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…how their company operates and what makes them a little bit different but also how we can find some new suppliers and some manufacturers using globalsources.com.
All right. I’m really excited to share this conversation that I had with him and him and I were just really going back and forth with suppliers and manufacturers and how their platform works and what makes them different and what to look out for and some of the common mistakes. He’s been at this a long time. He’s been at it before Amazon Sellers were even doing it and now that they’re doing it more and more, he sees some common problems that he’s going to share with us and hopefully prevent anyone from making. So really, really excited to have him on.
Before we do jump in though I need to remind you that we’ve started to add transcripts to all of the podcast episodes. If you want to download the entire discussion that Peter and I had today or if you just want to read it on the blog, you can go over to this particular episode and this is 170. The link to that would be theamazingseller.com/170, again that’s theamazingseller.com/170. There’s going to be show notes there as well plus the transcripts and all the links that we discuss so you’re going to definitely want to head over there and grab it. All right. With that all being said, I’m going to stop talking so you can listen to this amazing interview or this discussion that I had with Peter Zapf.
[00:02:01] SV: Hey Peter, what’s going on? Thank you so much for coming on the TAS podcast. How are you doing man?
[00:02:05] PZ: I’m doing great. Hey I appreciate you having me on today.
[00:02:08] SV: Not a problem, I’m excited. We are going to be talking all about picking your brain, if you will, all about sourcing from different or finding different suppliers, finding agents and all of that stuff. I know that’s a huge sticking point for a lot of people and that’s why I want to have you on. You’ve got some experience in this and it’s going to be really interesting and it’s going to be very educational for people to understand that there’s not just one place that you can go to. May be you can give us a little bit of a background on who you are and kind of what you are up to today.
[00:02:38] PZ: Great. I’m Peter Zapf, I’ve been working with Global Sources for about 15 years now. Now, what Global Sources does, we run trade shows with our China suppliers and we also run an online sourcing site, GlobalSources.com. I’ve had the opportunity to be working with buyers and suppliers, the China suppliers and global buyers for many years. Buyers all the way from the big retailers down to Amazon and Ebay power sellers.
[00:03:02] SV: Wow, that’s really good. I’m glad that we are having you on because now, what we can do is we can dig into exactly … How long has Global Sources been out there, just before I do get into what I want to ask you?
[00:03:17] PZ: Sure, we’ve been in business for over 40 years. We started with magazines and had to ship them by air and ocean and then we added the website, then we added trade shows.
[00:03:25] SV: Wow, that’s awesome. Okay. Let’s just get right into it. Now, Global Sources, how do they compare or what is the differences between that and like Alibaba.
[00:03:37] PZ: Sure. For online, Alibaba is probably our closest competitor and in terms of similarities, we’re both directory of companies that you can use to source and get product. What I hear people telling me, some of the differences include: One, we run trade shows, so a lot of the suppliers you see on our site you can also meet face to face with our trade shows. Second, and we hear this a lot, a much higher percent of the suppliers on our site are manufacturers. If you want to go direct to factory, I would say you should go to our site first but we do have less suppliers because we don’t have that plethora of agents. If you’re really looking for an agent, maybe you don’t come to the global sources site first, I hate to say that but that’s just the reality.
[00:04:18] SV: No, it’s good.
[00:04:20] PZ: We tend to have more uniquely designed products because they come from the factories. Right. Not from agents that are kind of reselling or testing products they don’t have access to or they don’t own. Then we also try to do some work to get buyers trained and in best practices for sourcing so the buyers and suppliers have a good experience. In addition to the globalsources.com site. We also run a site called smartchinasourcing.com and that just has a lot of good content on sourcing practices.
[00:04:51] SV: Okay. All right. Let me ask you this then. You’re saying like we’re directly communicating with the manufacturer but if we were to go through and try to find a product that we’re looking for, right, and I go to your site maybe you can lead me through that process. I’m just a new Amazon seller, I want to launch my first product, I want to create my own brand, is your site or the site that you are affiliated with, is Global Sources able to help me or is that for when I get to be bigger.
[00:05:22] PZ: No, I think, we’re able to help you. I think what you’re going to find on our site is that– There are not agents. There are going to be factories that have, for example, MOQs and some of them are just going to say, especially if you’re smaller and just starting and not doing large orders, they are going to say, “No.” But then a lot of them are going to say, “Hey, yeah, we’ll accept your trial order.” It’s similar to the other online sourcing sites, you search for product, you find a supplier, you contact the supplier and you start your communication with them, “Hey, this is what I’m looking for, can you do this in this time frame, with these quantities at this quality level?” “Please send me some samples.”
[00:05:59] SV: Okay. It’s pretty much very, very similar then. Yeah, okay. Now that we’re dealing with the manufacturer and we are not directly speaking to an agent, how does that work as far as communications? Do they have someone that’s working for the manufacturer that’s acting as like an agent only for their manufacturer? How does that work?
[00:06:21] PZ: Yeah. Now usually what I see is, it’s based in how some sales executives or export sales executive. It’s the staff of the manufacturer and factory and its call up the sales people on the staff. In terms of communication, I presume it’s pretty similar to what an agent does. You’re just communicating your requirements, they’ll communicate sample fee and what their requirements or business practices are. The communication is similar, I think an advantage if you can work with the factory is you don’t have an intermediary between you and the factory who needs to pass information on. On the other hand, sometimes you may want that, somebody that understands how to work with the factory better. It depends on what your strategy is.
