509: Temu And Shein Decimated His Business. Now What? With Jerry Kozak

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You’re listening to My Wife Could Her Job podcast, the place where I bring on successful bootstrap business owners and delve deeply into what strategies are working and what strategies are not with their businesses. today I have my buddy Jerry Kozak on the show and we have a very interesting topic to talk about today. Jerry runs an eight figure e-commerce company called Ann Arbortese, but his business has been decimated recently by Chinese fast fashion companies and discount stores like Tmoo and Shien. So in this episode, we’re going to talk about the effects of companies like Tmoo and Shien

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with respect to small businesses, why they have an unfair advantage right now, and what you can do about it. But before we begin, I wanted to let you know that tickets for the 2024 Seller Summit are now on sale over at sellersummit.com. The Seller Summit is the conference that I hold every year that specifically targets e-commerce entrepreneurs selling physical products online. And unlike other events that focus on inspirational stories and high-level BS, is a curriculum-based conference where you will leave with practical

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Welcome to the My Wife Quitter Job podcast. Today I’m thrilled to have Jerry Kozak on the show. Now, Jerry is the founder of Ann Arbor Tees, a world-class full-service print and embroidery company in Ann Arbor, Michigan, that does over eight figures a year in sales. And as you all know, selling t-shirts and personalized apparel is an extremely competitive business. But Jerry has done great over the years with his print on demand operation through excellent customer service and by taking on large clients.

02:45
like high schools, universities, and international renowned artists. But thanks to sites like Tmoo and Shien, he feels as though the market is turning. So in this episode, we’re going to talk about how cheap Chinese marketplaces and fast fashion are affecting the apparel industry in the United States and Jerry’s strategy for growth in the coming years. And with that, welcome to the show, Jerry. How are you doing today, I’m great, Steve. Thank you so much for your interest. So Jerry, I know that we don’t know each other that well, but

03:15
I watched your first YouTube video the other day. You guys are hilarious. Oh, thank you. Yeah, we probably should have done a few more. think it’s from like 2014 something like that. Yeah, it a while back. But I mean, you guys definitely have the the talent there. But then I was saddened to see that you guys didn’t keep up the channel. So I know I do regret that. And yeah, yeah, I have regrets. But thank you. Always nice to meet a fan. So we

03:42
Before we get into the Chinese companies and fast fashion, I am curious how you got into the printing business in the first place and how you scaled it to as large it is today. Like in that video, I took a look at your factory. You guys got lots of expensive equipment in there. Yeah, we had very humble beginnings in that I just started drawing on t-shirts with a marker in like middle school. Because my mom, I remember when

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You came back from a summer one year and all of a sudden, you know, like the brand of shirts you had or whatever mattered. And it was like fifth grade. I asked my mom if I could have a an Abercrombie shirt and she said no. And so I just made one with a marker and went out. It’s a lot cheaper to be funny than cool. And so, then I just kept making those. My car got broken into my senior year of high school and they caught the guy and he had to like

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you know, pay for my window and my my everything he broke and rather than repairing most of that, I did repair the window, but the dashboard and everything. bought a little t-shirt press and brought that with me to University of Michigan as a freshman in my dorm room. We started making shirts there. My buddy Ricky, who’s my, uh, he’s the co-owner. He could do websites, which was kind of a unique skill at the time. Something like 2004. And, uh, we were most of me like bootleg.

05:09
Chuck Norris shirts and stuff like that. And we didn’t understand intellectual property at the time. But yeah, it just sort of grew. And we graduated into the recession in 08 and just figured what the heck, let’s let’s try this instead. And I had landscaped for a bunch of professors and kind of wealthy people around town. And we raised 15 grand at like 18 % interest or something crazy from them and bought

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little digital printer, which was a new tech at the time. My landlord didn’t speak a lot of English, but enough where we were able to communicate that like, I needed to shove this commercial printer into my apartment to pay rent. And he was like, fine, fine. And I think my neighbors thought I was a drug dealer, because like, we would sell stuff online, but it’d be for pickup. And so these cars would pull up at all hours to get the packages. And every year that we got a little 900 square foot end unit in a

06:08
the industrial district in Ann Arbor and put bunk beds up in the back there. So we went from illegally printing in a residence to illegally living in a workshop. But it was fun. mean, we were fresh out of college. Did you buy like a DDG printer or? Yeah, it was like those were brand new. So like that trade show that we got, that was just the Wild West. were like,

06:35
Everyone had the same Epson like carousels and it was called garage engineering and all this stuff. So yeah, it didn’t even have white ink. The white ink ones were so unreliable at the time. But you get in early with like iterative technology like that and you build a business model and then as the tech gets better, you can run with it quicker. Yeah, we just kept adding stuff. We added a manual screen printing press. We could do white ink. Then we added an automatic press. Then we added embroidery and

07:05
Now we have four or five giant, you know, automatic presses that are, you know, length of car. And yeah. So, yeah, it grew over the years and it wasn’t all Amazon and Ecom became the biggest part of it. But early on, we were doing a lot. What we still do live like.

