00:25
And in this episode, we’re going to talk about how to succeed in e-commerce as things get more and more competitive. But before we begin, I want to let you know that tickets for the 2023 Seller Summit are on sale over at SellersSummit.com. And it is the conference that I hold every year that specifically targets e-commerce entrepreneurs selling physical products online. Now, you all know me well enough by now to know that my event has zero fluff. Every speaker I invite is deep in the trenches of their e-commerce business and not high level guys who are overseeing their companies at 50,000 feet.

00:55
Every year we cut off ticket sales at around 200 people and it’s a very intimate event. Everyone eats together and everyone parties together every single night. I personally love smaller events and tickets always sell out far in advance. Now if you’re an e-commerce entrepreneur making over 250k or $1 million per year, we also offer a special mastermind experience where we break up into small groups, lock ourselves in a room and help each other with our businesses. The Seller Summit is going to be held in Fort Lauderdale, Florida from May 23rd to May 25th.

01:24
go to SellersSummit.com. I also want to thank Postscript for sponsoring this episode. Now, if you’re on an e-commerce business of any kind, you know how important it is to own your own customer contact list. And this is why I focus a significant amount of my efforts on SMS marketing. SMS, or text message marketing, is already a top five revenue source for my e-commerce store, and I couldn’t have done it without Postscript, which is my text message provider. Now, why did I choose Postscript? It’s because they specialize in e-commerce, and e-commerce is their primary focus.

01:54
Not only is it easy to use, but you can quickly segment your audience based on your exact sales data and implement automated flows like an abandoned cart at the push of a button. Not only that, but it’s price well too and SMS is the perfect way to engage with your customers. So head on over to postscript.io slash Steve and try it for free. That’s P O S T S C R I P T dot I O slash Steve. And then finally, I wanted to mention my other podcast that I run with my partner, Tony. And unlike this one,

02:21
where I interview successful entrepreneurs in e-commerce, the Profitable Audience Podcast covers all things related to content creation and building an audience. No topic is off the table and we tell it like how it is in a raw and entertaining way. So be sure to check out the Profitable Audience Podcast on your favorite podcast app. Now onto the show.

02:46
Welcome to the My Wife Could Her Job podcast. Today I’m really excited to have David Applegate on the show. Now, David is someone who I met recently on an Alibaba panel with Keon Ghazari and MetaWorld Peace of all people. He’s the founder of ImportYeti, a free service that allows you to search through the US import records to find the suppliers that your competitors are using. He is also a longstanding e-commerce seller himself on both Amazon and his own online store and a retail store.

03:12
which I believe is what led him to create Import Yeti in the first place, but we’ll find that out in the interview. But David is a wealth of knowledge. And today we’re gonna talk about, you know, how to be successful in e-commerce, which is an industry that’s getting more and more competitive every single year. So welcome to show, David. How are you doing today, I’m doing great, great, doing great, happy to be here. You know, I enjoyed that Alibaba panel as well. It was fun. know, I’m from Southern California and like Lakers are like gone down here. So to on the panel of Ron Ritesh was just, it was cool.

03:42
Yeah, yeah. And I’m a diehard warriors fan. So yeah, yeah. I always knew there was something off about you. Just kidding. Well, a tough loss the other night. Yeah, I know. You know, this is getting a little tangential, but I clay Thompson was one of our neighbors growing up. Yeah. So you’re friends with clay? Yeah, my little brother more so because they were the same class. But dude, that’s awesome. That’s awesome. So David, how’d you get started selling online and

04:12
Tell me about the brand that you run in the retail shop that I think you’re filming out of right now, right? Yeah, yeah. So I got started when I was in my early teens. Much to my mother’s kind of dismay, I was selling tobacco paraphernalia on eBay. Cigar cutters, hookahs, and things like that. And did that for a long time and just kind of kept with it. A lot of failures along the way.

04:41
And then I kind of haphazardly stepped into wrestling work. And that’s been just a blessing, a real, real kind of learning opportunity. then Pandemic Kit, sporting goods is, least high school sporting goods is not the space you want to be in. It’s gotten a lot better now, the pandemic’s kind of eased up. this, Import Yeti is my pandemic project, just kind of meant to fill some of my time and keep my learning and growth going.

05:10
It’s done, you know, just picked up a huge following, which is really cool. I didn’t realize that you started that during the pandemic, like in 2020. Yeah. Yeah. Like literally it was like they shut things down or like March something. It was like that Friday. was like, hmm. And, you know, we we have been using this stuff kind of ourselves, you know, to solve problems. You want to find somebody that makes, you know, a coffee mug. There’s a lot of manufacturers for that because you start to get into harder products.

05:39
and you’re trying to find higher quality suppliers, there’s a lot of challenges using existing tools out there. And this was our just solution of these problems. We built some of our most successful products and found our most successful suppliers using the Bill 8087. Interesting. So for your wrestling store, what were you using before Import Yeti was available? Like how did you find your products? Or were you just primarily carrying like popular brands?

06:08
Yeah, so we do a lot of, you know, reselling, but we would, you know, we go to trade shows a lot. Trade shows are really, really good, like Canton Fair, you know, the Magic Show in Vegas is great. You know, and then a lot of industry knowledge, like when you, if you take any product that you’re trying to develop and you really spend time in that industry, you really start to dedicate yourself to it. A lot of times the supply chains begin to emerge. You just start to understand who’s actually making the products.

06:36
You know, it happens serendipitously. People start reaching out to you. They start being like, hey, we see that you’re selling a lot of these things. We also, we make these things. You know, you get, you know, you get, you know, mail or, you know, you’ll, you know, be at a trade show. Someone will know that you are a company like this that already you see to their buddy, you know, who they know moves the products. And so we were doing a lot of kind of more manual sourcing.

07:02
and then using platforms like Alibaba and stuff as well depending on what the product is. You know what’s funny is we actually get emails like that every single day from mainly Asian manufacturers who wanna sell us stuff. I don’t think I’ve ever responded to any of them. So are you saying that you actually responded to some of those people that approached you? Yeah, we’ve found some killer manufacturers doing that, just killer. Wow, okay. Now that being said, 90 % of them are horrible. Okay.

07:30
So it’s not like they’re all good. when we try to look for a manufacturer, we really evaluate what type of company they are, what capabilities they have. And we do that stuff through Google. if we are, let’s say we’re trying to make widget A, and someone’s constantly emailing us saying, hey, we make widget A, we’re going to start looking for the ones that we think are good.

07:55
Let me ask you this, since you’re kind of unique, you’re a reseller of very popular brands and you have your own private label brands, what is the revenue distribution of each and which is what you focus on more, the reseller aspect or your private label stuff? Yeah, like I understand the question you’re asking, but we think about it a little bit differently. I think it’s better to say what’s the profit distribution of each is the first thing. And almost across the board, private labels can have higher profit.

08:25
ban when you’re reselling somebody else’s goods. And then we also look at things from saying, how can we develop customers that are able to spend more money with us and are really round out product ones? So we don’t look at it as a competitive thing, as much as it’s like, how can we take person A and really service them as much as we can? And there are certain holes that we choose to develop, which is kind of where Private Label falls into.

08:56
All right, so it’s not like you find out what’s selling well from a reseller and then private labeling a version of the same thing. Like Walmart, they know like Robitussin sells well, so they come out with Wal-tussin. That’s not your strategy, right? No, no. With almost everything we try to do, we innovate. I’m put things differently. If you’re in a marketplace where there’s not big people playing, that might be different. But we’re going up against Nike. I’m not gonna beat Nike.

09:24
You know, they’re a great company that creates great products. It’s stupid for me, strategy wise, to try to, you know, compete in that space. You know, so we try to choose things that we can win at and really stay close to that customer list. Give me an example of something that you’re selling in your wrestling store of something you’ve innovated on. Yeah, yeah. So like we need it very heavily as an example on design. That would be like a really strong innovation point for us because we’re closer to the customer and we have different kind of guidelines we’re able to create.

09:53
If it’s a, know, a singlet as an example, singlet designs that are going to very strongly resonate with our consumer. Whereas, you know, ASICS, Adidas and Nike tend to create more of a blank strategy, you know, where it’ll be like, hey, here’s a red singlet, you know, we’ll be able say like, here’s the Mexico singlet. Because the users want that Mexico singlet. And that’s not competing directly with, you know, with those big dogs, you know, we’re not going to win in that game. Interesting. So just for people listening, a singlet is essentially the wrestling uniform, right? Yeah.

10:24
So I imagine there’s standards on what the singlet can be made, right? Or no, I don’t know anything about wrestling, sorry. Yeah, there are some technical specifications with that, they’re easy for us to solve because we’re a wrestling company. We eat, and sleep to sport. Where I think people make mistakes is they’re like, oh, I’m going to try to develop specs for a product that I don’t actually use.

10:49
I don’t actually know in and out. We know the products like crazy. So it makes it real easy to kind of find the right manufacturer, which plays a huge role in your manufacturer as a whole. You’re not gonna find good manufacturers if you don’t know the product. When you’re asking these questions and things like that, they don’t take you seriously. They’re like, this person obviously doesn’t move this product because they don’t know anything about it. You mentioned not being able to go up against guys like Nike. And I can understand in shoes, that’s probably the case.

11:19
But in other things that, you know, where Nike, think, just puts their brand on something, I feel like you could definitely compete on those, especially wrestling specific items, right? Yeah, yeah. Yeah, I’m gonna be very careful with some of the stuff, as I’m sure you can all worry pussy putting around in a little bit. But we, you know, like what makes wrestling our crush is keeping those vendors just super happy. So it is a statement we know against those guys head to head in some areas, we don’t want to really touch on that. Yeah, that’s like, you know, we don’t move any of that volley, quote unquote.

11:49
Yeah, so they’re an important part of your business having those resellers, you because they give you legitimacy, right, which allows you to then move private label products. Okay. Yeah. All right. I can tell you don’t want to talk about that too much. So let’s switch gears a little bit. Yeah, I think that like we talked about, like the product development strategies, that’s like really stellar and like how to find sourcing agents, how to figure out what products to develop that stuff is. Yeah, it’s great. Let’s do that. Let’s do that. Let’s talk about Alibaba. You mentioned Alibaba in the beginning, but

12:15
Something must have made you start import Yeti. Were you not having great results on Alibaba or? I think that Alibaba starts to struggle when you get into very specialized products, which we had problems with. know, like if you’re searching coffee mugs, there’s a thousand coffee mug manufacturers. But if you’re searching, you know, die cast vintage cars and you want to find the company that has the molds for those. There’s a high chance that that’s not on Alibaba to figure out who’s actually making these products.

12:43
And in its core, that’s where we were kind of struggling. Combined with, know, Alibaba is great for, you know, helping you find a large amount of manufacturers, but it doesn’t do as good of a job of saying who is a better manufacturer than this other person, or at least doesn’t paint the full picture. And, you know, the bill laying data sets can really help you understand that, because you can look at things like how much volume do they move? Who are this? Who are like their customers? Do we trust their customers? What’s the product quality of their customers?

