199: The Best Way To Source Private Label Products From China With Nathan Resnick Of Sourcify

The Best Way To Source Private Label Products From China With Nathan Resnick Of Sourcify

Nathan Resnick is someone who I met at The Hustle conference in San Francisco. He is the founder of Sourcify which is a company that helps you find manufacturers to produce your products.

Prior to that, he owned 2 ecommerce companies, Yes Man Watches and Cork Supply Co. And recently, he was on the Hustle blog where he made 23k selling Conor McGregor F You Suits.

Nathan is my go to guy when it comes to sourcing from China so enjoy this episode!

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What You’ll Learn

  • Common mistakes when sourcing from China
  • The best way to find good suppliers
  • The disadvantages of using directories like Alibaba and Global Sources
  • How Nathan ensures the quality of a factory
  • How to attract the attention of a potential supplier
  • How to tell the difference between a wholesaler, trading company and factory

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You’re listening to the My Wife Quit Her Job Podcast, the place where I bring on successful bootstrapped business owners, and dig deep into what strategies they use to grow their businesses. Now today I’m happy to have Nathan Resnick of Sourcify with me on the show, and we’re going to talk about the ins and outs of products sourcing from China.

But before we begin, I want to give a quick shout out to Privy who is a sponsor of the show. Privy is the tool that I use to build my email list for both my blog and my online store. Now what does do? Privy is an email list growth platform, and they manage all of my email capture forms. And in fact I use Privy hand in hand with my email marketing provider.

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Intro: Welcome to the My Wife Quit Her Job Podcast. We will teach you how to create a business that suits your lifestyle, so you can spend more time with your family and focus on doing the things that you love. Here is your host, Steve Chou.

Steve: Welcome to the My Wife Quit her Job Podcast. Today I’m really excited to have Nathan Resnick on the show. Now Nathan is someone who I met at the Hustle conference in San Francisco. And what’s funny is I actually went over to chat with Tucker Max, but before long Nathan and I started talking about e-commerce and left Tucker out of the conversation. Anyway Nathan is the founder of Sourcify which is a company that helps you find manufacturers to produce your products.

And prior to that, he owed two e-commerce companies, Yes Man Watches and Cork Supply Co. And recently he was actually on the Hustle blog where he made $23,000 selling Conor McGregor FU suits which is really random. And with that, welcome to the show Nathan, how are you doing today man?

Nathan: What’s up, I’m doing great, thank you so much for having me.

Steve: Yeah so Nathan, first off how did you get started with e-commerce? Tell me about your journey selling watches to quirks to Conor McGregor suits to starting Sourcify.

Nathan: Totally. Well, I think really my journey in e-commerce starts about seven years ago, when I was living in China. I was a foreign exchange student living with a host family that didn’t speak English, this was in high school. So I mean I’m young, but even then I was younger back then and it just got me so excited by the supply chain and manufacturing landscape because I saw the power of these factories to bring new products to life. And literally you would see thousands of different products being produced everything from shoes and socks to bunk beds and [inaudible 00:03:51] at these factories.

And we had the opportunity to go check out a few factories and obviously that’s the main industry over in China. And so in 2010, I got very excited by the ability to turn ideas into products. And so I guess the following year I was working a nine to five summer internship. I was a sales intern making a hundred plus cold calls a day, and I actually read The 4-Hour Work Week, I’m sure you guys are all familiar with that book.

Steve: Sure.

Nathan: And it motivated me to start my own company. And so that’s basically what I did. And the first company I started that was run through Shopify I started through a Kickstarter campaign. We invented the first leather watch strap without holes. It worked like a zip tie where you slide the strap through the buckle. It caught on notches in the strap. We launched on Kickstarter, grew it to just over six figures in sales on Shopify. And since then I’ve just been bringing so many different products to market, and that’s kind of how Sourcify came about.

Steve: Can we talk about that first watch company? Like presumably you knew nothing at the time, right?

Nathan: Yeah totally. I mean literally I goggled how to start a watch company and it’s a funny story. I was launching our campaign on Kickstarter and I was on scholarship. I was a freshman in college, I obviously didn’t have the money to fund production, and that’s why we turned to crowdfunding. I mean most crowdfunding campaigns are basically raising money to fund their production runs.

And so that’s what we did initially. And so, literally I was in the library of my university, the University of San Diego at the time and we were about to launch on Kickstarter the following week. And my buddy who was smarter than me, I mean honestly I don’t consider myself that smart of a guy, but all I work and hopefully work smarter than most people. And so he was like, Nathan you should file for a corporation. In my head I always thought a incorporation, that’s like huge, like how am I going to do that?

And so we literally just goggled how to file a corporation, ended up filing for a Delaware C Corp in our university library, and a few days later I had Yes Man incorporated or registered with the state of Delaware.

Steve: But presumably — so in terms of sourcing you didn’t know what you were doing back then. So I was hoping to if you can just kind of talk about those experiences when you didn’t know what you were doing. And then now that you do know what you are doing, what were some of the common mistakes that you did early on?

