the certificate.

14:06
certification anyway, even if it says it’s on their Alibaba profile, I’m like, can you send it to me so I can read it and check it? Really important thing is to verify and check that the address on that certificate matches the address which is on their Alibaba.com profile, because then it could just be sending you any certificate. So I just always make sure that addresses match. And then, you know, the best test is yourself going there when travel opens back up to have eyes and ears inside the factory. you actually know who you’re doing business with. Because the way I was always doing it was I was going to the Canton Fair, meeting these suppliers face to face.

14:35
deciding who I wanted to work with and then going and flying to their factory and visit them and seeing them. Because, and even if anyone’s just sourcing online, in your messaging to the factories, I would always mention that as soon as travel opens back up, I’m coming to visit your factory. Even if you have no plans of doing that, I would always say that so that they know that you’re gonna be there one day. So they’re always gonna give you their honest information upfront. So if you ask like, many workers have you got in your factory? And they wanna say 500 to impress you, but they’ve only got 100, but you’ve said, I’m gonna come and visit you.

15:05
then they’re like, okay, well, let’s just tell him it’s 100, because he’s actually gonna come and check it out. So I would state my intention to go and visit, even if I don’t plan to, just so that you get more honest upfront information from day one. I It’s like a little threat, like the in-laws are coming or something like that. Okay, so we did verify, you look for certifications, and presumably all this is to weed out all the lesser players. Let’s say you do all that, and you still have 100 factories or 200 factories. How do you narrow it down further?

15:32
Yeah, great question. And that’s a common thing as well. So after that, I’m gonna be looking at what is the main region in China which specializes in this product, right? So for example, if it’s an electronic product, chances are it’s made in Shenzhen. If it’s a backpack, chances are it’s made in Xiamen or Shenzhou, right? If it’s blue light blocking glasses, it’s most likely made in Wenzhou, right? You’re not expected to know that, like whenever you type, in China, they concentrate in certain areas based on the access to raw materials, right? And the skilled labor that they have in those areas.

16:02
So if anyone wants go into alababa.com, hit manufacturers, type in blue light blocking glasses, take those boxes of the certifications that we just talked about, right? And just watch, scroll down the list. The first word of that company name, the first word is always the city or the state of where that company is based. So it’ll say like Wenzhou Optics, Wenzhou Glasses, Wenzhou this, right? And as you scroll down, you’ll just see Wenzhou, Wenzhou, Wenzhou. Then you’ll see an outlier, which will be like Suzhou. Then you’ll see one that’ll say like Guangdong. And it’ll go back Wenzhou, Wenzhou, Wenzhou.

16:30
So I like to scroll through that list, let’s say if you’ve got 100 results, to be like, what is the most common name, what is a common word that pops up? And then chances are that’s the area which specializes in this product. Because you essentially want to be buying it from the area which actually specializes in it. And then after that, I look at the number of years that they’ve been on alibaba.com and the number of years that they’ve been established in business. So it will say like years in the top left corner and it will be either two years, three years, eight years, 12 years. And that’s just the number of years they’ve been on alibaba.com. But why you need to be careful is that

16:59
a lot of very good suppliers only went to the Canton Fair and never registered their products online, right? But with what happened in the last few years, they’re like, well, actually now we need to put our products online because the customers aren’t coming to the Canton Fair anymore. So you might see a very good supplier, which has been established for 25 years, but next to their name, it will just say one year. And you’re like, oh, this is a new supplier, let’s just dismiss them. But they could actually be like the rock star supplier that you’ve been craving. So when you click on the profile, you go on company information and it’ll tell you.

17:27
the year established and next year established you’ll have a blue tick which is that verified information and it will stay like 1999 or 2002 and you’re like oh wow this company’s like over 20 years old so after all that I would like to search by you know the number of years have been in business and also the factor location and that will really hone it down but what’s your minimum usually

17:49
Normally I go minimum five years because I think that like five years is enough where you’ve developed enough experience, you’ve done enough orders, you’ve exported to enough different countries. And that’s the other thing as well. When I look at that company profile, I’m now looking at, okay, it will say like quality control and that will say like what machinery they have and what quantitative machinery they have. So let’s say for example, I’m doing footwear, right? I would want to, if I saw in their…

18:13
quality control in machinery, they had like flex test machine, which basically means that you put the boot in the machine and it just flexes it 10,000 times to show it’s done 10,000 steps, that it can walk like a few kilometers and the boots aren’t gonna be damaged, right? And if they say, right, we’ve got five flex test machines, I’m like, well, this is a great factory because this is the factory which tests the products in-house so they know they’re qualified before they even send it to a third party, they know they can pass, right? And you know, if it’s a backpack factory, they might have like a waterproof test machine, they might have a fabric strength test machine, they might have a zip test machine.

