Hoe Lui is someone I have known for a very long time. In fact, he was one of the guys that helped me out early on by guiding me through my first Canton Fair. What’s super cool about Hoe is that he owns and runs his own Chinese factory, Kloanz.com, which makes bobble heads for professional sports teams.
Now you’ve probably read a lot of articles on how to deal with Chinese vendors and how to navigate the cultural differences in China but as far as I know, no one has ever interviewed an actual Chinese factory owner.
So I’m thrilled to have Hoe on the show today and he’s going to teach us how importing from China works as an insider. Enjoy!
What You’ll Learn
- Why Hoe decided to start a factory
- How to vet a Chinese factory
- How to ensure quality from factory to factory
- How Hoe got his first customers
- Why Hoe doesn’t list his business on Alibaba
- What the payment terms are for Hoe’s company
- What he sets his minimum order quantity at
- How to get your products tested and how much does it cost
- How to go about finding Chinese factories to source your products
- The best way to find quality vendors when you don’t live in Asia
- What’s the best way to approach a vendor to make sure you get what you want
- How to perform quality control with your products
- If you need a website logo or website design, make sure you check out 99Designs.com and enjoy $99 in savings by clicking on this link!
Other Resources And Books
For more information go to www.mywifequitherjob.com/contest. And if you are interested in starting your own online business, be sure to sign up for my free six day mini-course where I show you how my wife and I managed to make over a hundred thousand in profit in our first year of business. Go to www.mywifequitherjob.com for more information.
Now before I begin, I just want to give a quick shout out to this episode’s sponsor 99designs. Now originally, I wasn’t going to take any sponsors at all, but 99designs caught my eye because, well I suck at design. And in fact, when I first started my online store back in 2007, the design for my website was terrible, and I had absolutely no idea who to turn to. Now first forward to the day 99designs is a site where you can provide a description of anything that you want designed whether it be a logo, web page, a t-shirt– pretty much anything and have dozens of designers compete to deliver you the best design possible. And by best I mean that you get to choose your favorite design among dozens of submissions from a pool of over 315,000 designers.
So, if you are design challenged like I am, I highly recommend that you go over to 99designs.com/mywifequit, and if you use that link and tell them that Steve from mywifequitherjob.com referred you, your design listing will be bolded, highlighted, given a prominent background and featured before all regular listings so that your request stands out among all of the designers. And in fact this special offer is worth $99, so if you need a logo, website, t-shirt, business card, or anything designed, go to www.99designs.com/mywifequit. Now on to the show.
Welcome to the My Wife Quit Her Job podcast. We will teach you how to create a business that suites 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: Steve: Welcome to the My Wife Quit Her Job podcast. Today, I have my friend Hoe Lui on the show. Now Hoe is actually the cousin of my best friend, and what’s cool about Hoe is that he runs his own factory in China. Now if you read e-commerce blogs, you’ve probably seen a bunch of articles on how to import goods from Asia or how to interact with Chinese vendors, but as far as a I know I’ve never seen an interview from an actual Chinese factory or himself. So that’s why I’m really excited to have Hoe on the show today.
Now Hoe runs the business Kloanz.com, where he makes bobble heads for sports teams among other items. Now chances are if you’ve seen a high quality bobble head of a baseball star or a sports star, it was made by his company. And before we begin, I thought I just throw out some random facts about Hoe since I do know the guy personally. The guy loves baseball and back when he was younger, he once played every single position in a single game. He used to star in commercials and his favorite teenage band was Color Me Badd, and his favorite song was “All for love”. And with that welcome to the show hoe.
Hoe: [Laughter] That’s nice, okay, oh that’s good, I recalled my [Inaudible] [00:03:54]
Steve: Well I and Eddy met up by the way, let’s go on live to everyone. So man hey, give us the background story, what you do and how you started Kloanz.com.
Hoe: So I was in LA and then I had an opportunity to go to Hong Kong back in the 90s, and then basically– so I started my company out there. And we decided– well first we didn’t have the factory, so we started to do different figurines and things like that [Inaudible] [00:04:19] recent type items. And then we kind of stumbled on one of the factories and we started investing a little bit more, and then and so we basically controlled all the production. And so then we started you know when the bobble heads came about– that was the really maze bobble head back in the day when the [Inaudible] [00:04:39] were giants. That was the first one that came out, and then everyone started you know jumping on the button [Inaudible] [00:04:45]. So we started making them.
Steve: So how does that work, so let’s say I wanted– when you first started out you had nothing. How did you get your first business, or how did you get anything made in the first place?
Hoe: Oh I mean I worked for a buying office so I mean you’re asking how I learned the business, so you know when you make something I mean like say for a bobble head I mean a lot of it is– I mean when you’re ordering from China you need to have quantity.
