448: The Future of Ecommerce Product Sourcing: What You Need to Know With Nathan Resnick

00:00
You’re listening to the My Wife Could Her Job podcast, the place where I bring on successful bootstrap business owners and delve deeply into the strategies they use to grow their businesses. And today I have my good friend Nathan Resnick back on the show. And Nathan is the founder of Sourceify, a company that helps other companies source products from all over the world. And with all the chatter about companies moving away from China into other countries, I invited Nathan to come back to talk about the current state of sourcing and freight forwarding. But before we begin,

00:27
I want to let you know that tickets for the 2023 Seller Summit are on sale at sellersummit.com. And it is a conference that I hold every year that specifically targets e-commerce entrepreneurs selling physical products online. Now you all know me well enough by now to know that my event has zero fluff. Every speaker I invite is deep into 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 we all eat together. We party together every single night.

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and I personally love smaller events and tickets always sell out far in advance. Now, 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, put ourselves in a room, cater in lunch, and then 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 ecommerce and it’s crushing it for me. I never thought that people would 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 ecommerce 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.

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That’s P-O-S-T-S-C-I-P-T dot I-O slash Steve. And finally, I wanted to mention my other podcast that I released with my partner Tony. And unlike this one, where I interviewed 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.

02:25
Welcome to the My Wife, Quit Her Job podcast. Today I’m really excited to have Nathan Resnick back on the show. And Nathan is someone who I met at the Hustle Conference in San Francisco a long time ago. He’s actually spoken at my annual e-commerce conference, the Seller Summit, and he’s often on television to talk about product sourcing in China. Anyway, Nathan is the founder of Sourceify, which is a company that helps you find manufacturers to produce your products. And we haven’t heard from Nathan on this podcast since episode 199.

02:54
A lot has changed since COVID and the lockdowns in the sourcing environment. And that’s what we’re gonna talk about today. So welcome back, show Nathan, how you doing today? Steve, thanks for having me on. You caught me on a day I’m not on, know, CNN or CNBC. I know it’s rare. It’s pretty high, but you know, for you, I’ll do anything. So really excited to dive in and appreciate you having me on. So what’s funny is I texted Nathan and he got, I got a reply right away and then, but he didn’t schedule.

03:24
And then I had to reply and said, Hey, this is Steve from CNN. I want to do a story on it. He replied right away and scheduled a little snobby now with his, uh, know, press mentions, but, uh, so, so it’s been a while. I’m happy to have you back. Uh, it seems like since the pandemic, a lot of changes have happened in your life. Like one, you got jacked and TV all the time. So I’m curious, how are you getting all these TV gigs? Is it just because you’re on their list? you know, honestly,

03:52
The first gig was CNBC. It was inbound. We were talking, we had written a blog post about, you know, the impact of COVID on the supply chain in China. And this was, you know, really like early 2020. I was actually in Japan in January of 2020, like right before COVID, like as the lockdowns were kind of starting to happen. And we wrote this blog post and I posted about it on LinkedIn and like woke up the next morning with one of the producers.

04:21
reaching out to me and saying, hey, would you be open to coming on TV to talk about what’s going on with COVID-19 in China and how that might affect the world? And honestly, the producer and both I didn’t know how quickly it would spread, right? I I thought it was going to be maybe this thing that would have an impact in China for two or three months, not something that would really change the course of e-commerce.

04:49
so many supply chains globally. Well, so I want to talk about the environment right now over there just for sourcing. Yeah, I would say overall it’s back to normal, fortunately. And I think really what we should highlight is just that freight rates are back to normal, right? Because the past, what, 18 months or so, freight rates just went through the roof. mean, you went from paying $3,000 to $4,000 or so a container to, I think, last.

05:19
Yeah, last year I think we had one container where we paid like 21,000 or something. Like it was insane. And like, it was almost unbelievable. And I was talking with our team and I was just like, how is this even like, like, I couldn’t even fathom paying that much for a container, right? It was just unbelievable. And so, you know, I think really the biggest news is that, you know, container prices are now back to normal and they seem to have stabilized.