13:11
If they’re able to meet the product standards of a big brand that you know and trust and love, they’re likely to be able to make your standards. If they’ve got the green and ESG certifications for a particular brand, they’re likely going to be capable of doing that in-house themselves for you. Yep. Let me ask you a question that I’ve always wondered. So there’s other competing services to import Yeti out there, which I will not name. Yes. But why start your own as opposed to just paying like the couple hundred bucks to use another person’s tool? Yeah. So

13:41
We struggled with some of the way that data was being represented when we used other free tools out there. That was the first kind of data point. For me, when I spoke with other e-commerce sellers, they found that this data was hard to utilize from an action standpoint. You wouldn’t actually be able to get what you needed out of it. You had to really, really understand data science. So we wanted to create something that would be user-friendly so that somebody who wasn’t

14:09
you know, a supply chain, you know, expert who didn’t have a strong understanding of the way big data worked, can go into something like this and be able to make those supply chain decisions as if they did. Give me an example of that. I mean, I’ve actually used all the tools at some point. Yeah. How’s yours different? Like, let’s say you’re searching, we’ll take a big company like IKEA. Now, IKEA, of course, you’re not going to be importing from IKEA’s manufacturers of fat, but

14:36
You know, on the bill laying data set, there are probably 500 IKEA entities, maybe a thousand IKEA entities. So you’re going to search that and it’s going to be like, IKEA, IKEA, IKEA, IKEA, IKEA, IKEA, IKEA. And you have to wait through all of those. You have to figure out which one is the right IKEA that adds your particular product. Right. We do a bunch of fancy footwork that when you search IKEA, there’s just IKEA. You know, and all of their, you know, things, all their vendor table is visualized.

15:04
The fact that when you look at their vendor table, you can understand the volume those vendors are moving. If you’re using the data set in its raw form, you would have to search IKEA, see that, and then search the vendor, tabulate how much that vendor is moving, try to visualize the consistency, compare that consistency across a bunch of other vendors. And that becomes very hard if you’re trying to make decisions around who is the right vendor based off their consistency.

15:31
You basically just want the data process in a different way in an easier to digest manner. Let me ask you this. I’ve had varying success with tools that browse the import database. Yes. Mainly because, you know, if you look for a big guy like IKEA, you’re right. They’re probably not going to work with you, right? So how do you approach like, how do you, let’s talk about how to use your tool actually. So you find a company and there’s a list of manufacturers. What is your strategy for actually getting one of them to even want to work with you?

16:00
So I think that you’re like, the way I like to think about it is that, you know, just like how you look at some customers is bad versus good. You can flip the roles and start to say, if you’re in that manufacturer issues, right? How do, how are they thinking about you? Why would they want to give you a good price? Why would they want to pick you up as a company? You know, why would they want to ensure that your product is super consistent and has no issues, right?

16:29
And when you start to ask those questions, you can then begin to kind of, you know, say, how do I present myself to alleviate those concerns? Like a really common problem I see is people will send out an email saying something like this. My name’s Billy. I’m an Amazon seller. I want to import your coffee mugs. Tell me your MOQ and price. What that email tells a vendor is, hi, I’m an unproven seller. And they think that

16:58
because of the fact that they got 800 other emails that month saying they’re an Amazon seller. Two, you’re gonna be extremely cost conscious because you’re asking about the price in the very beginning and you’re gonna be ordering the smallest amount of stuff possible. Now when you think about that, you would never give that person a good price ever. You just be like, you wouldn’t. You know what you wouldn’t even mention that I’m an Amazon seller. That’s probably a red flag too. I don’t. Yeah, I don’t.

17:26
Now, you put that script in you, if we take the wrestling mart analogy, imagine you make a wrestling product and somebody messages you and they say, Hi, my name is David Applegate. I’m the purchasing director at Wrestling Mart. Right. We’re the world’s largest specialty wrestling store. You know, I’m trying to import product ABCD from you. And, you know, we’re very aware of this product. You know, we’re looking for these specifications. You guys become highly recommended. I’d love to set up a call with, know.

17:55
you know, and your CEO or sales manager, so we can better understand what your company’s capabilities are and see if we might be the right strategic alliance or something like that. And then you’d have a call with the person and you’d start to build that relationship and they would become invested in your success. We want our partners to be like, you know, Wrestling Mart is the best company ever because when that happens, that’s when, you know, you get the best products, the highest quality and best price and all that good stuff. What if you can’t make that claim?

18:25
Like pretend that you were starting from scratch. What would you say? So I think the first thing I would say is that make sure that you’re the things that are inside your control. You understand like the product you’re trying to import. Do not ask questions about like, what is this material made out of? How is what about this feature and this feature? Because that just says that even if you’re a beginner, you don’t understand what you’re doing, you know. And if you don’t understand what you’re doing, learn.

18:51
I’ll even message like this, if I’m trying to import a product, I don’t know everything I’m importing, I’ll message some vendors from a different email address and just ask all those questions and learn all that stuff so that when I message the people I actually want to message, I already have all of that knowledge framework in my mind. So one, first thing, we don’t make any rookie errors around the things that you should be knowing, doing that. And then I think honesty is always the best kind of approach.

19:18
But there’s a difference between being honest and positioning yourself poorly and being honest and still positioning yourself well. So it’s okay to say, I’m a newer e-commerce brand and we’re investigating bringing this and this and this out. I’m looking through these products. In I’d still like to build a relationship. That’s a better thing than saying, tell me your MOQ and price in the first few steps. And I have a lot of friends that have started,

19:48
Amazon brands that have done very well, that have stellar relationships with their vendors from day one. And it makes a big difference. have been none of them are sending out those emails saying, me your MOQ and price in the first 10 seconds.

20:04
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20:34
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21:55
So if you were new, would you start out with like an Alibaba or would you consider just starting with, know, import yeti and finding out, you know, who your competitors are using and starting with Atlas first? I’m not a huge Alibaba fan. Alibaba gets a bad rep with some things, you know. I don’t think that it’s as binary as that. It’s a little bit of either or. You know, I would probably be searching the suppliers on

22:23
that find on Alibaba into import yeti and seeing the problem that the volume they actually move. One of the biggest problems that will happen on platforms, and this isn’t Alibaba’s spin-fix, just out there, is like, let’s say, you if you take Wrestling Mars as an analogy, we sell lots of wrestling shoes. We also sell wrestling laces. Now, our wrestling shoe competency is a lot better than our wrestling lace competency, but if we were to list our product in Alibaba, we’d say we sell both.

22:50
So you’re gonna end up messaging Wrestling Mart saying, I buy shoelaces? When we’re the worst shoelace supplier in the world. And by using data sets like Import, you can see what is the company actually move volume up. And when you understand what that supplier specializes in, hey, 70 % of their business is whatever the product you’re looking for is, or a particular manufacturing technology, then you’re gonna have a much higher quality, you’re gonna have a much…

23:19
you know, typically better cost structure because they get the efficiencies of sale of scale tied to that. Yeah. They’re going to have a more trained workforce in that space. They’re going to have, you know, they buy more raw materials. They got lower cost of goods for that type of stuff. See, I don’t think it’s an either or with Alibaba or Import Yeti. I almost always use it. Alibaba at least some stage of my sourcing journey. I think the more important thing is, you know, making sure you have a good product. It’s very rare.

23:47
that I see people that mess the sourcing stage up so bad that that’s the failure of their business. Every single time I’ve had somebody say like, this didn’t work, was because you chose the wrong product. Right. I mean, quality control is a problem. Actually, since we were just talking about that, what are your guidelines for deciding on a manufacturer?

24:11
Yeah, it’s, I mean, for me, it’s a lot of feel. It’s not as hardcore as that. And since I’m building the relationship, it’s the one I feel like is going to partner the most with, you know, our organization. You know, I those people that want our business, because those are the people that are going to make sure that there’s not issues, you know, that are going to make sure that they’re treating us right. You know, you know, we’ve had manufacturers where there are quality issues.

24:36
And if they’re a strong partner of ours who say, listen, there’s a quality issue here and they refund our money or they give us this context or they do right by us. Now, the reason that’s the case is they look at it they go, we want to keep you guys as a client. So it’s not in our best interest to screw this relationship up. Just like it’s not in our best interest to screw their relationship up. And we treat them fairly because there’s been times where it’s like we make an error or something like that. know, yeah. So it’s more about your gut feel on

25:06
how they’ll work with you as opposed to something that you’ll find in like the assessed supplier report on Alibaba or are there things you look for first? Yeah, I think that like maybe I put those as qual the problem where is I use as qualifiers. So I say like, what is my manufacturer need to have like what will be the right potential fit? You know, and if they’re checking those boxes off, then it becomes relationship. So it’s like, okay, I want to find somebody that

25:35
specializes in manufacturing product A, that we’re gonna be a big fish in their pond, that is located in this region or whatever the six things are, that has a stable customer relationships. And then from there, it would be at those two or three, which I don’t message 30 vendors, I pick one or two, sometimes three. I then say, hey, let’s build a relationship. So some of the common questions that I get asked are mostly solved by relationship.

26:04
So I’ll get asked like what’s stopping them from just copying my product and selling to other people? Yeah. And my answer to that is always, you know, once you’ve talked to them face to face, it usually doesn’t happen. What is your answer to that question? Like you have a good relationship. think that one, the copying problem isn’t as big of a deal as I think most people make it out to be. You know, it’s very I have heard of use cases where someone’s like, I was making this product with this manufacturer and then they started selling on Amazon and that has happened.

26:33
But it’s very, very rare. It’s not like I talk to 100 people and 20 of them have that experience. like one. So I think that’s the first endpoint. But the second thing is goes back to that relationship as you’re saying. There’s no way any of our vendors would want to do that because they’re like, okay, we can A, ruin this relationship that is very profitable for us and is win-win. Or B, we can try to make some, know, little bit cash on the side and, you know, it just doesn’t, the math doesn’t pencil out.

27:02
Plus, there’s an organizational competency thing. Most good manufacturers are not Amazon sellers because they’re focusing on manufacturing. You know, that’s a different skill set. Yeah, totally. So we talked about Amazon a couple of times, and it’s getting harder every single year. Yeah. How do you stand out among the crowd looking forward in 2023 for Amazon or DTC? Yeah. So, I mean, I think the first thing is, is I never like to think of

27:32
creating an Amazon business. I feel like that’s trying to say you’re trying to create an app on the app store. That’s not a business, it’s a sales technique, a distribution channel. The correct thing is can you create core business fundamentals that make sense and add value to customers? And if you can answer yes to those questions and you’re creating things people actually want to buy, Amazon’s a great accelerant for that sales.

28:00
You know, I have warehouses, do warehouses are hard. You have to scale. have to have ERP systems like it’s hard. Amazon completely abstracts all of that, which is a huge, huge, huge deal. That doesn’t, you know, make it so that you then magically can wash your hands of the actual business problems, which is how you create value, how you market your product. You know, like I can’t tell you how many Amazon’s I speak to, or I say, what’s your marketing strategy? And they say Amazon PPC. And that’s not

28:29
an entire marketing strategy. That’s one tool you can use out of many. And it’s a hyper competitive one that is getting much, much thinner in terms of value these days. But there’s thousands of other ones that are great, that work stellar. And you can use Amazon’s amazing warehousing and infrastructure to scale the way you never could in the past, which is just amazing. But you have to focus on this core business fundamentals if you want to create something that lasts.

28:56
you know, stands the test, you know, generates money over the like the time. Walk me through your process of finding that product that you know is going to sell well. Regardless of the first thing. Yeah. Yeah. The first thing I do is I try to be a consumer. You know, I really slight like spend time in areas that I enjoy. So like we look right here. Here is a fountain pen. Right. I love writing and I’ve got 10 fountain pens over here.

