Episode 78: Doing Business In and With China – Part Two
Welcome to the second half of our doing business in and with China Q and A session. Today we talk about the mistakes we made when we started importing goods from China. We both have examples of things catching us off guard while waiting for our shipments. The issues ranged from a high duty fee on an order, to a major cultural blindside, like Chinese New Year shuts down the whole country for a month!
We also discuss how we handled those time and money crunches that made us want to pull our hair out of our skulls. Sometimes the money just isn’t coming in fast enough and sometimes an international incident will delay your product. We offer advice on how to plan ahead, so you aren’t stuck with too little or too much inventory.
This half of the Q and A is all about the things that could (and often will) go wrong in your business. Tune in if you want to know what it is really like ordering and shipping products from China. The good, the bad, and the ugly.
Here are some of the topics we discussed today:
- What mistakes did we make in the beginning?
- Our experiences with poor money management.
- How tax laws differ in America versus Canada.
- Why waiting for a shipment will almost always take longer, than you expect.
- Strategies that will make waiting on inventory shipments a little more tolerable.
- Dave’s “shot gun” approach to product launching.
- Mike’s “order more” approach to product launching.
- What to do when a product “dies.”
- Things we do differently now because we learned it the hard way.
- The weird business culture differences we didn’t expect.
- Our top 3 tips for anyone wanting to get started in shipping from China.
As a side note, keep in mind we are launching an Ecom Crew course around September. If you are interested in being part of that, then visit www.ecomcrew.com/course, if you sign-up we’ll let you know when the course is ready. The first few people to purchase the course will receive a 25% discount.
This episode is sponsored by Stamped.io. We have recently switched to Stamped.io, so we can get the most out of our reviews, and they have a really great product. We are proud to partner with them and there is a link below to check them out.
Resources Mentioned Today:
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Full Audio Transcript
Mike: This is Mike.
Dave: This is Dave.
Mike: And welcome to EcomCrew podcast number 78. This is part two on our series of doing business in and with China. Good to have you back Dave.
Dave: Thank you Mike and happy to be here.
Mike: Yeah, we are going to bang out this part two. But before we do, I just want to mention real quickly that the Ecomcrew podcast is sponsored by Stamped.io. I want to thank those guys for sponsoring the podcast. It feels good to have a sponsor over the last couple of months here. It’s a new thing for us so we are definitely excited to have them and promote them the best way we can.
If you are on Shopify, and you need a review platform, I would definitely check out Stamped.io. If for anything else their support is absolutely amazing, not just because we are a sponsor, but they do a great job with support. So check them out. And without any further ado, let’s get right into part two of doing business in and with China.
So the first topic that Dave and I have on this list is mistakes that we’ve made. And then also I guess the part of this is not managing cash correctly, and understanding the logistics of time. So we got three kind of big things here that we are going to talk about for a few minutes. And Dave you want to scratch the surface of this monster first?
Dave: Yeah, well I mean I think my biggest mistakes kind of allude to what you mentioned there, managing cash, managing inventory and time. So from a cash perspective, I think a lot of ecommerce owners have been in this situation, especially ones who aren’t drop shipping or actually buying inventory. You have X many dollars, and you figure, okay, well that’s going to get me through to August.
All of a sudden though you are not getting cash in as quickly as you hoped for, and you get into a total cash flow crisis. And yeah, I’ve been in a situation where it’s like I had to take a bunch of my savings that I had in cash sitting in my drawer, and I had to use that cash to pay for payroll. And I mean it’s a really tough situation when you have so much money tied up in inventory. And just trying to forecast that, it becomes a huge headache.
So that’s definitely been the biggest mistake I’ve made is not kind of accurately forecasting how much money we are having coming in, how much money we are having coming out. And the result has been just serious, serious stress when there is not enough money in the bank.
Mike: You know, and I realize one of the biggest mistakes I made is that when I come visit, you’re not looking for the drawer that you have somewhere to like get that money out off. I got to go for that.
