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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 have got my buddy Dave Bryant on the show. Now I’m actually not 100% sure how we met Dave, but he randomly reached out to me one day and we’ve kept in touch ever since. And we finally were able to meet face to face at the Ecommerce Fuel conference last year.

Now David runs several online stores selling boat equipment, but I think the biggest business that he has sells boat anchors of all things. Big and heavy boat anchors that he imports from China, so that’s pretty niche as far as niches go. Now David also runs the popular blog Chineseimporting.com where he teaches others how to import goods from China, he’s been doing this since age 16.

He’s even written a couple of books about the topic, and what’s also cool is that he works with his wife just like I do. Today we are going to discuss his businesses and some more in depth topics on importing that kind of go beyond your typical find the products on Alibaba stuff that you’ve probably heard on other podcasts. With that welcome to the show Dave, how are you doing today man?

Dave: Good and I’ll clarify this because my wife is on maternity leave and the government of Canada would not like to hear about her working for me. She does not currently work for me, maybe in the future.

Steve: Everybody works for their wife Dave; it’s cool to admit it.

Dave: That is true, I only work for her, but she does not work for me.

Steve: I have always been curious how does one get into boat anchors of all things, like they are the heaviest most unwieldy things that you can possibly sell in my mind?

Dave: The lucrative world of boat anchors, so it’s kind of funny, way back when I was in university I was kind of a globe trotter, and I was always in the back [inaudible 00:03:53] crazy parts of the world. One of the things in my bucket list is — one of the countries to visit was North Korea, and the only way to get to North Korea is through China. Believe it or not there is no direct flight from Canada to North Korea.

I had to go through China to North Korea. I was – decided obviously while I’m in China I might as well travel around a little bit. And while I was there I decided to visit a couple of trade shows. I had always worked — I had worked with a family friend working for his import company actually. He was selling boat anchors himself. I was over there and I kind of split off with him, I didn’t talk to for a couple of years.

I was kind of familiar with the business itself, so I attended a trade show while I was in China, a boat trade show. I met a supplier there and I kind of hit it off with the supplier and he had this one product that I was really interested in, and it was boat anchors. I asked him if I could bring one of these samples back with me to Canada and he said sure no problem.

I took this boat anchor and there is actually a couple of other products with me, and I had this huge box of products I carried around me for the next 3 weeks all throughout Asia. And I was like going on trains and I was going on buses, and I was going on…

Steve: With the boat anchor?

Dave: With the boat anchor and actually people I’m sure said all things. Anyways long story short I made my way back to Canada somehow all the products arrived safe and sound. I put them on eBay even though I got the products for free; I knew the cost was about $50, sold them for I think around 200. Of course I went back to the supplier, I asked him, hey can I can buy some more products off you, of course he agreed, he sent me some more products, again had a similar success. And fast forward about 7 years later and the supplier to this day is actually our largest supplier.

Steve: Amazing, so wait you sold things on eBay, did you have the intention of creating this business at the time or no, you were just testing?

Dave: I mean it was a test to me. I knew like I said, I had worked with a friend, our family friend way back when he was actually doing something similar to boat anchors himself. And I kind of split off from him, and he had gone on his own way doing different things. I was kind of testing the water more than anything.

Steve: Do you own a boat?

Dave: I do not.

Steve: You do not own a boat, but you went to — okay you went to a boating…

Dave: My family has been in the boating their entire life, so I think that’s probably part of the reason why I don’t own a boat myself. I have grown sick of the [inaudible 00:06:14] over the years. It’s a great clientele to work with, but by myself, or I myself, no real interest in boats.

Steve: Okay and then you are based in Canada, right?

Dave: I am.

Steve: Okay, so for the listeners what’s kind of interesting about Dave and I get a lot of questions about this. He is in Canada, but he actually makes most of his sales in the United States, is that right?

Dave: Yes, absolutely true.

Steve: Do you ship to any other countries besides the US?

Dave: The way we work is we don’t — we actually don’t inventory anything in Canada really, everything is inventoried in the US. We ship anywhere in the world like pretty much any congress country. But even if we are shipping something in Canada, we actually ship from the US to Canada. We sell something to the UK the same thing going from the US to UK.

Steve: That implies that all of your goods when you make a shipment goes straight to the US and you don’t actually see it or?

Dave: It’s kind of a backwards way to do; we do it through the port of Vancouver and what they call your shipping in bond to the US. Meaning that it comes through Canada, we don’t pay any duties or taxes on it. It pays all the US duties and taxes, and then it goes directly to the warehouse in the US. But we never touch — we never put our fingers on it.

Steve: Okay so wow, okay I was going to talk about this later, but let’s try to talk about it now, what do you do about quality control?

Dave: We work with– I do travel to China once or twice a year kind of do a little bit of QA there. It’s a little bit tough to do it if you are not permanently situated in China as you might have experience with. Other than that we’ll use a third party inspection agency, pay $300 or $400, have them check it out kind of according to our checklist.

Then once it arrives in the US, then obviously we’ll have our warehouse down there do some QA there, take the [inaudible 00:08:00] we need it, and just kind of get an idea of the overall I guess quality of the products. And what was I going to say here? Yeah, we have such long lasting relationships with our suppliers where we haven’t really had any huge quality control issues, and when it has come up they’ve been pretty good at addressing it after the buck.

Steve: Because you told me earlier that you sell over 300 items, 300 skews, is that right?

Dave: Yeah, it’s about 300 skews. A lot of those are variations, so I would say it’s closer to probably 75 if you get rid of size and color variations.

Steve: Okay, and then for each one of these items you have a separate quality control checklist for each one of these?

Dave: I mean certain things you don’t necessarily need to have the stringent quality control checklist. So something like an anchor I mean more or less there is not a lot that can go wrong in an anchor, some of the…

Steve: Okay.

Dave: Some of the other things obviously yeah, you do need to– we have a certain checklist that we go through for example something like a rope. We’ll have a checklist, and basically asking them if it’s supposed to be happening throughout, we’ll have the third party inspecting agency or the supplier measure it, physically measure it to make sure it’s actually happened. We have a whole bunch of different criteria we use for all of the different products that we just kind of have either the supplier check, or have a third party inspection agency check, or have a warehouse checked after its been received.

Steve: In terms of sales you have your own website and you are also selling on Amazon, but if someone places an order on your site do you — like how does the communication go to your warehouse to — the shipment is from the US, right?

Dave: Yeah, so if somebody places an order on the website, it goes through our automatic — our auto management software. We have an order taker here, she basically just checks it over and make sure it’s all good, and then she emails it down to the warehouse and they ship it out. It’s kind of, it’s an old school way of doing it with this email and back and forth just a PDF invoices.

Steve: Interesting.

Dave: We are trying to get a little bit more automated, but a lot of times when you are working with these third party fulfillment companies especially some of the smaller ones, their automation schemes aren’t exactly up to today’s standards, so they prefer just the old PDF invoices even faxing them sometimes.

Steve: What about returns? Do people return anchors?

Dave: They do believe it or not, a lot of times they are on their boat. So it’s a pretty low return item, but people do return it like anything. A lot of gifts that people return and returns are a bit of a pain in the butt just for the fact that it’s hard without us really having any eyes and ears on the ground to handle returns.

But our third party fulfillment company that we work with, I kind of consider them almost one of the girls there, almost one of our employees because she’s been handling our orders for God almost five years plus now. She knows the products pretty much inside out, she can decide if it can be resold, it should be disposed off or whatever.

Steve: If it can’t be resold you just junk it?

Dave: Yeah pretty much. Well at times a lot of the products that we deal with are metals, so stainless steel items and they can actually be scrapped, and we can actually get a little bit of money back, I mean from when they are scrapped.

Steve: Interesting, so you said you sell over 300 items maybe 70 unique items, and you source all these from China, right?

Dave: Yeah, most of them are coming from China. We work with a few local distributors and manufactures in the US, a couple companies in Taiwan and even the guy in Canada too, but 90% of our sales are coming from Chinese made products.

Steve: I want to talk a little bit about kind of how you found these vendors. Now everyone who kind of listens to podcast and has been doing this, everyone talked about Alibaba, but let’s talk about some of the other things outside of Alibaba today.

Dave: Yeah, so I mean Alibaba is one of those things, it’s — You can’t really escape. And it’s like if you want to buy something online even if you don’t actually buy on Amazon, at some point they are probably going to be on the Amazon website. The same thing if you are looking for a product at some point you are probably going to come across Alibaba. But Alibaba is probably not the most ideal place to find a supplier, basically 99% of importers, that’s the first and only they go to is Alibaba.

If you find a supplier on Alibaba and a really good product and you are selling a ton of them on Amazon, somebody at some point in time is going to come along and see that, hey Dave is selling all these products, I want to buy the same thing. I’m going to go to Alibaba, try to find the supplier that Dave is using and just import the exact same product from the exact same supplier. If you can find the supplier not advertised on Alibaba, you’ve basically cut down 99% of your competition.

Steve: Good point, I think you are pretty safe with anchors though by the way Dave.

Dave: You would be surprised Steve.

Steve: Really, okay?

Dave: I think the nature of kind of the whole private labeling boundary now; I think there is competition in absolutely every single niche. Now obviously some niches are well guarded than others, but every niche out there is you have some degree of competition.

Steve: What’s funny is we never had used Alibaba until relatively recently I guess within the last few years, because we just always went to trade shows to find our vendors.

Dave: Yeah, and that’s how I found our top supplier like I said we meet the trade show too, and the great thing is they don’t advertising on Alibaba, so…

Steve: Yeah same with ours, none of the vendors that we use actually today pretty much they are not advertising on Alibaba anymore.

Dave: Yeah absolutely and it’s kind of weird, not every supplier wants to advertise on Alibaba. Alibaba is kind of like internet dating for Chinese suppliers, and if you ever talked to a girl that’s on an internet dating site, they get dozens of enquires a day, people messaging them all types of creepers and only a small selection of actually serious incredible guys.

For Chinese suppliers I get the impression it’s kind of the same way with Alibaba where they might get dozens of enquiries a day, and only a really small fraction of that actually turn in to sales. And the sales that they do get tend to be kind of picky really cheap buyers who are typically ordering pretty small orders.

Steve: Right, yeah, actually I asked our vendor the last time we were there why they weren’t on Alibaba. And they said that — in so many words that they didn’t want to deal with the riffraff.

Dave: Yeah, I think that’s absolutely right, but I mean it’s a lot of work I think for these guys actually managing all the leads that they get on Alibaba, and some which are obviously not the greatest quality.

Steve: Do you use Alibaba for any of your stuff?

Dave: Yeah, I mean again like I said, like Amazon if you want to buy something online you kind of go to Amazon. If you want to find a supplier you kind of go to Alibaba, and I would say about half of our suppliers I found through Alibaba. Those products don’t make up a huge percentage of our sales, but they are a lot of our recent products that aren’t necessarily a huge part of our sales yeah, we use Alibaba to find source.

Steve: In general do you go there first, or do you hit some of the other places we are going to talk about here first?

Dave: I mean it depends, if there is a product which I think that — I just know that our customers are going to buy it, they going to buy an anchor and they need this product as an ad on, and they really not that pretty sensitive, absolutely I go to Alibaba and just try to find it in the lowest price there and import it.

If it’s a product that I really want to be kind of considerable portion of our business which I — yeah which is not going to be an ad on or an accessory product, then I’ll try to reach out to some of our current suppliers, or like I say I’ll use a couple of the other tools available which I don’t know if you want to get to now or later to try to find a supplier.

Steve: Okay, well let’s talk about the way that you guys find vendors right now first, so outside of Alibaba.

Dave: Yeah, so first thing we do is go to trade shows. And every year I try to go over there and I try to attend a big one for instance obviously boat trade shows. Like I said the great thing with the trade shows is that you will find a lot of suppliers not advertising on Alibaba. The great thing with China is a lot of people know about Canton Fair. The Canton Fair is great, that’s a huge massive trade show, it takes place twice a year in Guangzhou, China.

The only problem with the Canton Fair is that it tends to be just such a huge fair and it has a little bit of everything, but it doesn’t really specialize in anything. In China there is a specialized trade show for absolutely every single niche that you can think of. Going to these specialized trades shows, there’s really a network; you’ll find some of the best suppliers for your products. Again the Canton Fair is an okay place to start, but there are a lot of trade shows outside of the Canton Fair.

Steve: How did you find these trade shows?

Dave: I believe Chinaexhibiton.com; I just goggled China trade shows, it has a huge list of all the trade shows. And again once you’ve kind of learn your niche that you are in, you just kind of get a feel for what the most popular trade shows are. It’s kind of a — it’s a long process to learn a niche, but once you do, you do this just intuitively through speaking to various people. You kind of know the big trade shows.

Steve: What is your process from when you get to the trade show, like what preparation do you do prior to going?

Dave: Ideally I’ll go through the website of the trade show, go through the supplier list, and kind of try to get a feel for anyone’s that I would like to speak to in particular. So go through — most trade shows will have exhibition or exhibitor list, go through those exhibitors, kind of browse their website, and get a feel for who is there. Make kind of a hit list for people that I want to talk to, and then when I’m there talk to them.

Then at the same time while I’m there maybe some other companies catch my eye which I never even knew about browsing the exhibitor list and talk to them. And more or less so I do kind of when I go to these trade shows, I want to kind of have an idea of various products I am interested in importing. I don’t really go there and get surprised by new products that I even never even thought about.

Steve: Is there a lot of overlap between these companies, do they go to both that fair and the Canton Fair?

Dave: Most of our suppliers especially in our niche they don’t go to the Canton Fair.

Steve: Okay, probably because you are in boating, right?

Dave: Yeah, I mean there is a boating section in the Canton Fair. There is a boating section at the Canton Fair, but again I think it’s maybe six or seven suppliers where a boat show would probably have like 300 suppliers. It’s the same thing for anything; I mean there is a popcorn trade show in China. There is a trade show for everything.