29:22
And I could tell you about the inks, the different strategies behind inks, different colors with inks, the different oils that go into inks. I know this stuff, but I don’t sell any fountain pen products, but I have considered it because I know what I want. For me, the things that value, that I really like is I like certain color reds. They’re drawn to me and I don’t see them in the marketplace a lot. I also like certain fountain pen holders and things like that. Fountain pen space in terms of the actual pens I’m very happy with.

29:51
I love a lot of pins on the market. I don’t go, ooh, I wish I could create this. But because I’m in this space, and it’s important, there’s a lot of spaces that I try to spend time in, whether it’s fitness or fountain pins or whatever, I begin to see opportunities, things that I would want, that my peers that I’m hanging out with want, that other people online want, because I’m in those communities.

30:21
You know, from there, I began to take what would be a potential product idea. And then I tested out with people. I’d say, Hey, I’m thinking of doing this. What are your guys’ thoughts on it? You know, because I’m in the community, people will give me feedback. You know, it’s kind of a slightly tangential story. A long time ago when was in college, we had a great senior project and everybody in the room had presented an idea.

30:45
And so we’re sitting in like, there’s like 40 of us or something like that. We’re in a circle. And the first person’s business idea is like, I’m going to create a cleaning service for college fraternity parties. And the next person’s like, I’m going to create hangover breakfast. The third person’s like, I’m going to create a book lending service. And the fourth person’s like, I’m going to create a college cleaning process for house parties. know, it’s like everybody had the same business ideas.

31:12
Like literally there was no diversion thinking. And you realize because we were all students and all we were doing was partying and studying. Right. know, and so that was the ideas we had. No one had any money. Nobody was playing around with fountain pens. Nobody was thinking of, you know, the next, you know, boring, you know, Shopify conversion app or something like that. Because they weren’t on Shopify. They weren’t, you know, playing with makeup or whatever kind of passion is.

31:38
So spend time in areas where you think you can actually add value and you’ll see serendipitously where those values can be created by being in that space. Once you have that idea mentioned, I like to test it, really say, hey, I’m thinking of creating an ink. And then I would say, okay, what are the biggest risk areas? Risk area one is are people gonna want to buy it? Risk area two is how am I gonna get in front of those customers? And risk area three is can I even make ink?

32:05
You know, maybe it’s different, but those are my first three that I would think of if I’m trying to make ink. And I would say, which is the riskiest or most, you know, kind of, um, you know, has the highest chance of failure. I have pretty high faith. I could probably figure out how to make the ink, you know, uh, like people I could pay to do that. Like, so I go, okay, that’s low distribution too. I actually don’t have a lot of risk in that area. I, know, I’m very competent at my ability to market on forums. I’ve seen a lot of people do things like this. I understand the way it’s worked in the past.

32:35
But I have no idea whether people actually want to read it. You know, I do. But am I the only one in the room? So I would probably, you know, message 30 people and I’d say, hey, listen, can I buy you a cup of coffee for a 10 minute Skype call or Google meets call and just ask a few questions about your ink purchasing habits. And I would say, hey, here’s my name’s Dave. Here’s what I’m thinking of doing. You know, do you feel that you want to read it too?

33:00
And people are like, they’re like, oh yes, I feel the same way as you. Yes, yes, yes, I’ve been dying for this. And I go, hey, you if you, I did the pre-order today for 20 bucks, would you pay for this? And the person’s like, yes. That’s a huge indicator of interest. And that’s, you know, the way we build everything. It’s the way Import Yeti was built. We didn’t build Import Yeti all in one day. We released a really, really shitty version of it. And people tore it to smithereens. But a lot of people tore it to smithereens, which indicated that people were interested.

33:31
You know, it’s funny, before we hit the record button, you were telling me that, you you run Wrestling Mart, you’re not really a wrestler. And we were just talking about like some of the merits of having a retail location. How do you get feedback from people regarding the next product that you’re gonna launch? I mean, I know you have this retail store. you, would you say that the retail part of your business is a very important component of your product research process? Insanely.

33:59
You know, especially for a sport where like you’re trying things on and stuff. So you get it like, you know, it’s if you’re dealing with like a coffee mug, it’s easier to get feedback from that over the phone. But with certain garments, like you have to be able to look at it person because people can’t describe the way a garment doesn’t fit correctly or whatever the particular thing is. And I actively try to develop, you know, ways to stay in touch with customers, whether it’s answering the phone a lot. Like most people would never answer a customer’s support call. I answer customers’ calls regularly. You know,

34:29
you know, looking at emails, surveys, you know, all that stuff makes a big difference. So what I’m getting at is, if you were to do this all over again, yeah, would you actually start the retail component? Also? That’s a tricky one.

34:48
I’m bullish on certain aspects of specialty retail, but it depends a lot on situations. It varies a lot depending on the kind of individual space. That being said, I think that there’s a lot of magic in retail that’s not being utilized correctly.

35:10
If you were online only, how would you get your feedback? I mean, lots of phone calls, you know, really trying to make sure that you’re plastering your ability to get in touch with customers, you know, just like everywhere’s phone numbers, you know, you’re available all the time. There’s surveys after purchase, like, you know, email addresses are everywhere. You know, you have those monitoring systems and you have all hands on deck meetings with team members so that, you know, people have

35:40
clear ways of bringing problems forward and you can have discussions around things. That kind of stuff makes a big difference. If you’re just starting something out, trying to participate in communities like forums or subreddits, things like that, just really, really being in there makes a big difference. Interesting, are you still doing all that stuff today or is your retail channel good enough?

36:10
Um, you know, I still answer the phone a lot. You know, I’d like to take 10 to 15 phone calls a day is my guess. Any more than that. Okay. You know, and then we, you know, we have like a lot of all hands on deck types of meetings, where it’s like, you know, people are able to disseminate information so that, you know, if someone takes a phone call, and they’re like, Hey, this person, you know, is complaining about this product. And then six other people have the opportunity to go, Oh, I got a phone call about that too.

36:39
or I got two emails and one phone call about that. And that provides a lot of opportunity to kind of make sure that those things are being dialed in and you’re getting everyone sharing information. So what’s funny about this is I’m trying to get information about you, like if you were to start all over. When you’re on Amazon, you don’t get any of that. So what would be the sequence that you would start things if you were to start wrestling all over again? I I would never start on Amazon. Like I know that’s probably a controversial opinion, but like,

37:10
I feel like if you’re starting on Amazon, you’re effectively doing, you’re doing manufacturer arbitrage now, you never spend the time, which is you’re trying to say like, as opposed to drop shipping, you’re just saying, I’m going to buy more units with a longer lead time and then sell the same widget as everybody else at 1 % lower the cost or 10 % more efficient, the PC campaign or whatever the, you know, the, the letter is. And that’s a, that’s a bad business strategy, like really bad business strategy. Because all you’re saying is, is I’m waiting for the next person who’s

37:39
X percent smarter than me or stupider than you will lose money, which is a likely thing that happens to and you know, you’re going to end up, you know, this just doesn’t work out well. That’s a short answer. You know, and in doing things like traditional retail, traditional Ecom are important. You can’t sell somebody on a Shopify store. You’re not going to build a good Amazon store out. The truth, not in the long term, at least not in the long term.

38:10
You could find that manufacturer arbitrage, but you’re not building a sustainable brand if you can’t do whatever. And I’m all for Amazon, I love it. It’s a beautiful platform that completely can accelerate your growth. But people think it’s a business and it’s not, so distribution show. Yeah, I always refer to it as like an ATM machine where you insert products and money comes out, like if someone, everything is a commodity on Amazon, right? People will just copy that exact same thing.

38:37
Yeah. So that’s interesting. I would say a lot of the people who are trying to get rich quick are selling commodities on Amazon. I buy a lot of things like ink that are not commodities. You know, like if I buy, you know, this beautiful Eldenstein, I think it’s how you pronounce it, Topaz Blue ink, which is one of my favorite colors. I got this on Amazon. This is not a commodity. This is a well-branded, well-developed product. Correct. Correct. But it has brand equity, right?

39:07
I’m just talking about when you’re first starting out. You probably don’t have brand equity. So it’s interesting. You wouldn’t start out on Amazon and you would launch your store first and get sales there and get the feedback there and then launch on Amazon later or? Yeah, I honestly probably wouldn’t even start on Shopify first. would buy, with most things I would just say, can I get community sales? So can I go into a subreddit or a forum or whatever and convince people to buy my product?

39:37
you know, you know, or even if it is you give it away, you know, he said no one’s willing to take it or whatever, then you’ve got other warning signs. And I would just from there, really hedge my bets. You know, and take baby steps forward. what are you talking about, like a PayPal button? Okay, that’s a perfect example of it. You know, like a PayPal link. Yeah. Like, hey, you know, like I see a lot of this like Kickstarter, like functions. Yeah, it’ll be like, hey, I’m bringing in this product.

40:07
you know, like I’m trying to sell 10 units of it. And if I do our 100 units, you know, we’ll do this. You know, and those things prove is stellar ways to prove out of market. You’ve mentioned several different ways kind of in passing, like, would just look on Reddit, what are the communities like, where do people hang out in communities? Typically, I know Facebook and Reddit are, are two, are those the two main platforms you use? Or? mean, it varies a lot depending on what the space is. So like,

40:37
And if you’re part of it, you generally get a very quick understanding of where those communities lie. some things, like you take guitars as an example, which is another thing I love, forums are very key with guitars. Probably slightly older demographic, not using younger social Like standard forms, like the old school, like BB press type of forms? Yeah, yeah, yeah, yeah, yeah. Wow, okay. And really tight-knit communities, just stellar places.

41:05
if you’re trying to move a new guitar tune or maybe you can innovate on or whatever the space is. And then Facebook groups work really well for some things, really bad for others. Reddit works great for some things. Some things, it’s physical meetups. I spent a lot of time going to e-commerce meetups. There’s lots of conventions. You just have to say, where are my people hanging out? And if you find where that place is, online, offline,

41:33
Discord, know, wherever it is. Yeah. Walk me through, like if you’re new to a community, walk me through your steps to kind of ingratiate yourself before you start dropping these questions like, hey, would you buy this? Yeah. So I, I almost like nobody ever responds to posts that are like, would you buy this? Like, that’s just like, I’m sure, you know, I focus on, you know, at first, just adding value and being a part of it, you know, and then I generally do reach outs.

42:01
to people after I’ve already built up a reputation, you know, of like a valued member of the community. You know, then people are going to want, because they know me, they’ve seen my screen name, they’re going to want to, you know, participate in that stuff. And there are sometimes some exceptions that were like, you truly have a product that like, is going to be viral, and you already have samples of it, and you’ve got a great post, you can eventually do the post and it’ll probably do well. But at first, I’m starting out just with messaging people and just trying to…

42:30
you know, get inside their heads and understand their worldview. Okay, and then if you can get people to buy it, we already kind of talked about interfacing with the factory. One thing that I forgot to ask you was, in terms of pricing, like, how do you gauge the profitability of the thing that you actually want to sell? So, one people, I think they’re afforded walk into this conversation that changed my views on pricing a lot, is time scum. I used to much more low cost kind of

43:00
You know, thinking so much is my part of resting Mars done a really good job and like saying, since higher prices are good and we’ve seen really good results with that. Um, you know, I think that because Amazon is so price conscious, people have the mindset they need to be the lowest cost. That is how a sale happens. You know, uh, but if you’re focusing more on value, you know, price becomes a secondary thing. Like for me, if we take, back to that ink example.