Nathan: Totally, I mean really for us, when I was first going through the process of bringing my idea to life like seven years ago, it took us five months to go from an idea to a finished product, and it was crazy. I mean, literally you have so many open databases out there like the Global Sources and Alibaba and Made in China, and all that stuff. And there’s going to be some solid factories on there, but the most of it is a lot of noise. I mean most of the companies on there are going to be trading companies or export agents and there are some reasons to work with them.

But really that whole process when we first turned — when I first turned my idea into actual product, it took us five months because they were so much back and forth. I had no clue even what a CAD was to actually create our custom mold that we needed for our watch buckle. And the whole process was crazy. I mean not only was the importation of the product almost got stuck in customs for some reason that I didn’t understand, but also just the back and forth with different factories, and there weren’t that many resources online at the time really diving into private label or leaning on creating custom products.

And so it was a complete learning curve. I mean at the end of the day if you want to dive into some details I was working in four different time zones. I was based over the summer in Washington DC area where I grew up and my buddy in San Diego called a buddy designing our first logo. I had an engineer based in Budapest who was doing our CADs, our computer data designs that we connected with through…

Steve: How did you find that first factory? Was it off of Alibaba or did you actually fly over to Asia?

Nathan: So the first factory was through a friend of a friend through my host dad in China’s friend who was in the factories and just connected me with one. And I had no clue whether to trust them or what exactly to make of it, but I didn’t have anyone else to trust. I said, all right well if my host dad introduced me to this guy and this guy introduced me to the factory, hopefully it’s all right.

And it was a whole process and even then when you go through and source products through Alibaba you’ll always going to have that back and forth and most people that go that route, they’re going to submit like 20, 30 plus requests to different potential manufacturing partners on a website like Alibaba. And that just takes so much time going back and forth and having to do your own due diligence on each factory. And it makes it so you can’t manufacture fast, and when speed especially with all these viral trends you see is so important, it doesn’t make sense to go through an open database like that.

Steve: Interesting, so it sounds like you kind of have a negative opinion of Alibaba or Global Sources and those type of resources?

Nathan: I think it’s a great starting point, but I think if you’re really trying to manufacture effectively and move fast, I think there’s some bottlenecks in that experience. And it just stems from them being an open database. It involves just a lot of back and forth, and I think there’s a better way to streamline that process. And so if you don’t necessary have to search, and validate and do the due diligence on the factories yourself, then you’re going to be more suited to bring your product to life faster. And so that’s kind of the whole dynamic that I realized.

And I can kind of dive into the different types of companies or manufacturers you might come across on Alibaba.

Steve: Sure, yeah.

Nathan: I mean the main ones are obviously going to be factories who are the actual producers of certain products and the main – so its factories, trading companies, wholesalers, export agents. The main way right off the bat to tell a trading company is sometimes they have it in their name. With that said, there are some factories that have a trading company arm to their company, but usually you can tell from product categories.

So if you go to their let’s say Alibaba home page and they’re producing everything from watches to backpacks and sunglasses, all those products stem from different raw materials, so it doesn’t make sense that a factory would produce in all those different product categories. But for like an apparel or a cut and sell manufacturer, they could produce in different apparel categories and still be considered a factory. And then diving deeper actually you can look at their business license. If you have a friend or if you speak Mandarin you can request for their business license, and they will hold back out on track through a province website in China and actually see how they’re registered as a company in China, or whether or even if they’re registered.

And then the sourcing agents, and export agents and even trading companies, those three categories of companies are basically just taking their margin on top of the actual unit cost that a factory gives them. And the value add that they provide is kind of being a liaison and having those English speaking sales reps.

Steve: So let’s say you wanted to make like your own mold or something and you went to a trading company, will then the trading company do all of the go between, between the design and the factory?

Nathan: They would act as a liaison. So I mean there are plenty of factories that don’t have English speaking sales reps. And so that’s where a trading company could come in to help and all that kind of that process to actually get that mold created and then go through that whole design phase.

Steve: What is your opinion on like going to like the trade shows then like the Canton Fair or Global Sources?

Nathan: Oh it’s valuable. I mean the value that you get from most trade shows is meeting these people face to face and like at these booths, I mean it’s much easier to tell if they are actual factory or trading company once you kind of dive into a conversation, or you just tell from the products that are in their booths. And in Asia business revolves around relationships, it’s very important to make that face to face relationship. And if you start doing business with a factory and you start reordering, if you actually make that trip over and go to their facility, they’ll even deepen that relationship.

I mean it’s crazy because when we’re doing factory tours, most tours are going to last two to three hours, and that’s just because it’s a whole process. It’s all about you know in China the term is [inaudible 00:12:17] and it’s just about bringing that synergy together from a business relationship standpoint in terms of look, like we don’t want the business to be transactional, how it is a lot of times in the Western world, we want to dive into the relationship of actually conducting a long term business and finding synergies across the board and hoping we can grow together.

And that’s even more important if you’re working with smaller middle tier factories. And even the big factories they understand like if it’s a small company that devotes time with them and puts in an effort to build a relationship, they could be more willing to work at lower not use lower minimum order quantities.

Steve: I know that most of my factories that I use for our store, they actually aren’t found on Alibaba, and is the reason for that that because there’s just too much riffraff on Alibaba and Global Sources?