05:45
And for the most part, would say factory work is back to normal as well. Yeah, and one thing that’s happening though for me, and I’m sure with a lot of people is they’re really jacking up their prices. So what are you seeing on that front? I think the increase in price stems from two things. Number one, and this is kind of the common things that factories will always say, right? Like labor has increased in price and materials have increased in price. I think labor.

06:14
you know, gone up a little bit. You know, it’s really hard to actually get the breakdown of labor per product for, you know, any production run in terms of like if you’re producing, you know, 100,000 units, like what’s the actual labor cost for each unit in that 100,000, you know, 100,000 unit production run. So labor has gone up a bit just because, you know, I think in general, you know, people in China, they, you know, don’t…

06:39
want to work in a factory if they don’t have to, right? I mean, still that is the biggest manufacturing hub in the world. But at the same time, you know, through COVID people have realized, you know, maybe I want to be closer with my family and that’s more important to me. And I’m willing to take, you know, you know, smaller or lower wage job to be closer to family because, know, traditionally in China, people would be at these factories for

07:03
you know, most of the year and go back to see their family for the holidays. Right. And so I think that’s shifted. So I think, it is a bit harder for these factories to employ. And number two, you know, materials, I think, you know, just look at inflation, right, and the cost of, you know, even gas, right? Like that’s gone up quite a bit, as we’ve seen and fluctuated quite a bit. And so I think, you know, materials in general to produce your product has gone up a bit. But, you know,

07:30
I don’t know how much. We’re like 15%, 10, 15%. Yeah, so it is pretty significant. 10, 15%. It is significant. And yeah, I mean, I would say, you know, to counterbalance that, I mean, you can try to negotiate in different ways. I mean, I don’t know if you have payment terms with your factories or if you’ve gone out and tried to, you

07:53
source from different factories. have now. Let’s talk about that actually. So what do you do if your factory, let’s say your factory has jacked up their prices like 25%. What do you do? So if it’s substantial, mean, I think substantial is anything above 10%. It’s substantial. And especially to like once the sales rep or once, you know, whoever you work with at that factory realizes like, okay, you know, we got them 10%. Can we get them 15%, you know, maybe 20? You know, it’s substantial. And so then

08:21
you what I would do is basically start, you know, a process to try to see what another factory would price your product at. So, you know, go out, you’ve got to send the product to them. You obviously can’t ask that factory to send the product to them. That’s a red flag for sure. But people still do that, Steve. Like it’s crazy to me, but people will still say, you know, hey, yeah, I got my factory to send it to this other factory. And it’s just like, number one.

08:48
It’s just like a red flag and such so damaging to the factory relationship that you work so hard to establish. It’s a small community I found like at least they all know each other. Yeah. Yeah. So you have to be really careful of that because you know, number one, they all know each other, especially if it’s a very specialized product, right? So if you have a product that is, you know, very meticulous or very unique, you know, there’s only going to be a certain amount of factories that can produce that. And oftentimes they’re going to be based in the same city or same area.

09:18
And so, I would make the process stem from whoever on your team is handling sourcing, whether it you or your supply chain lead, and make sure it stems from them and not from anyone in Asia, and send a factory that you’ve been able to do diligence, whether if you’ve gotten audit reports from them, you’ve looked at their business license and records, and send them your specs and a sample and ask them to price it out.

09:48
see where they come back at, Because you definitely want to create that competitive nature between your factory and other factories. And I think that’s what happens where a lot of people kind of overlook because they’re so focused in growing their business. And as their business grows, they get these little price increases from their factory and they don’t realize like, wow, I’m producing more product, but I’m paying 15 % more than I was when I first started. Like, how does that make sense?

10:15
When you’re starting your business, maybe you’re producing a thousand units and then now you’ve scaled to mid six or seven figures or higher and you’re producing a hundred thousand units. You 100X your volume and somehow your price went up 15%. It doesn’t really make much sense. You look at just the factory dynamic in your relationship with them and definitely you have to value that. Everyone knows that business in China revolves around relationships.

10:45
but you also need to make sure that you’re producing your product for a competitive rate. so I would say anytime a factory starts to increase your price, I would start a sourcing process and really try to do your best to make sure that your existing factory isn’t involved in that. And if they do find out, I would be honest with them and just say, hey, it’s gotten more expensive for us to acquire customers here. We now are having trouble.