18:43
So I’m kind of now looking at, what testing did they have in-house? And then on top of all that, when you go down to a company profile, it will tell you what trade shows they’ve done, right? So they might have exhibited at a Canton Fair for five years, they might have gone to a trade show in Italy, Spain, UK, Germany, whatever. And that is really good for me as well, because if you attend a trade show as a factory, it means that one, you have good English speakers within your company, two, it means you understand the export market, meaning you know what German customers want, you know what US customers want.

19:12
So if I say, hey, I need this latest certification to be compliant, they’re like, yeah, we’ve already got that. We do that for that other US customer. So they know the language that you’re talking basically. So there’s so much information that we kind of went over that you can get from your factory profile, but it all has to be verified so you know it’s true. But compare that to what we first started talking about when someone just types in a product, looks at the price and then goes for the cheapest one. Look at all the things you just missed out on. So it’s very important to sort of use that as a base.

19:40
to then find the right manufacturer. But then once you find the right manufacturer, that’s like part one done. Now it’s like communicate with the supplier. So we can now go into like, know, how we- Plus the prices on Alibaba are all bogus anyway. Absolutely. Yeah, yeah. I never ever, ever take the price on Alibaba for what it is because that is what the supplier thinks that you want. So let’s say for example, it’s an outdoor furniture or a camping chair, right? And you see a camping chair, you’re like, okay, that was $8. Well, that’s just what they make already, but-

20:08
What if you want steel tubing rather than aluminium tubing? What if you want polyester material rather than nylon material? What if you want 80 by 60 rather than 80 by 40 dimensions? So it’s like you have to say what you want and then get them to price it up, not just take the price of what they already sell.

20:24
My first book, The Family First Entrepreneur is available for pre-order at your favorite retailer. And for the month of April, I’m doing something crazy. I’m giving away a new bonus for people who pre-order every single week until the book launches on May 16th. And here’s the kicker. If you buy a book before the bonus expires, you get access to it forever. If you buy the book after the bonus expiration date, you won’t get access to that week’s bonus.

20:50
Here’s just a preview of the bonuses that I’m giving out for free in April. A workshop on search engine optimization for e-commerce store owners, which expires on April 6th. A workshop on chat GPT and how to use artificial intelligence to automate your business, which expires on April 13th. And also a workshop on how to structure your blog posts to rank them in search, which expires on April 20th. In addition to these bonuses, you also get access to my six week family first business challenge.

21:19
You get access to a three day workshop on print on demand, and you also get access to my two day passive income workshop and tickets to any book party that I happen to be throwing. Now aside from all these bonuses, the book itself will teach you an alternative to the hustle culture nonsense we so often hear about in relation to achieving financial success. You can in fact achieve financial success without being a stranger to your kids. You can make good money and have the freedom to enjoy it, and you don’t have to work 80 hours a week.

21:49
and be a slave to your business just to make it all work. So if you are tired of hearing from a bunch of single guys or women or 20 something kids who drive fancy cars and brag about how hard they work or how much they make, I will give you a different perspective from a father who makes both business and family work. Go to mywifequitterjob.com slash book and I’ll send you the bonuses, invitations to book parties that I’ll be throwing all over the country and other special offers. Once again, that’s mywifequitterjob.com slash book.

22:18
Now back to the show.

22:21
All right, so we just talked about narrowing down a top quality factory. A lot of those factories work with a lot of larger companies though. So how do you get them to work with someone who’s just starting out? What’s your question? Yeah, essentially what I wanna do is I wanna know who I’m working with first, right? So let’s say for example, you we looked at that company profile information and in the company profile under verified, it says number of workers, right? And.

22:48
If the number of workers says like, you know, 500, I’m like, you know what? That’s quite a big factory. They’ve probably got pretty big customers. They’ve got certain systems and processes. They run their production line pretty strictly. If I’m like, Hey, I want 300 pieces of this customer product. want to try it out. They’re probably going to think this is a massive pain in the ass and they’ll probably shut it down. I know I’ll ask them anyway, but I’m pretty sure that’s what they’re going to say. But if I have this like new innovative product, I want to try it. Um, I’ve never done it before. I’m going to look, go through the exact same process. But when I see company profile.