[00:07:03] SV: Okay. Then once we start working with this manufacturer, is it common to have the same sales rep that’s assigned to you now or …?
[00:07:14] PZ: Yeah, you’re usually emailing with the same person the whole time. Quite frankly on Ali and a lot of the sites, you may not know if you’re working with an agent or an in-house caller sales executive from one of the factories. The process is so similar and in fact, the agents are not going to tell you, “Hey, I’ve to go back and talk to the factory. They act like they are the factory, even if they are not the factory.
[00:07:38] SV: Yeah. I know. That is-
[00:07:40] PZ: Just as a result of that but the processes are very similar.
[00:07:43] SV: Yeah. I’m seeing that. I’ve never used them but I’m definitely going to be looking into Global Sources now because of that, because obviously if you can go direct but in the same breath, I think you shouldn’t have all your eggs in one basket either. If I was going to go there and right now look and look for my famous examples, my garlic press, I go there and I search for a garlic press, are they still able to go ahead and make these modifications and customized products for me? Are you able to do that or you take what they already have?
[00:08:22] PZ: Definitely, works like all of the factories, they are OEM factories and when I talked to them … We run the trade shows. I go around and talk to the factories and I ask them, “Hey, what percent of your business is people buying products, your designs off the shelf no changes and what percentages changes or original designs?” The overall answer is about 50-50. All of them are used to, “Hey, let me buy that design. Let me change the packaging put some labeling and whatever.” They are all used to, “Hey, I like that design, I’d like these eight changes. How can we do that?” As soon as you want changes, MOQs may go up. They are all used to that. Does that help?
[00:09:07] SV: Yeah, that totally helps and being able talk to the manufacturer directly is an advantage, in a sense as long as you can communicate that through that one person. With the agent, what I like with that is, yes, they are working for that company but they also have other companies that they work for. In a sense, if you’re looking for something they can find different manufacturers that they can pull from but in this case, we’re going directly with that manufacturer so we would want to then do the same process just maybe two or three times to find two or three different factories. Is that correct?
[00:09:46] PZ: Yeah, that’s exactly right. Just like you might do the same process with two or three agents. An agent may go out and talk to multiple factories and if you’re talking to one factory, you should be talking to multiple factories.
[00:09:57] SV: Yeah. Now, what are you seeing though typically? Maybe you can’t give me an exact answer but what is typically like if you wanted to do a test order? Are they willing to do?
[00:10:07] PZ: That’s a great question and I wish I could give a statistics but I don’t have accurate ones, so these are going to be gut feels. The manufacturer’s, five or ten years ago, you can have Ebay sellers and you going to have Amazon sellers. They were used to working with retailers and brand owners, MOQs were pretty strict, it was hard to go below MOQs. The world has changed a lot. Retailers, I’ll say 2007 to 2009, got stuck with a lot of inventory. The big box retailer started placing smaller quantity orders and they started seeing Ebay power sellers come in and now the Amazon private label sellers.
The world has changed and a lot of the suppliers recognize that they need to be able to support smaller order quantities. It’s very common and every supplier is used to being asked, “Hey, can I do a trial order, even if it’s below the MOQ?” I think they will also expect and to have clear communications, you should say and expect to have your next order hit the MOQ. Like you can’t do three trial orders in a row. I wouldn’t recommend that, it’s not going to be good for the relationship. You can tell them, “Look, we can do an MOQ order but we need to do an initial trial order to test the quality of the product, test market acceptance, if that works then the next order we expect would be at MOQ level. My gut feel is about two thirds of the suppliers, we’ll say yes to that, one more. Right.
[00:10:07] SV: Now. Let me ask you this, what is typically, by going to your site, like what is a minimum order that is required? I know that’s got a very and especially problem and size of product and stuff, if you’re talking about something that’s small, light-weight, are we talking like five thousand, are we talking a thousand, what are we looking at?
[00:12:02] PZ: Like you said, it varies a ton from product to product but just a round number, a thousand would not an uncommon MOQ, if you have to throw a number out.
[00:12:09] SV: Okay. Let’s move into … We’re doing some communications with these people, how is the payment stuff handled?
[00:12:19] PZ: Great, sample payment, PayPal is very common. I actually specifically went around and talked to a bunch of suppliers at our show, “How do you do sample payments?” Receiving PayPal, virtually everybody accepts PayPal for sample payments. Then when you get to the order, that’s different. In general the suppliers don’t like PayPal, there’s more fees that cuts into their margin. You can totally understand that. The other thing that they hear from their friends, the charter among the suppliers is, everybody has some order that PayPal is holding up or some funds that PayPal is holding up for some reason. The charter among the buyer side is, it’s always a suppliers fault but the charter you hear on the supplier side is, “Hey, these are all the problems the buyers are causing for us.” It’s interesting listening to the charter on both sides of the community. PayPal creates a lot of risk for them, so they don’t like PayPal and it’s expensive so they don’t like it.
Much more common for the order would be a wired transfer, paying call it 30% when you place the order, now they need that money so they can go out and get raw materials and then 70% before the order ships. I don’t want to get too complicated but I do recommend, when you get larger, you may not to do this for trial orders. Do a pre-shipment inspection before you do that 70% payment and there’s plenty of companies that can do that for you. Is that okay?