11:14
making a profit with this price increase that you’ve put on our unit costs. And so, you know, now we’re really in limbo trying to lower our costs so we can actually make some money, right? So I always try to steer towards honesty with the factories and just tell them, look, you know, it’s gotten more expensive for us to run our business too. Yeah. You know, you mentioned payment terms earlier. That doesn’t really solve the problem.

11:41
It helps with cash flow. Well, what I was going to say is if you’ve gotten a scale and if you have payment terms with your factory, like let’s say it’s net 30 or, know, typically when you’re starting, you’re, you know, putting 30 % down and 70%, you know, upon shipment or before shipment. And so if you have gotten a point where you have payment terms, you know, maybe you can try to lower your unit price by, you know, to get like getting worse payment terms for yourself actually. saying, you know, hey,

12:10
I’ll pay more of a deposit upfront if I can pay 5 % less in unit costs. If you can make your upfront deposit 50 % instead of 30%, well then you alleviate some of the cash flow challenges that a factory faces. And so maybe they’re willing to give you a better price on your product. So the payment terms that I’m mentioning are, if you have payment terms already, you could try to negotiate those in a way that

12:38
is not necessarily good for your business but could lower your unit cost. And then nowadays there are so many inventory finance software solutions that can help finance your inventory so you don’t have to pay for your goods for net 30 or net 60, whatever it may be. So I think you could even look at solutions that are software based here in America that could help you finance inventory.

13:04
What always makes me a little suspicious is whenever we push back on the price, we can usually get it down like single digit percentages. do you always have to haggle? mean, it just seems like once you’ve been doing business. Yeah, you’ve been there, right? I feel like you haggle for everything over there. You go to the market, you go for, it’s just part of the culture and negotiation process there. And I think too, you look at the way that you’re

13:34
factory workers, like the sales reps there grew up, like they were haggling for fruits and veggies and groceries a lot of times and all this stuff. And so I think it’s just part of the way they negotiate in terms of the haggle culture. And that’s really kind of how it goes. I yeah, it is extremely difficult to get your prices lower and even moving the needle a few percentage points like you’ve done.

14:01
is a step in the right direction. But to get a factory to cut your unit costs by 10 % is really hard. I think the only way you do that is you come to them and say, look, I want to be really honest with you and say, when you increased our prices, the last order by 15%, I was in a challenging situation.

14:24
you know, it cut into our margins where we weren’t really going to make money off this product. And so I went to another factory and they quoted me, you know, 10 % less than what we’re producing for. And I’ve done a test production run with them. You know, they’ve already produced three or 5,000 units or whatever it be of my product. And I know they can produce the same quality product for a much better price. You know, I really value and trust and, you know,

14:51
enjoy working with you and I really want to grow long term with your factory but our business just can’t take on this price increase that you’ve put on our business. And so I just try to be as honest and transparent with them as possible and you know I feel like the hacker culture there kind of it kind of sucks in some ways. You know it’s just how it goes there in terms of negotiations but you know for me I always try to take a very honest and just transparent approach and say look you know

15:20
this price increase that you put on our business just makes it so we aren’t making money on this product. And to a sense, that’s true, right? Because every time you have to pay more for your product or every time you have to pay more to get your product to your customer, that cuts into your margins. at the end of the day, you know, everyone’s in Right? Yeah. Yeah. And everyone, you know, is in business to make money. And if you raise prices, well, does that mean you’re not going to sell as much? You know, there’s so many implications.

15:49
on both sides of the table, but I always try to stand towards transparency and honesty.

15:59
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18:07
Let me ask you this, Nathan. Is China still the best place to source? mean, can we talk about some of the other countries or depending on what the industry is, textiles, electronics, leather, plastics, metalwork, like what are the best places now? Yeah, it’s a really good question. you know, it’s been so interesting to see this trend towards producing outside of China, right? Like I first saw the spike and I’ve been in China since, you know, early 2010.