Steve: Interesting, okay, yeah, I have only been to the Canton Fair myself and some of the ones in Hong Kong too, but…

Dave: Yeah, I’m surprised with you because I think linens, handkerchiefs; there must be a natural specialized trade show for that I would think.

Steve: Interesting, yeah I’ll go look after this, not that that would really excite me, but yeah, I’m sure — at least with the Canton Fair there is variety like, if you are bored you can go off and see some of the other cool stuff.

Dave: I know, I mean it’s overwhelming. I mean I have only been there actually once in my life, and it’s — you definitely need quite a few days to actually go through it. And I think that’s almost the predicament people are getting into, there is so much selection there, it’s almost too much selection. If you have a more narrow idea of what you want to import, it’s a lot of times you can deal with a more a little bit more efficient.

Steve: Yeah, I don’t actually recommend going there without a plan, because otherwise you’ll just wonder aimlessly. Okay so trade shows, what else you got?

Dave: The other way, so another actual good way that we reach out to a lot of suppliers is we’ve got put on these Chinese spam lists. And somehow if you ever give your card out to any trade show in China, you get put on any email list. First pity you and second you are going to get a lot of emails from a million different suppliers every day.

The only funny thing is aside from your traditional spam which nobody is ever interested in, when you get put on these Chinese spam list, actually quite a few credible suppliers will email you. They’ll say, “Hey Dave, we noticed that you are selling boat anchors. By the way we sell boat anchors. You may be interested in our products.” It’s actually, responding to those spam emails is kind of a nontraditional way actually to find suppliers.

Steve: We’ve actually found two legit suppliers that way now that you mention it.

Dave: I think talking before you; you met a guy in India out of all places?

Steve: Yeah.

Dave: So, it’s kind of funny. I will never reply to a spam email from a US company, but Chinese company for whatever reason, it’s pretty well directed spam.

Steve: Yeah, exactly and actually that one person even showed his photos of stuff that was similar to what we sold on our site, and so that’s what caught our attention.

Dave: Yeah, they do a lot of due diligence.

Steve: Unlike the US companies which just …

Dave: I know, it’s just a mass of email to everybody.

Steve: Okay, so we’ve got emails, what else?

Dave: The other thing is you can public import records. This might not be news to all of your listeners, but probably news to a lot of them that whenever you import something to US, at least if it was coming via ocean freight, the information contained on the shipping records is public information. If I’m importing boat anchors, you can actually, and you know that company name, you can go find what supplier we are using and what products we are importing.

The US government releases its public information. I think they do it on the premise that’s it’s free information, and can be used to predict economic indicators, but long story short it’s public information. To get access to this information, you either have to pay the US government a fee, or you can use one of the websites out there. There’s free websites out there and you can actually access this information, and you can type any company name, and basically type in Dave Bryant company import records, and it will return a list of some of the products that we’ve imported.

But some of the paid services like Import Genius and Panjiva, what they will do is they aggregate the information a lot more nicely. So you type in the company name, and it will really give you an itemized list of all the suppliers that my company or any other company is using, and it will give you a list of the products they are importing and a list of all the supplier names.

And why this is really good is that you can use one of these import tools, you type in the company name that you are kind of snooping on, and normally what I like to use, I do pick a big retailer who is probably less products I know they are private labeling themselves. Type in that name of that company and maybe take for example [inaudible 00:22:30]. I will type into Import Genius and they will give me a list of all suppliers that [inaudible 00:22:34] is using to import from China.

Then I will get that list of suppliers and I’ll search for them on Google, and I will reach out to all those suppliers, and only a small fraction of them are actually going to reply to you with cost sheets and spec sheets. And the ones that do, typically they are going to have really good high quality good products, because they are selling to the bigger brands, and they are going to have pretty low prices as well.

Steve: What I actually didn’t know is that, you mentioned that there are some free services that do this? Do you happen to know what they are off head?

Dave: Yeah. I think there’s, Port Examiner is one of them. I think if you go to them, you’ll kind of get my point of what I mean is that they don’t aggregate information very nicely. So they’ll give you I think, if there’s 30 different import records from my company, they’ll give you 30 different HTML pages, where some of the paid services, they’ll actually export to a nice excel worksheet for you.

Steve: Okay.

Dave: There’s [inaudible 00:23:25] and then there’s paid services.

Steve: In terms of ordering, or when you look for suppliers, do you tend to go this route first, second, third, last?

Dave: It’s pretty aware now, we have such a– we have a nice typing group of maybe ten to 12 suppliers that we kind of rely upon. When it comes to actually finding new suppliers, first thing I will do is actually I would go through kind of my list of various companies that I’ve bumped into tradeshows, and see if there’s anybody there that might be selling the products I’m interested in.

Second, I would see if one of the big box retailers is selling the products, because the big box retailers they tend a lot of times especially in small niches like boating, they tend to sell for really high prices. So I will go on to Import Genius or one of the other tools, find the list of the suppliers that they are using, get that list of suppliers, find the ones who are selling the products I’m interested in, see if there– and reach out to those suppliers directly. Then as kind of a last resort, I’ll go on Alibaba.

Steve: Okay, okay. What about Global Sources?

Dave: I think, I’ve heard good things about Global Sources and the fact that you can kind of refine your search criteria a little bit better, but my impression has always been Global Sources more or less is kind of Alibaba 2.0.

Steve: Global Sources, from what I understand is, the vendors are more vetted and they tend to cater to – they are like more established players, whereas Alibaba seems like a hodge purge [ph] of a lot of different types of vendors.

Dave: Yeah, I’ve heard really good things about Global Sources. Just my experience using that I always find it more or less a lot of overlap between them. Like said, I know people that swear by them.

Steve: Yeah, I just actually had Peter, I don’t know if I added the episode yet, the CIO of Global Sources here. I was just curious what your opinion was.

Dave: Yeah, I’ve actually never used them, but I’ve heard good things about them.

Steve: Okay, so that, today at least that’s the order it seems like you go to Alibaba, kind of like a last resort so to speak today?

Dave: Yeah, like I said the only problem with Alibaba, and you can actually find good suppliers, the problem is I know if I go to Alibaba, I find a supplier without a product I know if it starts to take off, somebody is going to rip me off probably within a year.

Steve: Okay. Let’s just assume now for a sec that you’ve kind of found a potential vendor, what I was going to talk with you about today was kind of more along the lines of establishing relationships with vendors, negotiating and that sort of thing. You’ve gotten in touch with a vendor, what are some steps to kind of ease the relationship so to speak? Do you start negotiating on a price, do you talk about MOQs, what do you do to ensure quality?

Dave: I mean, I think one of the bigger mistakes that new importers make is that, I don’t know how to say it, they tend to be a little high maintenance. So they’ll send a million emails back and forth with the supplier on a really small order. So I think one of the first thing that you can do to kind of start building that relationship is be to the point, be efficient with your communication, don’t hug all over pennies on a crazy off, you should have an idea if you are importing a product. You got to have an idea of more or less what the fair price for it is.

So if you know the fair price for an anchor is $100, don’t try to get them down to $50. Get a whole bunch of quotes from different suppliers, figure out what the fair price for it is, and just make sure you get a fair price, but don’t be a haggler, nickel, and diming the supplier. Be efficient with the communication. Don’t– if you get your products and you order a thousand widgets and one of those widgets is defective, don’t make a bid deal of it. So I think just being really efficient is a really good way to kind of get your relationship with the supplier off on the right foot.

Steve: I actually don’t ever negotiate on price in the beginning. Instead I just do a shot gun, and just go with the range of prices and kind of wrap up the highest and the lowest. Do you do that too?

Dave: Yeah, absolutely. I think time is changing quite a bit in the last few years where the prices you get tend to be a lot more firm. I don’t know about your experience too, but the negotiating room there isn’t quite as high as it used to be.

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Steve: In fact my prices have been going up.

Dave: Yeah, except up until recently with the price of oil and everything has really been dropping prices.

Steve: Okay, so your tip was be low maintenance.

Dave: Number two, it’s scary for a lot of people this idea, but actually travelling to China and meeting your supplies, because China still is a very relationship oriented country. So actually going over to China and going for beers, going for dinner with your supplier, you can’t really duplicate that relationship building and trust building the same way that you can through email and even Skype.

It’s scary I know travelling over to China, and eating a bunch of weird of food, but if you can go over there even once and meet a supplier that you’ve been working with, I guarantee you, you are going to see a huge improvement in your relationship with that supplier, and so certain benefits that you don’t get. Obviously your lead time will go from 60 days to 30 days if you let the supplier know that your order is urgent. They won’t be self [inaudible 00:29:23] on minimum order quantities with you. Overall the quality of products that you get will tend to be a lot higher if you kind of have that good relationship with your supplier.

Steve: I think that a lot of suppliers that you find, at least on Alibaba, they give you a high MOQ just to kind of weed out like the riffraff, but if you actually fly over there and visit them, they know you are serious and they are probably much more willing to work with you and be more flexible.

Dave: Yeah, absolutely, I mean our main suppliers; MOQ is not really an issue. Obviously they are not going to sell you one, but we want to import ten or twenty as a sample, no problem. The minimum order quantity doesn’t really come up all that often. Again, that’s kind of one of the things that’s important about building that relationship with your supplier, because getting low MOQs is probably one of the most important things when you are importing from China. You have that relationship and you can kind of make it. So MOQ is not really an issue. You are going to have quite a leg up on your competition.

Steve: Let’s say you can’t go to China, what are some of your strategies for lowering the MOQ at least in the beginning?

Dave: Yeah, if you are just working with a supplier, professional off the butt, first thing you can do is again just be low maintenance. So a lot of times, take for example I was working with a new supplier this year. I think that an MOQ 250 pieces, I only wanted to order 50. They said there’s no negotiation on the MOQ. I said, okay, we can only do 50, but we will pay entirely upfront not 30% deposit and 70% upon shipment like normally, and will make payment right away tomorrow.

And they said okay, fine, fine, fine. Yeah, we made the payment in full and upfront, real quick and we never really hag all over the price too much. Again, paying upfront and just offering to pay 100% upfront a lot of times will– a lot of suppliers will be a lot more open to that low MOQ.

Steve: Also just asking for their bank number, so you can wire the money over right away does wonders.

Dave: Yes absolutely. Yeah if you start asking for something like a PayPal account, where you can escrow the money to, they are probably not going to be as receptive. Again, just be straight to the point like you said ask for the bank information, and a lot of times money talks. It’s hard to say no to money.

Steve: Okay. What are some other things because we were talking prior to the recording here, what are some of the other things that you kind of talk about besides price and MOQs, some of the more obvious things. What else do you negotiate?

Dave: When I’m negotiating with the buyer, I kind of figure, price is kind of the last thing I always negotiate. I figure these five things that I kind of go to order trying to negotiating. Kind of every order I try to negotiate with that supplier on a new item. The first one is obviously minimum order quantity. I think for most importers, that’s always going to be the first thing they need to negotiate, because it’s pretty rare that a supplier gives a minimum order quantity that you are completely comfortable with. So it’s kind of trying to negotiate that minimum order quantity.

Then the second thing that you can negotiate is shipment terms. Again, I’ve seen so many importers get burned on this. Supplier will get them a really low price, but will have shipment terms of EXW their factory, and I get the impression that you … Have you been burnt?

Steve: I haven’t been burned, but some of the students who just didn’t do their research, they are like, this is so cheap and then they realized they had to pay everything from the factory all the way to their warehouse.

Dave: To give some background of EXW you basically normally people or suppliers are going to quote you on FOB Shanghai or FOB Beijing, and that basically means supplier pays everything to get it to the port. If you’ve been quoted EXW, chances are you are going to pay at least $500 to $1000 more in extra fees, basically customs, brokerage to export the products, getting the products from your supplier’s factory on to a track and load it to the port, and a bunch of other mysterious fees. EXW adds a lot of money to the price. So if you get quoted EXW, that’s another negotiation point. Try and negotiate it to get FOB terms.

Third thing that you can negotiate is actually the cost of freight. Again once you are ordering big enough, your supplier might not be receptive to say a 5% price cut, but if you ask them hey do you think you can cover the cost of freight to Vancouver, for whatever reasons, suppliers tend to be a lot more receptive to covering the cost of freight to your country rather than actual price discount.

Steve: Interesting. I have not tried that before.

Dave: Our two biggest suppliers right now, one of them pays all the freight, every order to Vancouver, and the other one pays half bill.

Steve: I wonder if it’s just all the same though. They are like wamping that into the cost of the goods.

Dave: I’m sure it’s being locked in to the cost to some degree. The one that obviously pays for all of it I’ve no idea what they are charging. The other guy, where we pay 50%, I mean our prices haven’t changed in four years.

Steve: That’s impressive. Okay.

Dave: When we first started working with them, they weren’t paying the cost of the freight, so I get the impression that they are actually just eating that cost now.

Steve: Okay.

Dave: Yeah, obviously if they agree to cover the cost of freight and they jack up your prices, $2 per unit then you are not really saving. The third thing or the fourth thing you can negotiate is packaging. Again it’s something that a lot of new importers forget about is packaging. Your supplier, when you are importing, their default is going to be to give you the cheapest ugliest packaging possible.

Steve: Yes.

Dave: Depending on your product, I’ve ordered products before, 100 different widgets. Assuming that they are going to come individually boxed, instead they just give you 100 widgets in one massive box. Of course you will be selling online, that means that now you have 100 widgets which you need to buy boxes for. That can actually be a pretty sizable sum.

So either getting something as simple as what they call an inner box for each item, or actually have them pay for the cost of all color packaging. Because even if you are selling online, look in what somebody gets when they first get an amazingly design package, it does result in a lot better reviews on places like Amazon. Packaging does matter even if you are selling online. That is something to keep in mind, negotiate with your supplier especially once you start getting orders which are, have the bigger variety.