23:17
I’ll get excited when I see a factory that says it’s only got 25 workers or 50 workers, because I know they’re a small and nimble operation and they also want to acquire new customers and they’re willing to try different things and they don’t have a set system in terms of production and processes. So I’ve got a much higher chance to get success with a factory which has got fewer workers rather than one which has got larger workers. But saying that, you can still get the bigger factories even for your custom project, even on a small MOQ. And the whole thing is, it’s about like building leverage.

23:47
you might already be a big brand, right? You might already have had two Amazon brands who both doing like a million dollars in turnover. You might be doing Shopify and I want to get that factory excited to work with me. So the first product that I give them might be a new item. Let’s just say, for example, we’ve invented some new neck pillow. We don’t know if it’s going to work, but hey, we’ve developed other brands before which have gone pretty well. So I’ve got a good feeling about this. Rather than saying, hey, I want 250 pieces of this custom new neck pillow. I would say here’s a product that I want.

24:17
but here’s what I’m capable of. Here’s the other two brands that I’ve got. Here’s the quantity that we’ve been selling. And we’re very experienced in online sales. We work with the biggest influencers. We’re very familiar with Amazon platform, with Shopify platform. So now I’m like, okay, supplier’s thinking, okay, well, this is just a really small order, but look what they’re capable of. So if I get this order right first time, these guys are capable of scaling a massive business. So let me just give them what they want. Let me just do this first order at a break even. I don’t really care if I don’t make a profit from this first order.

24:46
but I wanna acquire this customer because the supplier is not thinking how much money am I gonna make from this order or thinking how much money am I gonna make from this customer over the next three, five, 10 years. So if you can sort of build leverage to be like, we’re capable of scaling big businesses. And look, if this is your first business and you’ve not scaled any businesses before, just show that you’re a specialist in this particular product. So let’s say for example, it’s a yoga mat, right? I would say, hey, I’ve been a yoga instructor for 14 years. I have my own studio. I can…

25:14
Developing your products feedback to my clients get a lot of knowledge. I know the biggest influencers and in China to call them KOLs key opinion leaders I know the biggest KOLs in this space. So we have really big opportunity I’ve got new ideas for lots of products. It will help improve your systems and products and stuff like that as well So now the suppliers thinking you know what like this is not a big order, but this is a qualified customer This is someone who really knows a product inside out and it’s different to the other inquiries that we get where they ask for a price and then we never hear from them again, so

25:42
I would always hone in on what are your strengths and build leverage using that. And then you get the suppliers to want to work with you. Cause bear in mind, if you go on one these websites like alababa.com, those suppliers are getting inquiries from maybe 50 to a hundred customers every week, right? And a lot of them will be the same thing. Hey, what’s your best price? What’s your MOQ? Can I get customized packaging? Same message, right? And then the supplier gives them that information and then never hear from that customer again. But now you have this nice long detailed message. You’re like, you know what? This is what we are. So what we bring to the table, this is brands that we’ve built.

26:10
hey, and this is why like working with you. You have these certifications, you’ve been to the Canton Fair before, you’re expert to the markets that we like, you have these quality testing machines. And then now the supplier is thinking, wow, like, okay, this is a, we’ve told the supplier why we know that they’re good factory. So we’ve done our research and then they’re also thinking they’re gonna be a good customer. So now your inquiry goes to the top of the pile. So that is the difference in terms of make a bit of effort, read up about them, state your leverage, state what you like about them.

26:38
share the specification sheet of the product that you want to make, and then you get their best service from day one. And that’s really what a lot of people miss out on, regardless if you’re a beginner, intermediate, or advanced seller. I think the key here is for anyone listening, these factories, they’re really just people. And if you were to go on a date, you wouldn’t just say, hey, give me your phone number, right? If you make a little bit of effort, you’ll stand out among thousands of people. It’s like this with business or anything that you do. I get like…

27:06
hundreds of outreach emails every day from people wanting something, but if they’ve taken a really thoughtful way of writing it, I’ll at least read it. And even if it’s like someone small or whatever, you know, I’ll listen if they actually made an effort. It’s the same thing with sourcing. That analogy is one of the best analogies I’ve heard, right? It’s kind of like, if you see a girl at the bar that you like, and you’re like, hey, my hotel’s around the corner, do wanna go? Right? There’s like five or 10 different steps before that. Hey, let me get you a drink.