18:33
That’s when I started importing from China. So it’s been 12 years now, over 12 years now. China is still the world’s manufacturing hub, but I’ve always seen it go through ebbs and flows. Most recently, the big shift was when the tariff wars came to be and tariffs were being increased and everyone was scrambling, we’ve got to get to Vietnam. We got to move our production outside of China. I kid you not, like…

18:59
we got flooded with requests to how do we get production outside of China and you know, there are some really good countries like Vietnam, India, Pakistan that focus on some great products and have some amazing factories. I think really it depends on the products like you’re saying. So, you know, in Vietnam, as an example, to this date, the biggest factory I’ve personally ever been to was in Vietnam and it was like a mini city of 30,000 factory workers that were at a shoe factory.

19:28
that produced for like Clarks, Adidas and big shoe brands. And it was just, it was mind blowing to see honestly, it was crazy. And I feel like in a lot of these other countries, the factories that have the right audits, like if you’re selling into a big box retailer, the factories that have the right audits, they’re typically positioned to work with much larger brands. The factories that are more kind of mom and pop, that are small, medium size where a lot of factories

19:58
in China are that work with e-commerce brands, they might not have the right audits or certificates to produce your product. so that’s something just to be mindful of in general when looking outside of China. And then think number two is, generally speaking, it’s harder to find a factory that’s reliable outside of China, partially because Alibaba is just a great starting place to find a factory in China. They’ve expanded a lot outside of China now too.

20:28
Same with global sources and all those other marketplaces. I’ve met with their teams in Vietnam multiple times and they really are pushing to expand and they have been expanding there the past few years. But I just think the quality of factories in general is not as high unless you’re producing Fortune 1000 level production runs. But I do think there’s been a shift. A lot of Chinese factories have opened their own facilities and

20:57
Vietnam and Cambodia. But it always goes through different waves. I one wave that I think will continue to trend that’s interesting to me is Mexico. You know, it’s just so close and there’s a lot of good cut and sew there. You know, there’s a lot of good bags and backpacks and leather and even some electronics. So it’s just been really interesting to see that hub grow. And I’ve been spending more more time down there.

21:24
Even from a fulfillment standpoint, if you’re listening and you have a Shopify brand that ships mostly direct to consumer, you should really look into Section 321. It’s going to, in general, save you quite a bit of money. You want to describe what that is for everyone listening? Yeah. Yeah. So Section 321 is this really cool, useful law that brands like Taylor Guitars and major Fortune 1000 brands utilize where they basically import their products

21:53
into Mexico and then they warehouse them in Mexico and they ship them one by one to their end customer into America and because the value of each shipment is under $800, they don’t pay import tax. They pay tariffs on those goods and so they save just a lot of money not having to pay tariffs. So the question is, how do you find like a 3PL or something over there? Is there like a director?

22:22
Yeah, if you want to reach out to me, I mean, I know a ton of them down there, like there’s Baja fulfillment, there’s, I want to say IBEX fulfillment. There’s quite a few. know even Shipmonk. of IBEX. Okay. Oh, Shipmonk. Yeah, course, Shipmonk. Yeah, and then Shipmonk is another big one that opened a facility down there. So, you know, I think it’s becoming more common practice for e-commerce brands that are, you know, mid-size. you know, if you’re importing a million dollars worth of product, like,

22:52
you’re probably spending quite a bit on duties and tariffs. So it’s worthwhile to check out. That could be an additional low six figures or so in your pocket, right? Yeah. What about finding the manufacturers? Is there a nice directory down there also or no? I wish. I wish there was a nice directory. I think the key is just networking down there, right? I think especially too, even if you start with

23:20
trying to find a fulfillment center down there and then talk to your fulfillment center and say, hey, are there opportunities or options to produce my product in Mexico? It’s all through networking down there and relationships, that’s for sure. And really down there, you’ve got to go explore yourself and look at these facilities yourself. And it’s an easy trip, like you can fly into San Diego and drive across the border. Yeah, exactly. It’s fun too.

23:49
I think there’s a lot of opportunity there. And definitely, think, in general, think production will start to shift more and more outside of China. I think the political nature has always been a little iffy just the past five, 10 years and kind of continues to be a bit shaky. And now, especially, just see kind of what’s going on with the macro environment in terms of the war in Ukraine and what side is China on.

24:17
all of that, it’s, you know, really has, I think, vast implications that a lot of, you know, e-commerce brands need to be, need to look out for. I, I tried looking for suppliers in Mexico and I actually found this sourcing agent who had, you know, lot of connections with tech. They do textiles very well down there. I got a couple of quotes back and it was cheaper than the U S but it was still pretty significantly more expensive than China. And this is just a small sample set, obviously.