43:28
I genuinely don’t know what I paid for that ink, but I can tell you there is a 0 % chance I’m not buying it. It’s $9, $15, $19, $29. It’s the same ink. like for me, it’s 20 bucks. You know, like I want the ink, you know, I want the color. I want that color, you know, so I’m willing to pay more money for that. Just like how everybody buys the fancy new iPhone, it three times the price of the Android phone that does the exact same thing. And anyone who’s like my iPhone’s better than an Android phone.

43:57
myself because I have an iPhone and love iPhones is lying to you. You’re buying that because you want to have an iPhone. And that’s the way your products I think need to be if you want to charge those kind of premium prices. And if you are going to say we’re going to be a low cost provider, that’s okay. But you have to have a competitive advantage with that type, that low cost strategy. What doesn’t work is you’re going to say, I’m going to use the same manufacturers as everybody else, get the same pricing as everybody else.

44:26
and sell it for a lower cost than everybody else. That’s a flawed business strategy. If you’re like, I’m able to manufacture these things 20 % lower because I’ve got ADCD technology, or I’m innovating in this space, or I understand this thing. And that allows me to sell at a significantly lower price than anybody else, and still be profitable, that might work. But most people aren’t thinking like, or actually, they’re not thinking like that. They don’t have the opportunity for that. I think going low cost is one of the hardest things that you can do.

44:56
I always tell everyone to just go high end because then it’s not a question. That puts money out of the equation altogether. And having competitors, it kind of makes you more resistant to the competition. If you can put out something that’s really good, you’re right. I pay for stuff where I don’t even look at the price. it makes advertising easier. It makes customer service easier. Because you can just, you don’t care. You just give it away for free or whatever, like if they complain. And that adds to your bottom line. So yeah.

45:26
I actually don’t know that many people who stand the test of time going on the low end route and just, because it’s always a race to the bottom in terms of price. Yeah, my first product I ever sold was that tobacco paraphernalia. And I’m gonna, you know, he’s butchered the numbers a little bit, I would save some work, but I was selling these cigar cutters, and it was like, I was selling it for like 9.99, buying it for 50 cents, and I was charging like $3 shipping. And it was like 13 at times, I don’t sell like 20 of these things a day.

45:55
which when you’re that age with that, this is back in 1992. Like I was literally looking for my Ferrari online. like my first car is going to be a Ferrari type of thing, you know, thinking I was like, this is it. And I do this for like 30, 45 days or something like that. And then I woke up one day and there was zero sales. And I was like, that’s weird. I went 20 of the day before, you know, and then the next day comes around zero sale.

46:23
So I go on eBay search and now some dude selling cigar cutters at 9.50. I’m like, whatever. So I changed my ID to 8.99 and then 20 sales, right? Next day, 20 sales, 20 sales, 20 sales. And this goes on for nine more days. And then I wake up the day and there’s zero sales. And this time immediately go and check and the dude’s now selling them at 7.99. know, and fast forward four months, I’m now selling cigar cutters in a dollar 99 with free shipping and losing 50 cents on every cigar center I sell, with shipping included, you know.

46:53
And that’s the way eBay went back then. Amazon is going through the same thing, although it isn’t quite as extreme yet. If you search my favorite searching exercise rings on Amazon, you will see 195 exercise rings listings that are all from the exact same pair of exercise rings. It’s probably coming out of one of two factories. What do you expect this gonna have?

47:22
My last question for you actually is how do you feel about those people doing Amazon wholesale where they’re using these pricers to just make sure that they get the buy box and whatnot. To me that’s unsustainable but I’m just kind of curious what your thoughts are. Yeah, mean like I know a lot of people that made a lot of money doing a lot of different things online and you know I’ve got you know I’m not gonna use my name and I’ve got a friend that makes a fortune doing things like that. His mindset is I’m gonna be ahead of the curtain. That’s always what he thinks.

47:52
It’s how can I be the first one to figure this out? Push it as hard as I can and then recognize when it stops and take my foot off the gas and move on or next. You know, and I don’t agree with that business model at all. You know, he makes a lot of money doing it, you know, but he has done things like that before. Now, the reason I say that is that obviously people make money doing things like people make money doing retail arbitrage, manufacturer arbitrage and drop shipping.

48:22
whatever it is, but there’s good and bad business models. And, you know, if you, if you focus on what the good business models are and core business fundamentals, you stand the test of time, you actually make the world a better place. And you tend to, you know, have a much easier kind of, you know, time in the long run. The one other thing I’d say about my buddy is he is extremely intelligent, a lot smarter than I am. And

48:50
I think that intelligence serves him well. And if you’re looking at these sorts of opportunities and you’re going, haven’t spent 20 years doing various internet marketing trends and always spinning on the top of the curve, you’re an idiot if you think that this time you’re going to be, you know, because history has said you’re hot, you know, and I’ve tried to do some of those hustles before and sometimes I, you know, uh, wins and I lose, but what I’ve learned is that

49:17
ends up being kind of net velocity at them all together. And that I am investing a lot of time. And so now I, you know, try my best to avoid that temptation. And you know, focus on what’s valuable. For me, it’s about sleeping well at night, actually. Yeah, with those fads and whatever, like you could lose that stuff really quickly. Whereas if you have your own brand, it’s still my drop, but it’s a lot more gradual and you have time to react. Yeah. And it’s I think that’s that’s well said, like especially if your income is depending.

49:45
Like if you’re saying that like I am the wholesale, you know, button buyer guy, like you have to be able to, you know, be able to weather that storm because there will come a day where that would stop. It’s just gonna happen. Yeah. Dave, where can people find about your tool? Ask you questions. Where are you at online? ImportYeti.com. And there’s a little contact us button and the emails go straight to me. And I would love to hear from anyone and everyone about how they use the tool.

50:14
especially if they have ways they can make it better. And I care about especially the granular things like you’re like this, putting this button here makes me want to punch you every time I see it. It’s so annoying, it’s the wrong spot. I want to hear that feedback. You know, it’s the thousands and thousands of Import Yeti users that have made Import Yeti good so far and allowed us to spread and give me opportunities to be on podcasts and stuff like this, which I’m very grateful for. And I love the tool and I love the fact that it’s actually free, which we had

50:42
talked about this earlier, like that core component of the product is always gonna be free. there’s no reason not to check it out. Thanks for coming on Dave. I appreciate it.

50:54
Hope you enjoyed that episode, and if you haven’t already, go check out Import Yeti right now because it’s free. For more information about this episode, go to mywifecluderjob.com slash episode 453. And once again, I want to thank Postscript, which is my SMS marketing platform of choice for e-commerce. With a few clicks of a button, you can easily segment and send targeted text messages to your client base. SMS is next big own marketing platform, and you can sign up for free over at postscript.io slash div.

51:22
That’s P-O-S-T-S-E-R-I-P-T dot I-O slash Steve. I also want to hang out with you in person in Fort Lauderdale, Florida. So grab a ticket to Seller Summit and let’s meet up. Go to SellerSummit.com. That’s S-E-L-L-E-R-S-S-U-M-M-I-T dot com. Now I talk about how I use these tools on my blog. And if you are interested in starting your own eCommerce store, head on over to mywifecouterjob.com and sign up for my free six day mini course. Just type in your email and I’ll send you the course right away. Thanks for listening.

00:27
are going up in price this Saturday on April 1st over at SellersSummit.com. It is the conference that I hold every year that specifically targets e-commerce entrepreneurs selling physical products online. And you all probably know me well enough by now to know that my event has zero fluff. Every speaker I invite is deep in the trenches of their e-commerce business and not high-level guys who are overseeing their companies at 50,000 feet. Every year, we cut off ticket sales at around 200 people and everyone eats together and everyone parties together every single night.

00:57
I personally love smaller events and tickets always sell out. If you’re an e-commerce entrepreneur making over 250k or $1 million per year, we also offer a special mastermind experience where we break up into small groups, lock ourselves in a room, and help each other with our businesses. The Seller Summit is going to be held in Fort Lauderdale, Florida from May 23rd to May 25th. That’s S-E-L-L-E-R-S-S-U-M-M-I-T.com. I also want to thank Postscript for sponsoring this episode.

01:25
Postscript is my SMS or text messaging provider that I use for e-commerce and it’s crushing it for me. I never thought that people will want marketing text messages, but it works. In fact, my tiny SMS list is performing on par with my email list, which is easily 10x bigger. Postscript specializes in text message marketing for e-commerce and you can segment your audience just like email. It’s an inexpensive solution, converts like crazy, and you can try it for free over at postscript.io slash d-u.

01:53
That’s P-O-S-T-S-E-R-I-P-T.I-O slash Steve. And then finally, I wanted to mention my other podcast that I run with my partner, Tony. And unlike this one, where I interview successful entrepreneurs in e-commerce, the Profitable Audience podcast covers all things related to content creation and building an audience. No topic is off the table, and we tell it like how it is in a raw and entertaining way. So be sure to check out the Profitable Audience podcast on your favorite podcast app. Now onto the show.

02:27
Welcome to the My Wife Quitter Job podcast. Today I’m really excited to have Keon Golzari on the show. Now, Keon is someone who I met recently on an Alibaba panel with David Applegate and MetaWorldPeace, the NBA player. He is one of the world’s leading sourcing experts who has visited over 500 factories and sourced over 2,500 products. He specializes in product design and manufacturing, and he’s a wealth of knowledge when it comes to best practices. He’s made stuff for the NBA, the UN,

02:56
the Olympics and top athletes like Kobe Bryant. And he’s also mentored over 200 Amazon entrepreneurs as part of the Titan network. Today, we are going to talk about product sourcing and where to have stuff made. And without, welcome to show Keon. How are doing, man? Thanks so much for having me, man. It’s a pleasure to be here. And I’m just excited to drop some value and help out wherever I can. So how did you get into product sourcing? Because visiting 500 factories, that’s a lot of factories. I’ve visited

03:26
Maybe like 1 % of that. Yeah, no, I was really lucky to be honest, because I started off in a family business. Like my dad started a camping and outdoor brand called Highlander because I grew up in Scotland in the UK and he was really, really keen on the outdoors. So he just had a shop in the UK and then he would actually, he went to China about 35 years ago when it was just coming out of a communist rule and sort of private companies were allowed to have factories for themselves. And he would help them to say like, hey, this is how we make goods in the West and kind of like.

03:54
helped him out build and then as a result he had very very close ties with China so from a young age when I was four or five years old I was like this curiosity of like you know what goes on in China how come my dad keeps going there all the time and then like Chinese suppliers would also come and visit us in the UK they would bring their kids so I was like always around that as a child so when I graduated university my dad was like hey do you want to join a family business do you want to head up the supply chain stuff do you want to come to China with me I’ll show you how it is I was like yeah absolutely

04:20
So went to China for the first time in 2010 and what was supposed to be just a two or three week trip, I ended up staying for three months, then went back to Scotland, grabbed my things and then moved to China and I lived there for several years, set up an office there. I became obsessed with how products were made. so I would say I’m so lucky because I found my passion at such a young age, whereas I know it takes some people a long time to really figure out.