27:35
here, let me get to know you, let me take you out for dinner. You have to go through those steps, right? Same with a supplier, you have to go through the steps of qualifying yourself and then you have to say what you like about them. And then as you said, people buy from people, right? This is not like, they get excited because they have customers all over the world. They have customers from the UK, from US, Brazil, Japan, and they get to communicate with loads of different people and that’s what excites them. So if you like talk about yourself a little bit, where you come from,

28:02
you know what you like to do and things like that that really excites some people buy from people and the more you build on those relationships the better Quality of service you get and a lot of people think oh hey if I get a good relationship Then I get about price or so much other things aside from price that they can really give you they can give you Faster delivery times they can push you right into the front of production schedule. They can give you better credit terms They can give you information about what other customers around the world are doing They can give you information on the products that they’re developing for next year

28:29
Because while we develop products all the time, well, so do your factories. They’re also developing products because they’re also specialists in that product. So there’s so many benefits you can get from a good relationship, but you just miss all of that goodness out if you just go straight for, hey, what’s your price? So you mentioned something earlier about looking for factories with less workers. Chances are those smaller factories aren’t going to be certified, right? It’s something that larger factories do.

28:54
Well, yes and no. I’ve still been to factories with like 50 workers, but still have all the right compliance and stuff like that because you know in today’s society, like it’s very hard to supply someone without all those certifications and accreditation and stuff like that. So I find that most of them have it. I’ll tell you where you have issues with like smaller factories. And this again goes back to the information that we can see. I had a client I was working with where they had one product that they were doing over 250,000 units of.

29:24
that they would always pass the inspection, but when the goods got delivered, they always got high return rate. And they’re like, how is it that these goods keep passing the inspection? We don’t pick anything up in the factory, but every time the goods arrive here in its cells, it’s defective units. And I was like, can you send me the pre-shipping inspection report and can you send me the Alibaba company profile? They’re like, cool. So I look at it and bear in mind that they’re doing 250,000 units of a cut and sew product. And when I looked at the factory profile,

29:49
When I looked under the equipment, it said sewing machines verified, it 25 sewing machines. I was like, it is impossible that a factory can have 25 sewing machines and they can manufacture 250,000 units in order. So they’re obviously outsourcing this production to smaller factories, but the reason they’re passing the inspection, you’re not picking it up, is that they’re doing the inspection in their factory, but the ones which are not being checked are the ones which are being outsourced.

30:13
So I was like, go back to the factory and ask them, you outsourcing this production to smaller factories? And they asked that and they said, yes, they were being honest about it, but it just never revealed that information. average seller is not gonna really know that stuff, but like, if you just look at the information that you’re given, like there’s 250,000 units, but it’s only 25 sewing machines, something’s got to give, I’ve got bad quality, you can start to figure that stuff out. So that’s where like, you have to be a little bit mindful of like smaller factories is that if you have big orders, and that’s actually a really good point in terms of like one of the biggest things that I see.

30:43
biggest mistakes I see sellers making is that you can outgrow your factory, meaning when you first start this item, you know, we just want to trial 300 units and only the smaller factories want to work with us. But now we’ve scaled it up to like 2000 units a month, but we never went back and renegotiated the price. We never went back and sort of seen like, are they actually the best factory for us today? And you might be better off with a factory which has got 500 workers, but you never went back to negotiate. So I would never just like switch factories, but.

31:11
Let’s say you have a specification sheet or a tech pack, which has got all the information of your product, the materials, dimensions, Pantone colours, packaging, testing, need all that PDF it, you send it out to multiple top five factories you find on alababa.com or maybe you use our friend David’s website, import yeti.com to find other factories as well. And then you contact those factories and they give me your best price and delivery date for this particular item. And the price starts to come back, you know, maybe a dollar, $2, $3 cheaper than what you were getting already. And at that stage, I wouldn’t just switch production to those cheaper factories.

31:39
I would tell my own factory, hey, by the way, I’ve had other suppliers contact me, which is possible because once you’re like on page one of Amazon or if you have a good website with traffic, suppliers will find your brand, find your website, contact you and say, hey, we also make this, they’ll make you a sample and they’ll send it to you. So I wouldn’t say to my supplier that I was shopping around, but I’d say to my supplier, hey, other factors have contacted me and they’re willing to make the exact same product that you supply me with, but are $2 cheaper. Now, I very much like working with you. You’ve been amazing so far. I don’t want to switch, but.

32:08
I need you to match the price. And if you can’t match the price, then I have to think about switching. And then you’re giving them the chance to be like, yep, you know what? We can actually come down on price a little bit and then cool, continue working for them. But if they’re like, you know what? We can’t match that price. We’ve had a great run, like go for it. Then you can sort of keep them as backup supplier, remain friends and use them whenever you need them. But you’ve now like got that better factor, that better quality, that faster production, those better production techniques, the better production equipment, all that sort of stuff.