24:47
What are the prices that you would expect to see from Mexico for textiles? Yeah, general, think on average, it’s going to be a bit more pricey than China, but your freight costs should be lower. So you’ve got to look at your actual landed costs. So unit price, I think in general, is going to be a bit higher than China. But your landed costs might be somewhat around the same.

25:14
At the end of the day too, just your access and hopefully turnaround time to actually get that product into your warehouse or to your customer should be a lot faster. And so I guess your bet when moving into Mexico is can I pay somewhat the same for this product, but can my lead times be a lot quicker? Instead of having to wait three or six months or whatever it be, depending on your production run in China, can I get this done in Mexico in less than two months?

25:44
And so that should free up a lot of cash as well. So I would look at the whole picture, right? Like at Sourceify, when we look at your supply chain, we look at price, quality, and lead time, right? Whenever you switch factories, you always want to produce a product with the same or higher quality. You want your price to be around the same. But I think in general, we try to look at the landed price versus just the unit cost. And then lead time.

26:10
You know, typically always the rule of thumb is you know, the faster the better as long as quality doesn’t fade. Sometimes hard to quantify that but yeah. Actually, I’m curious, how do you factor that into the calculations? I mean, that’s been really hard to do the past, you know, two and a half, three years with freight rates just being through the roof and now they’ve seemed to stabilize and gone back down. But you know, obviously if you had been producing in Mexico when container rates were, you know, $20,000 like

26:39
your landed costs would be a lot cheaper than they were getting them from China, right? And so I think you’ve got to look at the past three or five years and see, well, how much is it actually going to cost from fulfillment standpoint or freight standpoint to get my product to my end customer? I think you got to look at your strategy as a whole, right? Can you even tie in your 3PL costs if you’re at a scale where you might want to explore section 321? Yeah.

27:09
We always try to look at the whole picture, but I would just look at what’s on average the past two years, what I’ve been paying to get my product to my warehouse and what I’ve been paying to get my product from my warehouse to my customer and just do an average of that and say, okay, if I’m paying 10 % more unit cost or 20 % more unit cost to produce it in Mexico, but my freight costs go down by 50%,

27:38
Net net, you what am I actually looking at? Right? I’ve been in terms of like time though, like if it’s like one month versus three months, that’s a little harder to quantify. I guess it just depends on when you actually need the product, right? Yeah, I it depends on when you need the product and like what cashflow position your business is in. Right? So, you know, if you have a high margin product, then know, cashflow might not be as big a concern. But you know, if your product is, you know, lower margin and most your

28:06
Volume was your sales come during the holiday season like you know might be interesting to look into Mexico and say okay I’m willing to pay you know potentially a bit more but free up a lot of cash So I don’t have cash tied up for my holiday order for six months in China and said only have it tied up for you know two months in Mexico You mentioned It’s all about networking and doing your own legwork like how does someone who’s never sourced from Mexico?

28:33
You mentioned talking to like some of the fulfillment centers down there and see, you know, where you can get things done. what’s another way? Like you can’t just go down to Mexico and just drive randomly, right? So what would you do? The two key ways, Steve, are you got to number one, eat a lot of tacos, number two, drink a lot of cervezas. No wonder they ask you to go on the big news networks. No, I mean, honestly, I would reach out to different sourcing agents down there, different fulfillment centers down there.

29:02
Say you’re interested in producing a product there and almost go through a similar sourcing process as you would in China, but in Mexico. I think because there aren’t really any go-to marketplaces there where you can find a directory of factories, most of your relationships are going to stem from an agent or just someone in between. But at the end of the day, it’s pretty easy for you to go down and just visit the facility and make a trip out of it, right? Maybe try to visit…

29:32
three to five different facilities and enjoy some time on the beach, right? Yeah, yeah. know, tariffs are still a thing. Do you have any insights on whether they’re going to go away? You know, we’ll see, right? There was just the midterm elections yesterday. I mean, we’ll see what the political environment makes of this whole situation. It doesn’t seem like it’s been a big focal point in the elections, kind of in politics right now.