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merchandise for artists. And at one point, we were the biggest printer for NATO in Afghanistan before the drawdown. They went through a lot of t-shirts more than you’d think. You’d get like a phone call. They’d be like, because Canada Airfield had like 50,000 international troops. And for the most part, a lot of times they were bored. So you’d get a call from like a colonel and you’d be like, I need 3000 shirts for a 5k on next Friday. You’re like, I can print them.

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over the weekend, but how long does it take to get to Afghanistan? You’re like, let me take care of that. Okay, you got it, sir. So, uh, how are you getting these deals? I’m curious early on. mean, it’s, really saturated. Selling t-shirts is tough. Oh, it’s awful. Uh, don’t do it. Anyone. Uh, that one, well, it’s just a lot of like wheeling and dealing. So like early on, for example, that particular account was because

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we had a random like ROTC, we’re in Ann Arbor still. So University of Michigan is, you know, the big institution here. And we had like a random ROTC senior come in to get PT like physical fitness uniforms for their club, or not their club, but for the ROTC program. And we just got talking, I had buddies and ROTC around the state and they all kind of knew each other a little bit from like, you know, their

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joint training and yeah, just sort of, early on it was just, you’re making friends with all your clients cause there’s two of you in the shop and they come in and it’s fun, it’s personal, you’re helping with art, what’s it for, you get talking and that guy, he ended up getting deployed to Afghanistan and was in charge of getting bids for like a morale and welfare event with that needed t-shirts and.

09:24
He asked us if we wanted to bid on it and it was a competitive bid. We just didn’t know that everyone else is like a pig at the trough with military contracting. We bid at normal plus the shipping to get it to Kandahar and we won it and we were floored. And then we did a good job and like found out, you know, the other guys and his, uh, his purchasing unit where they were from. And so we threw in some like, uh,

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you know, sports team stuff from like their hometowns just as a thank you and you build a relationship across the world and then pretty soon we were just getting orders left and right and especially if it was time sensitive they didn’t need to mess around with bidding. So are you running ads, doing any SEO, social media or anything like that or is it just kind of word of mouth? Mostly word of mouth. Yeah, like a lot of our early stuff was more brick and mortar and then because Ann Arbor is small but because the university

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has so many hooks internationally, you would, you’d work with people as students and then within a couple years, they’d, you know, be rising in a fortune 500 company and send the business back. So, I always liked about that part was it was just very personable and like, you still still matter the relationships matter. We were never the cheapest or anything, but you know, you’re dependable. So, amazing. everything you do is pretty much custom. And then

10:51
You have a brick and mortar outlet in addition to your online and it’s just a lot of repeat business. Yeah. So brick and mortar is our custom and that’s a lot of local. So we do a lot of the back end like uniforming and stuff for like the a lot of the university programs and local businesses, corporate uniforms. But 70 percent plus of our top line is is e-commerce. And that’s the majority of that is Amazon at that.

11:21
Oh, it’s at Amazon. Okay, got it. And those are fixed designs, right? Probably. Yeah. So those are, that’s, you know, B2C, like we’re making the designs, we’re mostly FBAing the shirts. That’s another thing in itself. I mean, do you find that there’s rampant copying of your designs and whatnot on Amazon? Oh, And are you, have like a dedicated team to take those guys down or? It’s not. So with apparel, people abuse trademarks and that like they’ll

11:52
Like literally the Lanham Act that governs trademark law says like they can’t be decorative. It’s supposed to mark your trade. And so there’s just a cottage industry of trolls who try to trademark decorative designs. But the reality of it is like anyone should be able to make an I’m with stupid shirt or, you know, we have a trophy husband shirt and there are 900 people with trophy husband shirts and that’s all fine.

12:17
It’s all legal. can’t say theirs is made by us. Like we have quality standards and things like that. But so no, I don’t do a lot of takedown notices. I actually like contribute to some trademark watchdog groups that specifically go after trolls because I don’t like I respect intellectual property. But I also I hate people trying to like fence off the comments and

12:47
So like we, yeah, we fought, it ended up costing us almost 600 grand years ago, a trademark troll. I can’t remember the terms of the end. I’m not gonna say it, but yeah, we took them to the ropes and we won and it was awesome. you know, we specifically did all of our legal filings publicly like the tobacco lawsuit so that the next people they want to hit could just piggyback on our legislation.