[00:13:46] SV: Yeah, that was fine.
[00:13:49] PZ: I wouldn’t ever pay anything by Western Union, if you see somebody that wants you to pay by Western Union, I’d run, not walk, run away.
[00:14:03] SV: Okay. That’s good advice.
[00:14:04] PZ: Yeah and when you do pay by wire transfer, make sure the name of the bank account you’re paying to, it should be a corporate account and should match the company name that you’ve been talking to. There are cases where it doesn’t match, it’s not a red flag if they don’t match but it’s a least a yellow flag if you’re like, “This does not look like a company name that I’ve been dealing with.” You definitely need to investigate and get more depth.
[00:14:30] SV: All right. For example here, now that we’re kind of talking about the payment and stuff, if I was to send the sample, it’s pretty common to go out there and say, “I want to send you PayPal payment.” They are usually okay with that. But then moving forward, we’re going to then have to wire them some money and we can basically just get their banking information and then do that through a wire transfer through a bank. Is that typically how that would work?
[00:14:53] PZ: Yeah. Since I’m living in Hong Kong, I don’t know the US situation that much, like the Hong Kong banks you can do an international wire transfer online so it’s very easy. I don’t know how many the max require you to kind of go into the bank and how many have introduced international wire transfers when you go in there, so you just have to work that out with your bank, so yeah exactly what you said.
[00:15:14] SV: Okay, yeah, I mean typically for us here in the States it’s like 50 bucks for a wire transfer from your bank, so, it’s not terrible, it’s part of it but I mean, if you’re going to pay for credit card, you’re going to pay more of a fee for [inaudible] anyway they would. That’s why they don’t want to. Now I know, and I don’t know if you have heard this but Alibaba they just incorporated a credit card option now in there that is kind of offered. Is that anything there that Global Sources would ever do or is that a kind of a manufacturer basis, are they offer any type of credit card payment online?
[00:15:50] PZ: You know I can’t comment on what we’re doing in the future. We’re not doing that right now on the sourcing site. One of the reasons is because most of the transactions are individually negotiated, price, quantity, packaging, labeling, delivery time. Every changes with the product. As a result, there isn’t really standard pricing, one and then two, when it gets to the larger dollar values, like you said 2%, 3% on a credit card, it gets prohibitive.
[00:16:20] SV: Yeah.
[00:16:21] PZ: Most businesses get access to, I believe, lower cost wire transfer fees so the wire transfer just becomes a lot more cost effective.
[00:16:30] SV: Okay, yeah, okay. Now, I just pulled up your site, the sourcing site, Global Sources and I just pulled up the Garlic press. I just wanted to lead people through this. I’m looking at the minimum order here is 500 pieces and it says it’s from 90 cents to $1 per unit. Now, that’s not going to cover shipping and stuff like that. Basically, here it says product request, request sample, request latest price, is that all you would do now, is that what I would do, just enquire now?
[00:16:56] PZ: That’s the most common action, that’s right.
[00:16:58] SV: Okay, yeah, because I’m looking at the page right now. It just says enquire now and it gets all the specifications, it gives the contacts, supplier. Is there anything that we could put in here or anything that we should do to make sure that we are filtering the top suppliers or the manufacturer’s? Is there something we can add to a search or something like that?
[00:17:20] PZ: Well, if you’re still on the product page, kind of on the top right you’ll see, I think if you are on the same one I am second here, so that means the particular supplier has been on Global Sources for longer. I don’t want to say anything negative about the first year suppliers, we think all the suppliers on this site are good. On the Global sources, just to let you know, we do get, I’ll say comments or feedback from buyers about their interaction with suppliers. It’s about one supplier per year that we have to take down because we think that they are, I’ll say scammy.
[00:17:50] SV: Yeah. Okay.
[00:17:51] PZ: We’re really comfortable with the suppliers. The problems that we see more often are commercial disputes, most often it would be around quality and that would tend to be kind of a communication problem and no inspections having occurred.
[00:18:05] SV: Okay. Yeah, I see there is a little checkmarks to this, it says verified supplier, second year.
[00:18:11] PZ: That’s right. The checkmark for the verified supplier would make sure that they are a legal entity. The vast majority of the new suppliers we visit ourselves. Let me see what else is on this page, because there are a couple of other things that we do, it varies from supplier to supplier. If they have product certifications, they can upload them. We will where we can, where there’s a third-party database where we can validate that certification, we’ll check that so that we don’t get the Photoshop certifications. You know, that’s a little bit common in the industry so if you ever get certifications, you need to validate them.
[00:18:45] SV: Okay, I’m looking at some more badges down here towards says contact supplier and I see another one here, I’m hovering here, this supplier has a business registration profile independently verified with relevant government agencies. There is some other badges there I guess that we can look at. They’ve got their homepage address, they’ve got a telephone extension, they’ve got a fax, they’ve got a mobile. All of that stuff so I guess to kind of look at the contact information and you can find a good jest there. If they’re a real business I guess is what we’re looking at right?
[00:19:20] PZ: Yeah. I’ll go on the record and I’ll say every business on here that’s verified is a real business.
[00:19:26] SV: Okay.
[00:19:28] PZ: I’m very comfortable saying that.