Dave: Well, the drawer was not that big.
Mike: Okay, that’s why so. But in all seriousness, I mean from a cash-flow perspective our biggest crunches have been last year at the holidays as we were having inventory come in to have enough inventory to sell through the holidays, we legitimately almost went bankrupt. I mean it was not because we weren’t making money, but it was really hairy. And I knew it was going to be kind of close, I had to even have kind of a proactive talk with my mother-in-law, like, “do you have any money?” And I never do that.
I mean it was just, it was crazy, because like I mean there was so much stuff coming in at one time. And like I wouldn’t say that we weren’t prepared for it, because like I knew it was happening, but like there is nothing you can do about it at the same time. Because like you need more inventory for the holidays than you do for the other parts of the year, and you haven’t sold that inventory yet that you are ordering that.
And it’s just like this crazy moment in time where — and like once we got over that hump, it was sometime in October when that order came in. And we had like 10,000 or $15,000 within the bank, which for us is not a lot with the size of business we have. I was just like biting my fingernails. And once that order came in I knew we were good, right. I mean that was a good feeling to kind of get past that.
The other time that’s a little bit scary is tax time. I don’t know if you have that Dave in Canada, but tax time here is the US can also be a little bit hairy.
Dave: Yeah, I mean our tax situation here is, I mean our corporate income tax is really low. And in terms of like personal income tax isn’t all that. At least in Canada we are required to pay that monthly. So there is not really that big hit all of a sudden come year end where you are having to pay a bunch of taxes for the previous 12 months. So that issue we don’t really have that much here just with that like I said it’s — payments are typically made monthly.
Mike: Got you. I’m just kind of curious, so as far as inventory goes in Canada. Like in the United states you cannot write off inventory purchases as an expense. So it’s basically buying inventory is the same as having cash in the bank. Is it the same in Canada?
Dave: Yeah same in Canada. I think most countries are probably that way. I can’t think of anyone I’ve talked to where it’s been a little bit different. I mean it would be great if you could write off that inventory all at once. And you can really kind of strategically find your tax situation. But like you say I mean, you know when you make — if you buy a $100,000 worth of inventory, until you sell that inventory I mean, you can’t write that off. You are writing it off as you sell it which yeah, like you say makes a huge cash crunch.
Mike: Yeah, and I’m not really sure. I guess there’s probably some logic to or some way that you could advantage of the tax code by being able to write it off. But for us like I actually kind of think it’s unfair. Like I have no problem paying taxes. I’m kind of in a weird spot in my life where I think paying taxes is good in some ways, it means I’m making money. But it’s tough paying taxes on money that I haven’t actually taken out of the business yet, which is what happens with the inventory.
I mean we’ve gotten to the point where we are getting close to having certain figures in inventory. Which means that we’ve already paid $350,000 in taxes on that money, which means I could have 35% more inventory and be growing my business that much quicker. And I’m happy to pay the taxes like once I sell the business, and actually realize the gain or whatever it might be. So it’s definitely something to be aware of.
Luckily I was aware of it. I wasn’t in my early business career when we were in the online poker industry, and we had a pretty nasty tax situation. And we were able to get out of it luckily because we were getting lots of money at the time. But yeah, so I mean it’s just something to plan for. And cash is definitely, you hear this saying, ‘cash is king’, right?
Dave: I mean and the more you talk about it too, I mean actually when I started off running my business I was in the situation where I wasn’t required to pay monthly. All of a sudden year end, and got a big hit on my personal taxes, and totally wasn’t prepared for it. Thankfully at that time I was about 23. So the kind of money I was making wasn’t huge. And basically I was able to go to the bank with daddy, and have him bail me out for the time being. But yeah, actually thinking back that actually was a big shocker when I first run a business that I actually have to pay tax on all those money.
Mike: Yeah, yup. So the other thing we had on here, you had actually written on here is understanding, or underestimating the logistics of time, or let’s just take time frame or whatever. Yeah, I mean I can tell you for us that resulted in having to do air shipping to get ourselves out of that. And that is a painful experience, when the end always comes. But what’s kind of happened with you in these circumstances?