30:02
keep a super strong pulse on politics, but in terms of tariffs, I keep a close eye on that. I think it’s just going to be interesting to see how the relationship between America and China moves forward. I think we’re so intertwined both in terms of China being a manufacturing hub for America and as well as American debt. China owns so much of our debt.

30:32
interesting dynamic to see how our two countries are intertwined. And even during COVID, right, I think one of the biggest lessons and, you know, just takeaways from COVID is, you know, really the medical world and most the world saw how reliant they were on China to produce not only medicine, but you know, all the PPE equipment, right? Like it was crazy for the past two and a half years, you know, getting masks and gloves and all that. I mean, we didn’t

30:59
you know, source any PPE equipment, we decided to stay out of that. But at the end of the day, it was just pretty, I think, eye opening for most of the world to realize like, wow, like China literally produces all of this product. And if they, for whatever reason, decide to, you know, turn off their, you know, manufacturing, then where’s the world going to get this product? And even like, like medicine, right? Like so many of the, you know, pills and all of that, that people

31:28
Take our made overseas or even if they aren’t made overseas a lot of the raw material stems from there as well You know, it’s funny We’ve we’ve placed a couple orders where the shipment actually more actually comes from like Vietnam It’s it’s like owned by the Chinese and they just started their own facilities in other countries. I think to help their customers avoid the tariffs Altogether. Yeah. Yeah, definitely. That’s another trend as well, right? Especially, know in 2018 when there were

31:56
the tariff wars, a lot of Chinese factories tried to open up facilities in Vietnam or Cambodia and a lot of them have been successful at that. So I think definitely, you know, at a large scale, it makes sense. I’m curious. So you placed an order through your factory in China and the shipments then from Vietnam? And the shipment came from a different country. Yeah. And then we were planning on having to pay more customs, but then our customs agent was like, oh yeah, it was much lower.

32:25
It was the first time that it happened. Actually, there’s other sketchy things. That one’s not sketchy, but there’s been other sketchy things when… Well, let’s ask. So, was the country of origin on the bill of landing, was it China or Vietnam? It wasn’t China. It wasn’t China. Yeah. So, part’s not sketchy, but… Well, it is sketchy if those goods were produced in China. Maybe they weren’t produced in China. Well, you should know that if it’s your product, Well, let me tell you something that’s actually kind of sketchy.

32:53
We recently placed like a smaller order, it wasn’t a container. And the sourcing agent, you know, lumped our stuff in with someone else’s container. But then the customs duty that we ended up paying, and we didn’t have visibility into this because they handled the whole thing, ended up being significantly less than what we normally pay. How’s that possible? Yeah, so they probably lumped your goods in with the other good that, you know, we’re probably

33:21
Like a different HS code? Yeah, a different HS code. That was a lot less. So yeah, that happens. It’s definitely not correct, but especially when containers are consolidated where you didn’t have a full container load and it was shipped with another product that has a different HS code. It’s easier for the factory if they’re shipping it and it’s easier for the customs agents to be like, all this is under this code and there you go.

33:50
Yeah, okay, so that’s probably what happened then. If you’re like a small business, let’s say like six or seven figures, smaller business, is China still your best bet? Because you mentioned the other countries, Bangladesh, Pakistan, Vietnam, yeah. I would say, you number one, it depends on your product category. I think if it’s very like, if it’s a technical product, they’re very, you meticulous, like very detailed, like China’s probably gonna be your best bet to start. And I do think and it’s true that China has

34:18
the biggest hub of factories that are small, medium-sized that cater to these six, seven-figure brands. If you take a six or seven-figure footwear brand and go to Vietnam, the factories might not even respond to you just because your order size is too small for them. They don’t mean any disrespect by any means, but their business is catered towards large brands that are producing a million-plus units a year, not 100,000.