[00:19:29] SV: Okay, and then I’m just looking again here I see we have payment terms, 30% TT and then or LC at site and then delivery time 30 to 65 days after receiving deposit. It’s pretty much standard, conforming to FDA, let’s see and then it’s got some code here, food grade inspection standard, OEM service, all of that stuff-
[00:19:54] PZ: Interestingly about Garlic presses, technically you’re supposed to do some testing just to make sure that they are FDA approved, I don’t know the details of this testing but I think a lot of people don’t realize that.
[00:20:04] SV: Okay, so all of that is here right on the site and I would just hit enquire now and then go ahead and start that enquire process, the enquiry process. Okay. Good, all right. We’ve kind of covered … Okay, we go there, we search, we kind of get that … I guess this relationship started with the manufacturer, we do his with multiple ones that we’re interested in and you’re saying at that point then we can ask them, if we can modify it if we wanted to or make the handle a little bit longer or whatever we want to do. That’s when we do that, that’s when we start communicating with this manufacturer?
[00:20:39] PZ: That’s exactly right.
[00:20:40] SV: Now is shipping is that usually … Is that up to us, is that using their account, is it using our account or does that vary as well?
[00:20:49] PZ: Yeah, so for samples, I would recommend usually using their account or having them pay for shipping. The suppliers usually for samples, for air have access to better rates than the, whatever 30% discounts that we get from DHL and UPS. For the shipment itself, that depends on the terms of trade, very typical would be FOB which means that their response for getting goods to the port, for ocean shipping and then you’re responsible for getting it from the port to either Amazon, FDA or your warehouse or your house which your logistics provider would help with.
[00:21:27] SV: Right, okay, yeah and again that’s … Everything here is pretty much the same up until or as far as like getting yourself the product ordered or getting it shipped and all that stuff. Everything else is pretty much the same, the payment is pretty much the same. It’s just like you’re saying, these companies that are on this site are also, and you are, your company, Global Sources is also doing trade shows, you can actually go and physically talk to some these manufacturers, is that correct?
[00:21:57] PZ: Yeah, that’s exactly right. All these suppliers you can meet face to face at our trade shows. You can contact them before the show, like on this particular one, let’s see, you scroll further down the other supplier information, looks like they exhibited at our show. We did a show in South Africa, Johannesburg. It looks like-
[00:22:19] SV: I see that.
[00:22:20] PZ: … the Johannesburg show. I think this supplier hasn’t been to our Hong Kong shows.
[00:22:24] SV: Okay. Now are all of your shows are they … I guess what I’m saying is they’re never going to be in the States or do you ever have one in the States?
[00:22:34] PZ: No, we tried the States, we did one in Miami, we haven’t continued that at this point so our shows are primarily in Hong Kong. Just to let you know, when I walk into our shows, I walk in, and we have 3,000 groups of suppliers, and I walk in and I say, “Oh my gosh, you could fill not just a store, you could fill a whole mall with all the products here.
They’re big, so it’s a great opportunity. The buyers that I talk to they tell me, “Hey, the reason I go to the shows is I can meet suppliers face to face. I can see a lot of products quickly, I can see who has quality products quickly and because I saw them face to face, they think I’m a more serious buyer because I invested in coming out to the show.”
[00:23:19] SV: Sure, yeah, that’s great. How many shows do you typically have a year?
[00:23:23] PZ: We have six show dates so we are very strong on electronics, we do an electronics show, then we do a mobile electronics show, and a gifts and home show and then we do a fashion accessory show. Each of those are four days, we run them twice a year in April and October.
[00:23:40] SV: Oh, okay, that’s great. Okay. Let’s move into kind of some mistakes that you’ve seen people making and maybe we can bring them to the surface and hopefully help others not make these mistakes. Maybe you can kind of go through some of the common ones, like right off the top of your head, like what you see and then things that we can do to prevent these.
[00:24:03] PZ: Yeah, so I’ll start with the entry-level mistakes and then the experienced-guy mistakes. The entry-level mistakes are, “Hey, I bet I can find a low-cost iPhones or Xbox’s from a China supplier and then sell them in the US and make money. Okay, you can’t. Don’t buy branded stuff. Stay away from branded stuff you’ll avoid half the scams.
[00:24:25] SV: Okay, that’s a good one.
[00:24:26] PZ: The second one is, and we already said this, Western Union, I run. If they say, “We’ll only accept payment by Western Union,” I’d run really fast. It’s just too easy for fraudsters to pretend to be a supplier, request money by Western Union and you can never track them down
[00:24:49] SV: Yeah, that’s not good. We want to keep that out of their hands for sure.
[00:24:54] PZ: Those would be like super basic. Then kind of moving to the next step you talk about this all the time, get samples from multiple suppliers. Different suppliers have different policies but there is … Every year there are so many new people entering the business, like we saw in the very late 90s, people started realizing, “Hey, you can get free samples from suppliers.” You would have college kids requesting sample on TVs from suppliers, and suppliers because they’ve been dealing primarily with retailers would be like, ”Okay, yeah I’ll send you a sample TV because only legitimate buyers contact us. But then they figure out pretty quickly, ”Oh, that’s kind of a scam, so we should stop doing that.” Now they charge sample fees just as a threshold for, “Are you guys serious?”
[00:25:42] SV: That makes sense too. I get a lot of people too they say, “Scott, why do they want to charge me for samples?” Well number one, they’re shipping it to you, so they’ve got to cover the cost there.