13:16
I do get a call about once a year from someone sweating bullets like, Hey man, I got half a million dollars worth of like research. know, nice. So, um, yeah, I mean, it’s, it’s, it’s an ugly little industry. You know, we figured out how to go about it. Um, and yeah, you’re constantly dealing with, with IP stuff. That’s when you’re constantly releasing new designs. I would imagine, right? It’s not like a stagnant business. Yeah. Yeah. Yeah. We’re always releasing new stuff.

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you know, seeing how to iterate on old and we do more and more like licensing and stuff. Okay. The existence of merch by Amazon is, uh, you know, that means we’re competing with like literally anyone with an internet connection. So it’s a,

14:02
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14:43
Do you guys do FBA or Merchant Fulfilled? We do both. Both. Okay. Well, Jerry, the reason why I wanted to have you on the show was because you posted this very sobering article in the ECF forums that the entire apparel category is down 30 % year over year, including Amazon. And you actually posted some of your own stats, which I’m hoping you’re willing to share, but you don’t have to share. What do you think is going on out there right now in the apparel industry? Yeah. So, I mean, I,

15:13
Specifically, all I know is that the t-shirt category under apparel is down 30%. And that was told to me by an Amazonian who was, I believe the quote was, 99 % sure that includes Amazon. So that’s as close as we’re going to get. But yeah, it was wild to me. So we all knew 2020 was going to be a high watermark, you know, for probably a decade. And so I expected I wasn’t surprised when 21 fell off a bit.

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But 22, we really kept going. were down like 30 % from 21. And then this year we’re down like 30 % from 22. You you look around and you try and make sense of it and you go, okay, gas is $5 gallon, know, groceries are a mortgage payment. And it’s like, you see the obvious macro factors and that’s the story you tell yourself.

16:08
It didn’t quite make sense specifically because I’d always heard from like older guys in our industry that like t-shirts tend to do well in a recession because maybe when you’re getting good hours at work, you get your kid a $70 video game and when you’re not, you get them a t-shirt. You know, like it’s a thing. It’s a product that it’s an affordable luxury that people drop into and we weren’t seeing that. And then talking to other people in ECF and just

16:36
looking around other industries, it seemed like nobody was having a great time, but nobody was down like 30 % two years in a row. Right. And so then, yeah, you’re like, well, so then we thought like, hey, must be Amazon is finally eating our lunch. And how would you prove that? That’s when I just started asking, trying to needle all my contacts at Amazon and heard no, they’re down to like, what what is going on? Because like, you can look at their corporate

17:05
you know, top line stuff, like they’re not down 30 % like everywhere. And yeah, and that was when I started. I don’t remember if you know, I saw an ad for Tmoo or saw an article about it, but I was like, that’s interesting. And so I started pulling the stats on Shein and Tmoo. And I guess, yeah, for listeners, it’s, um, let’s explain what those two things are, just in case people listening have no idea what it is. Yeah.

17:33
So she is a it started I think it’s still mostly targeted at women but it is a Chinese marketplace that sells direct to us consumers like they don’t even sell within China and I’d like to throw a caveat I’m gonna talk a lot about China and the Chinese and I hope we all understand I’m talking about International corporations in the state not the people Yeah, these things can have you know, jingoistic tinges, but it’s like I

18:02
I had a lovely week in Beijing with my friend Rose’s family. I probably put on 15 pounds. have nothing but nice things to say about the Chinese people and the factories that are undercutting me. I probably have more in common with them than anyone. So I don’t even fault them. anyway, yeah. So Xi’an, I think has been around since like 14 or 15, but really took off in 21 and ended 2010.

18:29
2022 I think is the most downloaded app in the US or something like that. And they’re all focused on fast fashion. t-shirts would fall under that, you it’s not exactly what you think about, but it’s all cheap stuff. When I think of Shien, I think of fashion, not so many, not so much t-shirts. I feel like Tmoo sells more of those types of things. Yeah, I agree. think Shien, Shien.

18:55
showed a new model and it’s not brand new. Like you had wish you had Alibaba before but she and really showed what those models could do with a proper social media strategy. They’re very savvy and they just gobbled up market share. So then that was happening all through you know 21 and 22 which correlated with when we started to see our sales slump. We went from two million units

19:23
sold at our peak in 20 to I think like 1.4 the next year and we’re back to our 2018 levels now. So Shein showed this successful strategy and then Tmoo just blew it out of the water. So like if you and I were talking, it’s late October and now 23rd, this time last year I don’t.

19:49
I don’t think we could have gone to team. Or if we could, was brand new. released in November of 22. I want to say, yeah, that’s when they launched and then they did a Superball ad which which destroyed it. Yeah. Yeah. So like this, if you and I were talking one year ago today, they didn’t exist or right. You know, long-term purposes. They have since I believe they just passed their hundred millionth download or something like that.