Hoe: So you can’t have them– you can’t be ordering– you know some people will take 500 pieces or you know a few hundred pieces but it is just as much wrapped into 500 pieces as they do to 10, 000. So a lot of smaller factories do take smaller orders but the problem is when you do it, you still have the same cost for shipping. I mean when you have– there is minimum charges for shipping and everything and the ship that’s less than the container load, it’s not packed in a full container from the factory and delivered to the US or whatever your destination is there is a lot of breakage and everything. So, there’s lot of those different factors, so for us for example like on our bubble we try to have a minimum of about 3000 pieces.
Steve: Okay, so what’s involved in making one of these– you have to have a mold, is that correct?
Hoe: So, we take photos I mean normally the teams will give us some photos, we try to get the front and then the two profiles or whatever expression that they want to have. And we basically sculpt it out of clay. And so it’s just– a lot of people are doing it with about 3D imaging and everything, but we find that doing it by hand– it takes a little longer but you can get the nuts and little crannies and all the little details and the kind of the character I think of each piece. So for us we’ve doing this so long that it makes a lot of difference, I mean we don’t do caricatures, we do more I mean really how the player looks. So, it’s kind of I think ours has an element of being very realistic.
Steve: So, does that mean you have actually sculptists and artists on your staff to create these things?
Hoe: Yeah, we have sculptors and then we have a full art department, and the art department basically gives the sculptors all the information and gives them comments. They basically you know plot out lines on the face and then just kind of they can see if the eyes are uneven and so it’s quite– it’s pretty intensive. It takes about three weeks to a month just sculpt the piece.
Steve: Okay, wow.
Hoe: once you sculpt that piece and basically it looks like you know mud that’s been sculpted and then you just send it out to the buyers and you show that sculpt next to the photo of the player and then you just– so then they can see at least the proportions and everything are correct. And then once they approve that, then we go into sampling and that takes a few days. So we make the mold from we pour some silicon over the mud and then make a soft mold from it and then we pour this ,ester poly resin material into it, then we make this kind of– it’s almost like a clay material that is white and then you paint it, then you put all the colors on it.
Steve: Everything is hand painted then?
Hoe: Yeah, I mean the first one we get , we do a paint master– we paint it up and then we send it to the buyer and let them approve it or make changes, and then once that’s done, then we do– then they approve it then we do production molds on it and then you just basically– yeah you are left with all these heads and bodies and then you have a roll of– it could be– you know 20 people could be could be filling. We have about 350 people at our factory.
Steve: Crazy, okay. So, people in the US who are just listening to this, they are probably going to be really shocked. So how do you actually start a factory? Do you just rent out a place and just start hiring people and– I mean where do you find the people that work in your factory?
Hoe: Well, I mean it’s definitely a lot more difficult now than I mean the people would say well China has got– it’s the most populous nation in the world. But it’s still– a lot of people have lots of different options now in China, and so they are making a lot more money. So it’s hard to get factory workers, but eventually I mean it’s kind of like the US– you put out ads in the newspaper and you get workers, but how do you start a factory? Most of the time because how are you are a US citizen, so you want to have– you need to have a Chinese partner someone who’s local.
Hoe: So [Inaudible] [00:09:24] because there a lot of things that they have to do that’s may be not how we normally do it in the States, or you know…
Steve: Give me an example that of that actually.
Hoe: Well, just things that would be kind of on the edge of legality maybe.
Steve: [Laughter] Okay.
Hoe: So, those things that happen so those things happen and then you can’t refuse it, you have to do it otherwise you have lots of problems with exporting out of China. I mean with customs– customs can take stuff out of China and not let it go, and we’ve had that situation for like a month ago.
Steve: So how do you find this partner in China?
Hoe: For me it was– we had some business with them before, so when– then we had some opportunities from our business we just felt like okay we would like to invest in the factory and try to build it. They were at that point I mean it was a small factory so felt like we had a chance to grow it.
Steve: Okay, and why did you decide that you needed a factory, why not just take orders and then contract it out and find people to make it for you? Why did you want to own the factory?
Hoe: Well at that time I mean you know things change if you ask me whether or not I would have done that, I probably would not you know what I mean.
Hoe: And I mean I would be very honest, it’s not something that is for the faint of heart. It’s not– I think right now I would probably not do the same thing again but what it does provide us is some credibility. The eyes of buyers I mean people basically they think that– people would still think “oh! You are the factory, you are cheapest” that is not the case I mean I think you are in this business you know, it’s not always cheapest when you are going directly to a factory. Some other people can have other relationships; they could be a different quality level.
So like at this point I would probably say that I wouldn’t recommend it because there are so many things that you know the learning curve is so great, and it’s not like oh I did it once, it’s the same thing again if I started another. It would be a whole different set of circumstances and the things that I would probably concentrate more on the sales part of it and developing side, I think that’s where we are headed at to because we can’t manufacture everything say for example a team that we work with, they’re not just ordering bobble heads they want backpacks, they want caps, jerseys, plush items like their mascot. So you can’t possibly make everything at your own factory.
Steve: So what do you guys do about that, you just manufacture the bobble heads yourself and then find other people to make the other stuff?