Dave: I mean always it’s just completely like I mentioned, completely underestimating the amount of time it’s going to take from the time that you place that order in China to the time you get it in America or Canada or wherever you are. So you know, whenever, let’s say it’s you know, July first, I make an order with my supplier. They say, okay 30 days we’ll have that order finished. Well, they tell you 30 days, you can almost, I know now, you can basically add another 30 days on to that.
So whatever they say, pretty much double that time. And we get into the mistake of you know, assuming that what your supplier tells you for a lead time is going to be correct. Well, you are probably going to get burned. The only way I found around this is kind of building penalties into the purchase order. So giving the supplier a one or 2% penalty for every week that they are late, even then though there is always something that comes up that’s out of their control which delays things.
Aside from that, aside from just actually the Chinese supplier finishing the products is the shipping time to get it into America. And it might only be like a 15 day transit time from China over the sea to say Seattle. But by the time it actually lands in Seattle, there is a ton of other time that gets built into that. And it could land into Seattle on July 15th. And by the time it actually arrives at basically the warehouse in Seattle ready to be picked up and shipped to Amazon, it could be like another two weeks. It could sometimes be three weeks.
Mike: Yeah, especially when there is a port strike.
Dave: But I think, yeah and I was going to say, I think every time that I’ve tried to like run that time frame to the absolute most optimal way possible, so basically you know, I’m counting to get the products on a Monday, and so we are going to list the products ahead of time on Amazon and start getting some pre-sales, something happens. So like customs will decide to detain the shipment for an inspection or you know, like he said, a port strike will happen, and all of a sudden your shipment gets delayed. So that’s definitely been one thing where I’ve been burned many, many times just underestimating logistics time.
Mike: Yeah, and this is kind of an off-shoot to that, but underestimating logistics time can also happen with Chinese New Year. It’s just something that completely caught me off guard the first year we were doing this. Just like wait, wait, wait, wait a second, you are going to be shut down for a month? What does that mean? Like no one is coming to work for a month? Like okay wait, yeah, but you can get – like if I pay you extra, you can get my order done, right? Because we really need it. And it was just like that email doesn’t even get responded to because they have already left, it’s just like yeah, so.
Dave: Oh, I know. When do you normally start placing your Chinese New Year orders? So if you wanted something to ship before Chinese New Year?
Dave: Yeah, October.
Mike: Which is really awkward because your holiday sales haven’t happened yet. It’s the most awkward time of the year for me, because like you are placing an order, we just like I said, we just did this episode right before you started doing this with us about planning for the holidays. And so we are already planning for the holidays in July. And you place those huge orders, they’ve shown up. You’ve paid for them kind of like by October time frame, but you haven’t sold through them yet. And you are on pins and needles of, did I order too much inventory for the holidays or not enough or whatever it might be.
But you hope that you are going to sell through it, and your projections are correct. And once you sell through it, you will have nothing left to sell in January if you don’t place another order, because like they aren’t like going to ship that stuff again until March or April if you push through it after Chinese New Year. And just like, yeah I feel like the exorcist head spinning around.
Dave: Well, and it’s terrifying too because you know, you are placing a big order because you know that China is going to be shut down basically for a month. And so you are placing this really big order exactly when you don’t need it. And just the fear that you know, you are committing to this order, and this sizeable order, and yet you still have a ton of inventory.
I mean there is nothing better. It would be great if we lived in a world where you know these Chinese suppliers live next door. And you basically order these products as soon as you needed it, just in time inventory. But that’s just pretty much impossible dealing with China. You have to kind of get out of your comfort zone, make predictions, make estimates, and order months in advance of when you really need it.
Mike: To me there is basically like this, like five to six month stress zone in running ecommerce. And we are just getting ready to start it right now, where we need to be placing our holiday orders well in advance for the holidays. Then placing your Chinese New Year order like well ahead of that before you sell through inventory. And if your projections are wrong anywhere in that, then you don’t have your money to pay your taxes when April comes.