Nathan: So here is the thing that a lot of people don’t actually understand and they don’t even think about is think about the lead flow from a factory standpoint. Right now for most factories and their clients there’s too many lead flows, and that’s open databases like Alibaba and Global Sources or trade shows. Both lead sources provide pretty low quality leads.

If you look at Alibaba and analyze the lead flow that they provide for factories, let’s say you get 50 inbound requests from Alibaba as a factory each month, less than 1% of those inbound requests will actually convert into a production run. And the reason being is people just go on there a lot of times and spam different factories and say, hey, I’m interested in purchasing this and just kind of message the same thing across the board to a lot of different factories, and that’s the process that those open databases just require you to have.

So from a factory’s standpoint, they spend so much time and money qualifying leads. And that’s a whole dynamic, and a lot of times people say, you know what, didn’t the factory respond. Well it’s probably because they got ten other messages that day that all sounded similar and they weren’t sure if you were legit or not. I mean that’s the whole dynamic behind a factory lead flow. On the trade show side to, it’s nice to meet someone face to face, but at the end the day everyone has this little notebooks where they staple your business card in and write down a few notes on you.

And a lot of times at trade shows they’re usually pretty good at following up, but the dynamic there is it still depends on the presentation that you have with the factory especially when you’re on their booth. I mean after a long day at a major trade show like the Canton Fair, if it’s towards the end of the day and you’re a bit sluggish, I mean if you aren’t excited about producing these products, how do you think a sales rep that’s not getting paid that well is going to feel.

Steve: So based on what you just said, how would you stand out if you were to send an email to someone on Alibaba, like how would you let them know that you’re serious?

Nathan: That’s a great question. I think first and foremost you have to show buyers intent, and to do that you want to ask a few main questions and tell them about yourself like if you have a online store, I mean what’s your real risk in let’s say it’s like IP protected product of them necessarily copying it. I mean if you can actually showcase like, look, this is what we’ve done. This is our store, this is the growth we’ve had, these are the products we need to produce, your response rate is going to be much higher because they can actually see your assets and that’s the whole dynamic.

Or even if you have like easily searchable online presence, like send them your LinkedIn, or I won’t say Facebook, you can’t use Facebook over there, but LinkedIn is definitely doable. And so showcase to them that you’re actually looking to buy. And then don’t necessarily bombard them with questions right off the bat. I mean obviously you want to ask them a few key questions like, who they potentially produce for, what are their main markets, maybe about their MOQs. But don’t just bombard them with questions right off the bat because for them to reply back a decent answer, it’s obvious it’s going to take them quite some time.

And even on their end a lot of times the English level of these sales reps varies quite a bit pretty dramatically. But I think the whole dynamic there is like make it straightforward, easy to comprehend and make it your miracle words 1, 2, 3, 4, 5 type of order of questions.

Steve: I know you run Sourcify and presumably you have this huge database of vetted suppliers, right? But you’ve only run an e-commerce store selling watches and quirks and so I’m just kind of curious how you actually vet a factory unless you actually use them, right?

Nathan: Right exactly. So our dynamic to the factories basically stems from through connections, through the industry, trade shows and then verifying business license and certificates. So we work directly with like some bureaus or provinces to actually see their business licenses and then we basically go through like ISO certificates and RAP certificates to see what they’re qualified to produce from what certificates they have.

And obviously the best way to validate and verify a factory is working with them a few times and then confirming that they have quality over time and the communication holds up over time. And that’s something that we’re growing with. As we grow the factory relationships that we have become stronger and stronger.

Steve: So what are some questions that you ask to vet a factory, or what are some things that you’re looking for?

Nathan: Totally, I mean number one would be past clients, main market, main product categories, business licenses, certificates like ISO is a pretty standard one. And then also just we usually ask for a few different touch points at the factory. So number one you never just want to have one mode of communication, you want to be able to communicate with them on everything from email, WeChat, Skype, WhatsApp. WhatsApp actually just got – was banned.

Steve: Yeah they just got banned yeah.

Nathan: Yeah exactly, so heads up on that. If you use WhatsApp, try to switch over to WeChat. And then in terms of the actual process like most people that you deal with through like a request on Alibaba is going to be a sales rep. So try to get more to a managerial person at the factory and sometimes even the boss, because when we tell factory bosses what we’re doing at Sourcify, they get excited as well because number one, it’s free high quality lead flow for them, and number two it helps to streamline that process of a lot of the back and forth that happens when you go through a platform like Alibaba or even a trade show.

If you’re managing your product, your production process over e-mail or over WeChat, there’s a lot of back and forth and to be honest we do have quite a few entrepreneurs that aren’t really that organized. And so having some sort of project management tool on both sides of the table to help actually track that process is beneficial on both sides of the table.

Steve: I guess let me ask this in a different way, what are some red flags when you’re dealing with a factory?

Nathan: Right I mean red flags would be obviously lacking communication, I mean language barriers is always going to be there, but if the language barrier is too deep, it’s not a factory we’re going to want to deal with just because the communication with our clients isn’t going to work out. And then just background checks like business licenses like sometimes if they’re really just registered as a trading company or if they’re producing across product categories.