20:18
and did a billion dollars with a B in June for like a one month. People should fact check me, but these are. Let me just tell the audience real quick. So Tmoo actually shipped direct from China to the United States at ridiculously low prices. Think of it like a much better version of Aliexpress with superior marketing and virality in terms of referrals. Yeah, absolutely. And

20:48
So I started looking at that and I looked at their numbers and it’s like, if you add them together, they’re getting something like a third of the traffic daily of Amazon, but they’re focused in apparel. So, you know, that to me is like, they may very well be selling more apparel than Amazon. Like I can’t, I don’t know, I can’t prove that, but it’s certainly, for me in apparel, I feel like,

21:15
we are the canary in the coal mine on this issue where you’re like, oh wow, this is very, very significant. At least, yeah, if 30 % came off our top line, that makes all the sense in the world. There’s nothing else happening in retail that is a lever of that size. And so then you start looking and you’re like, okay, let me take one of my top sellers. What does that go for on Tmoo? It’s $6. Wow, that is a… How much do you sell it for?

21:44
Uh, 20 or 20 to 22. And you found the exact same shirt on Tmoo or something very similar. Same design anyway. Yeah. And, and again, you know, like I said, like if, it’s, know, everyone can sell and I’m with stupid, that’s not my intellectual property, but $6 is a wild figure because that is less than it would cost for us to get a blank shirt and send it through USPS next door. Like

22:13
with no printing, manufacturing, overhead, advertising, nothing. It’s untouchable for an American manufacturer. And so then you start reading about it and she in, so cotton is a plant and every fiber has a biological signature. So you can do isotope testing and look at the like carbon, hydrogen and oxygen isotopes.

22:42
and tell which region in the world they grew in. And CNN had commissioned a study or Bloomberg had commissioned a study and a German lab tested and the cotton and like nine pieces they took from Xi’an were from Xinjiang, which is under US sanctions because there a million Uighur Muslim minority Chinese who are in forced labor camps there. And it is

23:12
Specifically tied into the textile industry. That’s Xinjiang is that’s where Chinese cotton comes from. I think I saw a start It was like 90 % of Chinese cotton is sourced there. And so it is it is illegal to source to import products from that province or with that cotton into the US But it the only way that’s gonna get caught is if it gets inspected and tested by US Customs and Border Patrol which would

23:41
mean that the package would have to be inspected. And in the US, this is kind of what brings the full circle. We don’t inspect packages that are less than $800 and declared value. It’s called the de minimis loophole. And talking most historians seem to imply that the minimis was meant to be for like travelers returning home, like you could bring your souvenirs in. And it’s now 2 million packages a day come predominantly from China and predominantly from Xi and Timu.

24:11
Through the de minimis exception. So there’s there’s no enforcement of of our laws duties collected intellectual property of how like If you go to team right now and you just search Rolex It’s like the counterfeits are right there now. They don’t actually say Rolex they say Olev and has the Rolex crown and

24:39
What’s funny about Oleg is if you arrange the dials on the watch, it oops, sorry, I lost my window here. If you arrange the dials on the watch, it looks like Rolex the way that those letters play out. So yeah, like intellectual property and everything slips through the cracks when things are not being inspected. Let me ask you this. How is it possible for them to make the T-shirt printed?

25:08
and ship it for six bucks. Like how is that even feasible? Like the shipping alone for a t-shirt is probably like five bucks, right? Or- I would think so like a lot of people have, know, they’ll talk, there’s some outdated notions about shipping from China. Like there was the universal postal union. That’s when you had ePacket and all this like super, super cheap shipping that got renegotiated in 2018. And my understanding is it’s gotten more and more expensive. Like they’re trying to bring it up to parity.

25:38
I would expect I believe that they’re, you know, bulk freight forwarding and, and splitting the actual manufacturing. I think if, if you’re using forced labor and you’re using locally sourced cotton that has it’s, it’s hard to like parse out subsidies and stuff. Yeah. But, yeah, I think their manufacturing is probably

26:06
I don’t know. I would imagine they’re probably making everything for under a dollar. then, Tmoo, according to Wired, who I haven’t heard a lot of people like poke holes in their sourcing or the investigation. They claim that Tmoo is losing $30 per package shipped, which is wild. Like it’s, I think you could extrapolate to like a billion dollars a year. And so the

26:34
Easiest explanation would be like, wow, there that’s some like epic level predatory pricing to break into a market but that you know, that seems silly to me because it’s like They’re kind of chasing currently chasing junkie products and like as soon as it’s not dirt cheap Like why would people stick around if it’s gonna take ten days? So the more I guess conspiracy conspiracy minded explanation Grizzly reports at a short seller investigation

27:04
And they’ve declared that Tmoo is the most egregious malware, like spyware app for any like largely circulated product. And they did use reputable like security analysts who they source in the article. And amongst other things, the app can compile its own code on your phone. like they could, it could pass all of the

27:33
inspections from Google player Android or whatever, or Google Play or Apple to get on your phone. And then they could push code to it and write write code on your phone. So I actually just did a full article on on Tmoo. I didn’t read that anywhere. But I do know as an e commerce influencer, they’re reaching out to me almost every single day to make a YouTube video or tick tock or whatnot. And they’re paying top dollar for it.