34:47
So it’s just a different dynamic I feel like in terms of size of factory. But there are a lot of factories that are small, medium size outside of China. just would be very cautious of the quality control standards that they have because having personally been to lot of factories in Vietnam and the Philippines and all over Southeast Asia, just the process and the factory floor I think in general isn’t quite at the standard that

35:17
of Chinese factories are at. So what would you advise then? So certain countries are better at certain things, right? So you mentioned Vietnam, Pakistan, Bangladesh. What do they specialize in? Like, what are good types of products to source from there specifically? Yeah, yeah, I mean, I would say like, India, as an example, is very good at like

35:40
You know, they can do very good cutting. So they can do a lot of like crafty like furniture type of items too. They can do some good sporting equipment like Pakistan is great for leather and sporting equipment. You know, China is mostly like anything, you know, more technical. Like they can do anything for the most part. Like I know we’re doing like some pretty cool. I’ve gotten a little bit in the golf thing. We’re doing some pretty cool golf clubs there right now. It’s pretty awesome. Sorry, this is in which country?

36:08
China. But I think in general, there’s going to be different types of factories in each country. But what you’ll notice is that most cities have a hub for a certain type of factories, Watch factories all stem from a certain city, like outside Shenzhen, for watches. And you’ll just find that a lot of factories that focus on specific products are going to be based in a similar area.

36:37
And that I think a lot of times stems from a manager at a factory wanting to just go out and start his own factory. And he’s just going to go start it in a similar area because he knows that’s where he can get the raw materials to produce that product. I’m asking specifically about countries outside of China, though. Where would I even start if I wanted to make something in Bangladesh, for example? Yeah, mean, Pakistan is good for sporting goods and leather.

37:06
We’ve done quite a few different production runs of different types of sporting goods and leather equipment there. India is great for anything that’s craft-oriented or furniture. There’s no directory, right? Yeah. Yeah, there’s not a real directory. You can try to search global sources or Alibaba based on that country, but not a ton is going to come up. Really, it’s just a matter of… If you know a similar brand that’s importing out of that country, you could always look at the import records and see if you could

37:36
you know, backtrack that way or number two, you know, find a sourcing agent or, you know, a source over there because I think a lot of the sourcing work in those countries really happens on the ground floor. Okay. I mean, it’s not like I would actually fly to those places. Compared to China where I, know, find an agent or find someone that, you know, you know, over there that can source locally for you. You know, if you have a

38:03
a who has a family member or something like that. I mean, that’s a good starting point. How do you feel about those import records actually? Do you guys end up using those? First of all, describe what you’re talking about and then. Yeah, yeah, so I mean, I think it’s a lot of companies have tried to kind of hide their import records in terms of where they’re actually importing from in today’s world because it has become pretty common for people to backtrack. basically you could.

38:31
look up a brand that is similar to yours and look up their import records on, you know, there’s so many different tools out there nowadays, but you you could basically look up their import records and see who is the exporter of record and see if it’s the factory and, know, then basically search for that factory online. I know, doesn’t Jungle Scout have a tool that does that? Jungle Scout has it now. There’s a free one called Import Yeti. Yeah.

38:58
I think the other ones like Import Genius and Pangeva, you have to pay a lot for those and now it’s, all they’re doing is parsing free data, For Right, exactly. Yeah. mean, at end of the day, it’s free data. They just make it look nice, right? But yeah, that’s another good starting point. If you know a brand that’s importing from one of those countries, probably the first thing I would do is try to look up their import records and see if I can backtrack to find what that factory is.

39:25
And if not, try to find a local agent or someone locally that can help you source from that country. Yeah, okay. So what are you seeing now just in the overall e-commerce landscape right now in terms of sourcing and pricing, just as an aggregate, since you guys have visibility, yeah? Totally, as an aggregate, I would say there has been price increases over the past, let’s call it three years in terms of unit costs, both due to

39:54
labor wages going up and actual raw material going up. Freight rates have now stabilized. You should be paying, I would say, around $4,000 for a container or less. Thankfully, that’s back to normal. I think the future is pretty stable right now. think factories in general are probably seeing less demand this holiday season than the past two years. Even a lot of these big box retailers are over-inventoried, so they have

40:23
just too much stock and so they aren’t producing as much as either. So I would actually say next year and the following two or three years prices should, they shouldn’t go up. If anything, they should come down a little bit because big box retailers have slowed down in terms of what they’re producing and they have too much inventory right now. So on their books, even if you look at Walmart, Publicly Trader, you can look at their balance sheet and see the inventory that they have. It’s pretty drastic, right?