It’s a balance. I mean to be honest most of the like I’d say around 85, 90% of the companies that you find on some of these online databases aren’t really actual factories, and sometimes going through a trading company if you’re producing at lower MOQs is worthwhile because then you can produce at these lower order quantities, and for a trading company you might not necessarily be the smallest fish in their pond. But it’s always a dynamic and I think that really at the end of the day it’s going to come down to the relationship that you’re able to establish between your company and the factory or your manufacturing partner.

Steve: So based on what you said, would you recommend like using a tool like Panjiva or Import Genius and find out who your competitors are getting their stuff from if it’s good quality?

Nathan: Yeah you could, I mean those are great tools. A lot of times those are produced for — a lot of people use them more at scale. If you really, really want to find out, it could be a good option, but at the same time you just have to be careful in terms of like who they’re actually importing through, or sometimes if they’re working through like an importation agent, the factory name might not necessarily be read on the label.

Steve: Okay and in terms of just like maybe Sourcify, are you finding suppliers outside of China, or are most of the suppliers still within China?

Nathan: I mean the trend really this is something that I think is really shifting more and more. Bigger companies are moving outside of China. It’s just a matter of fact that the labor costs in countries like India and Pakistan are cheaper. I mean the average factory worker in China is going to make about 400 to 600 a month whereas in Pakistan sometimes it’s like around 200, even as low as 180 a month. It sounds crazy, but that’s the going rate of labor over there and it’s just the dynamic of the world economy out here.

And so I think really in terms of addressing your question, we work with factories everywhere from Thailand, India, Pakistan, Mexico. We work with like the Economic Development Council down there to work with – we work with about 40 factories down there. And it’s a dynamic in each country. I mean the main differences that I see between countries like India and Pakistan compared to China is that China, most of the factories are a lot more systemized, whereas in India and Pakistan a lot of it is very labor driven in terms of like they don’t necessarily have much automation behind their products.

So if you need to produce 100,000 shirts with the same stitch, you’re probably going to have a higher likelihood of keeping that quality up going through a factory that has some automation in China compared to a factory in India that is using a lot of manual labor.

Steve: Okay, and then what is like an easy way to find those factories that are in other countries? Do they go to the fair or are they on Alibaba?

Nathan: So they do have some at the fair. They do have international sections at different trade shows like the Canton Fair or even sourcing direct at AFC market, we’d get a few international factories. But there are a few on Alibaba. There isn’t really — it’s surprising there really isn’t a main go to online database for these different countries like Alibaba set up. And so really the dynamic like at least for what would at Sourcify, that dynamic between us and a lot of those factories in those countries is we basically hire like a freelance factory manager to manage those relationships and build those relationships.

Right now we have a freelancer in India and a freelancer in Pakistan that’s helping us dive into those markets because the barriers are still really big to those countries. But from what we’ve seen actually, the MOQs and costs in some of these countries like Pakistan, we’ve been doing some athletic apparel there is actually cheaper than China.

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So let’s switch gears a little bit, and I want to talk about your Conor McGregor suit story because it’s really interesting and it really caught my eye as soon I saw it. And from what I read, you got your first sample of the suit among other things like a wallet and some other things within ten days, is that right?

Nathan: Yeah that’s correct.

Steve: Okay, so tell me how that’s possible, and then just kind of walk me through your process.

Nathan: Totally yeah, that was honestly probably the most fun project we’ve done this year. And basically the way it went down for anyone that hasn’t seen or heard about the Conor McGregor suits, you wore a pinstriped suit that had FU letters going down on all sides of it. And my team saw that the night he wore to the press conference, the next morning it was all over social media, all over the biggest media outlets. And we said wow, let’s manufacture this, let’s showcase our ability to manufacture this faster than anyone else because even the original clothing supplier was saying it’s going to take them 16 to 20 weeks to actually produce those suits.

And so what we did was we already had this suit factory set up and we’ve produced suits before. Hit up three or four of the suit factories we work with and said, hey, we’re going to start as fast as possible, here’s the first of the sew.

Steve: How did you find those original suit factories in the first place?

Nathan: That was just through our own network at Sourcify. So that’s kind of showcasing just the ability to move fast in terms of, look if we went through online database it would be a lot of back and forth to win potential factories we wanted to work with. So we already had the factory relationships lined up, and so it was just a matter of hitting them up and saying, look, we want to manufacture this, let’s get a sample as fast we can. And so we did wallets, ties and the suit. The wallet and ties actually came in six days, like printed ties these ties are incredible, and they’re actually pretty nice, and the FU knocking down the front and what not.

Steve: So can we talk about the process on the suit, like the suit I imagine, do you need a pattern, or did you just take one of their off the shelf suits?

Nathan: Totally, so it’s always — whenever you go to produce a product, you learn so much about the product. And so with suits there’s so many different variations. The fabric and all this was done remotely like literally in a day. Our factory sent over fabric options like just through WeChat and email. We picked a fabric that looks similar to the suit that Conor wore.

Steve: But you didn’t have Conor’s suit in your hand either, right?