28:01
and their referral program is very generous. I’m just wondering how they’re making money and based on that article that you were just mentioning, yeah, it makes sense that they’re losing money hand over fist just to break into the market. Yeah, it’s the the wired sources said like their their goal is to see I think the median shopper spend like $1,200 a year on the platform. It theoretically you could get to profitability but like

28:31
I don’t know, it’d be very difficult. their parent company, Pinduoduo, their PDD now, I think they’ve kind of been struggling. Like the Chinese consumer market has been anemic for the last couple of years. And so there’s speculation that this is like more of a desperation play. But then the data scraping is pretty egregious, like very egregious, even relative to other apps. And so it’s like on

29:01
a little unclear. You know, is it a play for data or is it a play for market share? Maybe a bit of both. Yeah, I feel like it’s like the perfect storm right now because of the economy and people just looking for cheap stuff, right? Yeah, yeah. I mean, I I’m pretty livid with Amazon. mean, every Amazon seller has their litany of grievances, but it’s like, did you have to keep

29:29
Do we have to do the fee hikes again? And I feel like there’s been no let up on the gas of like pressure for us to raise prices when they’re at least for our category. We can’t. There is a clear actual competitor now who is not on the platform and is, you know, eating everyone’s lunch. Like how much higher than $20 can I go when the same shirt is $6 somewhere?

29:59
Like, you know, and they’ll say like, oh, you can get it quick. Oh, you have returns. It’s trusted at six bucks. Who cares? They don’t know what’s even going to return it. Like most of that value prop goes out the window and like, yes, expediency and convenience. Like that’s all great, but it’s not the only thing. And 100 million people are showing that like, yeah, I can wait a week. How confident are you that it is in fact, Timo and Shia and that’s affecting your sales?

30:29
I mean, I can’t certainly out with any certainty. Of course. Yeah. I don’t know. I mean, I can’t see it not, I guess. And I don’t think it’s just that like, there’s these two new entrants. It’s like, they are dominating social shopping, where Amazon never really has. And so it may be that even if they disappeared overnight, that

30:58
social shopping, regardless of who the, you know, who would take their place that that’s just a new medium. But yeah, and like I have absolutely no idea, you know, what macro demand and you mentioned like 70 % of your business is Amazon, right? And if Amazon’s taking the hit, mean, a lower tide lowers all ships, right? Yeah. In that respect. You know, what’s funny is I was just doing a case study on true classic tease.

31:28
a couple weeks ago how they’re killing it with their ads and everything and they’re a hundred million dollar company and all they do is they sell plain t-shirts. And so I guess my question is how are you planning on fighting against this? Are you gonna go more D to C social marketing or like what’s your strategy to combat this?

31:52
putting a lot of effort internally into like our other lines of businesses. So we do like uniforming for Fortune 500 and things like that. And so what we found is a lot of the expertise we built out around rapid product design and drop shipping and whatnot that’s actually also can give you just a really high service level for this older business. So we’re looking at that.

32:22
We never really put a lot of attention, honestly, into our own website and stuff like that. like, shame on us. But yeah, think part of us, part of it, we’re gonna ride out, like we’re gonna be okay. I’m being a little overly dramatic. Like we still have. Yeah, you guys still do a ton of money. Yeah. But you know, it doesn’t feel good. No, no. Well, and it’s a thing where I think it’s worth everyone

32:52
being aware of because it’s a new… I’ve heard a lot of people when I’ve talked about this say like, well, they’re just wish 2.0 and it’s like, well, let’s agree on that. Let’s start there. What is to… So they’re implying like it’s just wish and it’s like, no, it’s wish 2.0. If you plot market penetration and speed of penetration and you put…

33:22
Wish 1.0 on the bottom left, Wish 2.0 is exponentially up and to the right. Like they did it a lot better this time. so you should be thinking if Wish 2.0 is still just apparel and fast fashion, know, if it only remained that, it sucks to be me, but everyone else is probably fine. But I would just point out that that’s not necessarily the case.