32:34
but you never sort of seek that out because you just grew too fast and you always thought, you know, I’ve ticked that box with my supplier, I don’t need to look for a new supplier, but as you grow, you obviously sort of check back, if you know what mean. Yeah, I know that our supplier always raises their prices every year and I know everything’s been going up. In this environment though, in 2022 when we’re recording this, everything’s slowing down, right?

33:00
How do you negotiate lower pricing when you kind of know globally everything is slowing down? So yeah, a great point. And I would say that whenever your supplier gives you a price increase, you want to validate that price increase is correct. So for example, if they say, you know what, the price of wood has gone up 12%, your price has gone up or you know, the price of polyester has gone up, it’s going up, price of steel. So I’d be like, okay, cool. Tell me how much it’s gone up. You’re like, 12 % in the last three months. Okay, cool.

33:28
The same process we just went through in terms of finding suppliers on Alibaba, right? I would go through that exact same process and then I would talk to him, hey, we’re interested in buying these products, et cetera. And I would just drop in, by the way, can you tell me about the price of steel in the last three months? What’s been the change in price? And if all those suppliers were like, you know what, it’s gone up like 10 or 12%. I’m like, cool, yeah, that’s a warranted price increase. I agree. But if they’re like, you know what, it’s not really had any change in the last six months.

33:51
then I would go back to my supplier to be like, you know what, the other suppliers that I talk with haven’t mentioned any increase. So if you have to increase the price and have to look at sourcing it somewhere else, but you know that that’s true because you validate for yourself by talking to other suppliers about the raw material cost. Same with the labor costs. If they say, know what, the labor costs in our province has gone up 8%, now we have to put the prices up. Again, talk to factories in that area, ask them the same question. So you always want to validate and educate yourself before sort of agreeing, because we have no idea what’s the labor cost in China, the material cost in China. have to sort of validate from.

34:21
from other sources. But a quick hack, know, to anyone who’s enjoying this episode so far and you are like, know what, just give me one quick tip where I can like save on price. I would go to a website called xe.com, which is what monitors the exchange rate, right? And if you look at the dollar to RMB, April was, $1 was about 6.3 RMB and now, or Chinese Yuan, and now today, which is November, 2022.

34:47
$1 about 7.2 or 7.3. So the exchange rate has gone up about 12 13 percent in their favor meaning if you gave them a purchase order of a hundred thousand dollars in April and a purchase order of a hundred thousand dollars today They’ve made an additional 12 or 13 thousand dollars just on the exchange rate alone So what I would say to them was I would go to XC comm I would and you can hit graph graph that show it you got a purchase order on that day You got a purchase order on that day. You’ve made an additional twelve thousand dollars

35:13
Therefore, I want a 10 % decrease on my cost of goods on this order. And they might tell you, you know what? Yeah, the exchange rate has benefited 10, 12 % in our favor. However, the cost of goods and raw materials and all that stuff has gone up as well. So you might actually agree to five or 6 % split at 50-50, but you’ve still got a decent discount on your cost of goods. And you know it’s validated because you’ve given them the proof. But in terms of, it’s also very important when you ask for that discount, and I always like to ask for it at, wait.

35:42
at the time of shipment, when the time you have to pay your supplier. Because if you say, let’s say your goods are just about to start production now, or is there a good start production in like 20, 30 days, right? And then we negotiate at discount now. When it comes to starting production in a month’s time, they’re gonna tell you, know what Keanu, like, you know, we agreed that, you know, like 12 % discount based on the exchange rate, but you know what, since then, you know, we’ve had this like power outage situation in the factory, the government’s turned off our electricity, the electricity prices are a lot higher now.

36:08
and the cost of like steel has gone up like 4%. So now it can only be a 5 % saving. You’re like, oh, shoot. So, but if you negotiate at this count at the time of payment, they’re like 12%, cool, let’s agree on eight, cool, here’s a purchase order signed, delivered, deposit paid, go, let’s do it. So always, if you’re gonna talk about any price increases, or price negotiations, always do it at the time of when you actually have to make a payment, like a deposit or a final balance payment. Don’t allow any time for making that negotiation to then actually making the payment. Love it.

36:38
Love it, it’s all customer psychology and how it works. One thing, like I’m always very reluctant to threaten to go to another factory because that new factory is always like an unknown. Do you say those statements before you’ve had a chance to try your alternate factory or do you try the alternate factory first to prepare yourself to leave? Yeah, definitely. I would always get the backup first because you don’t want to burn any bridges, right? So if you say, know what, I’m going to start a factory and they’re like, yeah, cool, go for it.