Nathan: Right, of course, and it was all through just online looking at images and saying, look, does this fabric look the same. And it’s not something you can do with all products; obviously sometimes you want to have the fabric in hand. Like with athletic apparel for example there’s a lot of fabric weights that you can deal with or even just in apparel in general. But with suits and the lettering, the lettering was actually the hardest part, because we had to space out each and every letter.

And so what ended up happening was like we just printed different spacing on a piece of paper and said, hey, like does this look like pretty good spacing, what size are these letters? And it’s literally spaced out to the exact millimeter, and so the spacing has to be spot on. And with actually suit production especially when printing on fabric, the factories first send it to the printing factory that print on the fabric, they then go ahead and have to cut and sew the sample to our specifications.

I actually got the suit spec’d out to fit me, so I wore on a fight night which was pretty fun. But it was a whole dynamic and that’s the whole process you have to go through. But literally if you have trust in the factories you work with, like that first day or I guess it was night because here in San Diego our night time is day time in China. We paid for the samples and the samples — I think I wrote an article the samples were like I want to say around $100 or so including shipping. And we paid for all that before we even had all the specs ready because we knew that we could trust these factories, and we knew that we needed to do this fast.

And so ten days later, the suit and ties and wallets all showed up, did a little photo shoot, and we launched FUsuits.com, and that went pretty viral. I mean to get that going viral, we partnered up with a digital marketing agency, and I can dive in the story more if…

Steve: Actually, I’m curious about the back and forth to get the suits made. Can you just kind of describe what you did? Did you send them a photo of the suit in the beginning?

Nathan: Yeah literally. So photos of the suit and then they said, well, what’s the fabric, what’s the spacing of the letters, and then we were like what’s the trim, what’s the cut, all those certain details.

Steve: But did you know all those terms, did you know all the terminology?

Nathan: So what I literally did was I went to a custom tailor here in San Diego. I said, hey, I need every little measurement you can spec out and measure me. And I did that, that same day, the day after we saw the press conference. I went to a suit tailor here in San Diego, got measured, sent those measurements to the factories we were working with in China. They confirmed the measurements, and then next step was spacing out the letters and picking the fabric color.

Steve: Okay so they already have like a suit design in mind, right?

Nathan: Right.

Steve: Okay. And so it was just a standard suit it sounds like, and then you just had to pick the fabric and then the design that went on the suit, right?

Nathan: Yeah I mean so here’s the thing just briefly touching about the relationship that you can have with these factories. A lot of people especially if you’re dealing with a factory that handles this product a lot, they know the specific Asians that they need to produce your product. Like if you’re going to produce backpacks or whatever maybe, they know all the material options, they’ll know what design items you may want on your backpack, what kind of zippers you might want to have. They’ll ask you.

If they’re a good factory, they’ll ask you those questions. They’ll ask you like, hey, what about this type of zipper, or this pocket you forgot about. If they’re really thinking about the customers they’ll ask you that. And so we’re fortunate enough to work with factories that ask those questions, that want to develop great products as well.

Steve: Okay, can you describe some of the choices that you had to make, or the tradeoffs? Like was cost — cost was obviously a factor, right?

Nathan: Honestly the margins on these suits were great. Like literary I think our unit costs on these would have been about $30 or so or $40 per suit, and we were retailing the full suit for about 400 and that was — I mean the original tailor was selling them for like six or $7,000. And then the color he was doing at I mean it was wool fabric, we had a back with a double open, we had two pockets on the sleeve, two buttons. Literally whenever you produce a product, you learn so much about different options that you can incorporate into the product.

Steve: So you got your sample back. Was the sample fine when you got it or?

Nathan: So what we always recommend is usually if you need to move fast, you’re going to want to buy samples from two to three factories. So we bought two different samples. One of the suits, the lettering was a bit too — the letters were just too big was what, they didn’t space it correctly, and we wanted to test that. That was something we said, hey, let’s send one space into one factory, another space into another.

So one of the samples came in, the spacing was too big, the other one was right on point. I mean I’ll share a photo with you of the suit I wore out on the fight night and it was incredible.

Steve: Okay so you got one sample that was good like just right off the bat, right?

Nathan: Mm-hmm.

Steve: And presumably it fit you and all that. What were some of the logistics that — so you paid $100 per sample?

Nathan: Yeah.

Steve: Okay. So what are the logistics then in terms of getting orders? Did you have to preorder a bunch of suits or did you take orders first and then produce them?

Nathan: So that was the biggest dynamic. Once we got the suit in I was fortunate enough to be connected to a few different photographers here in San Diego. I said, hey, I really need these products shot like right now today like you’re going to do those shoots tonight or whatnot, made it happen, got products images up. And that was the biggest dynamic is we launched the site promising people to fulfill the orders before the fight. And so it was a race against time, if you wanted to fulfill these orders we had to do it fast.

The dynamic of what ended up happening is that first week at sales when launched fusuits.com, did $23,000 in sales. And that was primarily — I mean we had a digital marketing partner that was setting up the site and handling the assets and was going to run ads, but we landed on high [inaudible 00:33:09] to slay like a lot of big media outlets driving a lot of good traffic to our site. And that’s what primarily drove a lot of those sales. But as we grew, the marketing guys made a slip up and image of Connor McGregor and he’s got a great legal team to operate that way.