33:51
Wish 3.0, what’s different this time is they got 100 million people to try shopping from China directly. And it’s not all crap. And it’s not all a bad experience. That’s people just, that’s hubris to just say like, oh, it’s all garbage. A lot of it is the exact same stuff that’s sold on Amazon without 50 % fees. So it’s like, think about your own product.

34:19
Like especially if you make your product in China, what’s what’s to stop a more elegant, curated, sophisticated platform from approaching your manufacturer? And you might say, well, I have a brand brands. The biggest gate for a brand is intellectual property, and that’s not really being enforced when we’re not putting things through customs and border inspection. And you might say I have a great relationship with the the factory owner and he’s not that savvy. Well, his kid might be coming back from getting an MBA at Wharton next year.

34:48
and have other plans for the business. the Chinese industry is just like any other. Like it’s going to evolve. It’s going to get more sophisticated. And if we’re structurally getting American consumers used to just end running American retailers, you can make an argument for that. I’m not going to because this is my paycheck and I’m going to defend it. But it’s

35:15
Everyone should be a little alarmed at how fast Tmoo specifically penetrated the American market and wonder like, you know, and are you really that safe? I mean, I think a lot of this has to do with the cheap, relatively fast shipping from China, right? I’ve ordered from Tmoo a couple times. It came within, I would say, 10 to 15 days, which in my opinion is pretty fast from China.

35:41
And shipping was free, I think, for the first order or maybe I ordered enough for the first order for it to be free. And then there’s no, they don’t have to pay any customs duties or anything like that. And I can see if people don’t mind waiting for some of this stuff, they’ll probably just buy from Tmoo. I’m just wondering if the US is going to do anything about the de minimis level being at 800 bucks. Because, you know, I have colleagues that utilize this loophole also.

36:11
Oh, yeah, in importing stuff like to the border and in Canada or Mexico and then just slipping it in the US postal system. Yeah, yeah. Yeah, it’s um, well, I mean, we are really an exception. I think there’s like three. I could get this wrong. I think there’s like three countries in the world that have like, higher than a $500 de minimis. My understanding is that China has like a $7 de minimis. So

36:37
There is a lot of attention being paid to this in Washington. So in June alone, Senators Cassidy, there are two different bills, one in the Senate and then one by Kameral, both looking at closing the de minimis loophole. I think specifically the wording was around like non-market economy. So it would mostly apply to China, Russia, and I think you could interpret it as Vietnam.

37:07
And there was a letter from like 12 senators, bipartisan three weeks ago to the Biden administration asking on behalf of the apparel industry to close the loophole. And then all of the apparel trade groups are screaming about this. so apparel is a little interesting in that it is the lowest rung on like the industrial ladder. There’s a bunch of books about this. Like it’s always the first industry. It’s why the industrial revolution started with apparel.

37:37
Right. But it’s also so it’s not just a matter of like protecting American, you know, manufacturers or light manufacturer decorators like me. It’s also a trade a trade tool like a lot of our bargaining with Central and South America to get concessions on like, we’d like you to stop growing drugs in this region, like, well, these people need jobs. We’ll do a free trade agreement on apparel and then you can set up factories there. So we use apparel.

38:07
free trade agreements in our hemisphere as a bargaining chip to try and affect change. And so this is a thing like the textile industry is pointing out is like, if you think that we have border pressures now, you should see what what it’s going to look like in three years when all the factories in this hemisphere are shut down because they’ve been undercut by weaker cotton. And so it has these these geopolitical knock on effects. And that’s, that’s been making it into the conversation. So

38:37
I don’t know who’s on the other side of the argument. Like certainly UPS, FedEx, there are a lot of small businesses that I’ve heard of guys breaking their cargo shipment into fives to get them all in under the $800. But there is starting to be some concrete movement in Washington around this.

39:01
Yeah, you know, I guess I have different opinions on whether it’s going to affect I think if you’re selling cheaper trinkets, so to speak, and, and and cheaper, cheaper apparel, I guess t shirts kind of fall into that category, then you’re more likely to be disrupted by Tmoo. And then as you

39:22
I guess and we were talking about brand earlier. I mean, if you have a strong enough brand and quality matters, you know, it’s funny, I had a YouTube video on Tmoo. It has almost a million views and you should see the comments on this thing. Half the people are say it’s like cheap Chinese junk or they’re afraid like their information is getting collected. And then there’s this other half, which I’m sure a good portion of them are actually getting paid by Tmoo. I’m pretty sure of this because the comments are effusively good.

39:52
right about Tmoo. And I know that if they’re willing to pay me like, you know, $500 for like a one minute TikTok, then they’re probably paying commenters. But there’s generally like some cynicism, I guess, on the quality of the products, whether they’re even safe and that sort of thing. And stuff like that just takes some time to dissipate. It does. And again, like I’m not saying Tmoo is the threat.