40:51
They aren’t turning inventory as fast as they did the past two years. And so from a macro economic standpoint, they’ve slowed down. so even small, medium-sized factories that most six, seven-figure brands are going to produce with, prices should not go up because demand just isn’t there. And even from an e-commerce brand standpoint, a lot of our customers at Sourceify, their holiday orders weren’t quite as big as last year or even the year before.

41:19
in general just because you know e-commerce just had a crazy uptick during COVID and you know, it’s still growing but just not at the growth rate that it was Yeah, yeah, and then if you do end up getting some price increases you can use some of the techniques I guess that you outlined

41:40
Yeah, I would say that’s a great starting point. Try to see what’s going on. I would be surprised though, in this market if a factory tries to increase your price, mean, it just wouldn’t make sense from a macroeconomic standpoint because demand has slowed down, right? E-commerce is still growing, but at the end of the day, it’s not growing as fast as it was the past two years, right? And so these factories the past two years probably got…

42:08
know, slammed with different sourcing requests. But now they’ve seen a lot of their main customers like yourself, you know, they aren’t producing, you know, as much, you know, this Q4 as they were, you know, last Q4. Yeah. You know, it’s funny is, I think every single business I’ve ever started was during a downturn. I feel like it’s like the best time. Things tend to be cheaper, labor tends to be cheaper, like there’s a whole bunch of layoffs in my area. In theory, it should be much easier to find cheaper workers now. So

42:38
Yeah, is more affordable. I completely agree. mean, I think, you know, in a downturn, it’s a great time to start a business. know, talent in general is more affordable. There’s going to be less competition and advertising is going to be less competitive as well because less people are going to be willing to spend money to run ads. You know, even the big Fortune 500 that, you know, are taking up a lot of ad space aren’t running as many ads either.

43:06
know, CPM rates, know, cost per thousand impressions should go down as well. So it is, you know, a great time to start a business in a downturn because like you said, talent’s more affordable, advertising should be less expensive and, you know, hopefully factory’s not gonna try to, you know, increase your price. Yeah. Cool. And I know they actually, the iOS update kind of hurt a lot of the demand for like the smaller players.

43:33
which should affect order. yeah, overall, I feel pretty bullish, especially if you guys are listening out there and you’re looking to get started. yeah, mean, iOS was crazy, right? Like, yeah, my, we should come back in like a year or two and see, but my bet is Apple is going to create its own advertising product. And that’s why they had the iOS 14 update that messed up tracking, you know, for everyone advertising on Facebook and other ad platforms. So.

44:02
I bet you Steve in the next year or two, Apple will have its own ad platform. And then I’m a little scared like if this whole metaverse takes off and then you know meta takes over all that space, we’re have everyone wearing goggles all the time. That scares me more actually.

44:22
Yeah, Steve, your kids will be playing volleyball in the metaverse. You won’t have to go drive around and take them to all their games, right? It’s not that Park City, Nathan. You can just ski in your goggles, Yeah, exactly. It’s crazy. mean, that’s a whole other thing, right? And maybe all these e-commerce brands will be selling products in the metaverse now. Exactly. Or even digital products, Like virtual products. exactly.

44:51
Yeah, you’ll transition your brand to a virtual brand. Well, Nathan, I appreciate you coming on, man. I know you had to turn down a couple of Fox News, CNN gigs to come on here today. So I appreciate it. But thank you. I’ll see you soon. Let’s do it.

45:11
Hope you enjoyed that episode. Now the truth is, is that 2023 has been a tough year for a lot of companies heading into the recession and you should be able to negotiate with your suppliers. For more information about this episode, go to mywifecluderjob.com slash episode 448. 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 guys in person, so let’s meet up. Go to sellerssummit.com.

45:40
That’s S-E-L-L-E-R-S-S-U-M-M-I-T.com. I also want to thank Postscript, which is my SMS marketing platform of choice for eCommerce. 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 dev. That’s P-O-S-T-S-U-I-P-T dot I-O slash dev. Now I talk about how I these tools on my blog, and if you are interested in starting your own eCommerce store,

46:08
Head on over to mywifequitterjob.com and sign up for my free six day mini course. Just type in your email and I’ll send you the course right away. Thanks for listening.