37:07
and then you go and then you find out it’s not any better than the one you had, then you’re screwed a little bit, right? So I would always do my research in terms of like, all right, do I have a better price? Do I have better quality? Do I have better service, payment terms, all that sort of stuff? And then I would go back to my factory and say, hey, this is what I’ve been offered. Can you match it? So you know that if they say no, you’re good, you have that backup. And also all these things that they claim in terms of like, okay, well, here’s a reduced price and all that sort of stuff. You always wanna get a sample to verify that as well, right? Because we might be doing this product, we get $2 off, like, cool, I’m gonna go to that supplier.

37:36
they send you sample and it falls apart. You’re like, oh, well now I know why it’s two dollars cheaper. So I still want to check. And by the way, like when you first reach out to these suppliers, like we talked about like selecting the top five or whatever, I wouldn’t just go with the one that you like the most and get the sample and all that. Even if you have your number one, I would rank them number one, two and three and get samples from all three because you also want to compare the quality between suppliers. Like, all right, now I understand why your dollar 50 more expensive because this handle is way more robust than this one or

38:05
Let’s say you do go for your number one initially, but they have a situation six months down the line where they have the power outage situation in the factory. Well, now you have samples and prices from your two backup suppliers that you’ve already, they already know all the details of the product. You already have a sample. So you can now just say, okay, cool. Here’s your order, go for it. You don’t need to start that process from day one. So it’s always handy to have a couple of backup suppliers as well. Another common question I get asked is how do you prevent a supplier from just taking your design

38:35
and literally putting photos up of your product and selling it to other people. Yeah, it’s very difficult, right? So there’s two ways you could look at it. Like you have these like NNN agreements, which is like non-disclosure, non-circumvention and all that. I never do that with all the factories and stuff, the products I’ve developed. probably signed, I’ve got my supplier to sign one or two NNNs based on if something was extremely innovative that I just didn’t want getting out. But I think that a lot of people always ask me about like, know, how do I make sure my supplier doesn’t copy my product?

39:04
And I was like, first of all, you need a bit of self-awareness to be like, do I actually have something to protect here? Because a lot of people feel that like, well, you know what, because I just changed this color or changed this dimension or added this feature, now I need to protect it. But all you did was innovate it on top of what already exists. You didn’t necessarily develop something really new, right? And that’s the nature of the game. Like you probably got the idea for your product by innovating on top of what already existed. Now, if someone does that to you, it doesn’t mean that like, okay, well now we have to block everyone from selling it because…

39:32
Ultimately, you know, if you really want to protect your product, if you’ve got something of real innovation, the only way to protect it is from getting a patent, either a design patent or a utility patent. But people don’t necessarily want to spend the $4,000 on a design patent or the $15,000 on a utility patent. And if you don’t want to spend the money to basically protect it, then it probably wasn’t worth protecting in the first place. But there’s kind of two ways of protection. There’s like the protection against your supplier. Like you ask, if my supplier copies my product? And then there’s a protection against like, what if the rest of the industry copies my product?

40:02
And a lot of people think it’s the supplier that copies your product. But so in that initial communication, when we’re going back and forth with the factory, I would always ask them, know, like, are you just a manufacturer or do you sell yourself? Do you supply other Amazon sellers? What markets do you supply within those markets? Who are your biggest customers? I want to know like really like who are, where’s their attention going and who are the main people that are supplying? So that if I feel comfortable, if they’re supplying my direct competitor and my direct competitor is doing like eight times more business than I am, then I’d be very cautious of.

40:30
showing them new product ideas because I know that information is probably going to my competitor. But if they’re not supplying those guys and I find a new factory in a sort of blue ocean that like, you know, they’re not really dealing with my competitors and I’m going to be open book with them. So if you are worried about what my supplier copies my idea, I would tell them that I have a patent on the product when I actually don’t. But because I told them I’ve got a patent on it, now they’re scared about developing it. And on top of that, I would rather focus on building the relationship rather than getting them to sign a contract like an NNN.

41:00
because like that NNN is literally just not worth the piece of paper that is written on because are you really going to sue your factory in China? Are you really going to take them to court? Are you really going to hire a Chinese lawyer for the value of your $10,000 order? Absolutely not. So I’d much rather say to my factory, hey, this is an innovative product which we’ve developed. I’m dealing with you as a company because I admire that you’re going to keep all this information confidential and we’re going to really build this business together in partnership. I’m going to really grow and scale this business and you’re going to get those orders as a result of it.

41:29
and let’s really go into this together and build a really big business rather than I don’t trust you sign this document. Like think about the different levels of service you get and you’re not gonna enforce either one. You know what mean? So I always like to build a relationship rather than get legal documents. I like your answer better than mine. My answer is always you can’t really do anything about it. But if you brand it well enough and if you want, you can register a copyright in the US or patents are expensive to enforce too.