Steve: So you guys have a box for your anchors, or is it for the other stuff?

Dave: No we actually don’t, we don’t have – actually it’s not true, some of our anchors do have boxes off. It’s a long story. Most of them do not, but all of our other products do.

Steve: So I’m just curious, this is kind of a different topic, how do you find the suppliers outside of China since prices are kind of increasing?

Dave: We don’t actually– we work with suppliers in like say Vietnam, United States and Canada, but that’s pretty much it. I haven’t actually gone looking for boat anchors anywhere else in the world yet. Maybe in the future that will happen. I do notice for a lot of suppliers, the suppliers in China, they are outsourcing a lot of their manufacturing to different countries.

Take for example I was getting a quote recently for some life jackets, just like [inaudible 00:36:51] that you wear them on the boat, and they were having a lot of production done in Vermont. So it seems to be kind of the way Chinese suppliers tend to be outsourcing their production now.

Steve: Yeah, that’s kind of what I’ve noticed as well. They have like teams in like Pakistan or Vietnam.

Dave: I don’t know if we’re ever going to come to a point in history where we have such a big country of cheap labor that’s barely professional and they can barely high quality goods. India and Pakistan and those countries, they are trying to compete, but still in terms of price and quality, it’s really hard to compete with China even today.

I know prices are going up in China, but it’s still ridiculously cheap and like we kind of touched on before with the price of oil and kind of the Chinese economy not going down right now, they are not doing as well as it was in the past. Prices due seem to be stabilizing in China. I’m not an economic forecaster, but I think it’s probably going to be stable for at least a couple more years down.

Steve: Prior to the recording we kind of talked about some of these cool online services that you use for importing. What are kind of your go-to services?

Dave: So important doing this like I mentioned Duty Calculator is definitely your importing product, that’s what you should kind of always, that should be one of the first places you go to is figuring out what the duty on your product is. And Duty Calculator does a really good job of kind of classifying goods.

You can type in a pretty broad definition of your product. So running shoes and it will give you a fairly accurate duty rate for that product in your country. That should definitely be one of the places that you check. Make sure that you don’t get burned, because you can get burned pretty easily importing various products.

There’s personnel mastermind group for importers. The guy was importing pencil crowns from China. It turns out that pencil crowns have been plagued like antidumping product by the US government. Basically he gets charged like 110% duty on pencil crowns when he imports them, and he had no idea until the shipment actually arrived in port. Make sure you actually get an idea of what the duty rate on your products is.

Steve: Pencil crowns?

Dave: Yeah, for some bizarre reason, the US government what they call antidumping they think China is really affecting supply of pencil crowns in the United States, and they’ve now decided to tack on 110% duty on pencil crowns.

Steve: Interesting. What is your go to place in terms of finding out whether there’s any special rules and regulations for selling a product in the US?

Dave: Yeah, I know it’s a tough one, I mean that’s one of the reasons why you should try to work with a customs broker. If you work with a customs broker and you kind of build that, again that relationship they will likely tell you for free if you say, “Hey I want to import pencil crowns. Is there anything I should be aware of?” They will probably tell you for free, “Hey Dave, watch out, there’s a 110% duty on that product.”

Or if I’m considering importing a product that’s heavily regulated, they might say, “Hey Dave you got to be careful that you need to have such and such testing done.” A customs broker is a really good place that you can start. After that, there’s definitely certain categories of products which you always have to be aware of, and that you can eat or drink, anything for a kid, and anything really that’s inherently dangerous.

Steve: What is your go to place for finding a customs broker? For us, we just kind of went with the first one and we’ve kind of stuck with him ever since. But do you actually have a go to place that you recommend.

Dave: No, I’m kind of the same way; we’ve worked with our customs broker for years. I mean, I’ll just pick the biggest one in your area. I mean there’s quite a few of them. I think every city probably has at least a handful of them. Pick the biggest one, preferably the one that we work with they also have a freight forwarding division, so they can do everything for our shipment, by the time it comes in the port they can pick up their shipment, they can pay the various different local companies that need to be paid, they can pay the ports; they can absolutely do the customs for us.

Look for a customs broker that kind of has a few different services branched together. You might even be able to find one where they can actually arrange for pick up in China from you and ship it all the way to wherever you need to have it shipped. It’s really; it’s a really nifty feature to have if you have a customs broker who has a few different services that they offer.

Steve: It’s worth saying that the freight forwarding is pretty important because otherwise your goods are just sitting there at the port. What’s funny at least for me at least is getting the goods from the port to our warehouse often times cost as much as or more the shipment over.

Dave: Yeah, absolutely. We have something coming in the port right now. Overall cost was $9000 on the container. I think after the container fees, customs and all that, I think the fees were nearly $4000. It’s almost 50% of the overall cost was just on customs, freight and all that money stuff.

Steve: Cool. So what are some of the other services?

Dave: Aside from that, another fun little one is seafreight.com. Seafreight.com, what you can do is you can track basically any boat in the world, and track it where it is in the world. Why that is kind of fun is if you are importing something from China, you are going to get a bill of rating, and on that bill of rating is going to be the name of the ship that your products are on. It might be the Korea 123 Express.

You simply go under seefreight.com, type in the name of that ship and you can actually find out where your products are in the world. I don’t normally have some practical use, but there is something about seeing your shipment of products sitting in the middle of the Pacific Ocean, I don’t know, something bad about it.

Steve: Okay.

Dave: I think that’s pretty much the big three that I would recommend. Import Genius, Duty Calculator, and searates.com, sorry.

Steve: Searates.com yeah. I want to switch gears a little bit because I want to talk, since you are kind of unique in that you are from Canada and you sell into the US, but you don’t have like a US entity, right?

Dave: We don’t have US entity per say. I will get into that after the only thing that we do have to have.

Steve: Okay, but you do have like a three PR I guess in the US.

Dave: Maybe an easier way I will give a brief overview of how we do things. We are a Canadian company through and through. We don’t have a US company. What we do have, if you are– wherever you are warehousing your products in the states, if there’s a state sales tax there, you are going to be responsible for paying that state sale tax.

If you are– in our case, we warehouse our products in Washington State. We have to collect sales tax on any Washington State order. We have to be registered with the State of Washington. We collect sales tax of any Washington order, but in terms of actually US business, paying US income tax, we don’t do that.

Steve: And in terms of just selling on Amazon, you pretty much just need a bank account, right?

Dave: To sell on Amazon yes you only need a bank account. FBA is a whole another [inaudible 00:44:03] of legal issues when it comes to the tax ratio. But in terms of the selling on Amazon, yup, absolutely I believe that is right now all you need is just a bank account. That bank account, it can be a Canadian bank account. The only crappy thing is if you are a Canadian company, or a UK company or whatever, Amazon will only pay you in your local currency. For us if we had a Canadian bank account, Amazon would only pay us in Canadian dollars which kind of sucks, because when you are paying your Chinese suppliers you are paying them in US dollars. What happens is you are changing money from basically US to Canadian back to US.

Steve: Right, right.

Dave: It’s kind of a in-depth answer, but…

Steve: I’m also kind of curious what avenues you use to kind of market your store. First of all, I was just curious; do you make more money on Amazon or on your own site right now?

Dave: Every year you get maybe you can just speak to this. It seems every year Amazon is chipping away 10% on all the other channels. I don’t know if that’s kind of been reflective of your experience?

Steve: I haven’t been doing on Amazon as long as you have, so I have less data to work with. I mean our site is still by far more lucrative than Amazon. But that’s probably going to change this year.

Dave: Yeah, with Amazon taking more and more. For us right now Amazon– our website sales are about 25% of our sales, eBay is about 20%. 5% is just miscellaneous tradeshows, selling direct and 25% is selling directly on Amazon as a third party seller. The other 25% is selling on Amazon what they call through the vendor central platform. That’s basically them buying our products and selling them directly on behalf of Amazon.

Steve: They asked you to join that program, right?

Dave: It’s an invite only program. I get the feeling if you hit a certain threshold on Amazon in terms of your private label products; they will send you an invite because we’ve gotten a couple invites after we’ve been enjoying this program. They think that we are different company than we really are, but I do get the sense that after you hit a certain point on Amazon sales, they’ll pretty much automatically send you the invite.

Steve: Is that basically like an invite where you join or else they’ll find someone else to replace you?

Dave: No, they seem to do it. I think every– basically Amazon’s goal is to have every product in the universe. So once they kind of categorize you as a fairly large seller, they’ll say, okay we want to have your products. You can decline the invitation, but there are already lots of parts to it.

It seems that Amazon when they buy your products, they’ll tend to outsell you 2 to 1. We might have been selling 100 boat anchors as a direct seller on Amazon, when they start to buy our products; they were selling maybe 200 boat anchors. So it’s seems to be you are going to move up to 50% to 100% sales increase by selling directly to Amazon.

Steve: Outside of just the volume of sales, in terms of margins though, how far did they go down once you started…

Dave: That’s the crappy thing. They take more or less about 25% off your margins.

Steve: Okay, but they make up for it in volume.

Dave: Theoretically.

Steve: Have you ever had any…

Dave: You got to be careful. We got burned our first year of not watching the margins quite as well as we should have, and I’ve heard that from other people too.

Steve: Okay. I mean, is there any– what are the pros and cons of doing—like would you have declined? What would have happened if you declined? They probably would have found someone else and then lowered your visibility, right?

Dave: It’s hard to say. I mean, you’re always going to wonder with Amazon what kind of punishments they inflict on people. It’s kind of hearsay what they would have done. We agreed to it more or less. We don’t sell every product to them. We over the– they really wanted us to sell the product to them, but some of the time the margins just, we can’t do.

Steve: Didn’t make sense, right. Okay, and then you do a combination of that and you do FBA also or no?

Dave: I try to stay away from FBA just for some of the sales tax issues. I know it’s– FBA is becoming such a monstrous zone on behalf, but sometimes I try to avoid.

Steve: Okay by avoiding FBA, you are only covering sales tax in Washington.

Dave: Yes, and that’s one of the things, I mean, every seller, no matter where you are, if you are selling an FBA you should theoretically be collecting sales tax in nine states, or however many states that Amazon has warehouses in. Truth of it is that probably no one is doing that, but technically you should be. Again that’s a talk for another day.

Steve: Okay, no I was just curious because if you had that attitude, then FBA probably would have boosted your sales regardless, and are they going to go after you in Canada, maybe less likely than someone in the US.

Dave: In terms of Amazon and trying to find our competitors?

Steve: No, in terms of the US government going after you for taxes.

Dave: Yeah, yeah, I figure they’ll go after you before me.

Steve: Yeah exactly. Actually can we comment on what you just said though, Amazon like just going by passing you and going straight for your supplier?

Dave: Yeah, I don’t know. I mean, they are definitely doing that. There’s actually one product that we sell which is not a huge chunk of our sales, but they’ve actually are now sourcing it under what do they call private label brand, I forget. That was on basics I think. They have actually are sourcing now directly from China for that product. I think boat anchors and that type of product is going to be pretty low on their packing order, but I think it’s something everybody else is going to be aware of. They do seem to be reaching out more and more directly out to Chinese suppliers.

Steve: So given that they are doing that, when you are actually finding products to sell, do you have criteria more along the lines of random products, or like more niche products like boat anchors.

Dave: Again, that’s something I always try to recommend to people that the more niche you can get, the more successful you are going to be. Me and you, like you’ve mentioned in the intro we were at the Ecommerce Fuel live conference. One of the striking things attending this conference, it was basically a whole bunch of sellers just like me and Steve, and the crazy niches that were all in from boat anchors to handkerchiefs to pencil crowns to coloring books. Everybody seems to be…

Steve: Air filters.

Dave: Air filters. Everybody seems to be in some crazy little niche. I guess that’s one defining criteria to pick a product to sell. The crazier the niche probably the better protected you are going to be.

Steve: I also want to– every other person I talk to there seems to have been hijacked, or had problems with Amazon in some shape or form. That was one of my key take away from the conference session.

Dave: In terms of Amazon and kind of stealing their products and…

Steve: Either stealing their products or other suppliers just hijacking, similar to what you said, they found it on Alibaba, someone else just went on Alibaba and decided to either hijack or piggybacked a listing or sell something exactly the same.

Dave: It’s a check we do every month. Now we actually check all the listings to make sure nobody is piggybacking our brands, because you can’t, if you are selling our branded products, you can’t theoretically hijack that listing, you shouldn’t be able to. Normally just send an email to them saying, “Hey, you are probably not aware of what you are doing, but it is not allowed and could you please stop.” So that’s kind of a monthly check just to make sure nobody is piggybacking any of our products. Again we probably find five people every month doing it.

Steve: Going forward, just curious, are you spending more effort on your own site or Amazon and if it is your own site, what are some things that you are trying to do to increase sales?

Dave: I wish I could say it’s more of our own site, but Amazon– even people that go to our site, they are ultimately ending up on Amazon it seems. They might start this search and they might end up on our website looking for a product, but they are going to simply go to Amazon and see if they can find our branded product on Amazon. They have that trust I guess with buying through Amazon. It seems people sometimes joke about best buy being the display room for Amazon. I think in a lot of ways our websites are display rooms for Amazon.

Steve: Interesting. Even for boat anchors, amazing.

Dave: I know, it’s crazy. We are putting a lot– we are still continuing to put a lot of energy into our website, but not necessarily for direct sales through the website. If anything, just as kind of a display room for the products on Amazon.

Steve: Given that you are saying that, why not just have links directly to Amazon product listing.

Dave: Well, hopefully people buy through our websites; we don’t get charged 15% commission that Amazon does. I mean, ideally they don’t click through to Amazon, but like I mentioned, still about 25% of our customers do buy through our website, but a large portion of them are going to Amazon. Hopefully they buy through our website, but still a lot of them are going to Amazon ultimately.