04:46
what they like and what they’re good at and luckily I was just kind of thrown into it and I loved it and I’ve never looked back. This is a great first question and do you speak the language? I can speak a little bit of Mandarin but the tough thing was that like so I sat up in office in Ningbo and Ningbo was very much like you know Chinese you had to speak a little bit to get around so to obviously respect the local culture like I could order food at a restaurant I could take a taxi and speak Mandarin no problem but when I moved to Shanghai

05:15
I call Shanghai like China light, like it’s not the real China. can kind of, everyone speaks English, you can, you know, go to a nice Italian restaurant. So if you like basketball, you can play for a team there. Like it’s not the real China, but as soon as we leave Shanghai, that’s the real China. But so when I moved there, like my, my Mandarin basically went away because everyone would reply to me in English. I, but the one thing I really do know is like numbers because I would always, when I was sitting in factories and stuff like that, I would pretend like I didn’t speak any.

05:40
Chinese and then the factory bosses and stuff they would be communicating amongst themselves and they’d be talking about the numbers when we’re negotiating price and stuff like that. So pretended like I don’t understand what they’re saying. I was just like doodling but I was actually figuring out what they were talking about. So I guess that helped a little bit. Well, it just goes to show anyone listening out there, you don’t need to be able to speak the language. And I actually have that problem too. Whenever I go there, I actually try to speak Chinese because I speak it maybe like a kindergarten level, but they always reply to me in English because my accent is so bad and…

06:09
they know an American right away. Totally, and that’s actually a really good point because a lot of people think, oh hey, when I go to China for the first time, do I need a translator or should I hire a before I start talking to this factory online? And we’re absolutely not, like they have very good sales assistants which are very geared up towards English. You might deal with a factory boss which doesn’t speak English, but that’s fine because you communicate with the sales assistant and then they communicate to the boss. And you can still have a means to communicate with the boss, but it’s absolutely not essential to speak any form of Chinese to

06:39
to do business with them. And I would say worst case you can write it down. They can read English quite well. Maybe not speak it as well, but everyone can read. mean, they study Chinese from an early, I mean, they study English from an early age over there. So absolutely can’t. Okay. Walk me through the process of sourcing like a pro. Let’s say I want to create something. What are your best practices to find the best factories and get the best prices?

07:05
Okay, cool. So let’s just imagine that we already have, we know the product that we want to source. sort of identified, we looked at the competition, we’ve made all our changes and all that sort of stuff. And now we’re like, okay, cool. Now we’re ready to find factory. Like where do we start? So I always like to start with alibaba.com. Just as a general, this is where I’m gonna begin my research in terms of, let me find the top five factories for this product. And a lot of people just go to alibaba.com, they type in their product, they search by price. And let’s take the example of like blue light blocking glasses, right?

07:34
We’ll look at, we’ll type in blue light blocking glasses and all of them look the same, right? The images, but some are $1.80, some are $5, some are $7.90. And we’re like, how is it that all these products look the same but they’re so wildly different in price? And this is where a lot of people fall down and they just end up going for the cheapest one but it’s terrible quality. So when I search on alibaba.com, I search by manufacturers, not by product because the goal of alibaba.com is to find the best suppliers. And once you find the best suppliers, then you can negotiate the price down. Don’t start by looking at the prices.

08:02
So to find those best suppliers, I’m looking at manufacturers that must be verified, meaning that a third party has gone in and validated the information they provide is true. So if they say they have 2000 workers, a third party has proven that. If they say they have these inspections, third parties have validated that. If they say they’re in this particular location, that’s been accepted. Quality, number of sewing machines, et cetera, et cetera. So I start with the verified factors. And then after that, I also select trade assurance to make sure your payment is protected. So you get absolutely what you say you’re gonna get if you order.

08:30
and blue light blocking glasses with a blue frame, but you get a red frame. Well, now you get a refund from alibaba.com. So those are given, but then I also like now go into the certifications as well. So you get certifications on the factory and get certifications on the product. On the factory, you might get things like BSCI ISO 9001 ISO 14001, which is like environmental standard, business compliance, quality control, all that sort of stuff. Can you describe what those are actually? Yeah, sure. So ISO 9001 is more of a quality standard.

08:58
and ISO 14001 is more of an environmental standard. it doesn’t mean that, and BSEI is your business social compliance initiative. And if your factory has these things and it’s a great bonus, meaning that they very much care about quality control, that they’ve hired a third party to go and validate that they have sound quality control measures. And if they don’t have it, it doesn’t mean that they’re not capable of passing, it just means that they haven’t applied for it. But I like to start my search off with here are the factories which have this level of certification.

09:27
So I’m working with a certain standard. It might mean that, okay, they supply retailers in the US, they supply big customers. So if you supply Disney or if you supply Walmart, Walmart will ask you, hey, you have to take this audit for us to supply you. Like when I supplied the Olympics, every single factory which I purchased from had to be audited by Intratech. And then had to upload the report to the Olympic portal and then I would get permission to buy from that factory, even though I selected that factory myself. But like a lot of these big brands, they don’t want any bad press or bad.

09:56
bad publicity to be like, the factory that made these garments, the workers were making under minimum wage or anything like that. So those sort of audits validate all your sort of legals at the factory is a very sound place to work with. then- So actually a common question I get asked that I don’t have a good answer for is how do I know that the workers are not being abused? Which one of those certifications covers that? So I can tell you firsthand, right, from my experience, like from visiting over 500 factories,

10:24
probably seen one factory where there’s been like child labor or where there’s not been good working practices. And it’s a massive misconception in China that like, oh, hey, this is unfair labor. This is like, don’t get, they get forced to work overtime. They get forced to work every day. They don’t get paid fairly. And honestly, it’s just not true. Like, know, factory workers actually get paid more than what someone in Starbucks gets paid because they have in China like an aging workforce, right? So when I first went to China in 2010,

10:52
all the factories were at the major port cities. like your major cities like, know, Shanghai and Ningbo and Hangzhou, Fuzhou, all these places, all the factories were there. But then as a result of this growth in the middle class in China, right, it starts to make a lot more of a disposable income. So they start to desire Western goods. So they start to pop up like KFC, Starbucks, Pizza Hut, nightclubs, bars, restaurants, coffee shops. So now you had that young workforce that used to go into the factory and now you’re like, well, you know what?

11:18
let me just go work in Starbucks and make coffee and play on my phone all day and have conversations rather than work in a factory. It’s much easier work. So the factories had to move more and more inland. So now when I get on a plane to China, I need to go like four hours on a train into the countryside. And then as a result, they have to pay those workers more to want to work in a factory because there’s jobs available to work in other places. So you would never get away with, you know, paying like underage labor or low wages and stuff like that. But to your question in terms of like what certifications check all that, I would always ask your factory.

11:48
what factory audits have you got? And there’s many different types of audits. know, it could be the ISO 9001, it could be the BSEI, it could be an organization called SEDEX. And whatever they send you, if you don’t understand any of it, just Google these certifications just to make sure that they’re validated. But going back to alibaba.com, well, the good thing is if you select a verified factory and they say right here is our Intertech report for the ISO 9001 quality certificate, and that means that that report is…

12:16
actually correct and has been verified. It’s not like, we just made this report up and we uploaded it. It’s like, no, a third party has gone in and validated that this report is correct and all the information that we’ve said here is true. So that’s why I love it because it’s kind of like your eyes and ears inside the factory and not to change topics. But a lot of people ask about, well, what about sourcing in Mexico and all those other places? And like, well, that’s great, but you don’t have that like verification that you know who you’re working with. They can just say whoever they are and you have to kind of take their word for it.

12:43
but at least with alababa.com, you have lot of transparency and visibility in the factory. And then, to further that in terms of, how do I know if this is true and stuff like that? I always talk in my content in terms of building a relationship with your factory using either WeChat or alababa.com, like chat feature on the app. talking about, hey, where you guys up to on the weekend? What are you having for dinner? How do you celebrate Chinese New Year? Just informal conversation. But then you can video call them. So let’s say your goods are ready on the 1st of April.

13:13
and you’re now at the end of March and you know the inspection’s happening, you can literally call them on the app to be like, hey, can you take me down to the factory floor? Can you show me what the inspectors are looking at? Can you show me that all the production pieces are finished before I make this payment? So you’ve got eyes and ears inside the factory because of that verification process, right? And building that relationship and chatting on the features. my mind just goes in different tangents, so I probably answered a few different questions. what you’re saying from what I’m interpreting from what you’re saying.

13:40
If you choose verified and they have those intertech reports, chances are there’s not child abuse going on in that factory. Yeah, absolutely not. And you’ll have the certificate to back it up. let’s say, for example, anyone ever quizzes you about it. Let’s say, for example, a particular big customer wants to a large order and they’re like, can you prove to me that you don’t have underage labor here? Then you just ask the factory to send the certification. Now, an important thing is that I always ask the factory to send me the certificate.

14:06
certification anyway, even if it says it’s on their Alibaba profile, I’m like, can you send it to me so I can read it and check it? Really important thing is to verify and check that the address on that certificate matches the address which is on their Alibaba.com profile, because then it could just be sending you any certificate. So I just always make sure that addresses match. And then, you know, the best test is yourself going there when travel opens back up to have eyes and ears inside the factory. you actually know who you’re doing business with. Because the way I was always doing it was I was going to the Canton Fair, meeting these suppliers face to face.

14:35
deciding who I wanted to work with and then going and flying to their factory and visit them and seeing them. Because, and even if anyone’s just sourcing online, in your messaging to the factories, I would always mention that as soon as travel opens back up, I’m coming to visit your factory. Even if you have no plans of doing that, I would always say that so that they know that you’re gonna be there one day. So they’re always gonna give you their honest information upfront. So if you ask like, many workers have you got in your factory? And they wanna say 500 to impress you, but they’ve only got 100, but you’ve said, I’m gonna come and visit you.

15:05
then they’re like, okay, well, let’s just tell him it’s 100, because he’s actually gonna come and check it out. So I would state my intention to go and visit, even if I don’t plan to, just so that you get more honest upfront information from day one. I It’s like a little threat, like the in-laws are coming or something like that. Okay, so we did verify, you look for certifications, and presumably all this is to weed out all the lesser players. Let’s say you do all that, and you still have 100 factories or 200 factories. How do you narrow it down further?

15:32
Yeah, great question. And that’s a common thing as well. So after that, I’m gonna be looking at what is the main region in China which specializes in this product, right? So for example, if it’s an electronic product, chances are it’s made in Shenzhen. If it’s a backpack, chances are it’s made in Xiamen or Shenzhou, right? If it’s blue light blocking glasses, it’s most likely made in Wenzhou, right? You’re not expected to know that, like whenever you type, in China, they concentrate in certain areas based on the access to raw materials, right? And the skilled labor that they have in those areas.

16:02
So if anyone wants go into alababa.com, hit manufacturers, type in blue light blocking glasses, take those boxes of the certifications that we just talked about, right? And just watch, scroll down the list. The first word of that company name, the first word is always the city or the state of where that company is based. So it’ll say like Wenzhou Optics, Wenzhou Glasses, Wenzhou this, right? And as you scroll down, you’ll just see Wenzhou, Wenzhou, Wenzhou. Then you’ll see an outlier, which will be like Suzhou. Then you’ll see one that’ll say like Guangdong. And it’ll go back Wenzhou, Wenzhou, Wenzhou.