Hoe: And then for us our biggest competitive advantage is having an art department, a full art department that understands what’s your taste and my artist– my staff have been with me for over ten years. So it allows us to– when we go into our teams for example go into say the Gold State Warriors, I can come up with ideas that– and drawings that will look pretty close to the final sample. Like it’s not going to be– it’ll be designed from a manufacturing point of view so it’s something that can be, that really looks like how it will look you know when they give it up to the clients.
Steve: That probably gives you a big advantage over some of the other Chinese factories, right? Because you have this western– because you are from the US essentially right?
Hoe: Obviously, I mean that’s– so people are– we are not the only bobble head makers out there, so there are other people out there. They get photos from the importer who is selling to the team, they get photos from them– their factory and then they just give it to their sculptor who doesn’t know baseball, who doesn’t know basketball, who doesn’t know any of their sports.
So they just sculpt from– we have their pictures, they are just– so they are not like 3D images that we get. So they don’t know the player, so at least for us when we are doing a baseball pose or something like that, we can suggest poses and everything that are really– that look like the player, like it’s a basketball pose or it’s a baseball swing you know. So those little details I think just because of our sports background I think that helps out a lot. And you see other people when they do like the warriors [Inaudible] [00:14:06] and they look like it is really a stick figure. So it’s kind of like you know something that people do that based on price and everything, but for us keep to our standards and make sure it’s you know I play basketball, I play baseball, so I want to make sure it looks right.
Steve: So you mentioned like in any given factory the prices could be completely different even if they are getting manufactured, but given that the quality is the same what would be some of the different factors involved in the prices that you might get from a factory in China?
Hoe: Oh no the quality will probably not be the same.
Hoe: There is the different like say if it’s a backpack it could be the thickness, it could be the sowing, it could be how they are manufacturing it, whether or not they are doing it under the one roof or they are contracting it all out. And so sometimes those things– it works out but sometimes it’s like oh when you have a problem then that’s when you know whether or not that factory is going to be you know satisfying their product, because a lot of them– I mean for us in our business, once we get an order I mean that state that it’s given like they say December 16 they are going to give this out you know and so we work around that to make sure that it’s delivered on time.
Hoe: We can’t basically a week before tell the team “oh! Sorry can you cancel that order?” Factories do that you know some factories, so for me it’s all about when you pick other factories you want to be able to do your diligence, make sure that they’ve done stuff and that you can sleep at night. I mean it’s a sleep factor for me it’s like I don’t want to give an order to someone and be constantly micromanaging it you know.
Steve: Right. Incidentally that knockoff North face jacket I bought when I visited you guys last fell apart as soon as I came home but that’s a different story. Okay, so how do you vet a factory like let’s say I want to get something made, let’s say I want a bobble head made and I’m like first of all are you guys on Alibaba at all?
Hoe: No we aren’t.
Steve: You aren’t, okay so how do you get business in the first place?
Hoe: For us we are dealing directly with the teams.
Steve: How did you get that first team?
Hoe: When I came back in ’06, started the US side of the business because I already had my Hong Kong China site. So I started the business over here, I mean we’re over in Northern California and so I just kind of called the Sacramento kings and they wanted to see me okay, cool.
Steve: You just called the Sacramento kings?
Hoe: Yeah, I mean you just physically I mean some people you can’t get a hold of them you know but you kind of its old school and you hopefully if you get– for me it’s all about if I can sit down with the team– the client and I explain if they give a fair shake for anybody who does– for their vendors then I think I can explain to them our competitive advantage and once they realize that then they can go like “oh! Why do I want to buy from someone else who is buying from me you know what I mean? So I do have clients who sell to the same teams who I make their stuff but it’s through that client.
Hoe: So it’s a little bit of a sticky situation but it is what it is you try that.
Steve: So everything that you’ve got so it started out by you cold calling teams to get the initial business and then after that it became a game of referrals. Is that accurate?
Hoe: Yeah. At first I mean still I tried to do some cold calls you know I don’t want– you don’t want to rest on– I feel like we have some momentum, I want to keep on calling people. So now we have some teams that will vouch for us which is very rare in this business. You know the buyers will go out on a limb to actually recommend you to someone because that’s still on their reputation online.
Steve: So I’m just curious how come you don’t list yourself on places like Alibaba?
Hoe: Because you know there is a lot of…
Steve: Noise or.
Hoe: Pardon me?
Steve: Is it– would you get a lot of riff raff contacting you? Is that one of the reasons or…
Hoe: Yeah, there is a lot of just general inquiries and we are just trying to you know work lean and lean right? So we can’t be replying to everyone, it’s just really difficult. We can’t hire enough people to handle that amount of inquiry.
Hoe: And so everyone basically when you are on Alibaba, everyone is just talking about price. We’ve never been about that I mean we– I tell everyone we are not the cheapest I mean in whatever we do because we have a lot of people managing this stuff and people who speak English as a first language not just myself. I have people on my staff who are from the States you know who kind of get our business so that when I’m out here in the states meeting with teams, I can just kind of forward their e-mails back to my staff back in Hong Kong and China and they can kind of follow up on everything.