Steve: What is your primarily traffic source of sales for your own website?

Dave: Definitely AdWords. And AdWords again is becoming more competitive. Just going through our yearly profit and loss kind of per campaign like our cost per clicks it seems like 50% higher in 2015 than they were in 2014. Again, everyone is getting squeezed there, so AdWords isn’t quite as profitable as it once was, but you can still definitely run some pretty profitable campaigns on there.

Google shopping is really where all the money is in terms of our ROI. So Google shopping is just becoming a huge avenue in some regards. I think if anybody was kind of trying to sell their own products through their website, first thing I would do is make sure you are on Google shopping.

Steve: What about organic search?

Dave: Again, it’s one of the things where all the big brands Google tend to be favoring more and more. We still get probably half of our sales are through organic search, but like everything, it’s becoming more and more competitive even for boat anchors.

Steve: Amazing, boat anchors.

Dave: I know.

Steve: Do you guys do anything on Facebook or…

Dave: Facebook, because of our audience we tend to be kind of an older clientele, they don’t tend use Facebook a lot, so we don’t use a lot of Facebook, compare to some shopping engines, things like Nextag and…

Steve: Does that work for you?

Dave: And [inaudible 00:54:29] and Shopzilla.

Steve: Shopzilla.

Dave: They actually, they bring quite a bit of traffic.

Steve: Do they really for boat anchors? Okay.

Dave: Yeah, again it’s just– I think again because of our older clientele, it’s just, if they have a search and maybe Shopzilla is their default search engine. So that’s how they find it.

Steve: I stopped using Shopzilla because I was getting really high volumes of fake clicks.

Dave: Yeah, it’s hard to say. I mean there’s some products where we make a killing on, and there’s other products where they are outnumbering Google in terms of clicks and you get to wonder how is that possible.

Steve: Well, I actually stalked a few of these people and they are clearly butts.

Dave: Really?

Steve: Yeah because I was annoyed, because I contacted them and I said, “Hey these are clearly boughts, and I have logs to show for it.” He was like, “No, we do a great a job of filtering out clicks.” Anyway that’s why I stopped using them.

Dave: Yeah, I know. That’s been our experience. You really have to monitor the campaigns, because you can dump a lot of money on a product, get out so there’s no conversions from it. But if you do monitor, you can actually get some pretty profitable campaigns.

Steve: Cool. Hey, Dave, we’ve actually been chatting longer than I was planning. I understand you got a pretty cool website. Where can people contact you? First of all, what is the website and where people can contact you at?

Dave: Yup, so the best way is chineseimporting.com, we get a lot about how to use [inaudible 00:55:57] and importing from China. So it’s a really good way if you are a beginner import, a lot of useful information there. If you are even a more experience importer there’s a lot of good information there for you too. On Facebook, facebook.com/chineseimporting.

Steve: And you have a book, right?

Dave: We do. It’s Importing is Easy: How to Make a Million Dollars Importing from China. You can buy that through the website chineseimporting.com, or you can find it on Amazon.

Steve: Awesome. Thanks Dave for coming on the show.

Dave: Yeah, thank you for having me.

Steve: All right take care.

Dave: You too.

Steve: Hope you enjoyed that episode. Dave is the perfect example of a business that does extremely well in a very narrow niche. Like boat anchors would probably the last thing that I would think to import from China, but Dave makes it work. For more information about this episode, go to mywifequitherjob.com/episode110.

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So go to famebit.com right now, and get famous YouTubers to promote your products online. And finally if you’re interested in starting your own online business, be sure to sign up for my free 6 day mini course where I show you how my wife and I managed to make over 100,000K in profit in our first year of business, so go to mywifequiteherjob.com for more information, sign up right there on the front page, and I will send you the course right away via email. 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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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 happy to have Peter Zeff the CIO of globalsoruces.com which is one of the leading B to B market places for connecting buyers and suppliers in Asia. Now Global Sources has been around for four years, they make around 200 million revenues, and they’ve got over 150,000 suppliers in their database, and they also work with 95% of the top global retailers all over the world. Now Peter was gracious enough to come on my podcast, to kind of give us an overview of the private labeling landscape and all of the recent trends in importing. And with that welcome to the show Peter, how are you doing today man?

Peter: Oh great, thanks, I appreciate you having me on, it’s just a comment in relation to the top retailers we also have a lot of Amazon private label sellers and eBay private sellers that uses our services as well. So it’s quite a range of buyers that use our services.

Steve: Yeah and just so a quick background on Peter, he was actually nice enough to come on my create a profitable online store office hours, where he actually went and answered a whole bunch of the student questions as well, so I was very appreciative of that. So Peter give us the quick background story about kind of what Global Sources is all about and kind of how it compares with some of the other B to B market places like Alibaba?

Peter: Sure, so Global Sources as you said we’ve been in business for over 40 years. We started with trade magazines, and really our goal was to help bring manufacturers and overseas importers, wholesalers and retailers together, help them find each other. And 40 years ago the best way to do that was with magazines. We’ve converted those magazines to electronic magazines now; they are still popular although not as popular. And they are available at globalsources.com/magazines if you want to download them.

So what we did then is we launched our website because in the late 90s we started saying, hey, wow, the internet is a great way to distribute information about suppliers very quickly to global buyers. The magazines would two to six weeks to distribute by boat, so the near instantaneous distribution on the internet was great. So we launched the website in the late 90s, and then in the early 2000s we launched our trade shows. So that gives the buyers an opportunity to meet suppliers face to face, and also meets some suppliers that don’t market themselves online.

And then in conjunction with that we have a small site called smartchinasourcing.com. And that’s really good for folks that are just getting into importing and learning how to import and want to know things about logistics and payment and quality control and all the others as you deal with importing. Well those are kind of some of the things that we do, and ultimately the goal is to bring overseas buyers and suppliers and nowadays they are primarily in China, the China manufacturers together, so they can do business.

Steve: Are the vendors primarily on the website, are they primarily from Asia, or are they vendors from other countries as well?

Peter: We do have vendors from other countries, but I would say that the majority of them nowadays are from mainland China.

Steve: Okay, and as I was just going through like Global Sources is one of the places that I recommend to the students in my class, but I thought it would be interesting just to kind of hear it from you guys what kind of differentiates Global Sources from some of the other places, like what do you guys that’s just really good?

Peter: Sure, first of all there a lot of good other sites on the internet, and they do a lot of similar things, right? Search for products, search for suppliers and contact them. A couple of other things that we do a little bit differently, the first is because we also run trade shows we try to get all of the exhibitors from the trade shows online as well. Now what’s interesting and a lot of people I don’t think realize this is the suppliers, a lot of them I’ll call them trade shows lovers.

They like participating at trade shows because the people that they meet at a Hong Kong show for example are people that have invested in paying for a plane ticket and spending a few days in Hong Kong. So they tend to be more serious buyers. So those types — some of those suppliers they don’t want to be on some of the more widely used online sites, because then they get a lot of inquiries from I’ll call it less serious suppliers.

So the first thing is because we run the trade shows and we get those suppliers on our website, we have some suppliers that you can’t find in other places and other trade shows. So they also tend to be more likely to be a manufacturer and more likely to have export experience and more likely to be a larger and more sustainable business. So that’s the first thing just all the touch points with the trade shows that we run.

The second is we also have quite a bit of editorial content, and really editorial content in two areas. If you go to the homepage on Global Sources in the left column you’ll see a bunch of product categories. And you can click on one of the product categories and click down to see a lot of the editorial content that we have there, here let me just bring something op here to give you an example.

So in our fashion accessories and footwear for instance, we’ve got an analyst choice section with some new products that have come out. Some flip flops are here, leather handbags, gold statement necklaces. And then some top 20 most popular section for content that is very popular on the site that people may be interested in seeing. And trending section for content that’s most trending in that particular category, this should be fashion accessories and then some…

Steve: It sounds like instead of just a listing of products and vendors you guys kind of have a little bit of value add in that you kind of carry certain things as well, is that accurate?

Peter: That’s exactly right, so it’s accurate and then part editorial content around it just to give the audience a little more information on what’s new. So those are two big things.

Steve: Yeah, I was just going to make a quick comment here that I’ve kind of noticed lately that Alibaba is becoming a kind of saturated full middle man traded companies and actually all the vendors I use for my shop are actually not on Alibaba. I found almost all of our vendors from trade shows, not like the Global Source — not your trade show, but like trade shows like the Canton Fair. I think what you are saying is quite true and I actually asked my vendors at one point why they don’t list on some of these places, why they just focus on the fair, is because they don’t really want to be dealing with some of the smaller guys in the space.

Peter: Yeah, and we’ve had that from the buy side also, some of the buyers will tell us that they visit our site because they don’t want have to read through a lot of the smaller say independent college dorm room sellers that are on some of the other sites. And they find that it’s easier to find manufacturers or larger trading companies that are real [inaudible 00:09:11] in our businesses using our services, both on our site and the trade shows.

Steve: So along those same lines, so how does Global Sources kind of vet the companies in the database?

Peter: Sure and that’s a good question for everybody, we do a couple things. The first thing we do is we do for the verified suppliers that are on our site, we visit those suppliers, so we’ve seen them face to face, we’ve seen their offices. And we also get their business registration, so we ensure that they are a legally registered entity. So that’s the very beginning part of the process.

Then the next stop is as content is uploaded, we also review and we are not perfect so if you see something let us know, but we’ll review for obvious say trademark and intellectual property infringement. So you tend not to find that kind of content on our site and some of the brand owners have commented to us that they like working with us because when there are issues we are very responsive, and they don’t find many issues on our site. And then those processes work pretty well, not perfect work pretty well.

But the real managers at the end of the process, there are always commercial disputes between buyers and suppliers, and sometimes the buyers contact us asking us for help or assistance. And in the vast majority of cases they are commercial disputes; it’s only in a very-very small number of cases that we actually have to go take a supplier down because the supplier did something that was shady.

And I would say it’s around one supplier per year that we have to take down. So to me that’s a pretty good measure of quality that the upfront steps that we take are a result of us having to take a very-very small number of actions on suppliers at the end of the process based on buyer feedback.

Steve: So along those same lines, I get this question a lot from people. When you find a vendor whether it would be Global Sources or Alibaba, do you kind of have to do that extra leg work to make sure that you are not violating or copying other people’s brands? You can never make the assumption that what you are getting is legit, right?

Peter: Well I think there is two things to think about, well maybe three things. The first is, are you looking for something that’s unique, so is it your design or not? A lot of the private label sellers are not doing a lot of design work. So then the second thing is if you are using the supplier’s design, you may want to do a little bit of research to figure out does somebody have a design pattern on it in your country, which is different than trademark. Trademark is mainly the logo that’s on it, so that you can also look up on the databases in the US to see if anybody has that trademark in your product category.

But you do need to do some work to make sure that you are not violating somebody else’s intellectual property if it looks like it’s not a commoditized product. If it’s a commoditized product like picture frames or something like that, there’s not a lot of intellectual property in that, so that’s not as worrisome. But it is something that folks should at least be aware of.

Steve: So finding out whether you are infringing a trademark is relatively simple, but how would you go about finding out whether you are violating a design pattern?

Peter: Yeah that is a lot tougher. My two way I reverse image search on some of the product images and see where else they show up and then try to figure out if some of — and then look up whether some of those are coupon [inaudible 00:12:50] have design patterns. Oh, that one is not totally easy. The other way to do it is to request some changes to the product that will make it more different from what other folks that might be selling. None of these are guarantees; they are all risk management steps.

Steve: Okay and I’ve used a lot of these listing services or market places in the past, and a lot of times you have good vendors and you have kind of middle man, and you have bad vendors. What are some of your word tactics for kind of weeding out the good guys from like the bad guys?

Peter: I hate using the words on good and bad, the supplier is selling to buyers in 200 different countries, and every buyer has different requirements whether they are regulatory and sort of occasional requirements or body requirements. And to me the key is good communication, so the supplier has a clear understanding of what you as a buyer what your requirements are, and especially the quality requirements, because that’s where a lot of the commercial disputes seem to come from.

And to do that one of the practices that you can do is first to get samples and I think everybody is right about that and doing that. The second thing is when you get the samples everything that you don’t like about the samples are put down on what’s going to become your quality control or inspection criteria checklist. And everything that you don’t like about the samples turn into a very objective statement that the third party could look at and assess, hey does this product meet this quality requirement or not. And if you get a few samples from a few factories, you’ll be able to put together a pretty good quality checklist.

Then when you have that checklist done and it’s got to be objective, it can’t be like it looks pretty. Well, pretty is — everybody defines pretty differently. No visible scratches, that’s more objective, the more objective you can make it the better. Then when you have that list of criteria, include it as part of the purchase order, and ask the supplier to sign off on it and say, look it’s part of the purchase order, these are the inspect, these are the quality criteria we want, and we are going to have a third party inspection agent come in and judge against these inspection criteria before the product ships.

So then you’ve told the supplier two things, one these are quality criteria, and two we are going to have somebody check on them before you get your final payment. And that helps also, and then the supplier, the supplier may come back and say; hey these quality requirements are higher than what we can do. And that’s fine, that’s what you wanted to learn at that point in the process, we are going to come back and sign off on it. And then after manufacturing is done, it’s a good idea to then bring in a third party inspector to inspect the goods before they ship.

And again to me I look at that as an investment, you are trying to figure out, hey can this supplier meet my quality requirements? Not just for this shipment, because the shipment may be a smaller trial orders, and you may not make a lot of money on that shipment especially when you add the inspection cost in. But you are learning better whether as the supplier increases their production quantity they can meet your quality requirements, and that’s super valuable. Especially if you don’t want to start getting a lot of bad reviews when you start selling your product, so that’s…

Steve: Can you just comment real quick on how much it costs to get an inspection company; I imagine they are paid by a certain amount of time, right?