16:30
So I like to scroll through that list, let’s say if you’ve got 100 results, to be like, what is the most common name, what is a common word that pops up? And then chances are that’s the area which specializes in this product. Because you essentially want to be buying it from the area which actually specializes in it. And then after that, I look at the number of years that they’ve been on alibaba.com and the number of years that they’ve been established in business. So it will say like years in the top left corner and it will be either two years, three years, eight years, 12 years. And that’s just the number of years they’ve been on alibaba.com. But why you need to be careful is that

16:59
a lot of very good suppliers only went to the Canton Fair and never registered their products online, right? But with what happened in the last few years, they’re like, well, actually now we need to put our products online because the customers aren’t coming to the Canton Fair anymore. So you might see a very good supplier, which has been established for 25 years, but next to their name, it will just say one year. And you’re like, oh, this is a new supplier, let’s just dismiss them. But they could actually be like the rock star supplier that you’ve been craving. So when you click on the profile, you go on company information and it’ll tell you.

17:27
the year established and next year established you’ll have a blue tick which is that verified information and it will stay like 1999 or 2002 and you’re like oh wow this company’s like over 20 years old so after all that I would like to search by you know the number of years have been in business and also the factor location and that will really hone it down but what’s your minimum usually

17:49
Normally I go minimum five years because I think that like five years is enough where you’ve developed enough experience, you’ve done enough orders, you’ve exported to enough different countries. And that’s the other thing as well. When I look at that company profile, I’m now looking at, okay, it will say like quality control and that will say like what machinery they have and what quantitative machinery they have. So let’s say for example, I’m doing footwear, right? I would want to, if I saw in their…

18:13
quality control in machinery, they had like flex test machine, which basically means that you put the boot in the machine and it just flexes it 10,000 times to show it’s done 10,000 steps, that it can walk like a few kilometers and the boots aren’t gonna be damaged, right? And if they say, right, we’ve got five flex test machines, I’m like, well, this is a great factory because this is the factory which tests the products in-house so they know they’re qualified before they even send it to a third party, they know they can pass, right? And you know, if it’s a backpack factory, they might have like a waterproof test machine, they might have a fabric strength test machine, they might have a zip test machine.

18:43
So I’m kind of now looking at, what testing did they have in-house? And then on top of all that, when you go down to a company profile, it will tell you what trade shows they’ve done, right? So they might have exhibited at a Canton Fair for five years, they might have gone to a trade show in Italy, Spain, UK, Germany, whatever. And that is really good for me as well, because if you attend a trade show as a factory, it means that one, you have good English speakers within your company, two, it means you understand the export market, meaning you know what German customers want, you know what US customers want.

19:12
So if I say, hey, I need this latest certification to be compliant, they’re like, yeah, we’ve already got that. We do that for that other US customer. So they know the language that you’re talking basically. So there’s so much information that we kind of went over that you can get from your factory profile, but it all has to be verified so you know it’s true. But compare that to what we first started talking about when someone just types in a product, looks at the price and then goes for the cheapest one. Look at all the things you just missed out on. So it’s very important to sort of use that as a base.

19:40
to then find the right manufacturer. But then once you find the right manufacturer, that’s like part one done. Now it’s like communicate with the supplier. So we can now go into like, know, how we- Plus the prices on Alibaba are all bogus anyway. Absolutely. Yeah, yeah. I never ever, ever take the price on Alibaba for what it is because that is what the supplier thinks that you want. So let’s say for example, it’s an outdoor furniture or a camping chair, right? And you see a camping chair, you’re like, okay, that was $8. Well, that’s just what they make already, but-

20:08
What if you want steel tubing rather than aluminium tubing? What if you want polyester material rather than nylon material? What if you want 80 by 60 rather than 80 by 40 dimensions? So it’s like you have to say what you want and then get them to price it up, not just take the price of what they already sell.

20:24
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22:18
Now back to the show.

22:21
All right, so we just talked about narrowing down a top quality factory. A lot of those factories work with a lot of larger companies though. So how do you get them to work with someone who’s just starting out? What’s your question? Yeah, essentially what I wanna do is I wanna know who I’m working with first, right? So let’s say for example, you we looked at that company profile information and in the company profile under verified, it says number of workers, right? And.

22:48
If the number of workers says like, you know, 500, I’m like, you know what? That’s quite a big factory. They’ve probably got pretty big customers. They’ve got certain systems and processes. They run their production line pretty strictly. If I’m like, Hey, I want 300 pieces of this customer product. want to try it out. They’re probably going to think this is a massive pain in the ass and they’ll probably shut it down. I know I’ll ask them anyway, but I’m pretty sure that’s what they’re going to say. But if I have this like new innovative product, I want to try it. Um, I’ve never done it before. I’m going to look, go through the exact same process. But when I see company profile.

23:17
I’ll get excited when I see a factory that says it’s only got 25 workers or 50 workers, because I know they’re a small and nimble operation and they also want to acquire new customers and they’re willing to try different things and they don’t have a set system in terms of production and processes. So I’ve got a much higher chance to get success with a factory which has got fewer workers rather than one which has got larger workers. But saying that, you can still get the bigger factories even for your custom project, even on a small MOQ. And the whole thing is, it’s about like building leverage.

23:47
you might already be a big brand, right? You might already have had two Amazon brands who both doing like a million dollars in turnover. You might be doing Shopify and I want to get that factory excited to work with me. So the first product that I give them might be a new item. Let’s just say, for example, we’ve invented some new neck pillow. We don’t know if it’s going to work, but hey, we’ve developed other brands before which have gone pretty well. So I’ve got a good feeling about this. Rather than saying, hey, I want 250 pieces of this custom new neck pillow. I would say here’s a product that I want.

24:17
but here’s what I’m capable of. Here’s the other two brands that I’ve got. Here’s the quantity that we’ve been selling. And we’re very experienced in online sales. We work with the biggest influencers. We’re very familiar with Amazon platform, with Shopify platform. So now I’m like, okay, supplier’s thinking, okay, well, this is just a really small order, but look what they’re capable of. So if I get this order right first time, these guys are capable of scaling a massive business. So let me just give them what they want. Let me just do this first order at a break even. I don’t really care if I don’t make a profit from this first order.

24:46
but I wanna acquire this customer because the supplier is not thinking how much money am I gonna make from this order or thinking how much money am I gonna make from this customer over the next three, five, 10 years. So if you can sort of build leverage to be like, we’re capable of scaling big businesses. And look, if this is your first business and you’ve not scaled any businesses before, just show that you’re a specialist in this particular product. So let’s say for example, it’s a yoga mat, right? I would say, hey, I’ve been a yoga instructor for 14 years. I have my own studio. I can…

25:14
Developing your products feedback to my clients get a lot of knowledge. I know the biggest influencers and in China to call them KOLs key opinion leaders I know the biggest KOLs in this space. So we have really big opportunity I’ve got new ideas for lots of products. It will help improve your systems and products and stuff like that as well So now the suppliers thinking you know what like this is not a big order, but this is a qualified customer This is someone who really knows a product inside out and it’s different to the other inquiries that we get where they ask for a price and then we never hear from them again, so

25:42
I would always hone in on what are your strengths and build leverage using that. And then you get the suppliers to want to work with you. Cause bear in mind, if you go on one these websites like alababa.com, those suppliers are getting inquiries from maybe 50 to a hundred customers every week, right? And a lot of them will be the same thing. Hey, what’s your best price? What’s your MOQ? Can I get customized packaging? Same message, right? And then the supplier gives them that information and then never hear from that customer again. But now you have this nice long detailed message. You’re like, you know what? This is what we are. So what we bring to the table, this is brands that we’ve built.

26:10
hey, and this is why like working with you. You have these certifications, you’ve been to the Canton Fair before, you’re expert to the markets that we like, you have these quality testing machines. And then now the supplier is thinking, wow, like, okay, this is a, we’ve told the supplier why we know that they’re good factory. So we’ve done our research and then they’re also thinking they’re gonna be a good customer. So now your inquiry goes to the top of the pile. So that is the difference in terms of make a bit of effort, read up about them, state your leverage, state what you like about them.

26:38
share the specification sheet of the product that you want to make, and then you get their best service from day one. And that’s really what a lot of people miss out on, regardless if you’re a beginner, intermediate, or advanced seller. I think the key here is for anyone listening, these factories, they’re really just people. And if you were to go on a date, you wouldn’t just say, hey, give me your phone number, right? If you make a little bit of effort, you’ll stand out among thousands of people. It’s like this with business or anything that you do. I get like…

27:06
hundreds of outreach emails every day from people wanting something, but if they’ve taken a really thoughtful way of writing it, I’ll at least read it. And even if it’s like someone small or whatever, you know, I’ll listen if they actually made an effort. It’s the same thing with sourcing. That analogy is one of the best analogies I’ve heard, right? It’s kind of like, if you see a girl at the bar that you like, and you’re like, hey, my hotel’s around the corner, do wanna go? Right? There’s like five or 10 different steps before that. Hey, let me get you a drink.

27:35
here, let me get to know you, let me take you out for dinner. You have to go through those steps, right? Same with a supplier, you have to go through the steps of qualifying yourself and then you have to say what you like about them. And then as you said, people buy from people, right? This is not like, they get excited because they have customers all over the world. They have customers from the UK, from US, Brazil, Japan, and they get to communicate with loads of different people and that’s what excites them. So if you like talk about yourself a little bit, where you come from,

28:02
you know what you like to do and things like that that really excites some people buy from people and the more you build on those relationships the better Quality of service you get and a lot of people think oh hey if I get a good relationship Then I get about price or so much other things aside from price that they can really give you they can give you Faster delivery times they can push you right into the front of production schedule. They can give you better credit terms They can give you information about what other customers around the world are doing They can give you information on the products that they’re developing for next year

28:29
Because while we develop products all the time, well, so do your factories. They’re also developing products because they’re also specialists in that product. So there’s so many benefits you can get from a good relationship, but you just miss all of that goodness out if you just go straight for, hey, what’s your price? So you mentioned something earlier about looking for factories with less workers. Chances are those smaller factories aren’t going to be certified, right? It’s something that larger factories do.

28:54
Well, yes and no. I’ve still been to factories with like 50 workers, but still have all the right compliance and stuff like that because you know in today’s society, like it’s very hard to supply someone without all those certifications and accreditation and stuff like that. So I find that most of them have it. I’ll tell you where you have issues with like smaller factories. And this again goes back to the information that we can see. I had a client I was working with where they had one product that they were doing over 250,000 units of.

29:24
that they would always pass the inspection, but when the goods got delivered, they always got high return rate. And they’re like, how is it that these goods keep passing the inspection? We don’t pick anything up in the factory, but every time the goods arrive here in its cells, it’s defective units. And I was like, can you send me the pre-shipping inspection report and can you send me the Alibaba company profile? They’re like, cool. So I look at it and bear in mind that they’re doing 250,000 units of a cut and sew product. And when I looked at the factory profile,

29:49
When I looked under the equipment, it said sewing machines verified, it 25 sewing machines. I was like, it is impossible that a factory can have 25 sewing machines and they can manufacture 250,000 units in order. So they’re obviously outsourcing this production to smaller factories, but the reason they’re passing the inspection, you’re not picking it up, is that they’re doing the inspection in their factory, but the ones which are not being checked are the ones which are being outsourced.

30:13
So I was like, go back to the factory and ask them, you outsourcing this production to smaller factories? And they asked that and they said, yes, they were being honest about it, but it just never revealed that information. average seller is not gonna really know that stuff, but like, if you just look at the information that you’re given, like there’s 250,000 units, but it’s only 25 sewing machines, something’s got to give, I’ve got bad quality, you can start to figure that stuff out. So that’s where like, you have to be a little bit mindful of like smaller factories is that if you have big orders, and that’s actually a really good point in terms of like one of the biggest things that I see.