[00:25:51] PZ: Definitely.
SV: Even if they give you the sample for free, they are going to want to cover that because they get tons of people that want these sample and not everyone is going to do it. It doesn’t really bother me that they charge for that, I just figures cost of business right, you got to have the sample in hand.
[00:26:06] PZ: To be fair there again, they’re not really trying to recover the proto cost, they are trying to recover the shipping cost but more, it’s just a hurdle to see how serious you are.
[00:26:16] SV: Yeah, no I agree, I agree. With samples, we’ve always said that and I’ve always said that. You’ve got to get a sample in your hand. What’s another one?
[00:26:32] PZ: Now we’re getting to kind of more common issues that experienced guys also face. That would be the quality of the product and the shipment is not the same as what you have in the sample. Especially, if you’re working with an agent who has a lot less influence over the factory he’s working with. These are things as folks mature or they’re doing bigger orders, they may want more somewhat rigorous process in place. Just to be aware of what I’d recommend, at a particular point in your business. I’d say get the samples, all the things you don’t like about them, write them down objectively. They become your quality control criteria.
Then attach that to your purchase order. Then the supplier when he’s agreeing to the purchase order, he’s also agreeing to your QC criteria and some suppliers will say, “No, I can’t achieve that QC criteria. Whatever. This component, I get it on the open market I don’t control the quality.” Well then you make a decision, “I can accept that or I can’t,” and you can walk away. It’s a good initial step to figure out will the supplier be able to achieve the levels of quality that I want.
Then pre-shipment, get a third-party inspector and it costs about 300 bucks a day and usually one man day is enough for a pre-shipment to get the products inspected before they ship. For the inspection, I think a lot of people think of it as an extra cost. I think of it as insurance because you can get product reworked if it doesn’t pass inspection when it’s still in China and before you’ve made your final payment. If you’ve received it, you can’t get it reworked and you’ve paid 100%. Plus if you do that pre-shipment inspection, you’re positioning yourself to be able to ship direct to FDA, instead of shipping to yourself and then re-shipping to FDA.
[00:28:28] SV: That’s a good point.
[00:28:28] PZ: I think it’s a good process to plan on growing into.
[00:28:32] SV: What typically is the timeframe for that, as far as like a third-party inspection company? Are they pretty readily available?
[00:28:40] PZ: The inspection companies nowadays they are saying,” Look, you can book a day before.” I would suggest booking earlier. Typically, you work with the supplier to figure out when they’ll be ready for the inspection. Then you book with the inspection company. Kind of the second tier ones you see a lot that I would recommend. I think I’ve seen on your Facebook page, is Inspection very reputable? Is your quality focused?, pro QC, V-Trust, Sofeast, In touch quality, any of those guys will do a good job. You book with them, after product’s ready, they’ll inspect, they’ll send you a report, it’s basically 20 pages, from that they’ll figure out the size of the sample to check. They’ll take photos of any of the things that are problematic or didn’t meet your QC criteria.
Then based on the math, they’ll say okay, objectively, this passed or failed, they were too many critical major or minor problems or not so many. Then you’ll say you’ll accept the shipment or not and you have the photos of the products and the defects they found.
[00:29:46] SV: Okay, okay, that’s good, that way we can also go back to the manufacturer at this point and say, “This is what was wrong, we need this fixed, and if they’re fixed we will accept and if not, we won’t.”
[00:29:58] PZ: Yeah, so then kind of a next kind of complication is in your purchase order you can put terms and now says, “Look, now you fail inspection, you’ll have to pay for the second inspection.”
[00:30:07] SV: Oh, okay. That’s a good one.
[00:30:07] PZ: Now I’ve talked to a couple of folks and one of the folks that I talked to said, “ I use that as a term, I’ve never had the supplier actually pay for the second inspection.” The point there is and this is how sometimes China sometimes works is, okay they might not pay but then they owe you because you can say to them,” Hey, this is what we put in there.” You kind of have a little bit of moral leverage so to speak. If you tell them you’re going to give them the pre-shipment inspection done upfront, they know you’re serious about quality. They are not going to take defects from other runs and stick them to your shipment.
[00:30:43] SV: That’s true, that’s good. Again, depending on where you are in this process and how many you’re ordering, I think especially if you’re starting to order at scale that’ definitely, if you’re using sea shipping and all of that stuff too, right, you’ve got a lot of money invested here to invest in a third-party company is probably the smartest thing that you can do.
[00:31:05] PZ: Yeah. Like you said, early on samples, they come straight to you. An initial trial order of, I don’t know 40 pieces, you could come to yourself, 200 pieces, you could come to yourself. At like that trial level it’s a question of, to me, hey do I want to start getting inspection company and figure out how the inspection is going to work with this particular supplier? Because if you do it at 200, you do that then when you get to 1,000 or 2,000 or container load orders you and the supplier know how it’s going to work, but you can also wait until you get to the large orders. You can do that 200-piece order and ship it to yourself.
[00:31:41] SV: Now does the Inspection company usually charge more per size?
[00:31:46] PZ: No, they charge per man day. If it’s a really big order and the sample size requires them to spend two man days to be able to check that sample size of your order, then it cost more. For the types of orders we’re talking about, it will typically be one man day and that’s about $300 give or take.