40:21
I’m saying what comes next because like, I mean, Foxconn makes Apple in China. China can make everything up to the quality scale. So in that sense, it’s like, if, I don’t know, I’m sure there’s probably a factory that’s back-ending like,

40:45
I don’t know, Bosch or DeWalt or like some great course, What’s to stop them from being savvy and setting up like an alternative to Home Depot? That is it’s the same quality tools and they get backing from tradesmen and they’re half the price, you know, and maybe maybe we want that as a society. I get that but I’m

41:09
I’m saying that the new thing here is that people have gotten used to shopping direct on China and then there is a de facto one way free trade agreement that none of us voted for that would never pass Congress. You know, it’s a strange thing and until there is action, I think it’s going to keep moving forward and getting more sophisticated. I don’t see why it wouldn’t.

41:38
I guess the real question is what can you do to fight about it? And we didn’t really go into depth on what you guys are doing about it, but presumably you have all these relationships with all these companies and you get a lot of repeat business. I imagine that’s how your business is safe, right? Yeah, I think so. mean, and we have a lot like we do have a brand. We do have a reputation like that’s not that’s not for nothing. I’m not I’m not saying that at all. Of course. It’s just yeah, if you’re

42:05
it would be nice to have that 30 % back of your customers who weren’t that brand loyal. You’re just, you know, you were there. We’re specifically talking about the Amazon side of your business though, right? Yeah. Yeah. Yeah. So my, my custom side, like that’s all more of a, um, the value prop is more in the service than, you know, that. So, yeah, like we’re, we’re, we’re changing, we’re evolving, we’re going to be fine. Um, I’ve been doing a lot of like just promotion advocacy, this idea of just like,

42:35
It’s kind of a new thing facing American retail and American B2C manufacturers that it came on so fast and under the cover of inflation that I don’t think a lot of people, there’s no way to assess it and I don’t think a lot of people are even aware of the scope. I mean, arguably, it’s hard to even build a brand on Amazon in the first place. So I guess if anyone out there is listening and your main channel is Amazon, I think you’re probably more likely to get disrupted there.

43:05
I’m curious, I was on your site earlier, it seems like you have to get a quote, right? order to Yeah, you guys aren’t like a pure e commerce company. No, no. And again, think shame on us. never really put a lot of that’s not the point I was making. My point was like, it’s hard to tell how many sales you lost from like the direct quotes. Because you know, you’re not taking transactions on there versus your Amazon where it’s readily obvious, right? Yeah, yeah. And I think the

43:34
that end of the business where we’re custom making custom apparel, like I don’t think that’s in any danger because it’s so relationship and service dependent. But yeah, anything where it’s just the product is the product and then particularly an unsophisticated product where you can look at it and go like, well, it’s not, you know, diaper cream for my baby where I’m concerned about, you know, a rash.

44:01
So mean my views on that are even they go way beyond team and she and actually if you’re just making a product that Kind of blends in with the rest. I mean even even the Chinese factories have been listing their products directly on Amazon I mean that’s been going on for like the past five years which which have hurt everyone Team is just like an extra level beyond that. I think Yeah, I think to me the thing that’s frustrating with team is that? It’s an unlevel

44:30
playing field basically. If your business model is based on dumping, losing $30 predatory pricing, it’s very frustrating to be an American making a product in America, selling in America, and not being able to compete. And people point out like, Amazon used to do predatory pricing, and that was messed up too. I wish we had better.

44:58
case law. think that’s something the Supreme Court botched in the in the 70s. But yeah, it’s it’s like I don’t we’ve competed for years, we built a pretty big t shirt operation. That part was fine until we ran into. Yeah, one level playing field. And so but this can’t last forever because they’ll run out of money at some point, right? I think so. Yeah, I mean, and that’s where again, like my

45:28
my caution or what I see in it that I’m pointing out is more that it’s there. There will probably be another there will they’ll probably have to move up chain to make the dollars and cents work. But I would I don’t know how how team could hold on to this forever. think she and I believe just bought Forever 21 and like is investing in warehousing in the US. So, you know, they’re just going to be more of

45:57
they’re an international retailer and hey, if they’re paying taxes here and following labor laws here and everything, fine. Like that’s the game. But I don’t like, yeah, this other business model of just drop shipping from China under, I thought we got rid of sweatshops in like the 90s and stuff. Well, in the US for the most part.