Dave: Yeah, and there’s always — and it is I mean at certain times like you feel like the richest man in the kingdom, and the other times you feel like the poorest man. And like there seems to be no middle ground. Like your cash is never steady, it’s always either basically at near zero or way higher than you would ever need it to be. It’s never just kind of a steady ground, so the feast [inaudible 00:12:42].
Mike: Yeah, I agree so yeah. So, we’ve kind of talked about managing cash, and we are just – let’s kind of move on to the next thing here, which is just some things that we are doing differently now. My time frame on this is much shorter because we’ve only been doing this for a couple of years. So I’m definitely curious to see how far you’ve come or things that you have been doing differently over the last, I guess it’s been like six years since you have been doing this or more.
Dave: Yeah even more. Well I think I mean especially after having sold my previous company and now starting a new company. For starting the new company I’m doing things way differently. The big one in which I’ve talked about I think in even a previous podcast with you is just launching more products at once.
Because I know if I can do all the research in the world, I can load up Jungle Scout and all these other Amazon estimation tools. These are only predictions, they are only forecasts. It’s not really until you actually put the items on Amazon and see what’s selling and what’s not, that you can get a good idea of what’s going to sell, and what’s not going to sell.
So my, basically, strategy is just the shotgun approach. Take a big, take a big shot at the Amazon marketplace, launch 10 to 20 different products. Hopefully of those 20 products, ten are going to do mediocre, five are going to be home runs, and five are just going to do nothing. As long as my strategy is just launch more products at once, don’t put all your eggs in one product basket, try to do as many as possible, and see what sticks.
Mike: Yeah, I definitely think that’s good advice. My one for start off here with things we are doing differently here. Now for me I order way more inventory or whatever you want to call it on my first order than I did when I first got started. You know what I found is this consistent cycle of okay, I’m worried that this isn’t going to sell. I order enough to kind of get through what I anticipate being three to six months of inventory.
It turns out to being more like a month worth of inventory, because it sells better than I think, and then I run out. And it destroys my Amazon rankings and listings, and I get more inventory in and then it’s hard to get the listing to like kind of resurrect. So I’d rather caution on the side of having inventory laying around than running out.
Dave: I mean I have to say you have way bigger guts than I do. I’ve seen some of your first time orders. Like you are the guy who’ll order like a 20 foot container of one product, and just with total confidence that you are going to sell that container two or three months. I’m completely opposite; I try to get in as cheap as possible with as few products as possible, see if they sell. If they do sell out, I figure out, hey that’s great. I know I’m going to take out a little bit of a penalty from being out stock. But you know, I’d much rather face that penalty than having a warehouse full of product that’s not selling at all.
Dave: So for me that’s kind of my, that’s my mind set. I think we are totally different in that regard, I’m not sure which way is better.
Mike: I think what made me this way, and we can talk about this as far as a side bar for a few seconds. But we had a couple of products in particular. And this was almost two years ago, two, four years ago that we ordered. They started selling like gang busters; we were out of stock for about three months. Of course it happened during Chinese New Year.
All right so we had a, maybe we were out of stock for three to four months before we placed a re-order, how do we put to get over here. We re-ordered based on what the sales were before we even run out. It’s just based on that, and then the thing was just dead. Like we’ve never been able to resurrect it since then, and it’s happened twice. So that’s why I’m so paranoid.
Dave: Yeah and I’ve never had that experience where a product has completely died, and I’ve never been able to regain the rankings. And I think that’s — it’s probably where we just have a different strategy there. I think I go after the lower demand, lower completion side of the product scheme, and you can go after the higher demand, higher competition side. I’m not sure…
Mike: Yeah maybe that’s a really good point, because I actually — recently we had another product that we ordered, what I thought was puny and it sold out pretty fast. We had to reorder; it was out of stock for about 45 days. But it’s definitely a lower demand item, and it did come right back. So that’s actually, I’m glad you mentioned that particular aspect, because I think that could probably have a lot to do with it so.