Hoe: Why I mean Alibaba because I think it’s more effective for me to go and you know– this next week I’ll be going to three teams in four days.
Steve: Wow! Okay.
Hoe: It’s more effective, I just kind of hold up an NBA team that I have been wanting to contact for a while and they said okay lets meet up since I’m going to be in that area, I mean wanting to see the baseball team, so and then I had a couple of people call those teams up for me to kind of say why don’t you try working with them– working with us. So that’s when it helps to have a fairly unique name that’s Hoe.
Steve: That’s true.
Hoe: I mean they go all right we’re going contact Hoe, you know it’s like… [Laughter]
Steve: So you mentioned that you guys are pretty lean, so what are kind of some of your policies in terms of like the minimum order quantities, the turnaround times the payment terms and that sort of thing?
Hoe: We try to keep it around 3,000 pieces.
Steve: 3,000 pieces, okay.
Hoe: And it depends if it’s like a plastic item when you have a stainless steel mold that you are going to have to invest 8,000 to 10,000 dollars on, then the minimum is going to be 20,000 pieces because you can’t advertise it over a small amount of pieces, it’s just not going to make sense, right? So if it is some things like plastic maybe 20,000 pieces and some other so– some poly resin items like our bobble heads maybe 3,000 pieces and it really depends sometimes on the imprint like so if we are doing the like a jersey or something you have to imprint something maybe that needs 5,000 pieces. So it really depends case by case, we don’t have anything in stock everything is custom.
Steve: Made to order.
Hoe: Yeah, so…
Steve: Okay. And so if someone asks for samples I guess in the case of bobble heads you would always give them a sample anyways based on the prototype?
Hoe: Yeah, I mean we basically like if it’s a customer or I mean we have a sample charge and everything so…
Steve: Okay, and typically that sample is delivered– it’s a custom sample right?
Hoe: Yeah. Or sometimes people don’t want to pay a few hundred bucks or 500 dollars to make something, so then they get something okay here is a seven inch bobble head, here is the type of quality that we make. So it’s like when they see a professional sports team they are like “Oh, okay”. So these people buy from us, so then they kind of there is some kind of credibility right there built in.
Steve: Okay, and what are the typical payment terms? Do people pay you in full or is there an upfront payment and then you get the rest later? How is the payment terms work?
Hoe: First its 50% deposit.
Hoe: And 50% before it ships out of China.
Steve: Okay. And how does it work, so let’s say it ships and it gets damaged is just everything insured? How does the quality control work?
Hoe: It depends, if we are doing the importing on it we have insurance for it, some of the stuff when it gets– how do we quality control it. We normally we will put together quality speck sheet and work out with the client like okay what’s good and what’s bad and then you go by established– it’s called AQL acceptable quality level standards. And so they have numbers basically out of the 10,000 you pick out 300 pieces out of that, here is your majors, minus. What are the majors and the minors, you figure that out with your client. So it’s kind of it’s all pretty standard.
Hoe: We can get testing I mean we’ll do all the testing for the lead, some of the CPSIA, the consumer product safety…
Steve: Yes, Yes okay.
Hoe: We do that basically if it’s a toy you do the toy test and depending on the age grading, that’s how you develop stuff as well. Okay, does this have to be all age grade you know it depends on the client like if it’s an import that we’re selling to Kraft foods, well we did before a few million pieces of an item, so you work with a testing lab and so all of our stuff is tested.
Steve: Are you guys in charge of that or the end customer in charge of that?
Hoe: We normally help them do it I mean we’re using pretty well known testing labs.
Hoe: So sometimes if the client is big enough they have their own rates with a particular testing lab, then we use that.
Steve: So let’s say you are making some sort of kid’s toy, how much does the testing and certification actually cost?
Hoe: Well that stuff can cost anywhere from 800 to 1500 to 2000 dollars.
Steve: Per item?
Steve: Wow. Okay.
Hoe: Because, the toy tests are a little bit, I mean it’s more intense as you can imagine right?
Hoe: So some of the other stuff like our backpacks is lead testing I would say you know or they test it phthalate, right? So they test the zippers and things like that. So it varies, toy testing is pretty much the most expensive as it is the most intense right?
Steve: So let me ask you this, let’s say the team wants bobble heads but they want something else that you don’t make, right? So what’s the process that you go for to find someone to make that item? So let’s say it was for like blankets or something and that’s something that you don’t do and you actually don’t know anyone off hand that makes that, how would you go about finding someone to do that?
Hoe: There are trade shows in China; I mean the Canton fair I think you’ve been over there as well.