Peter: Yeah most of them will, they’ll look at the size of your order, and usually what the larger retailers do is they’ll have a random sample, the products is checked and there is statistical tables to figure out how many need to be checked. And then they’ll figure how much time it’s going to take to do that and charge you based on mandates. I would suspect that for most of the Amazon private label sellers, one mandate would be enough to do an inspection. That may not be 100%, it may be a good random sample.

And the typical mandate rates are around $300 although I have seen — and that would be from folks that are – I’ll say — I don’t want to use the word reputable, but a lot of the good inspection companies that’s the pay charge. If you search around you may be able to find folks that are less well known that charge less than that. I’ve seen numbers I think as low as $150, but I would recommend sticking with folks that are maybe a little bit more reputable and the…

Steve: 300 is actually in line with what we’ve gotten in the past.

Peter: Yeah, so that makes sense. And then the big inspection companies which can be more difficult for smaller entrepreneurial companies to work with, the bigger inspection companies are SGS, Pure, VeriTest, and Intertech. But then there’s a number of I’ll say mid tier inspection companies, Asia inspection, Intouch, V-trust, and they are all — and Sofist [ph]. And they are all pretty good for working with Amazon private label sellers.

Steve: Okay, yes so I just want to emphasize a couple of things about what you said that quality control or a QC checklist is actually really important. We import napkins and there was a time when we were just like, hey, ship us white napkins. And it turns out that there is thousands of shades of white which we actually discovered very quickly. So you have to get really specific on what you want in order to actually get what you want, because if you don’t specify something they will make assumptions, and almost always those assumptions will not match what you were thinking.

Peter: Yeah and it’s not that they are purposely trying to do it, it’s just that they are different assumptions. Plus they may also be trying to manage the cost and they’ll say, okay within these assumptions you gave me he said, white okay, this off white is a little bit less expensive so let me do that one, and it’s still right.

Steve: Or even materials like you will say you want curtain, but then they’ll give you like a blend or something like that because you didn’t specify 100%, stuff like that.

Peter: Yeah, absolutely, yeah so…

Steve: Let’s talk a little bit about just kind of interacting with potential vendors. So what are some of your best practices just for kind of the initial contact and like kind of the negotiation process? Like what are some common no, nos, when dealing with Chinese vendors?

Peter: I think what I would suggest first is a lot of folks are going to be contacting the suppliers via email, and one of the things to recognize especially with the – I’ll say the larger more experienced suppliers is they maybe capacity constrained or labor constrained, so they may not need new or more business, which then means you have to sell yourself to them. And in fact this is more likely among I’ll say the good suppliers who have relationships with a lot of overseas buyers, and those buyers keep coming back to them because they are good suppliers. As a result those suppliers have run out of capacity, so I think you should do a little bit more than just say, hey I’m interested in this product, what’s the MOQ, what’s the price?

It’s also helpful to introduce your company and try to explain something about why you will be able to help break that supplier into a new market or product line. We are very good in this, these are some of the channels that we use, we are expanding our product categories, we are very interested in your product, and we think we can help take this product to market. So to get the supplier excited about working with you, sell yourself to the supplier.

So I think that’s one thing to keep in mind. The second thing we talked about is the quality, I mean you are working across time zones, you are working across cultures, a lot of the folks that you are initially contacting they’ll be 20-21 years old, straight out of business English course from college. They may not have travelled internationally at all, so they really don’t — so the norms are different, just because you are crossing cultures and all those other things. So as a result it does become important to communicate very clearly and very explicitly.

I think the third thing and a lot of folks have said this to me also. A lot of the suppliers, I mean form a western perspective we view, hey this is the contract and the negotiation is over because we’ve agreed on the terms and conditions in the contract. And the China suppliers often view the contract as I’ll say the start of the negotiation. It’s more like, oh, okay, we are seriously going to do business now because they’ve given us a purchase order and a contract, we’ll sign it off and then as we go through the process we’ll identify whether there are areas that we need to adjust or change in order to meet their requirements. Which for a western or American perspective it’s a little bit different and then can create frustration. So just be aware of that upfront, and then it’s a lot less frustrating when it happens.

But that’s why from a western perspective just get those quality criteria upfront, get everything signed off upfront, get everything agreed to, then you can go back and say, no look, we agreed to this at the beginning, I really do need it this way. There are maybe things the supplier has asked that you can change, I don’t know packing quantities, number of pieces per curtain. I mean there could be a million things that they ask that you say, oh, yeah, that’s not a big issue; I have not problems if you change that if it makes it easier for you. But then there are other things that you will feel absolutely not, now this is critical to the success of this product in the market, so we can’t change that. But those kinds of discussions are going to happen maybe more often than most people expect.

Steve: So based on kind of what you said if a vendor is kind of over eager to work with you is that generally a red flag?

Peter: No I don’t think it’s a — that doesn’t go either way.

Steve: Okay.

Peter: One valuable aspect of a vendor is how well they communicate, and good communication makes them easier to work with. That being said good communication itself, the executive that communicates with you well that doesn’t mean that he has any control over the manufacturing and production line, or the QC inspector if there is one on the manufacturing and production line. So I think good communication is a plus, but it doesn’t necessarily mean you are going to get what you want, you are going to have to take additional steps to make sure that you get what you are looking for and what you want.

Steve: Yeah, I mean we’ve had cases where the vendor has agreed to everything that we’ve said and we’ve been very explicit, but then when it comes to time to get the products it’s not what we said. I guess this kind of ties into what you mentioned about always getting an inspection company into play, right?

Peter: Yeah and what folks that have larger productions runs do is they’ll also ask for — they could ask for samples from the beginning of the production run, or have an inspector go in during the beginning of the production run. Because at the end of the production run if there is problems, that’s harder to resolve, but if you can identify this at the beginning of the production run, then it’s easier to make changes.

Or even nowadays just over Skype get one of the first pieces off the — they come off the production line and review them over Skype. Really what you are trying to think about is what are all the checkpoints that I can put in to minimize problems, maximize the odds that I’m going to get what I believe I need, and then minimize issues at the end of process, because if you get to the end of the process and you have issues it’s kind of too late.

Steve: Right, yeah, so you mentioned before that you kind of have to sell yourself to the Chinese vendors. What are some of things that you can say to make yourself look better in their eyes?

Peter: For startup entrepreneurs, in any industry it’s always going to be difficult to get started. But you can leverage either knowledge or success, we are selling these channels, we are selling in these volumes, we are selling our own website and third party market places, we’ve had a lot of success with these products that we are — and if you are importing them, that we are importing. If you are sourcing domestically that we are sourcing domestically, but we would like to move toward importing some products directly from manufacture. Just something that explains one — like cover the experience that you have, and something that explains why you are going to be able to grow with that volumes and sales.

Steve: Okay and do you recommend kind of negotiating the minimum order quantities in the beginning. And if you are like how would you kind of phrase those questions about minimum order quantities to not turn off the vendor?

Peter: Yeah, I know that’s a great question too. I think the three steps tends to be get a sample, review the sample, then do a trial order which is a different way of saying negotiate the minimum order quantity. And then move to orders that hit the minimum order quantities. And that middle step of the trial order, the conversation with the supplier can be, hey, we really like this product, we would like to do a trial order of whatever, 200 pieces, 500 pieces.

And the reason we want to do the trial order is to assess, one the quality of the product when it’s manufactured, and two to get market feedback when you try to sell it. Subject to the quality in the market feedback, we would expect to place orders that hit your MOQ requirements.

Steve: Okay.

Peter: Every supplier is different, some suppliers will say yes, some suppliers will say no, it also depends on time of year. Right now everybody is maxed, any manufacturer right now because we are on holiday in China. But this time of year manufacturing capacity is kind of maxed out to get everything on the boat in time for Christmas. Other times of the year it tends to be slower, so depending on the time of the year it could also change the suppliers answer. Or if the supplier for whatever reason has additional capacity, he will be more open to a trial order with a small order size than if he’s got 15 customers with an order backlog of three months.

Steve: That’s actually a very interesting point, so would you recommend looking for new vendors towards kind of the beginning of the year when things are a little bit slower?

Peter: I think there is a lot of advantages to that plus with the lead times. And also if you are having maybe trouble getting feedback during the say August-September timeframe, check back in January-February. I mean each product category has a little bit of a different sourcing cycle. But yeah, I think one can check back in it at a different time.

Steve: Okay, let’s talk a little bit about quality control, I mean we’ve already talked about several things, the QC checklist, and the inspector. Is there any recourse for shipments that you’ve received that maybe inspected okay, but they are either late or damaged by the time you receive them?

Peter: I guess it would depend on the terms that you have in the purchase order. If you are buying FOB which is a pretty common term that means that the goods kind of moved to your I guess legal possession at the port in China if you are ocean shipping. Anything that happens after that is your responsibility. So if the goods get damaged in transit, it’s your responsibility. But quite frankly commercially once you’ve sent that final payment to the supplier, there is very — it’s very difficult to have any recourse. You might be able to get a discount on a future order.

Steve: Okay, because shipping it back would be prohibitively expensive, and so yeah you are pretty much stuck with it, right? Okay, and for — do you recommend putting in a shipping date clause in your purchase order?

Peter: I think so, yeah, and then also put in a clause that says, if you miss by whatever is important to you, if you miss by three days we are going to deduct 1% per day that you are late in shipping. But then during the manufacturing process, be careful about when you ask for changes, hey, I want the labels differently, hey I need the boxes differently, that they will not impact the shipping time. Because then the supplier will come back to you and say, well, hold on the reason we are late is because you asked for a change.

But I think it is a good practice to put in an agreed ship date, you are going to ask the supplier, hey, what ship date can you hack I’m going to put that in there. And then put in a clause that says, I don’t know 1% a day for more than 3 days late. And then whether or not you actually get that 1% back at least the supplier recognizes if he’s got two orders, hey this guy might penalize me if I’m late, this guy won’t. So yours might move up right, and you are increasing the odds of hitting ship date.

Steve: Okay now that makes a whole lot of sense. I’m just curious have you ever had cases where you spent — send an inspection company in, the whole production run is done and it’s sitting at the factory and the inspection guy goes in and says, hey, none of these are acceptable, what generally happens then?

Peter: Yeah, so again, we don’t do a lot of the importing ourselves, so I’m mainly relying on what I have heard from buyers and suppliers. If that happens usually often you’ll have paid your 30% deposit, manufacturing is done, you haven’t paid your remaining 70%. So at that point you will request the manufacturer to rework the product to meet the requirements and then have a second inspection done. And that would be a very typical process in that case.

Steve: Okay I want to switch gears a little bit now and just kind of talk about a lot of these people are going — these Amazon private labelers; they are having their stuff shipped directly to Amazon. And I have just kind of anecdotally heard that Amazon is now working with factories directly to getting their stuff and kind of cutting out the middle man or the private labeler so to speak. Are you seeing that happen and are there any reasons why a manufacturer would not ship directly to Amazon?

Peter: Yeah, I think well there is a few underlying questions here, let me cover each of them. The first is Amazon has some of their own brands, their own private label, just like the large retailers do. And those private label brands they will go direct to the manufacturer and say can you get this product for me. I think that Amazon basics is one of their private label brands.

So absolutely Amazon is going in and getting — going direct to manufactures and sourcing products. The second thing is there are a lot of common private label sellers, or third party sellers from China also are selling on Amazon as I’m sure folks have seen. And Amazon has offices in China and Amazon is supporting those guys as well. Amazon is an equal opportunity market place.

So as a private label seller you just need to be aware of the different directions the competition is going to come from. Amazon is not there to make your life easier; Amazon is there to make money for Amazon. And they are providing a great opportunity for folks to get in front of a good audience and providing a lot of great services to make it easier to sell products, but they are doing that for everybody. So you are competing against everybody when you’re taking advantage of those services.

Steve: So do you see that as a trend going forward then more and more of these factory and manufacturers are going to be working with Amazon directly to kind of reap the profits?

Peter: Well, so, yeah, let’s talk about that from two directions. The first is Amazon is a private label; Amazon goes to the factory to source its products, just like the large retailers do for their private labels. So that’ll probably continue. Second is Amazon helping manufacturers sell say the manufacturers own private label. And a lot of manufacturers are interested in this, and I’d say that there is three groups, one they are interested they haven’t tried it, they are interested, they are trying it and they are going to keep doing it. They are interested they try it; they are going to stop doing it. And I’ll explain some of what we see the manufacturers think about when they do this.

The first thing they think about is hey; well, if I do my own brand on Amazon I get great margins. So that’s very interesting to them. Then they realize, oh, but wait, it’s FBA so I have to manufacture stock without getting paid, and that’s risky and I’m not used to doing that, so maybe I won’t do this. Third thing they might realize is okay I manufactured this stock, I put it in FBA, but I don’t really know how Amazon works well right? I don’t have good native English skills, I don’t have good Amazon optimization skills, I’m not good at managing the people that leave reviews and following up with them etcetera.

So then a lot of them come back and say, okay, let me focus on what I’m good at, let me focus on what we are manufacturing and find other people who are better at selling whether they are retailers on Amazon, power sellers whoever to buy from me and let them handle the sales. It’s going to be quite a mix, but certainly the manufacturers are aware of Amazon and they are thinking about whether it’s something they should pursue or not.

Steve: Okay, what I was trying to get at is it’s not just some mad gold rush where a whole bunch of manufacturers are turning over to FBA. It just sounds like it’s a consideration in their business, and they just have to evaluate their needs and what they are good at it sounds like okay?

Peter: Yeah, and a lot of suppliers are choosing not to do it.

Steve: Okay, one other question that I constantly get asked is a lot of people who are manufacturing their own things, they are kind of worried about intellectual property theft. So you might take your design and have it manufactured, but then all of a sudden the design leaks, and all of a sudden a whole bunch of other guys are producing the same thing. How do you prevent that from happening, is there anything that you can do?