Dave: Yeah, I mean if you have ten competitors, if you only have ten competitors, you go out of stock and you come back. Well you know you are going to be in the top 10 listings because if there are going to be another 1,000 competitors, yeah, you could be that 1,001.
Mike: Yeah, so another thing I’m doing differently now, I mean this is, I want to say now but just from when I started is just investing a lot more into packaging. We’ve definitely noticed a trend of make the product perceived value higher, and people will perceive it to be higher. Which creates higher rankings, better reviews, better photography, better first impression, better experience just over all with the product and higher margins. So that’s something that we’ve been doing differently than when we first got started.
Dave: Yeah, and completely different angle for me is one of the things I’m trying to do is definitely consolidate freight a lot more. So I’m strategically trying to group my suppliers in the same region, have them all consolidated at one of my supplier’s warehouse. So if I’m ordering from supplier A, B and C, I’ll have supplier B and C ship all the products to supplier A, get everything loaded in the same container. It saves a lot of money both from like customs perspective, from a sea freight perspective, and also makes things a lot quicker because all of a sudden you have everything arriving at the same time. You can just plan it a little bit better.
So that’s kind of been a big win for me is trying to consolidate freight as much as possible. Also allows me to order slightly smaller orders at the same time, because shipping one pallet of goods from China to America, rarely does that make sense from a cost standpoint. But shipping one pallet with ten other pallets, that totally makes sense.
Mike: Yeah, so you stole my next one because I was going to say consolidation. But I have another one already lined up. The other thing we are doing differently here is just we already kind of hit on this, but I think it’s so important I’ll mention again. Number one we are not air shipping anything. We’ve made it through six months this year without having to air ship anything just to save on cost. And that’s based on just being better at planning logistics. So we kind of already mentioned it, but that’s definitely something we are doing different. It’s had a profound impact on the bottom line.
Dave: And I have looked at a lot of people’s shipping costs over the years. And one of last year when I looked at your PNL and seeing how much you’d paid a couple of times for air shipping, it was, it’s horrifying. I think like you are almost renting an entire plane load and full of ColorIt whatever and shipping them into America. It was like that was a staggering bill.
Mike: Yeah, it was gross. I mean it was around the holidays and we needed it. And I was seeing that I’d rather sell it and break even or make no money or whatever than run out and risk destroying something that is making us well in the five figures a month. It just doesn’t make sense to take a chance.
Mike: You have another thing differently?
Dave: Yeah, one of the other things I’m trying to do too is I’m trying to get product photography done as much as possible in China. So either pushing my suppliers to take photography themselves, or find a local photographer to take those photo shots. Number one, it saves time for me having to do it in America or Canada. And it also lets me launch the products a little bit quicker in America, because what I’ll do is I’ll have the supplier in China take all the photography.
And then I’ll also have them air ship me a couple of different products, get them launched in FBA as soon as possible. Because I think most people realized that it takes Amazon a few weeks to kind of get their tentacles around your product and start kind of indexing it, and start getting some listings and some rankings.
So that’s what I’m trying to do is get photography taken a little in China, get our products air shipped from China into FBA, and get those listings on as soon as possible, and just get Amazon crawling them. And it seems to help just for the speed of time that it takes the listings to kind of gain some traction.
Mike: Yeah, it makes a lot of sense because it definitely takes quite a long time for Amazon to like you said get their tentacles around it. And I think that’s a great way of putting it. So, all right, so the next thing we have here after the sub which one of these weird things I want to talk about, but weird situations we’ve had both here and then dealing with remotely wherever with China.
Dave: You want me to go first or you?
Mike: Oh man I don’t know, like this is recorded. So I don’t even know if I want to touch this one. There’s some funny stories, but they are not good. I’ll let you go first.