Hoe: So you go over there and check it out, I mean we do that just for our own market research just to see what people are putting out there. And so that’s something– you can go on Alibaba but it’s just a reference point more or less okay. When you go to the Canton fair it’s just a reference point and once we start talking with them then we have– I have people from my China office go to the factory and check them out, because a lot of times they are not the factory themselves, it’s an export company that reps those factories. Sometimes those factories don’t have proper licenses to export. And so you kind of want to deal with some of the exporters who know the ins and outs about taking goods out of China because you don’t want suddenly oh all the goods are done oh well it’s got stuck because they can’t– they didn’t know how to fill out the forms.
Steve: All right.
Hoe: So they filled it out wrong and people do that, oh they filled up the weight a few tons more than it should have been or something already less you know and that really if the China government– if the customs, if they had a bad day that day and they wanted to mess with you they can mess with you.
Steve: So, What happens if let’s say you are in the US and you couldn’t make the canton fair, how would you actually find companies and kind of vet them? What would you do?
Hoe: More difficult, I mean that’s bas– well that’s kind of what our competitors, they have advantages I mean even when we are still in Hong Kong and China, even for us when we are here on the ground trying to go visit people, bad things do happen. So you can imagine if you did it from the States, it is you are at a big disadvantage. And what you want to do, is you want to ask around in the states, you probably want to go through like say Hong Kong trade development council.
Hoe: People that are you know so they are out of Hong Kong and maybe they have a list of vendors. You can do that. You know you can work with importers in the states.
Steve: Do they have a website saying this is the Hong Kong trade development council. Is that what you’ve just said?
Hoe: Yeah. You can look that up TDC it’s called. So and then I think on small orders, what you should always probably do is, you buy from people in the States first I mean the ASIS suppliers. So once you start getting some of the orders, getting a list of business first I mean you don’t want– people a lot of times they just go on Alibaba and they look at these prices and are like “wow look at how much we can save”, well then they order a bunch more than they wouldn’t have if they did it from the States at half the price because they felt oh I have– it’s so much cheaper, I can buy so much more and then they end up with a lot of inventory that they have to close out.
People always you know they have– when they first see pricing from overseas they are like “wow it’s so much cheaper than in the States” but sometimes there is a reason for that, you know. So what you probably want to do is you know try and have less margin at first and try to buy less quantities so you don’t have that much inventory and once you get to a certain level where you go okay, well 5,000, 10,000 pieces you can sell, let’s try and start you know talking with some people you know because a lot of these companies out of the States, they will help you do direct import orders as well.
Steve: Are there any companies that you work with that you can recommend?
Hoe: No, but I think you can I mean because there are some of them are our clients right?
Hoe: But I mean you can go online a lot and then they have you know they are pretty big, you know some of the big importers they basically they buy you know 20,000, 50,000 of t-shirts, hats, blanks and then they have the ability to imprint them right? So I mean those are I think the safer options you may not make as much but at least you can find out whether or not you have a business.
Steve: So your recommendation would be to just try and do stuff in the US first until you get sufficient quantity and then you go overseas to you know once you know for sure that’s stuff is going to sell?
Hoe: Yeah because I think that you know I mean you know I always think that people should just sell, you’ve got to stay here and just sell you know and like if– because then you’ll spend so much time you know on Skype, on the phone at three in the morning you know talking with overseas you know talking with factories and the other thing is the language barrier right? And Chinese people tend to say “Yes, Okay” you know verses in the states the questions are always like “Yes or No? Can you do this yes or no?”
Well then in China people will be like “well yes we think we can, but you know but there may be some difficulties” then for us we would say “well but you can do it right? Yes we can but there is still a lot of difficulties” you know but [laughter]. They are operating a bit it’s like I told you that there’s lot of difficulties with it but people don’t get it right? People don’t get it, people think oh but you said you did it– you can do it. But the culture is not such worried, they’ll go they’ll refuse an order right?
Steve: So these are the general inclination of an overseas vendor is to just say yes with caveats essentially. So let me ask you this, so what’s the best way to approach an Asian vendor to make sure that you are going to get what you want?
Hoe: You definitely want to find out like who they are and see if they can tell you some of the people they are working with you know. Sometimes they won’t tell you but I mean you know you can still find out. There are also certain websites that if they are shipping stuff to the States, you can find out– you can type in their company name and find out who they are selling to because all the bill of ratings, I don’t know if you know.
Steve: Yeah, it’s all public knowledge.
Hoe: Yeah, it’s all public. So it’s in those websites like pencheva [phonetic], commons mother, import genius or something like that you can find out like where this factory is, if they were the shipper right? If they were the people– if they were the company that was on the documents right? So you can find out that so and then I mean is there any sure far way. Okay we have our offices in Hong Kong and China and there is no sure far way you know there is a reason why things are made in China okay, or in these countries that are– I mean the infrastructure is not great, there are certain things that happen, when it’s all perfect we are going to be moving to…
Steve: Some other country.
Steve: Right [Laughter]. So when you send your people out to the factory what are you looking for?