[00:32:10] SV: Okay, so like if I had an order coming through and it was 1,000 units and I was going to have 1,000 units coming through, do I tell them that I just want a certain number of those inspected, and then that’s kind of the criteria they go by?
[00:32:24] PZ: Yeah, you can Google this now but I’ll explain it as best as I can. There’s sampling criteria. The first thing is how much do you want to sample very common, it’s called AQL level two. I don’t have the tables in front of me but let’s just say that at AQL level two, you sample 75 for an order of 1,000. I don’t know if that’s the right number, but there’s a table that tells you the number. Within that 75 the table will tell you, hey if there’s more than four minor defects it fails and if there’s three major defects it fails.
I’m sorry, I skipped the step. There’s also kind of what turns into the quantity of failures, the very common would be 0, 0.25, 4, I think 0 is critical failures, 2.5 major and 4 minor and that translates into numbers. If you exceed that threshold it fails the inspection, if you’re below that threshold it passes the inspection. The inspection company can work with you on all of this. You can Google it to understand it but the inspection company will work with you.
[00:33:28] SV: Okay, so you communicate with the inspection company and they are kind of going to walk with you kind of typical stuff and then kind of what we can do additionally and then you’re going to pick the thing that is going to suit your business and then go from there.
[00:33:40] PZ: Yeah. Just so that they don’t have to educate you too much, I would do a little bit of research on inspections beforehand. You can do that on Smart channel sourcing or Google AQL inspection levels, it will be 20 minutes of reading and you’ll be a lot more educated. More importantly, it is very valuable, you know the product, maybe better than the inspection company, so they will benefit a lot from seeing your QC criteria. Then your QC criteria, there is the product criteria but then there’s also the labeling and packaging. You can include that in your QC criteria also and have them check some of them and see how that’s progressing.
[00:34:21] SV: Well, yeah it could be as simple as the printing on the boxes are … How they were supposed to be and if they pull them out of the packaging, they’re seeing that the coloring is faded or maybe they had something wrong with the printing, and they can pick that stuff up and so that can be in your criteria sheet.
[00:34:43] PZ: Yeah, exactly and I like, hey the right NFSQ label is on the right product.
[00:34:49] SV: Yeah.
[00:34:49] PZ: It’s not smudged so that it’s scannable.
[00:34:51] SV: Yeah, yeah, that’s good. Anything I think on the surface level of us as being the product owner, you’re not going to know what those are and then those we can put on our QC sheet that they have to follow but those are like surface level. We just want to know our product when it hits the warehouse, that it’s going to be sellable right? We don’t want to-
[00:35:14] PZ: That’s exactly right.
[00:35:16] SV: Because I think that’s the scary thing with a lot of people as you’re ordering, your test order might be a couple of 100 and if something is wrong with that it’s not the end of the world, you go ordering 1,000 plus and something’s wrong and it gets in the Amazon warehouse and you don’t know it. Well, no all of a sudden you’ve got 1,000 pieces in there that are wrong, or that are damaged and now you either got they’re being sold and your customers are going to leave you negative views and that’s bad.
[00:35:40] PZ: Right. You want to prevent that.
[00:35:41] SV: Yeah, we want to prevent that, definitely. Okay, cool, do you have any other common mistakes that we can be aware of and that we could hopefully avoid?
[00:35:52] PZ: A different one, I’ll talk about a scam that we’re seeing but it’s not a supplier scam. What’s happening is the bad guy phishers, they’re phishing the suppliers, so they’re getting access to a supplier’s credentials from their email, then they’re logging in to that supplier’s email address, they’re checking the emails and they are saying,” Hey, which buyer is going to pay us some money soon,” and then they’ll email that buyer from that supplier’s email address and saying, “ Hey, our banking information has changed, can you send your payment to this other bank instead.” I’ve seen and heard that happen, I haven’t followed up with folks to understand that the bank can actually get the money back once they’ve transferred it but kind of another red flag, if the bank account details change, find another way other than email probably phone to call up a supplier and say,” Hey, I just want to confirm that your banking details really did change and not somebody phished your email and is trying to get me to give them money.
[00:37:05] SV: I think that’s the smart thing, so anybody listening right now whether you’re finding your suppliers or manufacturers on other sources or whatever, this here is a great one because again that would be very easy to do and not knowing you would be like, oh okay, they’ve changed their banking so I’ve to just change my routing but I think the best thing to do is then call your manufacturer and then talk to them and then get that so you know that they actually did that. I do that with my credit card, so if I get something in my email about my credit card, they want me to log in to see this or the other thing, or I know that that’s probably a phishing thing, so I’ll call my credit card company and then I’ll ask them, and then if they say yes or no, then I follow up. I think that’s good practice.
[00:37:54] PZ: Yup. Let me talk about one area, one other area and this one’s a little bit more complicated but people should at least be aware of it and that is the regulatory compliance issues. The problem is that it’s difficult. Different product categories have got different regulatory compliance requirements. Children and toys, healthcare, even electronics. There are some categories that have fewer requirements like picture frames or pet toys. It’s worth doing maybe a little bit of research, you can talk to your suppliers and say, “Hey what certifications or what regulatory requirements do your customers usually ask about?”
You can also talk to your freight forwarder if you are working with one to ask them, but just do a little bit of research and try to understand, are there regulatory requirements for this product in the US and do I need to meet them or not?