Dave: Well I mean, probably something you are alluding to. I think everytime you — if you are male at least — you go to China, you are meeting suppliers, what they always try to do is as kind of like a token of appreciation for you being there is they try to line you up with the prostitutes.
Mike: No, I have not had that happen, because my wife has been with me every time so —
Dave: You’ve never had that happen? That’s amazing. Yeah, they probably bring it up in a very coy way. They drop you off at your hotel and they basically say, “Oh hi Dave, you know I have to leave home early tonight. I’m just wondering would you like some company later tonight?”. At the first couple of times you don’t really get what they are getting at. And eventually they kind of come out with it, “Do you want me to send a lady to your hotel?”.
Mike: Okay, wow.
Dave: Yeah, I’m surprised actually you’ve never run into that. I mean it could be a little bit different, because I think you tend to go there with your wife. But a lot of times that I’m going to China I’m going there without my wife, they assume I’m a single man.
Mike: This explains why she won’t let me off the leash when I go, when it comes to the China.
Dave: It could be.
Mike: Wow! Yes, so I have never had that happen, that’s definitely, that would be pretty awkward.
Dave: Well, apparently some people like it. But like I said I have a wife and kid back home, so it’s definitely not for me.
Mike: Yeah, that would not be for me either. So my weird situations have just been more from drinking. And like things that kind of come from drinking — these from drinking lighter fluids straight out of the bottle, gasoline or whatever you want to call this stuff that they serve you over there. Another thing that’s happened I guess weird situation just, it was just from being young in this process by finding out about high tax rates, or duty rates after you’ve already placed an order. And knowing that the manufacturer knew that that was going to be the case, but didn’t say anything to you.
And having a in-person conversation about that with someone in Shenzhen was definitely really, really uncomfortable. And of course their standard line is always like, “We’ll take care of it for you in the next order”. And I’m like there isn’t going to be a next order if you don’t. I must not leave this crap here like really tick me off. And I also realized at the time that it was my fault for not asking those things.
I guess you know if you were to go back and then go up with those things we are doing differently. I think that’s one thing we do differently for sure is before we place some order with any manufacturer like I cross every T and dot, every eye as far what is the duty rate going to be? Are there any regulations? Are there any certifications or whatever that I have to have to get the product in, and not take the manufacturer’s word for it.
This was very early on. I tend to operate; my way of doing things in life is like I’ll figure it out later. I just have a way of always figuring something out no matter how difficult it is. That just is my personality. Some people will get analysis paralysis on the other end of the spectrum. I’m definitely not in that camp. So yeah, I was just like we are going to order this stuff and see what happens. And then I was like, oh crap, there is really high duty rate. So that was a definite weird situation for us, and definitely something we do differently now.
Dave: Yup, and one of my other weird situations I guess to kind of wrap this up is when I was first importing. I think this was probably my third or fourth shipment. I ordered, I think it was about four pallets for the boat ladders. And I didn’t have — again this comes back to my experience before where I had just learned that you don’t get these products delivered to your home, you have to go pick them up.
This was about four pallets worth of product, and I couldn’t have picked this up in my small little car. So I had my dad in his big truck go down to the warehouse and pick up these boat ladders. And I didn’t tell him what product he was picking up, and he just went down there. He gave the old lady and he said, okay I’m coming to pick these boat ladders — I’ coming to pick these products up. And later that day he comes home, back to his place, and he unloads everything into his garage. And I go there to check out my product, and somehow he had been given four pallets worth of brake calipers. I still have absolutely no idea what happened.
These brake calipers are actually still sitting in his garage. But long story short, I actually went back to the supplier and I said I don’t know what happened here. But somehow we got four pallets worth of brake calipers. And kind of being a testament to how honest Chinese suppliers are, I think it was actually a screw up in the warehouse. But this supplier basically agreed that if I made another order for four pallets with the boat ladders, he would send me a free, another four pallets worth of boat ladders. So I ended up being out of stock for about two or three months, but actually it was no worse for the wear.