30:43
biggest mistakes I see sellers making is that you can outgrow your factory, meaning when you first start this item, you know, we just want to trial 300 units and only the smaller factories want to work with us. But now we’ve scaled it up to like 2000 units a month, but we never went back and renegotiated the price. We never went back and sort of seen like, are they actually the best factory for us today? And you might be better off with a factory which has got 500 workers, but you never went back to negotiate. So I would never just like switch factories, but.

31:11
Let’s say you have a specification sheet or a tech pack, which has got all the information of your product, the materials, dimensions, Pantone colours, packaging, testing, need all that PDF it, you send it out to multiple top five factories you find on alababa.com or maybe you use our friend David’s website, import yeti.com to find other factories as well. And then you contact those factories and they give me your best price and delivery date for this particular item. And the price starts to come back, you know, maybe a dollar, $2, $3 cheaper than what you were getting already. And at that stage, I wouldn’t just switch production to those cheaper factories.

31:39
I would tell my own factory, hey, by the way, I’ve had other suppliers contact me, which is possible because once you’re like on page one of Amazon or if you have a good website with traffic, suppliers will find your brand, find your website, contact you and say, hey, we also make this, they’ll make you a sample and they’ll send it to you. So I wouldn’t say to my supplier that I was shopping around, but I’d say to my supplier, hey, other factors have contacted me and they’re willing to make the exact same product that you supply me with, but are $2 cheaper. Now, I very much like working with you. You’ve been amazing so far. I don’t want to switch, but.

32:08
I need you to match the price. And if you can’t match the price, then I have to think about switching. And then you’re giving them the chance to be like, yep, you know what? We can actually come down on price a little bit and then cool, continue working for them. But if they’re like, you know what? We can’t match that price. We’ve had a great run, like go for it. Then you can sort of keep them as backup supplier, remain friends and use them whenever you need them. But you’ve now like got that better factor, that better quality, that faster production, those better production techniques, the better production equipment, all that sort of stuff.

32:34
but you never sort of seek that out because you just grew too fast and you always thought, you know, I’ve ticked that box with my supplier, I don’t need to look for a new supplier, but as you grow, you obviously sort of check back, if you know what mean. Yeah, I know that our supplier always raises their prices every year and I know everything’s been going up. In this environment though, in 2022 when we’re recording this, everything’s slowing down, right?

33:00
How do you negotiate lower pricing when you kind of know globally everything is slowing down? So yeah, a great point. And I would say that whenever your supplier gives you a price increase, you want to validate that price increase is correct. So for example, if they say, you know what, the price of wood has gone up 12%, your price has gone up or you know, the price of polyester has gone up, it’s going up, price of steel. So I’d be like, okay, cool. Tell me how much it’s gone up. You’re like, 12 % in the last three months. Okay, cool.

33:28
The same process we just went through in terms of finding suppliers on Alibaba, right? I would go through that exact same process and then I would talk to him, hey, we’re interested in buying these products, et cetera. And I would just drop in, by the way, can you tell me about the price of steel in the last three months? What’s been the change in price? And if all those suppliers were like, you know what, it’s gone up like 10 or 12%. I’m like, cool, yeah, that’s a warranted price increase. I agree. But if they’re like, you know what, it’s not really had any change in the last six months.

33:51
then I would go back to my supplier to be like, you know what, the other suppliers that I talk with haven’t mentioned any increase. So if you have to increase the price and have to look at sourcing it somewhere else, but you know that that’s true because you validate for yourself by talking to other suppliers about the raw material cost. Same with the labor costs. If they say, know what, the labor costs in our province has gone up 8%, now we have to put the prices up. Again, talk to factories in that area, ask them the same question. So you always want to validate and educate yourself before sort of agreeing, because we have no idea what’s the labor cost in China, the material cost in China. have to sort of validate from.

34:21
from other sources. But a quick hack, know, to anyone who’s enjoying this episode so far and you are like, know what, just give me one quick tip where I can like save on price. I would go to a website called xe.com, which is what monitors the exchange rate, right? And if you look at the dollar to RMB, April was, $1 was about 6.3 RMB and now, or Chinese Yuan, and now today, which is November, 2022.

34:47
$1 about 7.2 or 7.3. So the exchange rate has gone up about 12 13 percent in their favor meaning if you gave them a purchase order of a hundred thousand dollars in April and a purchase order of a hundred thousand dollars today They’ve made an additional 12 or 13 thousand dollars just on the exchange rate alone So what I would say to them was I would go to XC comm I would and you can hit graph graph that show it you got a purchase order on that day You got a purchase order on that day. You’ve made an additional twelve thousand dollars

35:13
Therefore, I want a 10 % decrease on my cost of goods on this order. And they might tell you, you know what? Yeah, the exchange rate has benefited 10, 12 % in our favor. However, the cost of goods and raw materials and all that stuff has gone up as well. So you might actually agree to five or 6 % split at 50-50, but you’ve still got a decent discount on your cost of goods. And you know it’s validated because you’ve given them the proof. But in terms of, it’s also very important when you ask for that discount, and I always like to ask for it at, wait.

35:42
at the time of shipment, when the time you have to pay your supplier. Because if you say, let’s say your goods are just about to start production now, or is there a good start production in like 20, 30 days, right? And then we negotiate at discount now. When it comes to starting production in a month’s time, they’re gonna tell you, know what Keanu, like, you know, we agreed that, you know, like 12 % discount based on the exchange rate, but you know what, since then, you know, we’ve had this like power outage situation in the factory, the government’s turned off our electricity, the electricity prices are a lot higher now.

36:08
and the cost of like steel has gone up like 4%. So now it can only be a 5 % saving. You’re like, oh, shoot. So, but if you negotiate at this count at the time of payment, they’re like 12%, cool, let’s agree on eight, cool, here’s a purchase order signed, delivered, deposit paid, go, let’s do it. So always, if you’re gonna talk about any price increases, or price negotiations, always do it at the time of when you actually have to make a payment, like a deposit or a final balance payment. Don’t allow any time for making that negotiation to then actually making the payment. Love it.

36:38
Love it, it’s all customer psychology and how it works. One thing, like I’m always very reluctant to threaten to go to another factory because that new factory is always like an unknown. Do you say those statements before you’ve had a chance to try your alternate factory or do you try the alternate factory first to prepare yourself to leave? Yeah, definitely. I would always get the backup first because you don’t want to burn any bridges, right? So if you say, know what, I’m going to start a factory and they’re like, yeah, cool, go for it.

37:07
and then you go and then you find out it’s not any better than the one you had, then you’re screwed a little bit, right? So I would always do my research in terms of like, all right, do I have a better price? Do I have better quality? Do I have better service, payment terms, all that sort of stuff? And then I would go back to my factory and say, hey, this is what I’ve been offered. Can you match it? So you know that if they say no, you’re good, you have that backup. And also all these things that they claim in terms of like, okay, well, here’s a reduced price and all that sort of stuff. You always wanna get a sample to verify that as well, right? Because we might be doing this product, we get $2 off, like, cool, I’m gonna go to that supplier.

37:36
they send you sample and it falls apart. You’re like, oh, well now I know why it’s two dollars cheaper. So I still want to check. And by the way, like when you first reach out to these suppliers, like we talked about like selecting the top five or whatever, I wouldn’t just go with the one that you like the most and get the sample and all that. Even if you have your number one, I would rank them number one, two and three and get samples from all three because you also want to compare the quality between suppliers. Like, all right, now I understand why your dollar 50 more expensive because this handle is way more robust than this one or

38:05
Let’s say you do go for your number one initially, but they have a situation six months down the line where they have the power outage situation in the factory. Well, now you have samples and prices from your two backup suppliers that you’ve already, they already know all the details of the product. You already have a sample. So you can now just say, okay, cool. Here’s your order, go for it. You don’t need to start that process from day one. So it’s always handy to have a couple of backup suppliers as well. Another common question I get asked is how do you prevent a supplier from just taking your design

38:35
and literally putting photos up of your product and selling it to other people. Yeah, it’s very difficult, right? So there’s two ways you could look at it. Like you have these like NNN agreements, which is like non-disclosure, non-circumvention and all that. I never do that with all the factories and stuff, the products I’ve developed. probably signed, I’ve got my supplier to sign one or two NNNs based on if something was extremely innovative that I just didn’t want getting out. But I think that a lot of people always ask me about like, know, how do I make sure my supplier doesn’t copy my product?

39:04
And I was like, first of all, you need a bit of self-awareness to be like, do I actually have something to protect here? Because a lot of people feel that like, well, you know what, because I just changed this color or changed this dimension or added this feature, now I need to protect it. But all you did was innovate it on top of what already exists. You didn’t necessarily develop something really new, right? And that’s the nature of the game. Like you probably got the idea for your product by innovating on top of what already existed. Now, if someone does that to you, it doesn’t mean that like, okay, well now we have to block everyone from selling it because…

39:32
Ultimately, you know, if you really want to protect your product, if you’ve got something of real innovation, the only way to protect it is from getting a patent, either a design patent or a utility patent. But people don’t necessarily want to spend the $4,000 on a design patent or the $15,000 on a utility patent. And if you don’t want to spend the money to basically protect it, then it probably wasn’t worth protecting in the first place. But there’s kind of two ways of protection. There’s like the protection against your supplier. Like you ask, if my supplier copies my product? And then there’s a protection against like, what if the rest of the industry copies my product?

40:02
And a lot of people think it’s the supplier that copies your product. But so in that initial communication, when we’re going back and forth with the factory, I would always ask them, know, like, are you just a manufacturer or do you sell yourself? Do you supply other Amazon sellers? What markets do you supply within those markets? Who are your biggest customers? I want to know like really like who are, where’s their attention going and who are the main people that are supplying? So that if I feel comfortable, if they’re supplying my direct competitor and my direct competitor is doing like eight times more business than I am, then I’d be very cautious of.

40:30
showing them new product ideas because I know that information is probably going to my competitor. But if they’re not supplying those guys and I find a new factory in a sort of blue ocean that like, you know, they’re not really dealing with my competitors and I’m going to be open book with them. So if you are worried about what my supplier copies my idea, I would tell them that I have a patent on the product when I actually don’t. But because I told them I’ve got a patent on it, now they’re scared about developing it. And on top of that, I would rather focus on building the relationship rather than getting them to sign a contract like an NNN.

41:00
because like that NNN is literally just not worth the piece of paper that is written on because are you really going to sue your factory in China? Are you really going to take them to court? Are you really going to hire a Chinese lawyer for the value of your $10,000 order? Absolutely not. So I’d much rather say to my factory, hey, this is an innovative product which we’ve developed. I’m dealing with you as a company because I admire that you’re going to keep all this information confidential and we’re going to really build this business together in partnership. I’m going to really grow and scale this business and you’re going to get those orders as a result of it.

41:29
and let’s really go into this together and build a really big business rather than I don’t trust you sign this document. Like think about the different levels of service you get and you’re not gonna enforce either one. You know what mean? So I always like to build a relationship rather than get legal documents. I like your answer better than mine. My answer is always you can’t really do anything about it. But if you brand it well enough and if you want, you can register a copyright in the US or patents are expensive to enforce too.