41:59
Really, I mean, it’s probably gonna happen. You can prevent it from being sold in the US and that’s usually good enough. But if you have a good brand and whatnot, you got nothing to worry about in the long And so I’ve actually got a YouTube channel as well called Sourcing with Kean and the last episode which I posted was all about patents, half an hour in depth. I interviewed a patent attorney. So if you do have a deeper desire to learn more about patents, I would check that out. But that can be a deep conversation in itself. But you know, like in terms of like,

42:26
product protection, I kind of look at it as in you’ve got three layers, right? If you innovate something of value, right? First thing is you can get a mold, right? Because if you’ve developed or changed something, well, now you have a high buyer to entry cost, because the mold can cost anything between like $500 and $50,000, right? But it’s essentially another buyer to entry. So if it costs you $5,000 to develop that mold, chances are the competitor might not have that disposable income to try a new product, right? And on top of that, if you put a patent on that product, well, now there’s…

42:54
competitor sees right, well, there’s a patent and there’s a mold cost. So I don’t even know if I can sell this product and I have to pay $5,000 just to manufacture it. That’s a really big buyer to entry. And then the third one is also like an exclusivity agreement with your supplier. Let’s say you didn’t develop the product. Let’s say the supplier developed the product and you’re like, hey, I want to sell this product in like the U.S. market. Can I get exclusivity? They might say no.

43:18
But then I’d say, okay, give me exclusivity for six months, meaning don’t sell it to anyone else in the US market. Just sell it to me for six, and after six months, open it up to everyone, but just give me the first sales. And they’re like, you know what, yeah, that’s reasonable. And I’d say, you know what, tell me the quantity you want me to hit to remain exclusive. So if you need me to order 20,000 units within those six months, and if I do that, then let me remain exclusive. And if I don’t hit that and open up to everyone, they’re like, all right, cool.

43:42
or if it’s product selling really well and they want to open up to everyone else, I would ask for, me exclusivity of a different region. So give me exclusivity for Germany or give me exclusivity for the UK. So you’ll be the only seller of that product and then get those exclusivity agreements either by quantity or by region. So those are the three layers I look at. Do I have a mold on the product? Do I have a patent on the product? And do I have an exclusivity agreement with my supplier? And that is your defensibility, not necessarily like your NDA contract, which means nothing. Since we’re talking about molds here,

44:10
Once you have a mold made and it’s at a manufacturer, how do you switch easily? It’s tough because, so for example, if you wanna move supplier, then you have to move the mold, but I would always say that like I’ve done that research prior to investing in the mold cost with a manufacturer. And the way I do it is that like, I’m gonna pay for the mold outright, but I’m gonna get that mold cost back from the supplier. So if I do want to switch, then I’ve not paid for the mold. So for example, right?

44:40
let’s say the mold cost is $10,000, right? I would say to the supplier, look, I’ll pay the 10, you don’t say, look, let’s do this in partnership 50-50, I pay 5K, you pay 5K, cool, done, let’s go. So we just got 50 % discount on the mold now. Or I would say, look, I’ll pay the $10,000 upfront for the mold, but I need you to refund me 25 % of the mold cost once I order 5,000 units. I need you to refund me 50 % of the mold cost once I order 10,000 units. I need you to refund me 100 % of the mold cost once I’ve ordered 20,000 units.

45:08
And the supplier’s okay with that because you’ve paid the mold cost upfront, but they pay for it once you’ve ordered 20,000 units. And once you’ve ordered 20,000 units, they’re doing big business with you. So they’re like, okay, cool, I’ll refund it. So that, I sort of like make an agreement with my supplier that way. So let’s say for example, we hit those 20,000 units, I get the mold cost back from my supplier and they’re not actually gonna pay you that money back. But let’s just say when you place your next purchase order, you just deduct that mold cost from the invoice cost that you owe them, right? So now all of a sudden my mold is free.

45:38
So if the supplier randomly just puts up the price and I’m like, well, now when I switched to this supplier, I’m like, cool, well, now let me go make that agreement with this supplier and then I’ve not paid for that mold so I can switch quite easily. Interesting. I never thought to do it that way. Cause getting someone, getting a manufacturer to ship that heavy mold to a new manufacturer, that’s just not going to happen, right? Or.

45:59
Yeah, and the other sort of layer of protection for mold is that you could because you’re making this mold, right? You’re now making the custom shape of how this product is going to be made. So I would always have my logo on the mold, right? So let’s say, for example, we’re Nike, I would have the tick in the mold embossed. So let’s say that tick is now going on a buckle, right? That buckle is going on the backpack. Well, it’s very important to get that.