Mike: That’s pretty cool; I have never heard that story, that’s interesting.
Dave: Yeah, yeah.
Mike: So to finish up the episode here today we have our top three tips each. We’ll bounce back and forth, I’ll go first. Top three tips of what to do on ordering from China or dealing with China. My first tip is to always get an inspection. Like on every order no matter how long you have been working with the manufacturer, allways get inspections, always let it be known that you are going to get inspections. Let it be known like quality is the most important thing. That if they want to waste their time and jack you around that’s fine by you, but you are not going to accept the order unless it meets your criteria, and define those upfront.
That’s helped us tremendously. And even still we still get manufacturers that we just had an order right now for our EBA cases which is frustrating because it’s adding two or three weeks to our shipment. But at least we haven’t sent them the 70% final payment yet until they fix the problem and they will fix it. So inspection is my first tip.
Dave: Yeah, and I think kind of expanding a couple of points you made there. I agree with the inspection especially on the first shipment. You can maybe get away within my opinion on doing kind of a random inspection, every other shipment or something on subsequent shipments. But definitely yeah, the first shipment, try to get an inspection unless it’s some ridiculously low order amount. But also on that kind of expanding on your point, you mentioned how you still have 70% payment to make to your supplier. Well, never let your supplier coerce you into making 100% payment upfront.
And it’s not that they are going to never send your product, it’s that they are not going to be responsive to any problems that might occur along the way. And they are not going to be trying any harder to get your order done quicker. But if you have 70% ransom, it’s going to give you a lot of power over them making sure that your product is produced at the quality that you want, and also making sure that it gets to you as fast as first as you want. So definitely I’ve been experiencing a lot more suppliers lately that they are trying to get you to pay 100% upfront. Don’t ever go for that in my opinion.
Mike: Yeah, I mean I’ve never even been asked that. So I would laugh at them if they asked that. There is no way in heck I would ever do that.
Dave: So I think, what is your next tip?
Mike: My next one? All right, so the next one I have here, we don’t agree on this one because we already kind of talked about it. But I’m going to say it anyway. I don’t like running out of inventory. So I say tip number two is don’t run out. So try to order the right amount of inventory, so you don’t run out. Order, you know keep your pipeline going so you don’t run out of inventory, maybe it’s just began.
So maybe I would revise this if it is a very competitive product in a competitive niche. Don’t run out of inventory if you are on a less competitive niche like Dave’s been doing which I think is really smart. Then it’s probably less of an issue, but for me and for our key products we do everything that we can possible not to run out of inventory.
Dave: Yup, fine and again just to counter to your point, my tip would be to start off as quickly and cheaply as possible. Get as small a shipment as you can, really negotiate that MOQ down as low as you possibly can. Get your products in, see if they are selling. They do great, suck it up that you are going to be out of stock and you are going to pay the Amazon price service fee. But then make a bigger order for the next one. But get your products in as cheaply and quickly as possible.
Mike: Yup, so the next one I have I guess I will just do with the third one here is try to work and find manufacturers that are focusing more on quality and reliability versus the price. And not try to needle the manufacturer on price all the time. At some point they have to make money too just like you want to make money, and they will accept a lower price. So you can needle them and say, “I want to pay less, I want to pay less, I want to pay less.” And they will eventually say yes, but you can guarantee that you are sacrificing something for that money.
Whether they use a slightly cheaper material somewhere, or sew faster. Whatever the heck it is, you are going to pay for that somehow. So I mean for us we are looking — we are still a smaller company, we look for efficiency and reliability. The manufacturers we’ve been working with that we want to continue working with the most are the ones that just can consistently produce high quality products, and their orders on time, and not jerk us around. Even though I know I can probably go to another manufacturer and get it ten, 20, or maybe 50% cheaper, I don’t care at that point. I just want; I want it to be efficient.
Dave: Yeah, and I think the more differentiated your products are the more kind of bang that you are adding to people’s buck at least on the customer end, the more flexibility you have in that pricing. So again it kind of goes back to a point that strict private labeling where you are making no changes to the product even if the small changes like just from a packaging perspective.