Hoe: We are looking for decent people, we are looking for– I mean really I’ve been in this business for over 20 years and it’s kind of like you get what you pay for, you know and sometimes it’s like wow okay now I know why they made it so cheap. It’s like and it’s pulling teeth so you just kind of see how they are, what’s their standard. Because sometimes you think okay- I mean I had a conversation a few years ago it was like I had to send a piece of white paper to tell them what white was you know what’s white color? I’m like snow white you know snow in China is really kind of yellowish.
[Laughter] I mean like what is white? And it was like this kind of conversation over white obviously and I ended having to send like that piece of paper is like yellow. I mean so when you have these kind of– and that’s just one thing but it’s just kind of– you just have to you know at first I think it’s best to work with other companies, there is a reason why you know there are trading companies out there. Sometimes there are the big trading companies out of Hong Kong, I mean that’s what Reebok and a lot of these companies they work with big trading companies in Hong Kong.
And you can look up you know you can look up biggest trading companies in the world and there are a lot of people– there’s a lot of big companies out there, they have full infrastructure up there. I mean you’ll pay for it, but it’s just at the beginning stages sometimes it’s okay to do that you know. I mean if the order is not that big and you can afford wasting a few thousand dollars like 10,000 dollars, then you can go for it, but it’s like you know it’s okay when I mean sometimes and most of the times it would work out, but then sometimes there are those things that “oh my god I didn’t cross those T’s or dot those I’s” you know it comes back and bites you.
Steve: I mean I got a story there one time we were just kind of haggling over the price because they were raising these prices up on us for some of our handkerchiefs and we ended up haggling down and they conceited a little too easily and when we finally got our shipment the fabric was just paper thin, and we ended up not being able to sell these things. So, how do you kind of mitigate like how do you deal with quality like it’s hard to specify in words right? So when you are going and let’s say a team wants to order backpacks or what not, how do you know the quality that you are going to get? Like how do you make sure that the quality is perfect?
Hoe: What’s the samples made up of? The sample is normally made from fabric that is normally existing there at the factory, okay. So that verses when the material is finally there delivered and then they start cutting it that could be a big difference.
Hoe: Because maybe they get the material of that fabric and then it’s thinner but nobody picks up on it. So for us we go in and we check on the fabric when it comes in. So we are there when they are cutting it. When we first get the samples we make sure that once the mass production fabric is there we get some samples made up right away, we want to compare– make sure that its okay you know make sure the gauge is correct, make sure the weight is correct of the material.
Steve: Okay so what you are saying is I just want to retaliate this for the people listening. Your sample is not necessarily going to be representative of the final product right? So it’s important for you to ask the vendor to give you a sample of the final raw materials before they begin, is that…
Steve: Wow okay, so back to your business so right now you don’t advertise on Alibaba, you have a website but does the website actually generate a lot of business for you?
Hoe: Not really, we need to redo it I mean it’s some old technology so you know so my Iphone doesn’t really show it up pretty well. So we do need that’s one of our focuses in the coming months to kind of redo it a little bit. It just serves as just a place for people to go to kind of check out the press area simply because we put up some of the press that we’ve gotten and some of the– like I did a segment on the Dodger TV show.
Steve: That’s pretty sweet.
Hoe: It was kind of cool, we went out there and we showed them how to balance on baits and it was where Mani Ramirez was playing and we turned it around very quickly and so they wanted to show the whole production process from beginning to end and so it was kind of cool. So it kind of gives us credibility too, so I’m sitting there on the dodger’s tee network.
Steve: Yeah, that’s awesome.
Hoe: So it was kind of cool you know it was a first experience and I know now that I need to script that next time I kind of went out limp on it. I did a great job editing and so we came out pretty funny I mean, so the website doesn’t do much. It’s just kind of it’s for people to see kind of some of the other work that we do.
Steve: Okay, and so it’s primarily just direct sales you going around visiting these people face to face and then negotiating deals with sports teams.
Hoe: That’s the bulk part of our business I mean what we try to do also is we do two trade shows a year in Hong Kong so kind of works. My belief is that we want to try to keep expanding what we do and stretching ourselves not just doing sports teams or corporate companies, we try to do our own retail products, We’re doing– we have our own sculptures and artists, so we try to use those assets and try to create product lines that– so that when we do these shows, when we exhibit there we show a product that is retail ready. So then we were fortunate enough to kind of create couple of different lines, one of which is I’ve got to get this line which is like 12 inch garden gnomes essentially but a company retailer out of Australia picked it up and we’ve been doing it the past three years and quite a decent quantity I mean they are like out of 30-40 dollar retail so it’s…
Hoe: It’s pretty cool and even though those orders aren’t that big but it’s nice to kind of come up with an idea and then someone buys it. So we have duty shows to try to be proactive about it, do they pay for themselves these shows? Not always, but for me it’s kind of like the proper way of doing the business right? If you are in the business you want to kind of you know be creative, thinker.
Steve: So you make the product ahead of time and then you display it at the show to see if anyone likes it, is that…?
Hoe: It’s pretty old school right?
Steve: Yeah, it is.