Peter: Well there are a number of things that you can do, and they all come down to — I’ll call it risk mitigation again. So there is – it’s difficult to be full proof and everybody has this issue, whether it’s a China manufacture has a new design or US or European design or brand owner. But one thing that I have seen done, if your product has multiple parts, have different manufacturers make different parts, and then bring it to an assembly facility, have the assembly facility assemble that.

And try to make sure that nobody knows kind of each of the contributors because then it’s harder to replicate, not impossible but harder that’s one. Second is to the extent that you can put some kind of intellectual property protection around it whether it’s a design pattern or some other kind of pattern, that’s helpful as well, but keep in mind that there are legal costs in enforcing that.

So if you do find that folks are doing something unexpected then you are going to incur some legal cost to enforce that. And then your enforcement actions you want to think about well which countries do I want enforcement actions in. Do I want to do them in China or in — I mean sales market the US or somewhere else. So there are some strategy involved in where you are trying to get your IP protection. So it is a challenge for everybody and…

Steve: It sounds like for a little guy they are unlikely to go the enforcement route, and so it sounds like the best option is to just kind of [inaudible 00:37:55] the design process by using different manufacturers, at least that’s what it sounds like to me.

Peter: Sure and then actually the third option is just do better marketing, so people know that your product is the real deal.

Steve: Okay, but there will still be clones out there at that point, right? You are just going to be out selling to clones essentially.

Peter: Possibly yeah, that sometimes happens.

Steve: Okay, let’s switch gears again and talk a little bit about trade shows like my wife and I try to go trade shows every other year. And I have my own stories, but I was hoping to hear some of your input about the advantage of actually going to shows. I know it’s quite intimidating for people to go to a brand new country. So I was hoping to get your take on and hopefully convince people that going to shows isn’t that intimating and it’s very valuable.

Peter: Why? Yeah, I completely agree with what you said not that intimidating and very valuable, but yeah, I’ll give you some comments. First I’m always amazed when I walk into trade shows; I’m amazed at how much product there is there. Because there is not enough just to stock at store, there is enough product to stock entire malls. And I’m just amazed by the depth and variety of product. For us we run shows twice a year in Hong Kong, our upcoming shows are in October. We have October 11th through to 14th we’ll have about 300 booths of home office electronics components suppliers. Then from the 18th to 21st we have a second set of show dates which should be a lot of mobile electronics products, smart phones, tablets, wearables, accessories. During those same dates 18th to 21st we also run a gifts and home product show.

And then from the 27th through the 30th we run a fashion accessory show and that has a lot of accessories, bags, caps, etcetera. So and we run those shows twice a year, it’s quite late for folks to make it up for these shows in October, but we run them every October and April. There is couple of things to know about visiting a show; first the shows — there are several organizers in Hong Kong and China the Canton Fair. And we all organize our shows around the same time. So a lot of buyers they come out and they visit each of the shows, or all of the shows that are relevant to them. And I would recommend visiting multiple shows to get a sense of the differences in which ones you like the best.

Second thing to keep in mind is the Hong Kong shows — Hong Kong is still English speaking. It’s very easy to get around, I think with an America passport you can just come in on a 90 days tourist visa. So it’s just a long flight that’s all, but once you get here it’s like — it’s pretty easy. A third thing about the trade shows is as I mentioned before a lot of the exhibitors at the trade shows, they are not marketing in other online channels. Now we do try to get them all on the globalsources.com site. So you’ll see different suppliers than you might see if you are only doing online research. Well even more important than that, a lot of the suppliers don’t put all of their products online.

So if you go to the show you can see additional products, and you can touch and feel them, and you can see maybe five or six or ten suppliers have similar products, and you can talk to them and get immediate feedback about any questions you have about the product or anything that you learned about the product. Then the very last thing to keep in mind is if you do meet a supplier face to face in the show and you start building a relationship, then they may start showing you products before they show anybody else. And you are less likely to get that as an online only buyer, so you end up getting better access to suppliers and their products if you meet them face to face at a show, and if you start developing that relationship with them.

Steve: A couple of comments here, one thing that I’ve noticed in the past is that vendors are very reluctant to give you like a listing of their products. And I think – I suspect it’s because they don’t want other people copying what they had to offer, but as soon as you see them face to face they’ll just show you everything.

Peter: Well also online they don’t know if you are one of their competitors emasculating as a real buyer or a real buyer. So that also makes them a little more cautious.

Steve: I also did also want to vouch that going to Hong Kong is actually quite simple, you can get by just speaking English, and the public transit system is very good. So it’s actually not that — it’s very easy to get around in Hong Kong, Canton…

Peter: You don’t need to rent a car I forget; whenever I go to a city in the US I’m often renting cars. I don’t need to rent a car in Hong Kong, public transportation and taxis are great, yeah.

Steve: I was just going to make a comment on the Canton Fair is a little bit more intimidating because not everyone speaks English, but you can still get by just taking a taxi, there’s a lot of hotels. I think I posted my itinerary in one of my posts of the exact hotel that I stayed at, and there’s usually shuttles that go back and forth on the fair. So you don’t really need to do anything there either.

Peter: Yeah that makes sense I mean the Canton Fair it’s in China, so there’s less English speaking. I think it’s also a little bit harder to get around, but if you are out for an adventure and like I said visit all the shows and get to know the differences between the shows.

Steve: What would you say is one of the big differences between the Global Source’s show and the Canton Fair?

Peter: Well what some of the buyers have told us and this is coming admittedly a little bit from say the larger retailers. But they prefer the Hong Kong shows including our show, because you’re getting more suppliers have export experience and they’re more export ready. At some of the China shows you may have more smaller suppliers, they may have less export experience. So that’s one of the differences that we hear some of the buyers that visit the show.

Steve: Okay and in terms of products selection, does Global Sources kind of specialize in a certain area or what are they strong at?

Peter: That’s a good question too. As I mentioned for electronics and consumer electronics I think we are super strong, I think you have to go to one of our shows if you are sourcing any kind of electronic or mobile electronics products. For gifts and home products we have a very solid medium size show working closely trying to bring suppliers and have more innovative products. So I think one should visit it.

The Canton Fair probably has a higher quantity of suppliers in that category, but maybe not the same kind of innovation or export experience, but I mean visit both. And then for the fashion products the scraps and the bags, we are pretty sure that we are largest show of those types of products anywhere, because there aren’t a lot of shows focused on those types of fashion accessory products.

Steve: Okay, I just also want to comment that Peter keeps mentioning that you can go to both. It’s actually very easy to go from Hong Kong to Canton. It’s just a train ride I can’t remember exactly how long it is, I think its 90 minutes, does that sound accurate to you?

Peter: Yeah, I was going to say about two hours I mean you have book your train tickets in advance because during that time of year everybody is going back and forth. And don’t take the bus because the bus takes like six or seven hours.

Steve: Yeah exactly, yeah, the train is super fast and so you can actually go — there is one fair we actually stayed in Hong Kong and actually took the train over really early in the morning to go to the Canton Fair, and then we came back to Hong Kong. I actually don’t recommend doing that, but you could if you wanted to.

Peter: Yeah no that’s exactly like some people will do a day trip, but as you said it is a long day and there is a lot of working when you are that he fair so…

Steve: Yeah, one other question I wanted to ask you is I’ve noticed actually with my vendors that the prices have just been increasing year over year at pretty significant levels. So what is a good way that I as a buyer can find cheaper prices or other vendors maybe in other countries or — what is the trend that you are seeing that’s causing these price hikes first of all, and what can I do about it?

Peter: Yeah, that’s a great question. We’ve had articles about this on our smartchinasourcing.com site on and off over the years. I remember one of the articles a buyer was saying, look if you are not going to be able to get a 30% price improvement by souring from overseas keep sourcing where you are sourcing, or sourcing from China. Because cost — this was a few years ago because cost in China keep going up. And the components of costs that are going up include labor costs, raw material costs, and the exchange rates.

Now if I would have commented on this two or three years ago I would have said all three of those are definitely going up. Now I would say labor rates are still going up no doubt about that, raw materials cost it’s unclear, it depends of what product you are sourcing, so you can check that. And the exchange rate interestingly moved about 3% in the other direction about a month ago. So kind of having an understanding of some of those underlying factors that are driving changes in pricing is helpful.

Then when again time is on the larger retailers what they do — well there’s two things they’ll do, one is they’ll try to do call it a bill of materials costs things. So they’ll try to get component costs, try to figure out the amount of labor it takes to assemble the components, then try to figure out what a fair manufacturing price is. I think that’s a little bit challenging but that’s an approach some folks take. A last approach is just get multiple quotes, so some of the larger retailers they require getting three quotes for a particular product. Then use the different quotes in the negotiating with the supplier. Say hey, I would really like to work with you, but I have this quote from another supplier that’s this price and I don’t really understand or I’m wondering if you can help me that price. So those are some strategies.

Steve: I knew for myself like going to a new vendor is such a pain in the butt, like we have to go through this whole quality control process again even though we specify everything on paper, there’s always things that we don’t specify even though we’ve done this for many years. So the cost is switching and it seems to be pretty high for us at least.

Peter: No I think that’s true for a lot of folks, so you want to think about how much — at the end of the day the best outcome is stay with my current supplier and get a good price. So if you get quotes from other folks you can go back to your current supplier and say, look I really like working with you, but we are really having a tough time in the market. There’s other suppliers, or we are getting quotes from other suppliers for these prices. But you got to be careful, the other suppliers may not be understanding your quality criteria right, like you mentioned. And you have to be very careful about how you do that conversation, because you could damage the relationship with the existing supplier.

Steve: Absolutely, hey Peter I want to be respectful of your time we’ve been chatting for almost 50 minutes. If people want to find a little bit more about Global Sources or if they have any questions for you, where can they find you, and what are some of the resources that you guys provide?

Peter: Yeah, I think the best place is globalsources.com. One of the things we didn’t talk about if people go to the site and they want to keep updated on new products as suppliers post them, they can sign up for products alerts on the globalsoruces.com site, so that’s a great resource. Second we talked about the magazines, the magazines are great for let’s say browsing and discovery, and we have PDF versions of those magazines by product category, people can find those at globalsources.com/magazines.

And for the trade shows they can learn more about them at globalsources.com/exhibitions. And we spent a lot of time on best practices for importing from China, and we have a lot of content on that at smartchinasourcing.com. So I think those are all great resources, if folks need to contact us, we have customer service links on our website. If folks who want to reach out to me they can go through the customer services, and the customer services folks will reach me.

Steve: I just want to also mention so everything is free right, these PDFs, these magazines are all free going to the tradeshow is also free.

Peter: That’s correct; I think for the trade shows if you don’t pre-register we’ve started charging I think it’s 100 Hong Kong which is about $13 US, but yeah.

Steve: Okay, yeah, more or less free. All right Peter thanks a lot for coming on the show.

Peter: Oh no, my pleasure, thank you for having me.

Steve: All right, I appreciate it take care.

Peter: Take care.

Steve: Hope you enjoyed that episode. Global Sources is a great place to find vendors from Asia especially if you are selling into the electronics and accessory space. It was pretty cool to hear from the CIO himself and get advice from someone who deals with Chinese vendors every single day. For more information about this episode go to mywifequitherjob.com/episode99.

And once again I want to thank Famebit for sponsoring this episode. As I mentioned earlier Famebit is the best place to find Youtubers, Instagramers and other influencers to promote your products online, and it works. One of my podcast guests Emanuel Elayae used famebit.com to make over $65,000 in four months with YouTube influencer marketing, and its cost as low as 50 bucks to give a try. And the best part is if you use coupon code mywife@famebit.com you will automatically get $25 off your first campaign. So go to famebit.com right now and get famous Youtubers to promote your products today.

And then finally 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 100K in profit in our first year of business. Go to mywifequitherjob.com, sign up right there on the front page, and I’ll send you over the course. Thanks for listening.

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

Now if you enjoy this podcast please leave me a review on iTunes, and if you want to learn how to start 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 100k in profit in our first year of business. Go to www.mywifequitherjob.com sign up right there on the front page, and I’ll send you the mini course right away via email, now onto the show.

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 chat with Sam Boyd of guidedimports.com, a company that helps others import safely from China. Now in the past few years more and more people have been kind of jumping on the Amazon private labeling band wagon. So I brought Sam Boyd on the show to kind of give us his unique perspective on the Amazon gold rush.

Now as I have mentioned many times in previous articles and podcast relying solely on Amazon is kind of a dangerous play, because you are putting all your eggs in one basket, and you kind of really need to establish your own branded website or business in order to kind of future proof your business. And with that welcome to the show Sam, how are you doing today man?

Sam: Thank you so much for having me Steve, I’m doing great, how are you?

Steve: Very good, so tell us about Guided Imports, so what do you guys do, and why did you start this company?

Sam: Yeah sure, so to put it simply, Guided Imports is a company that helps people get products made in China and safely and easily get them shifted to their destination country to be sold. So we started as just a regular sourcing company and what that means is, larger businesses and brands who don’t necessarily have the means of having their own purchasing office in China, we started out as being very dedicated purchasing office. And through the time of us working with these clients, we realized that there was a huge market for people who were interested in selling on Amazon and also selling on ecommerce.

So at about a year after we were established as our first sourcing company, we launched Guided Imports. And guided import’s goal is to help buyer or help sellers on Amazon purchase products and get them manufactured in China and seamlessly deal with everything on the China side to get them over to Amazon warehouses, and to be sold on Amazon.

Steve: So Sam if I went up to you and said, hey, I want to sell cell phone cases for example, you would just take care of it from there after I give the specifications?

Sam: Yeah, I mean that’s the ideal goal right? So essentially the way it works is we offer the seamless service that allows people to tell us exactly what it is that they are looking for. We sort of walk them through the information that we need to know. And we come back to with them with reports telling them okay this is how much we think it’s going to cost. This is what it’s going to cost to do to get the products through customs and pay the duty in taxes. These are the necessary certifications you need and ultimately give you an idea of the entire process and then start working from A to Z, so exactly what you said.