You are not changing in a little bit it gets — you have to become a lot more price sensitive. So again I think absolutely what you said, like don’t be so stingy. But to have luxury of not being so stingy, you have to really kind of focus on improving the product in some way.
Mike: Yup, yup and I guess to look at it in another way is that you think about your life and in your customers. Like the customers and the people in your life that you make the most amount of money of off, or that they give you the most back in relationships or whatever. The people that you go out of the way the most for, and we want to be that guy over in China as well or with anybody that we work with. I mean I want them to have a bit — a worthwhile relationship for them and not be someone that’s just is a pain in their butt.
Dave: Yeah, and exactly to that point, my third tip would be definitely to build a few really solid relationships with suppliers. One of the things I see a lot of new importers doing is that they simply shop for suppliers based on price. And they will bounce from one supplier to another to another basically taking the lowest quote every time. And if somebody new comes along, give us a lower quote; they’ll go to that supplier.
But the closer relationships you can build with these people, and China is still really a relationship based culture, the more tight of a relationship that you can have with these suppliers. And you know almost like a friend, the way bigger benefits that you are going to get. Like they are going to just give your orders and your business that much more respect, that much more attention.
So kind of think of your supplier almost as a friend. And you don’t start off honestly as friends, but work consistently to building that friendship level of relationship with them. Go over to China and see them. When problems do arise, do it in a polite way, do it in a cordial way. Don’t just be an asshole about it. So yeah, I think that would be my final tip is really build tight relationships with suppliers. Don’t just bounce from one supplier to another.
Mike: Yeah, and one thing that I just want to add that you didn’t mention in that kind of a dialogue there. One of the things that come out of that strong relationship is terms, which you know I’m jealous Dave has these long standing relationships with vendors, because he’s been doing these longer. And I hear about some of the terms you have. And we’ve been able to make some headway with these with some of our manufacturers.
But you are getting in a situation where you are putting less that 30% down, and paying less than 30% at the time it ships. You are having an ability to pay when it hits the United States or getting that 30 even after it hits the the port and not 60. These are the things that can like completely change your business for the better. And that is not something that somebody that you jump ship for to save 3% is going to give you on the first order.
Dave: Yeah, it all comes to trust here. I mean if these Chinese suppliers, they are not giving terms really based on your credit scores, and your assets and how much they consider you for. They are doing it based on just kind of their gut feel for you. So you know the better gut feel that you can give to those suppliers about you, the better likely you are going to get terms.
Mike: Yeah, cool. So did you — was that your third tip as well?
Dave: That was my third tip.
Mike: Okay, excellent. We are finished a little bit late but that’s okay. I hope you guys enjoyed this two part series on importing from China and just kind of dos and don’ts from China. It kind of became like a whole bunch of China stuff which is cool.
Just as a reminder if you go to Ecomcrew.com/course, Dave and I are actually working on a course about this very topic actually. It’s going to be our first course and then we have a couple of others down the pipeline. So if you interested in more of this type of stuff, definitely hop on over there. Definitely no pressure on anything, but if you do sign up you will get an opportunity to get 25% off of the course when we release it and have first access to it.
So we are pretty excited about it, been working a lot on that stuff for the last couple of months. So that’s about it for this week guys. We will talk to you next week. As a special reminder, I am still on vacation when this episode comes out. I think there is going to be one more podcast that will be recorded. And after that we’ll get back on our live shows on Mondays, usually around, between 2pm and 4pm Pacific Time. I apologize for not being able to do live shows. But right about now I’m either getting eaten by a bear or enjoying my hike. So until then guys, were you going to say something here Dave?
Dave: I was going to say hopefully I’m not doing the show alone by the time that you are supposed to be back.
Mike: Yeah, yeah I hope not. That would be sad. But yeah, all right so on that note, on that friendly lovely note, happy selling everybody, and I will talk to you soon.
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