Hoe: It’s just sometimes okay we try to do something that we like you know and then it is nice when they order it because it’s just kind of like they order it and we basically…
Steve: They’ve validated your idea essentially.
Hoe: We created and made the boxes so it’s kind of we just put their name distributed by that particular company. So we pick up orders from Australia, the UK, Germany, Italy. So it’s kind of nice I don’t mean in the states it’s still has the largest demographic, you know similar demographic and everything so those are the biggest orders still.
Steve: So what are these two trade shows that you go to?
Hoe: We exhibit in October which is the Canton fair which is in Hong Kong it’s in Wan Chai over the convention centre and then the TDC show which is in April which is a gifts and premium show.
Steve: Okay, I’ll definitely link those up in the show notes, cool. And are these shows open to the public?
Hoe: Not, I mean you have to have a business I guess you can’t just walk in. Because nobody has stock, so it’s not like a show in the States where you can go in there and buy then you can buy individual things people have it you know [Inaudible] [00:40:08].
Steve: Okay and these are much smaller in scale than the Canton fair, right?
Hoe: A little bit smaller.
Hoe: But I think it’s more creativity. Canton fair– there’s a lot of I mean it gets overwhelming the first time you go there it is literally you know…
Steve: I didn’t even get through a single building actually.
Hoe: The buildings are not like so popular; I mean it’s like six floors on each one.
Hoe: It’s just crazy and that’s when you realize okay the prices can go everywhere you know depending on where they are making it and they are really like you go experience something– you thought everything was going to be good and then they come back and it’s like wow you like it.
Hoe: I mean you have to be– when you are doing importing you have to kind of be willing to spend the money for FedEx for samples even though it seems like okay I got to pay 100 dollars for this package for just a couple of slotches [phonetic] of a material, you should do it, right. You realize now like I should’ve done that, I should have gotten many orders, I should have got you know….
Steve: Oh yeah, we’ve learned our lesson, we actually even use FedEx for some of our shipments like if we need something immediately we just send like a 100 pound package over by air. It’s more expensive but we’ll get it faster.
Hoe: A lot of times you just– you want to make your clients happy right?
Steve: Yeah. Absolutely, so I wanted to kind of give you a hypothetical here. So let’s say I want to make a plastic widget and I’m coming to you, what do you need from like what materials do I need to provide to you in order to make this process smooth? Like if I’m your customer.
Hoe: Oh we’ll just find out where we try to sell it to. So if it’s a kid’s item, it’s a toy item then we figure out like you know how we can get to measure in trongstan [phonetic] here in Hong Kong and China or we can do it a lot of times if you just have a rough idea a lot more say try to get the handmade sample or try to get more information done locally in the States because then its more efficient.
Steve: So get the engineering drawings done like where would I go to get that done?
Hoe: There are companies in the States that do this.
Hoe: I mean it costs more money but a lot of the times you want to be close by to those engineers so you can tell them no don’t do it like this, do it like this, I want it like this. So that just makes the process a lot faster. And you can do it in China, I’ve seen it done, but it’s much more frustrating. I mean you give some engineering drawings to someone overseas, then once they draw it all up and they give it back to you, you’re “Oh no I didn’t want it like that” that’s just took three weeks of your life then you have to do it again another three weeks.
Steve: But you guys offer that service right?
Hoe: We do, we do.
Steve: Okay, and that’s just like an upright cost like if I was coming to you and I wanted a Steve Chou bobble head?
Hoe: I mean yeah, for like a bobble head yeah we would just– that wouldn’t be as much I mean when you are talking about plastic then you’re talking about engineering drawings for your bobble head and you would just go ahead and give us the photos, what’s you pose, what do you want to do, what do you want to put on base? Then we’ll draw it up real quick just a rough sketch of how it would look, how you like it cool, okay then we sculpt from the actual photos all your expression, get it all done, it all takes about three weeks to a month, get you the mud sculpt…
Steve: Has money changed hands at this point during the design phase though?
Hoe: Yeah. Basically you’d say I want a thousand pieces of these to send to my– you know 1,000 best friends.
Steve: [laughter] Okay.
Hoe: I think that’s when my cousin finds out Hoe has got 1,000 best friends.
Steve: No, they’d go like hotcakes man, trust me.
Hoe: Yeah, then so we give you a quote and say it’s going to be six dollars and that’s delivered to you and then the sculpt fee is 300 dollars or something like that then you pay for that 300 dollars first and then we start the process. So money does exchange hands and since we are a US company you just send a cheque to My US Company, well we do it like that.
Steve: I see. Okay and in terms of and this is just for the benefit of the listeners here I guess–when you’re doing deals with other companies is it traditional to just wire them the money? Or do some of these factories take credit card or PayPal or what not?
Hoe: Most factories will need a wire.
Steve: A wire transfer, okay.
Hoe: Wire transfer, I mean that’s why and then which is a scary concept when you’re sending money to China.