41:59
Really, I mean, it’s probably gonna happen. You can prevent it from being sold in the US and that’s usually good enough. But if you have a good brand and whatnot, you got nothing to worry about in the long And so I’ve actually got a YouTube channel as well called Sourcing with Kean and the last episode which I posted was all about patents, half an hour in depth. I interviewed a patent attorney. So if you do have a deeper desire to learn more about patents, I would check that out. But that can be a deep conversation in itself. But you know, like in terms of like,

42:26
product protection, I kind of look at it as in you’ve got three layers, right? If you innovate something of value, right? First thing is you can get a mold, right? Because if you’ve developed or changed something, well, now you have a high buyer to entry cost, because the mold can cost anything between like $500 and $50,000, right? But it’s essentially another buyer to entry. So if it costs you $5,000 to develop that mold, chances are the competitor might not have that disposable income to try a new product, right? And on top of that, if you put a patent on that product, well, now there’s…

42:54
competitor sees right, well, there’s a patent and there’s a mold cost. So I don’t even know if I can sell this product and I have to pay $5,000 just to manufacture it. That’s a really big buyer to entry. And then the third one is also like an exclusivity agreement with your supplier. Let’s say you didn’t develop the product. Let’s say the supplier developed the product and you’re like, hey, I want to sell this product in like the U.S. market. Can I get exclusivity? They might say no.

43:18
But then I’d say, okay, give me exclusivity for six months, meaning don’t sell it to anyone else in the US market. Just sell it to me for six, and after six months, open it up to everyone, but just give me the first sales. And they’re like, you know what, yeah, that’s reasonable. And I’d say, you know what, tell me the quantity you want me to hit to remain exclusive. So if you need me to order 20,000 units within those six months, and if I do that, then let me remain exclusive. And if I don’t hit that and open up to everyone, they’re like, all right, cool.

43:42
or if it’s product selling really well and they want to open up to everyone else, I would ask for, me exclusivity of a different region. So give me exclusivity for Germany or give me exclusivity for the UK. So you’ll be the only seller of that product and then get those exclusivity agreements either by quantity or by region. So those are the three layers I look at. Do I have a mold on the product? Do I have a patent on the product? And do I have an exclusivity agreement with my supplier? And that is your defensibility, not necessarily like your NDA contract, which means nothing. Since we’re talking about molds here,

44:10
Once you have a mold made and it’s at a manufacturer, how do you switch easily? It’s tough because, so for example, if you wanna move supplier, then you have to move the mold, but I would always say that like I’ve done that research prior to investing in the mold cost with a manufacturer. And the way I do it is that like, I’m gonna pay for the mold outright, but I’m gonna get that mold cost back from the supplier. So if I do want to switch, then I’ve not paid for the mold. So for example, right?

44:40
let’s say the mold cost is $10,000, right? I would say to the supplier, look, I’ll pay the 10, you don’t say, look, let’s do this in partnership 50-50, I pay 5K, you pay 5K, cool, done, let’s go. So we just got 50 % discount on the mold now. Or I would say, look, I’ll pay the $10,000 upfront for the mold, but I need you to refund me 25 % of the mold cost once I order 5,000 units. I need you to refund me 50 % of the mold cost once I order 10,000 units. I need you to refund me 100 % of the mold cost once I’ve ordered 20,000 units.

45:08
And the supplier’s okay with that because you’ve paid the mold cost upfront, but they pay for it once you’ve ordered 20,000 units. And once you’ve ordered 20,000 units, they’re doing big business with you. So they’re like, okay, cool, I’ll refund it. So that, I sort of like make an agreement with my supplier that way. So let’s say for example, we hit those 20,000 units, I get the mold cost back from my supplier and they’re not actually gonna pay you that money back. But let’s just say when you place your next purchase order, you just deduct that mold cost from the invoice cost that you owe them, right? So now all of a sudden my mold is free.

45:38
So if the supplier randomly just puts up the price and I’m like, well, now when I switched to this supplier, I’m like, cool, well, now let me go make that agreement with this supplier and then I’ve not paid for that mold so I can switch quite easily. Interesting. I never thought to do it that way. Cause getting someone, getting a manufacturer to ship that heavy mold to a new manufacturer, that’s just not going to happen, right? Or.

45:59
Yeah, and the other sort of layer of protection for mold is that you could because you’re making this mold, right? You’re now making the custom shape of how this product is going to be made. So I would always have my logo on the mold, right? So let’s say, for example, we’re Nike, I would have the tick in the mold embossed. So let’s say that tick is now going on a buckle, right? That buckle is going on the backpack. Well, it’s very important to get that.

46:24
mold that logo embossed not debossed because if it’s debossed then it can be filled in but if it’s embossed it means that that logo now sticks out so that manufacturer cannot get rid of that logo so if we now switched on our manufacturer they can’t just go and produce that product now and sell it to someone else because it has our logo on it so that’s always another defensible way of your manufacturer not using it for someone else by putting your logo on the mold as well cool I love that I love that

46:52
Keon, wanna end with, we talked about Alibaba and kind of focused on Alibaba so far. I like Alibaba and all, but I still find Alibaba a little bit tedious. Do you still use it today to source for yourself? Yeah, for sure. I mean, my favorite way is definitely going to the factory myself and sort of doing that business face to face. But while we can’t do that easily at the moment, my starting point is always alibaba.com because while there’s other methods and stuff that we can get into, I want to know like who,

47:22
who my competitors also have access to in terms of like, what suppliers are available here. And if I find this supplier here, well then so do my competition. So where, and they might be a great factor and I’ll still use them because it might be the best. But for certain products, as you said, you might have over a hundred different suppliers to choose from, but for certain products, you might only have like two or three. And then now I’m just gonna basically qualify it or those two or three good enough. And then.

47:46
Regardless if I like those suppliers or not I’m still gonna look at other sources and the other one we mentioned was David’s company import yeti.com and the beauty about that is as you know, then use it as well as like you get access to the shipping documents of The the market leaders for that particular product and that’s only for them shipping to the US because that’s public information, right? So Let’s say for example, I’ve got an outdoor brand and my main competitors in our face. I can now find the nor faces suppliers

48:14
what country they’re importing from, what HS code they’re clearing the goods at, what quantity they’re doing, how often they’re shipping, so much very valuable information you get there. And often these are suppliers which don’t necessarily list on alibaba.com either. So that’s kind of like the second tier of supplier like to go through. those are probably like two very solid options that you have. If I was gonna add a third one, it would be like,

48:39
going to trade shows for your particular category of products. So let’s say for example, you’ve got a cycling brand, there will be a very good cycling trade show in like Denver or Utah like once a year. And quite often the suppliers will also visit those shows as well. Sometimes we just walk the show and sometimes they’ll have a booth there and I’ll meet those suppliers there and then. But let’s say for example, you’re based somewhere else and you can’t attend that trade show, I would go on the trade shows website, go on the exhibitor list and on the exhibitor list, it’ll tell you all the companies which are gonna be there.

49:08
and you look for the Chinese sounding names and then you Google their company information and you contact them directly. So that’s another way to find like really good suppliers outside of alibaba.com. Well, Kea, that was a great interview, I’m sure everyone owned a lot. I picked up on a number of things. If anyone has any questions for you, where can they find you online?

49:30
Yeah sure, so I’ve got a YouTube channel as I mentioned just called Sourcing with Kean, I’ll just lose different topics in supply chain so definitely check that out. I’ve also got a Facebook group of the same name where it’s just like everyone just asks supply chain questions and we all help each other out. I’m also on LinkedIn, Kean Gozari, also on Instagram, Kean underscore JG, and I’ve also got a sourcing platform and sourcing service called titansourcing.com. If you want to submit an inquiry, we can have my team look at it for you as well.

49:58
So yeah, those are where you can reach me if you wanna reach out, I’d be happy to help out. Cool, Keon, thanks lot for coming on the show, man. Really appreciate it. Oh man, love being here. That time just absolutely flew by and would love to jump back on any time.

50:13
Hope you enjoy that episode with Kian Golzari. And for more information about this episode, go to mywifequitterjob.com slash episode 450. And once again, I want to remind you that my annual e-commerce conference will be held in Fort Lauderdale, Florida on May 23rd to May 25th of 2023. I really want to hang out with you in person, so let’s meet up. Go to sellersummit.com. That’s S-E-L-L-E-R-S-S-U-M-M-I-T.com. I also want to thank Postscript.

50:40
which is my SMS marketing platform of choice for e-commerce. With a few clicks of a button, you can easily segment and send targeted text messages to your client base. SMS is the next big own marketing platform and you can sign up for free over at postscript.io slash div. That’s P-O-S-T-S-E-O-I-P-T dot I-O slash div. Now I talk about how I these tools on my blog. If you are interested in starting your own e-commerce store, head on over to mywifecoupterjob.com and sign up for my free six day mini course.

51:09
Just type in your email and they’ll send you the course right away. Thanks for listening.

00:27
I want to let you know that tickets for the 2023 Seller Summit are on sale at sellersummit.com. And it is a conference that I hold every year that specifically targets e-commerce entrepreneurs selling physical products online. Now you all know me well enough by now to know that my event has zero fluff. Every speaker I invite is deep into the trenches of their e-commerce business and not high-level guys who are overseeing their companies at 50,000 feet. Every year we cut off ticket sales at around 200 people and we all eat together. We party together every single night.

00:56
and I personally love smaller events and tickets always sell out far in advance. Now, if you’re an e-commerce entrepreneur making over 250K or $1 million per year, we also offer a special mastermind experience where we break up into small groups, put ourselves in a room, cater in lunch, and then help each other with our businesses. The Seller Summit is going to be held in Fort Lauderdale, Florida from May 23rd to May 25th. That’s S-E-L-L-E-R-S-S-U-M-M-I-T.com. I also want to thank Postscript for sponsoring this episode.

01:25
Postscript is my SMS or text messaging provider that I use for ecommerce and it’s crushing it for me. I never thought that people would want marketing text messages, but it works. In fact, my tiny SMS list is performing on par with my email list, which is easily 10x bigger. Postscript specializes in text message marketing for ecommerce and you can segment your audience just like email. It’s an inexpensive solution, converts like crazy, and you can try it for free over at postscript.io slash d.

01:52
That’s P-O-S-T-S-C-I-P-T dot I-O slash Steve. And finally, I wanted to mention my other podcast that I released with my partner Tony. And unlike this one, where I interviewed successful entrepreneurs in e-commerce, the Profitable Audience podcast covers all things related to content creation and building an audience. No topic is off the table and we tell it like how it is in a raw and entertaining way. So be sure to check out the Profitable Audience podcast on your favorite podcast app. Now onto the show.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

45:11
Hope you enjoyed that episode. Now the truth is, is that 2023 has been a tough year for a lot of companies heading into the recession and you should be able to negotiate with your suppliers. For more information about this episode, go to mywifecluderjob.com slash episode 448. And once again, I want to remind you that my annual e-commerce conference will be held in Fort Lauderdale, Florida on May 23rd to May 25th of 2023. I really want to hang out with you guys in person, so let’s meet up. Go to sellerssummit.com.

45:40
That’s S-E-L-L-E-R-S-S-U-M-M-I-T.com. I also want to thank Postscript, which is my SMS marketing platform of choice for eCommerce. With a few clicks of a button, you can easily segment and send targeted text messages to your client base. SMS is the next big own marketing platform, and you can sign up for free over at postscript.io slash dev. That’s P-O-S-T-S-U-I-P-T dot I-O slash dev. Now I talk about how I these tools on my blog, and if you are interested in starting your own eCommerce store,

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