46:24
mold that logo embossed not debossed because if it’s debossed then it can be filled in but if it’s embossed it means that that logo now sticks out so that manufacturer cannot get rid of that logo so if we now switched on our manufacturer they can’t just go and produce that product now and sell it to someone else because it has our logo on it so that’s always another defensible way of your manufacturer not using it for someone else by putting your logo on the mold as well cool I love that I love that

46:52
Keon, wanna end with, we talked about Alibaba and kind of focused on Alibaba so far. I like Alibaba and all, but I still find Alibaba a little bit tedious. Do you still use it today to source for yourself? Yeah, for sure. I mean, my favorite way is definitely going to the factory myself and sort of doing that business face to face. But while we can’t do that easily at the moment, my starting point is always alibaba.com because while there’s other methods and stuff that we can get into, I want to know like who,

47:22
who my competitors also have access to in terms of like, what suppliers are available here. And if I find this supplier here, well then so do my competition. So where, and they might be a great factor and I’ll still use them because it might be the best. But for certain products, as you said, you might have over a hundred different suppliers to choose from, but for certain products, you might only have like two or three. And then now I’m just gonna basically qualify it or those two or three good enough. And then.

47:46
Regardless if I like those suppliers or not I’m still gonna look at other sources and the other one we mentioned was David’s company import yeti.com and the beauty about that is as you know, then use it as well as like you get access to the shipping documents of The the market leaders for that particular product and that’s only for them shipping to the US because that’s public information, right? So Let’s say for example, I’ve got an outdoor brand and my main competitors in our face. I can now find the nor faces suppliers

48:14
what country they’re importing from, what HS code they’re clearing the goods at, what quantity they’re doing, how often they’re shipping, so much very valuable information you get there. And often these are suppliers which don’t necessarily list on alibaba.com either. So that’s kind of like the second tier of supplier like to go through. those are probably like two very solid options that you have. If I was gonna add a third one, it would be like,

48:39
going to trade shows for your particular category of products. So let’s say for example, you’ve got a cycling brand, there will be a very good cycling trade show in like Denver or Utah like once a year. And quite often the suppliers will also visit those shows as well. Sometimes we just walk the show and sometimes they’ll have a booth there and I’ll meet those suppliers there and then. But let’s say for example, you’re based somewhere else and you can’t attend that trade show, I would go on the trade shows website, go on the exhibitor list and on the exhibitor list, it’ll tell you all the companies which are gonna be there.

49:08
and you look for the Chinese sounding names and then you Google their company information and you contact them directly. So that’s another way to find like really good suppliers outside of alibaba.com. Well, Kea, that was a great interview, I’m sure everyone owned a lot. I picked up on a number of things. If anyone has any questions for you, where can they find you online?

49:30
Yeah sure, so I’ve got a YouTube channel as I mentioned just called Sourcing with Kean, I’ll just lose different topics in supply chain so definitely check that out. I’ve also got a Facebook group of the same name where it’s just like everyone just asks supply chain questions and we all help each other out. I’m also on LinkedIn, Kean Gozari, also on Instagram, Kean underscore JG, and I’ve also got a sourcing platform and sourcing service called titansourcing.com. If you want to submit an inquiry, we can have my team look at it for you as well.

49:58
So yeah, those are where you can reach me if you wanna reach out, I’d be happy to help out. Cool, Keon, thanks lot for coming on the show, man. Really appreciate it. Oh man, love being here. That time just absolutely flew by and would love to jump back on any time.

50:13
Hope you enjoy that episode with Kian Golzari. And for more information about this episode, go to mywifequitterjob.com slash episode 450. And once again, I want to remind you that my annual e-commerce conference will be held in Fort Lauderdale, Florida on May 23rd to May 25th of 2023. I really want to hang out with you in person, so let’s meet up. Go to sellersummit.com. That’s S-E-L-L-E-R-S-S-U-M-M-I-T.com. I also want to thank Postscript.

50:40
which is my SMS marketing platform of choice for e-commerce. With a few clicks of a button, you can easily segment and send targeted text messages to your client base. SMS is the next big own marketing platform and you can sign up for free over at postscript.io slash div. That’s P-O-S-T-S-E-O-I-P-T dot I-O slash div. Now I talk about how I these tools on my blog. If you are interested in starting your own e-commerce store, head on over to mywifecoupterjob.com and sign up for my free six day mini course.

51:09
Just type in your email and they’ll send you the course right away. Thanks for listening.