[00:38:49] SV: Yeah. That’s good advice. The one I’ve been hearing quite a bit about, I don’t know if you’ve heard about Flexport. Flexport’s been coming on the radar here, that I’ve been hearing about, I had a gentleman on the show recently, Derrick Miller, who’s using them and he says basically it’s all kind of done through their dashboard and like you just said, that’s part of their process I believe too as you said, give you guys the heads up as far as what you need to place in order to allow all that to go through all of the different stages. Have you heard of Flexport?
[00:39:23] PZ: Yes, so Flexport, they are on the logistics site, they’ll handle ocean and air shipping actually we’re, sorry a slight plug, we’re going to have the Flexport guys speaking at our China sourcing summit. It’s sourcing specific training we’re doing in Hong Kong with our trade show. Yes, the Flexport guys, they’re great, they’ve got a good user interface to book your ocean logistics online, and they’ll track it and air logistics. There are a ton of other companies too. I’ve heard some feedback that Flexport isn’t taking on new customers right now, but you can Google third-party logistics provider freight forwarder or customs broker. Then I’ll come up with a couple and find one that we’ll work with you. The industry is super fragmented.
[00:40:09] SV: Okay I’ve been hearing a lot about Flexport and I hear that they’re really, really good. Definitely anyone listening check them out I guess, I’ll leave it in the show notes. I just know that because I was talking to Derrick about it and he was saying that pretty much anything along that process, if they don’t have it in there, they’ll have like resources to get there. You know what I mean? They try to get that streamlined on the process because that can get complicated right? If we’re talking about now you have to figure out regulations and all of that stuff. You need to make sure that you know what you’re supposed to be doing and try to follow that as closely as possible.
[00:40:47] PZ: I’m not aware that they’ll help a lot on the regulatory compliance side, I’ve seen on their online interface, it’s definitely book the shipment, what’s the pickup date? Where is it going to get dropped off? What’s the current status and they are very good at that. I’m not sure that they’ve done as much on the regulatory compliance side. I don’t know if I would rely just on what you [inaudible] before that.
[00:41:07] SV: Yeah, yeah. I don’t know because I have not used them in particular, I think I was talking to Derrick again, as far as like having the bond and stuff like that and I guess they take care of helping you with that. I just thought maybe in that process they had some resources, but just check it out. Where would someone go to find more information about regulations and stuff? Once you ask your manufacturer and they say, “Yeah, it’s a certain thing.” Where do you go from there?
[00:41:39] PZ: Oh great, the certain thing just Google it and learn about it, the harder stuff is what are the certain things that I need to do?
[00:41:46] SV: Got you. Basically just ask the manufacturer and they are going to be able to give you a heads up and what other businesses have been using.
[00:41:55] PZ: That’s a great shortcut, it may not be complete but that’s where I’d start. The expensive ways are ask a lawyer, hire a third-party consultant. The cheap ways are ask the supplier or ask a couple of suppliers or ask your freight forwarder. I think the supplier feedback might be a little better. It just depends on how comprehensive you want to be.
[00:42:19] SV: Okay. Good. These were great, do you have any other last ones you want to add in here or do you want to wrap this up?
[00:42:27] PZ: I’ll do one last one, I think I touched on this earlier. As you get more mature, I would move away from the email back and forth, “Okay great I’ll buy 200 pieces,” and start putting it into a purchase order even if it’s a spreadsheet. You can start adding terms and conditions to the purchase order and one of the terms and conditions would be, “I’m not going to release the final payment until you satisfactorily pass inspection.”
This is an interesting story, I talked to one buyer, I’m not going to say I recommend this, but I talked to one buyer and she said, “I always tell them I’m going to get an inspection done because it signals that I’m serious about it and then I never have the inspection done.” Okay, I’m not recommending that.
You can signal upfront, I’m going to have an inspection done and then you can choose not to have the inspection, make the payment, have the goods shipped. Depending on your risk tolerance levels, she tends to order products that are less risky.
[00:43:31] SV: I don’t see that being that big of a deal. I think you could put that in place, even especially in the beginning and I think maybe even decide at the end of the process that you feel like everything has met the criteria and you’re going to take a chance on your first one maybe. If you didn’t do it for whatever reason. Or maybe you do one and you say you’re going to do another one and the next one you don’t, I think that can be up in the air. I think that’s fine.
[00:44:00] PZ: Quite frankly, all of the retailers do that differently too.
[00:44:04] SV: Yeah, I just think you need to keep people on their toes.
[00:44:07] PZ: You want to signal to them that this stuff is important to you.
[00:44:11] SV: Yes, yes, yes. I like that, I like that a lot. All right, this has been great Peter. I appreciate you taking the time to walking us through Global Sources, number one because I’ve seen it pop up here and there in different discussions and I just haven’t heard a lot of people using it, I know Alibaba is one of the bigger ones that people are talking about or the one that’s at least being talked about and then Ali Express obviously but we’re always looking for other channels, other sources and I think everyone should check it out. I know I will be, go through it and get familiar with the interface. I think it’s pretty basic, Peter. You do your search and you find the products that you want to source.
[00:44:56] PZ: Yeah. From that perspective, yes there’s some additional information at the supplier level that you can look at and like you said earlier, when folks businesses become more mature or bigger then there’s also the opportunity to come to our trade shows and see more suppliers face to face.