Steve: And this is probably getting a little too specific I was just curios. The way you guys get paid is it like flat fee or do you take cut off of each product?

Sam: Great question, so the way that — so what we do is — to put it simply this is a sourcing company there’s a lot of companies out here, we just try to give it a different approach. And what a lot of sourcing companies do is they’ll take some type of commission, they’ll charge percentage on top of the total sales or multiple payment structures. What we try to do is we have just one flat fee that you pay and we handle everything, we are your eyes, ears, boots on the ground, and that’s all you necessarily have to worry about.

Steve: Okay, so let’s get into kind of like the Amazon space I know a lot of people just been kind of jumping on the Amazon band wagon, and they’ve been just been making mistakes left and right in sourcing. I was just kind of curious what your view you probably see this more than I do but what is your view of just kind of selling on Amazon today?

Sam: So selling on Amazon is the phenomenal business model, it’s really the first platform where anyone can seemingly find a product, get it made, and sell it to the end user. The problem that we are seeing are importing is a serious game. It’s not just about finding a product, and for your example cell phone cases, and saying okay, I’m going to get 3000 of this made and start selling them. There’s a lot more that goes into it, and well, there are a lot of guides that are teaching people how to safely import, they are leaving out a lot of important information. And it’s really causing some Amazon sellers to feel the wrath, because Amazon is getting stricter.

And they are starting to essentially ban users for not complying with rules and regulations through Amazon as well as through import regulations. So while selling on Amazon is a great model, it really needs to be done carefully and properly.

Steve: Yeah, I have just noticed I think they just went through another banning wave like a month ago right? Where they just banned a whole bunch of people and they removed a lot of reviews as well. Do you happen to have any insight on why they were banned?

Sam: Yeah, there’s a lot of reasons, I think why people were banned and Amazon did recently change their terms of service where people are saying regarding false reviews or un-organic reviews. What we are hearing and what we are seeing on people posting on different blog posts or posting on our facebook group and things like this, are some of the instances where maybe they just got unlucky. But I don’t think everyone is being completely honest with the exact reasons why Amazon banned them, or they just don’t know. After hearing some stories I definitely have my own opinions as to why the majority of them are being banned, but…

Steve: Let’s hear them.

Sam: So essentially one of the biggest concerns is safety. Amazons customer is the end user, it’s not the seller. And this is the reason why Amazon is starting to teach factories how to sell on Amazon. Is because they want to minimize this risk of exposure that they have to products that are not necessarily safe and they don’t have the proper licenses and things like this. So a big example is anything that is food related, whether its food itself or a product that’s used in cooking, needs a certification through the FDA, if it’s being sold in the US market. Many people see this as something that they can just skip passed that they think well, I can get it — I can get this product, that not necessarily need me to spend a couple of 100 dollars on the FDA certification.

I can sort of just hope it slips through customs, start selling it on Amazon, and I figured that I have such a low volume that no one’s really going to catch me. Well this is a perfect example, but when we look at it it’s not just an FDA certification that people need for products, there’s tons and tons of certifications. And there’s so many to the extent that there’s — it’s a customs brokers job, it’s their profession to have an understanding and to advice people on all the necessary certification. So one of the biggest things that I see people getting banned for is, lacking this necessary compliance regulations and certifications, it’s ultimately let’s assume that you are selling baby products.

And you don’t get the products tested to make sure there’s let’s say — to make sure that there’s no lead in the product itself. This is a huge issue, because you are responsible for putting these products in the hands of children. A lot of other people that are selling are mothers and fathers themselves, so at least I have a family and they are neglecting these major concerns. That a major importer or someone who knows how to import would never do, but because people are just reading quick guides or just looking through forms and seeing how easy it is to sell on Amazon, they completely neglect this stuff and what’s happening is they are getting banned.

Steve: Okay, I have actually heard other stories about Amazon kind of cracking down on customer service and quality of products as well. Which is why if someone gets too many complaints after X number of sales, Amazon just doesn’t want the seller in the system anymore even though they might have a pretty decent track record.

Sam: Yeah, absolutely and that’s within reason, I mean there’s – it’s funny you asked me for what my theories are or what my thoughts are, there’s a lot of them Steve. That’s another one, its quality control. Quality controls, having an inspector, a third party inspector go to your factory and check the goods and test the goods cost usually under $300. But someone who is working on such tight margins might neglect doing this and what’s happening is they are going to get — their products are going to get banned because the products themselves don’t meet the necessary quality control. They don’t meet the necessary quality that the end users want to get in returns.

So it’s even easy for a long time seller to get banned as well for just saying I don’t want to spend $300 on QC. QC is quality control, and just because I’ll assume my supplier is good, I have worked with him in the past, I usually get good products, it doesn’t work like that. With manufacturing at least you really need to be one step ahead of the manufacturer at all times. And it’s costing people just like you said their accounts and essentially their business.

Steve: I mean I can talk a little bit about personal experience here, from production run to production run, we always go through everything. Because the materials might have changed, someone else might have been working in the line different set of people and the quality always varies from production run to production run. So let’s talk about some of these common mistakes that some of these newbie Amazon sellers are making, what are some of the problems that you’ve been seeing?

Sam: Sure, so I think we touched on two of them, two of them being not necessarily knowing what certifications needs to be purchased or applied or tested to a product quality control. Those are two of them some other ones are — some other problems that we are seeing are not working with proper factories…

Steve: What does that mean exactly?

Sam: Alibaba is a great platform to find factories; it’s what some people would say it’s the ideal platform. But a lot of people put too much faith into Alibaba, or suppliers on Alibaba because someone has a gold ratings, a [inaudible 00:13:26] that they paid Alibaba. And have that says we’ve been a perfect supplier for ten years, or we’ve been perfect supplier for five years. So one of the mistakes is with sourcing, so sourcing is searching for factories, finding ideal factories, that’s a serious problem is that they are finding the wrong factories, or they are finding factories that are not necessarily qualified.

And what is happening is they are facing all of these problems that we just spoke about but these problems could have easily been avoided had they found a proper factory or a factory that’s specialized in the product that they want to sell to be sold in the market that they want to sell.

Steve: So let me ask you this since we are on the topic, so what is the right way to find the proper factory to manufacture a specific item?

Sam: That’s a good question, so it’s … I don’t think you are going to like the answer because it takes a long time to do this. What we like to — the way we like to explain finding a factory to manufacture your product is to cast the white net. So speak to as many factories as you possibly can and what I mean by this is speak to a hundred factories and rapidly narrow down these 100 factory list into more qualified factories. Until you are getting down to approximately five factories that you’ve been able to personally vet and personally qualify and say of the 100 factories that we spoke with, these five we fell meet all requirements that we need.

And one of the most difficult and serious things that someone who is new to finding these factories needs to understand is, the very last thing you want to be looking at is the price of the product. A lot of people just look at price first, and then find a qualified factory based on price but it’s really the opposite.

Steve: What are some of the criteria that you use to go from a hundred down to five for example?

Sam: Sure, so some of them can just purely be how a factory responds, what’s the response rate, but other ones can be more serious ones looking at their products, so there’s hard factories that you can put into place. If you are looking for cell phone cases for example and you see that a factory sells everything from microwaves to wallets to cell phone cases, that’s not necessarily a good thing, because it’s telling you that supplier does not specialize in one criteria. They are trying to just throw — they are just trying to throw a bunch of stuff on the wall and see what’s sticking. So if a factory has multiple items that are in completely different categories that would be a factor that would make you say, okay, we don’t want to work with them.

Steve: Okay, they are probably not a factory either right, because they are probably not making their own stuff at that point either?

Sam: Yeah, there’s definitely a possibility that they are not a factory. And yeah, I try to use the word supplier and not factory because a lot of people have this idea that I’m going to China or I’m going to Asia and I want to get products manufactured. I need to go to a factory because I don’t want any middle man.

And it’s kind of a harmful thought process because it really minimizes your options, so one of the things that you can always look for is if they are some type of middle man, a trading company it doesn’t mean that they are bad, or it doesn’t mean that they are priced any more expensive, it just means that they are purchasing for maybe a factory that doesn’t necessarily have the means to do international export.

Steve: Okay.

Sam: I would say there’s a lot of criteria we list them on our blog, but one of more important thing that I would say, is focus on the export market that these factories manufacture for. So if you are going to be selling in the US but a factory says that 80% of their sales are to India, that’s not necessarily a good thing because the level of quality on products is different per country. And comparing India to the US in terms of quality is you are going to see such a huge difference that you want a factory that completely understands the western market, and it’s not selling just the lowest possible price, they are more focused on quality.

Steve: Okay and what services would you recommend to find vendors you mentioned Alibaba already, but do you have experience with like Global Sources, going to trade shows, using some of these import services like Panjiva and Import Genius?

Sam: I’m a huge fan of Global Sources, I love Global Sources, and I think for the newer importer, Global Sources does not get the amount of recognition that they deserve. Because the search features alone in Global Sources are a lot better for the newer importer. You can basically choose — as a newer importer you can basically choose how big of a factory you want to work with.

And if you are ordering a small quantity, it depends on the product but let’s say for these cell phone cases 5,000 cell phone cases, you don’t want to work with a huge company or a huge factory that’s selling also to best buy and radio check. You want to work with someone who is a little bit more in line with your business model, or with the size of your business.

And Global Sources is using their star ratings, it’s a very simple way to just read out these giant factories, we are going to have huge overheads and they are going to charge that on top of the — they are going to cover that through the product price. Other services yeah, Panjiva is great import, where as Import Genius is also good. They are good for identifying if there’s a brand that you want to know the factory, that they came from, that the product came from; those services are good for an Amazon seller. I don’t think it’s necessary to pay the hundreds some dollars a month for the service when most of this information can be found online anyway. So then there’s also websites like made in China, which is also a pretty good. And then trade shows, the canton fair is coming up soon in Guanzhong in a couple weeks, Guanzhong China.

And that is a great way to get product ideas but for a small seller it’s difficult to really use these companies, because these are some of those bigger factories. They are selling to Home Depot they are selling to Wal-Mart, they are clients, and they are searching for these big companies to put in multimillion dollar orders. And I don’t really think most Amazon sellers are ready to do that at this point.

Steve: Interesting every time we go to the canton fair we managed to find a bunch of small guys who are willing to work with us at least. So that’s interesting I guess it probably just depends on what products that you are trying to sell.

Sam: Absolutely, I bring clients to the canton fair and we are usually able to find some factories or some trading companies that are good. But nine times out of ten if not more, the prices that they come back, using our sourcing services we are able to beat their prices just through finding other factories.

Steve: Okay so for the little guy then where do you suggest finding sources for private labeling?

Sam: To find little guy?

Steve: Little guy someone starting out, they have a budget of maybe like five grand to start.

Sam: So someone in that range, Alibaba, Global Sources, are great if their budget is five grand, I don’t see how they could justify paying the five grand, it’s going to take for them to get to China.

Steve: Oh, I meant like just for products like initial inventory just to start with yeah.

Sam: Alibaba, Global Sources, these are two good locations to source suppliers if you want to do it on your own. There are services that help you do this, one of them is Guided Imports, but sourcing companies are there. The thing that most people will find when they run into sourcing companies is for a smaller buyer, it’s sometimes difficult to work with their margin and see a profit. So what I would suggest is if you are new, take your chances and get your feet wet using what’s available, using the databases that are out there, and from there scale up.

Steve: So to use a sourcing service such as Guided Imports, what would you typically be willing to spend, or what should you be willing to invest?

Sam: This is a good question because a lot of people think from a monetary standpoint and ultimately that’s completely understandable, because it’s their business, all they care about is the bottom line. But one of the things that they are really investing when they are using a sourcing service similar to Guided Imports, is they are investing money or the saved time. Traditionally if you were to do this on your own, it’s going to take having to speak with up to nine different services just to get your product idea to market to be sold on Amazon. And this is counting working with factories, working with quality control teams, doing what it just takes, all the stuff.

When you are looking towards a sourcing service, it’s — the biggest investment here is the amount of time that you are going to be able to save. Because ultimately a service like this is — they are focused on handling everything for you. So you can sit back and allow your business to grow where it matters which is your customers.

Steve: Okay.

Sam: You did mention $5000, I would say that can be a good starting point for someone who is interested in using one of these sourcing services its $5000. But we see buyers who are ready to — or looking to spend twice that or if not five times that amount on orders. So it does depend on the product, it depends on the kind of business you have, how much time do you want to dedicate to sourcing.

Steve: Okay, fair enough.

Sam: Right.

Steve: Okay, and just speaking with a bunch of Amazon sellers, people will tend to email me their problems and one big problem that they have is quality control. And so I was wondering if you have any inputs on kind of ensuring a consistent quality of product from under run.

Sam: Sure. So in regards to quality control, there’s a lot of great quality control services that will do inspections at the factory or at the supplier’s warehouse prior to the goods getting their final payment. But what someone really wants to ensure is that they have what I like to call to a quality gates throughout the entire process. So what that means is not only are they doing quality control the very end but they have some type of quality assurance through every step of the process.

So one of the quality gates that I mentioned is when you are sourcing a product, it’s finding that qualified supplier. Another one can be ordering samples. You always want to order samples. Another one can be doing preparing proper– we call product manuals which is like a purchase contract or purchasing agreement. So all of these things give you a safer and more qualified understanding, that the product that you intend to purchase is going to be the product that you are going to get.

Quality issues still happen and I think the ultimate way to prevent that is to have someone look at the goods before they are ever shipped out of the manufacturing country. But by having your checks and balances in place, even before that happens, you can really minimize the potential of bad quality.

Steve: This is a very general question. I’m not sure you are going to be able to provide a good answer but even though we have some of our stuff looked at; we still end up with defects when we get our final order. What is typically an acceptable defect rate or a reasonable defect rate?