Hoe: So, which I’ve learned through so we’ve had situations where we wired money to someone and then they said “oh we didn’t get it” and then they end up someone hacked into their e-mail and changed– hacked into their email so that person that hacked into their email just made a new email– there was an M in the email address. He m became an R and then N and so when you looked at it closely you go like “oh! its different” but you could not tell just by glancing at it. So we ended up like– and the problem was that email had our whole conversation on it, previous ones, so it looked like it was real.
Steve: So you are saying someone was pretending to be that vendor and then they gave you their bank account and…
Hoe: Oh you know we need– can you send it to this bank account through a different you know for whatever reason and then it looks the same because you still have the whole history and the conversation is still there right? And M if you type in an R and then N, it looks like an M. Okay even when we went to the police in Hong Kong to report it because it’s clear case of fraud they said they didn’t know what was different. I said “look at it the r and n” so those things definitely do happen and it’s like you know…
Steve: And you can’t get your money back right, once it’s wired its gone right?
Hoe: I mean even so, the Hong Kong police was like “well we’ll report this but our counterparts in China they don’t really answer” [laughter]. And so if it was sent to Hong Kong you could really follow up the police officer will say you could follow up, you just call the bank oh hey look this is a clear case of fraud, you can get your money back. So there is some benefits still of Hong Kong and being out here and that’s why I still have importers that work with us because they trust us even if they know the factory they’d give it to us and say, okay we can afford this and then we’ll tell them oaky this is okay yes, or we need more money because it is far away, we have to fly there, its time. So they’d rather send money to us– Hong Kong, so because there is at least someone that they can trust, right.
Steve: So what’s the recourse in case someone gets shipped a bunch of stuff and they are not happy with it from Asia. Let’s say you shipped a bunch of bobble heads, they got to the US and then they didn’t like it. What– can you describe what happens after that, what’s the process?
Hoe: The process is if I sold– a company in the US bought some say bobble heads from someone in China, or someone in Hong Kong– they shipped over, they don’t like it, it really depends on how the relationship is with that factory.
Hoe: Because there is really hardly any recourse on anything I mean you know you can sue people, it’s really difficult to sue people overseas. So that’s why for us when we deal with a team, the team could say we don’t like all this– all this stuff came in and it was– didn’t look good. Then we would have to redo it or do whatever the team tells us that they need to get done.
Hoe: Whether it will be a credit I mean– and in the end it’s whether or not is that business worth it for you to do that right? If it’s not then you just say okay but the recourse of getting stuff unless you are with a big factory and you are ordering millions of pieces, then you have some recourse but when you are a small company it’s a free for all, right.
Steve: Okay, yeah so it’s all based on relationship is basically what you are saying.
Hoe: If the factory thinks that they are going to get a lot more business from you, then maybe you have a lot more leverage.
Steve: Okay, cool Hoe. So in terms of your company, so you mainly only deal with kind of larger businesses so I had this feeling that after people listen to this podcast and people might be contacting you if they want something plastic made, I don’t know if that’s going to happen, but what are some ways that people can actually contact you if they have any questions about importing or trade shows or what not or if they want to source anything, is there any way to contact you?
Hoe: Yeah I mean you can go to our website, it’s just kloanz.com and our e-mail address is email@example.com. Speaking of e-mail I mean just ask some questions, I’m always you know depending on time– people call us all the time when they have a product idea. So I kind of give them I mean sometimes it’s through us, sometimes it’s not or if it’s something that I’m interested in then I like to get involved and I’ll tell them and then– or I just kind of show which way to go at least.
Steve: Okay, and what is your specialty?
Hoe: I started with the plastic injection, the poly resin, [Inaudible] [00:49:50] figurines, we do a lot of plush items like stuffed toys.
Steve: Okay, I didn’t know that.
Hoe: And we do I mean because a lot of the teams they do inflatables, so we do a lot of stuff for restaurants, fast food restaurants in California so they…
Steve: Inflatables they have, huh interesting, nothing.
Hoe: Yeah, I mean all kinds of inflatables, I mean when star wars came out with their second trilogy, we did a lot of these glow in the dark swords for our local hot dog chain.
Hoe: So pretty much anything that is made in China at least we have some experience in.
Steve: Okay. But mainly you specialize in plastics essentially right?
Hoe: Yeah. Plastics, poly resin.
Steve: Cool, anyway Hoe I want to be respectful of your time so thanks a lot for coming on the show, really appreciate it. I learned a lot and a lot of the stuff you said was kind of eye opening for me too even though I’ve been importing from China for like the last seven years. So, thanks a lot for coming on the show.
Hoe: Thanks for having me.
Steve: All right man, take care.
Hoe: All right.
Steve: I hope you enjoyed that episode. Hoe is actually one of those guys that was instrumental in showing me the ropes the first time I went to the Canton fair in China. And what I like about him is that he’s a hustler, he is constantly on the road drumming up new business and he runs his Chinese factory with integrity, with an emphasis on quality and customer service.
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