But we used the image of Conor McGregor and the name [inaudible 00:33:33] is and they claimed rights to that and basically sent us a cease and desist letter within a week of our e-commerce store being up.

Steve: How many suits is $23,000?

Nathan: 400 divided by 23,000.

Nathan: Okay, so it wasn’t a ton of suits, but I mean that’s the thing about selling a higher price ticket item is you don’t necessary have to sell a ton of units to make a lot of money.

Steve: So did you collect the money first and then produce them?

Nathan: So what happened is the cease and desist. We didn’t even go on to production, we just had the sample, and then we had the cease and desist. It was like look, if you ship we’re probably going to sue you guys, or you can just refund them and take down the site. So that’s what ended up happening, but even then we had the production lined up. We’re fortunate enough right now to have the cash flow to do kind of case studies like just to showcase our speed of manufacturing.

And we’ve done other case studies like we are – I don’t know if you’ve seen the [dad bought bags] [ph] that have been going viral. We were working with the original creator of that, but so many people knocked that off now that his market share has decreased dramatically because he didn’t pull the trigger fast enough. But it’s really a lot of times if you’re looking to capture viral trends, you have to move fast. And if you’re going through open database or you’re spending time trying to find a factory to work with or don’t have trust in your manufacturing partner, your ability to move fast just isn’t there.

Steve: So after you got your first sample, that factory was basically ready to go with production?

Nathan: Yeah, we would have had — I mean we could have had 500 suits done in two weeks basically which is it’s not a ton, but 500 times $400, I mean I don’t know how much money that is in sales, but it’s now decent money for two weeks.

Steve: So would you have gotten inspection then also or did you trust this factory enough, I’m just trying to get an idea?

Nathan: Yeah that’s the thing, when we work with factories because we’re sending them in the flow, we put pressure on them and say, look, if communication drops off, if the quality drops off, we’re going to cut off — we’re going to cut you off from our list of factories that we work with pretty much. And so that’s the whole dynamic there is we put a lot of pressure into our relationship.

And I don’t know if pressure is the right word, but we try to rule our relationship around this dynamic that we create by sending them lead flow, and that’s the whole dynamic. We’ve had — I’ll be honest we’ve had — we only had one factory that we really had to cut out and that’s because the communication was too iffy and the sample that they had produced for a client was tablecloth actually, some really cool tablecloth, but the communication was just wasn’t there and that’s huge. If you want to connect with your factory like obviously they have to respond back especially if you’re trying to go on a production run.

Steve: It’s actually a shame that you never shipped because I had a whole slew of other questions, like suits have sizing issues, right?

Nathan: Yeah.

Steve: And I was kind of curious how you were going to handle the custom sizing involved in selling suits of guys of different sizes.

Nathan: That was the hardest part of the biggest question is like how do we actually size this out. And what we were going to do is just group it into small, medium, large, extra large and kind of just shipped that. I mean it wasn’t necessarily like a long term e-commerce play.

Steve: Yeah of course.

Nathan: It was a short term catching a viral trend. And so we weren’t necessarily — we weren’t thinking too much about the long-term customer relationship that we have with the e-commerce store. It was a bit of like just kind of comparing it to a drop shipping model where you have so many like turn and burn entrepreneurs that will drop ship products that take three weeks for the products to arrive to a customer, and they don’t have any long-term relationship with those customers. It was more of that model, but I think really the scalability for any e-commerce store is in branding, in private labeling and creating custom products.

Steve: So your plan was to get the orders ahead of time, so you knew what sizes that you needed and then place the order and then have the factory make it?

Nathan: Exactly, exactly and we didn’t even — we kept all the money in Stripe, I think is what we’re using. Because that was another thing too, we decided not to use Shopify, we used Woo Commerce because Shopify sometimes if they see stores that are infringing on others IP wishes like a potential risk that obviously came to play in this case study, Shopify will take down a store if it’s infringing on IP, whereas Woo Commerce usually just lets it fly.

Steve: Okay. I had a question because I get this question a lot in terms of dealing with plastic products. In your experience when designing plastic products, how much does it cost, and what’s kind of like your process? Do you need like a CAD designer, or what are the resources you need?

Nathan: Yeah I mean classic products can mean a lot, like this pretty general kind of product category, but I would say usually first dynamic is trying to find a factory that’s produced something similar to what you are looking to make. And that’s the whole process. If you’re looking through like an open database, obviously you have to spend some time searching through those different manufacturing partners.

But if you’re trying to create a custom product and really go through that route of making your own mold, most of the time you’re going to want your own CADs done, and honesty can get CADs done through like the outsourcers and freelancers abroad for a pretty effective rate. And then molds like it obviously depends on the product, but I mean you can buy molds for the low like just a few thousand dollars or even less than that now. I mean especially if you can find a factory where you just need to modify a mold, then that’s really not that much work; it doesn’t have to be that expensive.

Steve: Where did you find your CAD people in general, like what service did you use?