46:24
But I know there was so much pressure like I have to do so much compliance for my like university licenses and stuff. And then I go on Tmoo and you’re like, Oh, I could buy a University of Michigan teacher for five bucks. I know, know, know. It’s it’s it’s wrong. Well, let me ask you this, Jerry. Let’s end it with what do you advise that people who are doing apparel? What do you advise that they do right now? Yeah, I mean, I So on the micro level,

46:54
build your relationships, build your brands like that. That is your best thing to do here because that is going to insulate you. And honestly, it’s just a better way to build a business. No one wants to sell a commodity. But at the macro, if I may, are these laws are going through Congress. Your brand is your micro-mote. I view political action as the macro-mote.

47:24
I’m sure you have plenty of international listeners. So apologies, guys, nothing personal. Yeah, I mean, I would contact your congressional reps and your senators. People really truly underestimate that. it’s like, you know, it doesn’t hurt. It’s easy. I think the de minimis level is something maybe we can do something about. But just coming in and taking losses and becoming a loss leader

47:53
is not really something that’s enforceable. I don’t think right. It’ll catch up to them at some point. Yeah, we have very weak laws around that. So that’s something you just sort of more ride out. But it would be much more difficult to do without the minimus. I think like apparel in particular would be like 25 percent. And you I imagine the packages would probably slow up and be harder at the border. But there again, like you can get around that by

48:22
opening a warehouse in the US, importing like the rest of us do paying duties like the rest of us do and following laws and selling like, I’m not I’m not actually an isolationist. I just think you should have to the same rules as the rest of us. I agree. I 100 % agree. And it’ll be interesting. Maybe I’ll have you on in like another five years and we’ll see what what’s going on then. I would love that. Or maybe even sooner than that. But Jerry, where can people get some really kick ass tease?

48:52
If they’re interested in what you sell. Currently, our biggest selection is on Amazon. We are we we we kind of went all in on FBA and we’re sort of working backwards now to build out our own site. So if it’s in the next few weeks, unfortunately, I probably can’t send you to my own website. We have more stuff on Amazon. But and don’t do that. I would. Yeah, you asked apparel people like.

49:22
It seems obvious to say like don’t put all your eggs in one basket that’s investing 101 and it is so much harder to do when you’re growing at four or five X to not just keep doubling or quintupling down every year. But in an inventory business that can bite you and I have a second 40,000 square foot warehouse full of T-shirts to prove it. Wow, that’s crazy. Well, Jerry, mean, you’ve done really well for yourself.

49:51
I just wish I just wish you had more of those YouTube videos. I that itself would make me buy from you over anything. You know, we will. We’ve you know, this last couple of years, like we’re doing a lot of introspection and like, okay, we got to change. We got to like get nimble and like, where do we want to go? And so but clearly what you’ve done has been good for these past several years. And I kind of know your numbers since you told me in private and you’re killing it. And even if

50:20
It goes down to just your personal business or the brick and mortar part. mean, still that’s like more money than anyone most people are ever going to make in their lives. So yeah, I can’t. We’ve been very fortunate. can’t. I can’t really get like. But. Yeah, well, I get back to some more creative marketing. Have fun with it again. Nice.

50:46
Well, Jerry, I appreciate you coming on the show and just being like an open book regarding your business and how Tmoo and these other Chinese companies have, you know, come in and I guess they’re playing by the rules, but the rules are kind of one sided. So yeah, I don’t fault them. Like that’s what we all do. But, you know, in a high, you know, I got in a bit of a debate with with

51:15
seller out of Hong Kong and saying, Hey, man, this is, this is what we do. This is our competitive advantage. And I was like, all right, no, nothing personal. But my competitive advantage as an American citizen, then is I’m going to lobby my legislators to close a loophole. Like, you know, it’s not personal. But and again, like I understand there’s a whole other valid side of the debate. People have been debating isolation or protectionism versus free trade for 300 years.

51:44
And so I am firmly currently in the camp of like you can’t convince a man he’s wrong when his pocketbook is on the line. It’s you I’m making a selfish argument, but it’s on behalf of my 75 employees and their families and I’m gonna do that. Yeah. Well, yeah, once again, Jerry, thanks for your perspective and maybe I’ll even link up. I think you had a link to to file a petition or something to your local congressman. So maybe I’ll link down the show notes as well. But once again, thanks a lot for coming on. Appreciate you. All right. Thanks, Steve.

52:16
Hope you enjoy that episode. Now, if you are worried about companies like Tmoo and Shien taking over, I also filmed a YouTube video about this subject that you can find in the show notes or on my YouTube channel. For more information about this episode, go to mywifecoderjob.com slash episode 509. And once again, tickets to Seller Summit 2024 are now on sale over at sellersummit.com. If you want to hang out in person in a small intimate setting, develop real relationships with like-minded entrepreneurs and learn a ton, then come to my event.

52:44
go to SellersSummit.com. And if you are interested in starting your own eCommerce store, head on over to MyWifeCoderJob.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.