Sam: It’s a good question. This is really going to depend on the product. It’s really going to depend on the product. If your product has very few moving pieces, if your product was cast from a single mold, from a single material, you’d expect the defect rate to be a little bit lower than something that has multiple moving pieces maybe an electronic component. One of the things that you can do to get a better understanding of this is ask your supplier what is the expected defect rate. And asking them what do they consider a reasonable amount of defects.

I would say, anything, defects are going to happen. Nothing in this world is perfect. The way manufacturing is done today, you are going to get defects. The goal is really minimizing that amount. So what I try to look for is for most consumer grade products, you want to try to shoot for a defect rate under 3%, usually even more than that. I mean if you can work with half of a percent, then you are in good shape.

Steve: Oh, half of a percent. That would be incredible.

Sam: That would be phenomenal, right?

Steve: Yeah.

Sam: And that can be done too if a factory has their, uses the proper techniques for their own quality control. So one thing that a lot of importers don’t necessarily understand or don’t yet know about is that there’s something that is called QMS stands for Quality Management Systems. And there’s a text book criteria for how a factory handles quality control in-house. They can get certified on certain types of quality control. What this certification say is that that the way that they do quality control equates to a certain level if not less, or a certain level or less defects than if they were just to do what someone would say in-house. Does that make sense?

Steve: Kind of. Can you elaborate a little bit more?

Sam: Sure, so one of the most basic ones and for some of your listeners who are interested in this they can always quickly look it off, is that ISO9001. So this is basically saying the way that our factory tests their product is only a certain amount of defects are going to make it to the final production. So this is a phenomenal quality gate that people can use that if a factory is certified in ISO then they can say, not only do they care about quality control, but the factory has these necessary techniques to test the quality.

So when you ask a factory, “How do you handle quality control?” And they simply say, “Oh, yeah, we do it in-house. We search; we just look through the line for products.” That’s telling you maybe they don’t necessarily care that much about quality control. Whereas that says, “We are ISO9001 certified,” that can potentially tell you, “Okay. These guys know a little bit more about quality control and I can sort of put a little bit more faith on the fact that prior to my inspector looking at the products, the factory is going to be able to deliver a decent level of quality.”

Steve: Okay, fair enough. Lets a step back a little bit and kind of just talk about how someone who’s smaller can actually even get the attention of a supplier to work with them. Do you have any tips there?

Sam: A lot of people, I see on these forums, a lot of people are saying to lie to suppliers and say that, “This is just a test order. This isn’t a big order. Our next order is going to be large.” I kind do frown on that because you, you are basing your relationship with the supplier off of false hopes, and that’s not really a great way to get into a business relationship with someone.

I would say instead of trying to get larger factories to look at someone who’s looking to—who only has the means of placing a small order, I would say, well a lot of people aren’t going to like the answer to this, it’s focus on the type of suppliers that are interested in working with them. So someone who only has a couple of thousand dollars to spend might want to look more towards a trading company who has the means to work with their smaller quantities.

Steve: Yeah, what I usually tell people also is, if their quantities are super low, just go on AliExpress, and just get your feet in the water.

Sam: Absolutely. I mean AliExpress, Dhgate, there’s a lot of viable options for someone who’s just trying to get their feet wet, absolutely.

Steve: Okay. Lets switch gears once again and just kind of talk about Amazon. I think one of the reasons we got into contact was I think one of your coworkers read my post on Amazon horror stories, and I just kind of wanted your take on just focusing all your efforts on one channel as opposed to kind of broadening, selling to the retail space, selling with your own shop and that sort of thing. What you are kind of seeing out there now?

Sam: Amazon is not going to—Amazon is a big company. They are ideal. Their customer is the end user. It’s not these sellers who are trying to make selling on Amazon their full time income. And while a lot of people are not going to like hearing that, sellers are expendable. They are absolutely expendable.

What’s happening is there– the people who are selling on Amazon were not getting banned, but the ones who are going to survive through this wave of Amazon getting stricter, or my opinion better at what they do, is if you broaden your sales channels, don’t only sell on Amazon.

Amazon is phenomenal right now, they are a great market, but put yourself in a position that you have, you have the entire world to sell your products to. Don’t—putting all your eggs in one basket is not necessarily the best solution in my opinion. But for those who are focused on selling on Amazon, it’s start listening to what it is that Amazon is preaching, because their regulations and their new rules, they are not going away.

Steve: You mentioned that a lot of the factories that you’ve been kind of encountering are starting to sell direct on Amazon kind of by passing the private labeler, are you seeing that more and more?

Sam: Amazon is training sellers, or Amazon is training factories to sell on Amazon. I would say that the extent that we are seeing it is not at a wave right now that it’s completely affecting everyone but it is something that we are seeing. And it is something that is the first move of Amazon saying, “Hey look, you guys are not who we—you guys are not our intended customers. It’s the end user. We are going to do everything we possibly can to ensure that our end user stays happy.”

Steve: And in terms of private labeling in general, what are your thoughts on the saturation level of Amazon right now?

Sam: So, it’s a good question. Amazon is a great market for people who are looking to purchase products. I think everyone—it’s safe to say almost everyone who’s listening has purchased a random product on Amazon. But what we see is there are so many different variations of one product that—I don’t think that’s necessarily a good thing.

There was this famous psychology experiment where this [inaudible 00:36:13] food store was—they were featuring a line of exotic and high quality jams. And customers who came to taste samples they were given a couple for a dollar off if they bought a jar. So in this one condition, the study had six varieties of jam that they were able to test and another testing, there was 24 varieties. In both testing, the consumer tasted the same amount. But when there was only six varieties, the purchase rate went up a lot more. While people like to have variations, too much variation is never a good thing.

Steve: Yeah, I don’t know about you but when I shop on Amazon these days, the shopping experience isn’t as pleasant because I have a bunch of stuff that all looks the same and I kind of have to sift through all reviews in order to buy stuff. Do you see Amazon kind of cracking down and kind of reducing the choices and eliminating all these smaller guys going forward?

Sam: Yeah, absolutely. The reviews that you are looking at, can you guarantee that those reviews were not written by someone who received the product for free or for 99 cents? I mean a lot of people are not really going to love where Amazon is going but what we are focused on and what people need to be focused on is that in order to get your product ranked and to stay a top product, you need to have quality.

So by just following in this band wagon of, “Oh, someone is selling a garlic press; let me sell it as well.” It’s not doing any one any favors because you are just another guy and potentially you have reviews that—nowadays people aren’t really sure if these reviews are genuine. That’s not a good position Amazon wants to be in.

Steve: So let me ask you this. So let’s say you are a brand new aspiring ecommerce store owner, or business owner, how would you proceed. Which market would you tackle first? Would you start out at Amazon, would you start with your own site, would you go into retail? What would be your strategy?

Sam: If I was starting from day one, I think Amazon is an ideal location to at least put some type of product. It’s great for validation. If the ecommerce market is interested in buying my products, there’s a good chance the rest of the market is interested in buying my product as well. So I would definitely start on Amazon. I would also focus on selling on my own ecommerce site. I mean if you just look at it, the numbers once you are able to build up a site and have a following, the numbers are just so much more in your favor, because you don’t have Amazon taking a decent chunk out of your pockets.

But one of the other things that is interesting that I don’t see a whole lot of people doing is go to retail. There’s some very simple ways. If you have a product already made, there’s some very simple ways for you to go to retail. If you are importing 5,000 units of your products, keep a hundred at your home and keep ten samples in your car. And any time that you are out shopping around, just show the product to a store owner of a small mom and pop shop and offer to fulfill their—to give them a certain quantity as a test quantity and say, “Hey if this sell, we can go into—we can do a purchase agreement. But you try it out. Maybe your consumers are interested in this.”

I can tell you, I’ve had experiences prior to moving to China in sales. It’s a phenomenal thing when you are given terms where you don’t have to pay until you’ve actually sold an item. For someone who wants to get into retail on minimal investment, go locally. Find those small stores and try to get your products in there, and maybe you’ll strike out a couple of times, but the one time that you do make a success it just flattens the door for you to get into an even bigger store the next time and even larger store. So if this remains, I will not just stick to Amazon and say, “This is where I’m going to grow everything.” I’d really focus on broadening my sales channels as much as possible.

Steve: What else I like about your retail strategy is that those type of customers would be ordering on a regular basis. You don’t have to actually go out and find them again.

Sam: Absolutely. Yeah, it’s amazing. It’s to be able to sell wholesale. I mean that’s your dream. As an importer and as a brand owner, do you really have to deal with customers for the rest of the life of the product? No, you want to deal with other buyers. And you want to be able to get into B to B, so you can leave B to C. leave the reviews and leave these things to the company who’s selling to the end user.

Steve: Yeah, that’s one thing that you definitely cannot be doing on Amazon. Amazon is always going to be B to C, for now at least.

Sam: Right now, absolutely.

Steve: I had kind of a personal problem that I was hoping you could help me out with. I’ve noticed that the price is in China have been increasing dramatically from year to year, so what can one do about that and is there an easy way to find suppliers outside of China like in Pakistan, Bangladesh, Indonesia or Vietnam?

Sam: So, price increase in China is something that not only are you seeing but huge companies are seeing and also China itself is seeing. China just devalued the Renminbi a couple of months ago in hopes to get more foreign buyers purchasing products from factories. But what’s going to happen, China is not going to be China forever. I mean, I live in China. I love China but unfortunately, it’s not—the China that we know is not going to be the manufacturing hub of the world forever.

So looking for other factories in other countries to produced goods, is something that can be done. But I think what you are going to notice is unless you are producing at the scale that allows you to get a factory to start its own production, then it might be difficult for you to look at India, Vietnam or Bangladesh. Also it depends on the product. So what I mean by this is, cell phone cases for example, most likely the reason you went to the one factory that you may be working with for cell phone cases for example, is probably because this supplier already makes these cell phone cases.

By leaving that factory and going to another country, you are most likely going to have to commission that factory to recreate the molds which is a very expensive part of manufacturing. It’s a very expensive startup cost and get them to the point where they can produce the product that you were having made at the same level of quality if not better at the price that you need it to be. So for someone in your position, I would say, you can start looking at other countries but you might have better luck figuring out better ways to negotiate with suppliers currently or find suppliers who are more willing to drop their costs for one reason or another.

Steve: Okay. What’s funny is some of my Chinese vendors have started opening I guess their own factories in other countries as well. I don’t know if you’ve seen that. I just found that kind of funny that they’ve actually travelled outside of their country to start other places where the labor is significantly cheaper.

Sam: Yeah, there’s definitely a lot of investment in that. It’s sort of goes in my belief that no one’s really going to be the next China. It’s really once we see the serious fall of Chinese production, other countries are going to specialize in their own individual thing. So we might look at Bangladesh as textiles and that will just be the best place to get textiles.

We might look at Vietnam for electronics, in India for plastics and consumer hard goods. So China is sort of—they are taking all of their eggs out of their own basket for good reason. That should be a good sign to you that if your suppliers are doing this, then their intent is to stay. That’s a very reassuring thing to have in a supplier.

Steve: Okay, hey Sam, we’ve been chatting for like 45 minutes. I don’t want to take up too much of your time. Can you tell the listeners where they can find you and where they can go on Guided Imports to get more information?

Sam: Yeah, sure, so you can always find me at guidedimports.com. You can email me directly at info@guidedimports.com. We are definitely very excited to be launching this new service that probably be out by the times this podcast is ready. It is truly streamlining the process of sourcing. So we are taking a product where our customers give us the idea and we are able to do absolutely everything for them where all they have to worry about is selling their products. So we will find their product, the factories, deal with the customs; deal with shipping absolutely everything, including marketing on Amazon.

We’ve a phenomenal new resource that is exclusive to us, that current tastings has allowed the BSR to go from about—the products that we’ve tested on, these are the BSR has gone from the high 4,000 to number nine in its category in under 36 hours and it’s 100% in Amazon’s terms of service and it’s more what they are looking for from a seller.

So we’re excited to be able to have that to our service. But if you are looking for more information we certainly have a blog as well. It’s guidedimports.com/blog. We have a Facebook group that you can search for us. I’m always open to answering questions whether it’s on a website or a blog or Facebook, or whatever you can find me. I try to be pretty open, so you know anyone who has problems or questions feel free to reach out to me. I’m happy to help them.

Steve: Sam, that almost sounds too good to be true. So I’ll have to check it out.

Sam: Yeah, you know what; I’m very excited for it. Yeah, it does sound too good to be true. It’s one of those things that the person that we are working with is one of the, I would say, one of the best Amazon affiliate marketers in the industry. And we’ve been able to partner with him and put something together that’s really revolutionary. This is keep in mind, this is the initial testing. This is what we are getting from the first products that we are trying. But we are sort of, all struck right now. Are these numbers real? Is this really what’s happening? While I don’t want to guarantee this will work for everyone, the tests and the products that we’ve done are, it’s looking good and it’s very exciting for us.

Steve: Sounds good Sam, I will definitely be checking it out.

Sam: Absolutely.

Steve: Well, thanks a lot for coming on the show Sam. Really appreciate your time.

Sam: No, Steve thank you so much, I appreciate it as well. It was great talking to you.

Steve: All right take care.

Sam: All right, thank you, you too.

Steve: Hope you enjoyed that episode. Getting your importing flow down is extremely important for any ecommerce store, and Sam’s tips were awesome.

For more information about this episode go to mywifequitherjob.com/episode97, and if you enjoyed this episode please go to iTunes and leave me a review. Because when you write me a review, it not only makes me feel proud but it helps keep this podcast up in the ranks other people can use this information, find the show more easily, and get awesome business advice for my guess. It’s also the best way to support the show and please tell your friends because the greatest compliment you can give me is to provide a referral to someone else, either in person or to share it on the web.

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