Nathan: I used Upwork, it used to be Elance, and that was my first time. That was like seven years ago when I was trying to bring this product to life. And I mean when I started out I didn’t even know what a CAD was. Luckily my dad is an engineer so he kind of explained what it was to me, and I just went through the process. And literally what I did like this is what I think you can do especially if you don’t have like a designer or product background. I say, look, see what products you like on the market, and then take different aspects of those products and apply it to a certain product to make it better.

And that I think is really – everyone is always trying to improve on different products, and you don’t necessarily need to create completely custom products. You can apply something that’s working on a different product to a new dynamic. Like for example with our watch straps that we invented, there was already those belt buckles that had a zip tie function. And some people say well you just took that zip tie function on the belt and put it on a watch strap, and you see a lot of brands that are doing that nowadays where they take aesthetic or a function that works on a product and apply it somewhere else.

Steve: And I guess the same goes with like clothing and textiles as well, right? You don’t have to actually have a pattern design per se, you can probably just take something that already exists and then a manufacturer maybe modify in some way, like get a pocket or a seam or something like that?

Nathan: Yeah totally and especially even with the rise of like more organic or sustainable products like bamboo or coal, all those different materials or wood, you see so many different brands that are sprouting out in all sorts of product categories because they see this trend towards sustainable products that are potentially selling better. And so they say, hey, if someone is creating wooden watches, why don’t I create wooden speakers, wooden hats and like we’ll have brands and stuff like that.

So it’s a whole dynamic, and I think that it opens a door for some entrepreneurs. But at the end of the day with the brand, I think it’s really the aesthetic that you create and especially on the marketing side there’s so much going on and in the digital marketing world right now that I mean I think you really need to start by honing in on a channel, optimizing that one channel and then figuring out other ways you want to grow.

You see some entrepreneurs that start off saying, oh I want to sell across channels on Amazon, Shopify, eBay, all these different channels, and like they don’t even know how to scale at one channel and they already started trying to scale five. It’s like look, first crush one channel, grow on that channel and then start expanding, then start figuring out other ways to grow.

And I think that’s partially because you have so many resources available where you can now sell effectively across channels, but also at the end of the day it’s partially the kind of maybe short sighted nature of some e-commerce entrepreneurs who really think they can really dive deep instead of — or I guess take a wider approach instead of diving deep on one platform.

Steve: I’m just curious, how do you prevent your manufacturers from selling your design to other people, or kind of violating copyright?

Nathan: Totally, I mean the IP question is always in play and we get that a lot especially with more customer private label products. I’d say first and foremost it goes back to the relationship that we have with these factories. We put contracts in place, but to be honest contracts number one are you going to really have the money to go fight a contract in China and is it even going to be worth it? And number two it’s just a lot of time that can be worth your time to go through that legal battle.

Ad so it’s all about the relationship on that end. And at the same time too like with branding, if you’re creating a new line of a consumer product good like let’s say socks or hats or whatever product it may be, at the end the day what’s going to sell your product is the brand. I mean like obviously you want to create a high quality product, but at the end of the day until someone actually touches and feels your product, they’re going to be sold especially online through the brand that you create.

Steve: Okay, I mean even if you design something completely unique, there’s really in theory nothing stopping a manufacturer from modifying a slight bit and selling to someone else, right?

Nathan: Yeah I mean I’ll touch on — I was looking into the story of the TRX straps, the workouts straps that are just like ropes, that I mean that founder literally spent I think I was listening to a podcast where he said he spent like five plus, five million dollars basically fighting a legal battle, and he wasn’t even fighting it necessarily with the direct factories overseas, he was fighting it with a trading company that was selling his products as a knock off brand on Amazon.

And what the lawsuit ended up happening is he worn it, but all that meant was that there was people’s products got taken off Amazon, and so he could now take over that online channel which is obviously huge and a big win. But at the end of the day I mean it’s always going to be a balance trading, you need products and there’s some stuff you can do with the Customs and Border Protection in terms of having them help you protect the IP around products that are being imported that are infringing on your trademark. But at the end of the day I mean sometimes you can work through these e-commerce platforms and have those stores taken down which is a more effective route.

Steve: Are you seeing more and more like trading companies and manufacturers selling directly on Amazon these days?

Nathan: One hundred percent, I mean that’s one of the biggest dynamics that I see in Asia right now is factories, they’re anxious to see what a product that they’re producing is being sold for online now, that’s a pretty simple Google search or buy new search in their case. And so they’re realizing that they aren’t making most of the margin, obviously the brand or company that is selling is making most of margin. And so if they’re able to sell direct, they are obviously making a lot more money.

But the hard part with that is number one; to be honest most factories in Asia are just bad at producing brands and in making cool products. And number two they just don’t understand the logistics of importing, and sometimes just don’t want to invest in it, just not their bread and butter.

Steve: So it just makes basically the bread even more important, because these Chinese factories are just throwing up their generic products on there?

Nathan: Right without a doubt. I mean that’s the thing, like you see what happened with recently there was fidget spinners, I mean it got crazy competitive and was just because everyone was producing those and trying to sell those. And it’s just the whole dynamic behind I think the manufacturing landscape right now is if you really want to create long-term protection around your product, you’re going to be selling the brand. I mean you can have IP around your product, but if you don’t have the money to protect that IP it’s not that valuable.