[00:45:12] SV: Yeah now that’s really good. I just think again like I said it just gives us more options and again, I’ve said this before too, it’s like you are making or you are creating relationships with either manufacturers, suppliers, agents, whatever you want to say and the more that you can make these different connections it gives you more options moving forward within your business because you have more places to pull from.
[00:45:39] PZ: That’s exactly right.
[00:45:40] SV: Yeah so I think that it’s smart to investigate and go out there and just keep finding new resources and I think this is a great one and I’ll definitely be looking at that myself and hey who knows maybe I’ll even get out to a trade show. That would be fun.
[00:45:55] PZ: Yeah let us know when you are able to make it April or October.
[00:45:58] SV: Yeah no problem. Okay Peter this has been great. Is there any last little bits of advice or words of wisdom that you want to give the TAS audience?
[00:46:07] PZ: I think everybody is just trying to, I don’t want to say make some money, but everybody is just trying to get by on both sides, the buyer and the supplier side. A lot of the mistakes they tend to be communication mistakes. There’s a lot of language differences. I’m just impressed that the Chinese can speak English so well, that they are able to communicate with us. Our level of Chinese is a lot lower than their level of English. But then there is time changes, there is cultural differences so communicating clearly and completely as much as you can, over communicating goes a long way to making sure that you don’t have problems in the sourcing process. That’s the only other point that I would add.
[00:46:48] SV: Yes really just like don’t overwhelm them really with … Ask what you need to know but then almost like I say you are interviewing them in a sense and they are interviewing you in the process as well so it’s like that back forth and you really have to treat it as a relationship that you are building with these people. Like you said I think communication is huge and if we can learn to communicate, because we might use slang in our language and it doesn’t make sense to them and they might use slang and we are, “What the heck, why are they saying that? That’s rude,” and it’s like they don’t know because they are communicating the way that we communicate.
[00:47:23] PZ: Yeah so a short story, within our company one of my colleague is British. He communicates with our Chinese colleagues and basically if they see a word that they don’t know they are going to click on it and see the Chinese translation and if it’s slang that translation may make no sense to them.
[00:47:42] SV: Yeah it’s true.
[00:47:46] PZ: Try to use the simple communication really help a lot just like you said.
[00:47:49] SV: Yeah now that’s awesome. Alright Peter so is there any other place other than globalsources.com that you want to point people to?
[00:47:56] PZ: Globalsources.com it’s good I mention smartchinasourcing.com
[00:48:00] SV: Oh yeah that’s for some information. That’s good.
[00:48:03] PZ: Sourcing information that I mentioned that we are going to be doing that summer and you can get information on that at globalsources.com/summit and that’s where we are going to be doing face to face sourcing training co-located with our trade show and its targeted toward Amazon PL sellers that are ready to do something like that.
[00:48:24] SV: Yeah that’s awesome. We’ll link all this up on the show notes and anyone listening I think sourcing is something that is definitely something that you need to learn but also when you learn it’s an asset because you are building these relationships and these channels for you to go out there and find more products and that will ultimately help build your business. I think it’s really, really important. Peter once again I want to thank you for taking time out of your day. I know that you are in your travels right now and you are going to be heading back to Hong Kong right?
[00:48:54] PZ: That’s right I’ve got my flight in a couple of hours yeah. Thanks for making the time for me I really appreciate it was great to be on here and like I said I love sharing the knowledge that I have so that people can have a better buying experience when they are working with suppliers.
[00:49:08] SV: Yeah I appreciate it and hey have a good flight back and we’ll definitely be in touch and everything that we mentioned here I’ll link up in the show notes so that everyone can have access to that. Once again Peter thank you so much and I look forward to talking to you soon bud.
[00:49:21] PZ: Thank you Scott take care yeah bye bye.
[00:49:25] SV: Okay so there you have it another great discussion with someone that knows a thing or two about sourcing and I think that this is really valuable for all of us because we don’t want to put our eggs all in one basket. I mean you guys have probably heard me say that before and just hear other people say it too. We don’t want to just depend on just one source so globalsources.com check it out. I’m going to be going over there as well and I’ve already played around with it a little bit and there are a lot of similarities to Alibaba and this particular platform. Definitely check it out. It’s worth looking into especially if you wanted to find other suppliers or other manufacturers whether it’s a product you are already currently selling and you want to have another backup source or if you want to go completely into another product and maybe start here.
I think it’s really, really good to be able to diversify where we are finding our products and our manufacturers from. Definitely check that out I think it’s valuable. That’s it guys that’s pretty much going to wrap it up. I did want to remind you if you are brand new or if you haven’t attended one of my live free workshops head over to theamazingseller.com/workshop you can register for an upcoming one there. I’ll take you through all of the steps for launching your first product on Amazon, everything that I did all the way up until now and what I’ve done differently and that I’ve changed. I share that all on the free live workshop and I also answer live Q&A.
I’d love to have you attend and then also I want to remind you that all of the show notes for today, all of the transcripts, all of the links that we discussed will be in this episode’s show notes so head over to theamazingseller.com/170 and you can get all of that over there and you can have access to it immediately. Alright so that’s it guys that’s going to wrap it up. Remember I’m here for you, I believe in you, I’m rooting for you but you have to, you have to … Come on say it with me, say it loud and say it proud, take action, have an awesome amazing day and I’ll see you in the next episode.
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