Steve: Right. All Nathan, we’ve been chatting for quite a while, I did want to get an opportunity to talk about Sourcify a bit. So tell us about your service, and what’s your secret source?

Nathan: Totally, so what we do is basic connect a company to the right factory and walk them through production process. This makes it easy for anyone to bring a product to life and cut manufacturing costs. I’d say our secret sauce is the ability to produce faster than anyone else, and more effectively. And the way it works is someone just submits a product spec on a website, that product’s specs get sent out to factories that we’ve pre-vetted.

Steve: How complicated does the product spec need to be?

Nathan: It depends on the product. For I guess simpler products like jackets or shoes like a tech pack or something similar works, or you can literally just send images of similar products and say, hey, I just want to put my brand on a product that looks like that. I mean we’ll literally just send it out to factories that we pre-vetted that produce those pretty much same products. So it can be simple in that regard.

Obviously if it’s a product that involves a mold, you’re going to need a CAD or at least have some understanding of the technicalities of that mold. And from there, we send out the products specs to factors we’ve pre-vetted, those factories send back price quotes, you get shown those price quotes. You can communicate with — usually we send in like three to five price quotes that we showcase to you. You can see those price quotes, choose a factory to work with, get a sample made, go through a production run.

And what’s really cool about our platform actually, by the end of this month it will be able to handle the payments between a company and a factory, and we send wire transfers through block chain. So we beat the bank straight and send a wire transfer in six hours compared to two to three days. So it’s all encompassing in terms of the importation of the products, we help you understand the compliance standards of your product and then also work with 3PLs and freight forwarders to optimize that whole side of the logistics.

Steve: So it’s like a one stop shop essentially?

Nathan: Exactly, I mean our goal is to just make it easy to bring a product to life. I mean the struggle that I went through seven years to bring my first product to life was ridiculous. And after bringing so many products to life and realizing what was out there, I figured there must be a better way, and that’s really why I started Sourcify.

Steve: How do you guys get paid, is it a monthly fee or an upfront fee or do you take like a cut of what the cost is?

Nathan: Yeah so right now it costs — we’re switching revenue models actually like literally next week, but basically what it’s going to be is it’s going to charge 1.99 to submit a project, and then we take a commission, it’s a processing fee basically between you and the company when you pay the factory to go into production.

Steve: And then once there’s already business done with that factory, do you guys kind of step out of the way at that point?

Nathan: I mean it can be all between you and the factory. Our payment processing research will always be there and we plug into different messaging platforms like WeChat as well to kind of streamline and optimize communication.

Steve: And when you say vet the factory, it means you’ve checked all the certifications and that sort of thing, right?

Nathan: Exactly.

Steve: Okay, well Nathan it sounds like a really interesting service. I appreciate you coming on the show, and telling your story about the Conor McGregor suit which was really random and answering all these various product sourcing questions regarding factories in China.

Nathan: Totally my pleasure, thank you so much for having me.

Steve: Yeah man, thanks for coming on.

Hope you enjoyed that episode. Nathan is a hustler and he’s now my go to guy when it comes to product sourcing from Asia, and in fact he’s going to be speaking at my conference in May. For more information about this episode, go to mywifequitherjob.com/episode199.

And once again I want to thank Klaviyo for sponsoring this episode. Klaviyo is my email marketing platform of choice for ecommerce merchants, and you can easily put together automated flows like an abandoned cart sequence, a post purchase flow, a win back campaign, basically all these sequences that will make you money on auto pilot. So head on over to mywifequitherjob.com/K-L-A-V-I-Y-O, once again that’s mywifequitherjob.com/K-L-A-V-I-Y-O.

I also want to thank Privy for sponsoring this episode. Privy is the email capture provider that I personally use to turn visitors into email subscribers. They offer email capture, exit intent, and site targeting tools to make it super simple as well. I like Privy because it’s so powerful and you can basically trigger custom pop ups for any primer that is closely tied to your e-commerce store. If you want to give it a try, it is free. So head on over to P-R-I-V-Y.com/Steve, once again that’s P-R-I-V-Y.com/Steve.

And finally I want to thank Payability. If you’re looking to take back control of your cash flow and scale your Amazon business fast, then sign up for Payability, and say goodbye to cash flow issues and stock outs. With daily payments, you can speed up your supply chain, buy inventory at optimal times, and stay in the buy box. The more control you have over your cash flow, the more buying power you will have. Visit Go.payability.com/Steve to get started, and cash in on a $200 credit just signing up. Once again that’s Go.payability.com/Steve.

Now, I talk about how I use all these tools on my blog, and if you’re interested in starting your own ecommerce store, head on over to mywifequitherjob.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.

Outro: Thanks for listening to the My Wife Quit Her Job Podcast, where we are giving the courage people need to start their own online business. For more information, visit Steve’s blog at www.mywifequitherjob.com.

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One thought on “199: The Best Way To Source Private Label Products From China With Nathan Resnick Of Sourcify”

  1. Belisa says:

    Thank you for putting this information on line. It was extremely helpful. The one thing that I can’t seem to find is the date of the podcast and if there’s a transcript or not. Any light on these questions would be appreciate it. Thank you. 🙂

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