Author: Gary

I work with many Amazon sellers to help them source from China. I’ve managed multimillion dollar sourcing campaigns and have been sourcing from China since 2008. I also am an Amazon Private Label seller myself so I know what you’re going through. My goal is to teach you how to source from China quickly and easily so you can own a 7-figure online business.

My Amazon Product Mistake – and how you can profit from my loss [Podcast]

“The successful man will profit from his mistakes and try again in a different way.” Dale Carnegie

A lot of Amazon gurus will tell their stories of how they made from zero to a million dollars in 8 months.  

That can be great for motivation but many times a “lottery story” like that doesn’t necessarily help you get the same results.  Those same people usually only give share their wins but they don’t talk about their losses.  

To give you a more complete and realistic picture of what it takes to run an Amazon business, I’d like to share with you an Amazon product failure of mine.  

Why?  Because I’m a firm believer in learning from your MISTAKES.

If one person is further down the path that you want to go (i.e. Selling on Amazon) and they’ve run into brick walls, doesn’t it make sense to LEARN from their experiences so you don’t run into the same walls?  

Recently I had the privilege of being interviewed by my friend Danny McMillan from Seller Sessions, a podcast that teaches advanced Amazon marketing tactics.  

He asked me to share an “Amazon Product Failure Story” and the lessons I learned from it.  I tell about how I researched and came up with this product idea.  How it sold well in the beginning but then something happened and the market changed.  Not only that my team and I made several mistakes, and then sales dried up as a result.  AND I reveal the actual product that we are selling in the podcast.

You can listen here.  

If you do listen, what did you takeaway from it?  Leave me a comment below.

Thanks,

-Gary

 

PO or Contract? The 7 essential questions to ask when signing an agreement with a Chinese Supplier… Advice from a Trademark Lawyer with over 100 wins

***UPDATE***

Here’s my exclusive webinar with Amy where she reveals how to protect your brand and trademark if you’re manufacturing in China… even if you don’t plan to sell there.  Don’t let what happened to New Balance happen to you!

If you’ve already sourced a product and found success selling on Amazon that’s great.  You’re probably concerned about running profitable PPCs campaigns, adding more SKUs to grow sales, and other ways of growing your business.  

But there could be a gaping hole in your business that you’re not aware of.  And this could potentially destroy all the hard work and money you’ve put into it.  To be successful you not only need to play a good offense but you need to protect your assets with a strong DEFENSE.  

As they say in sports “Offense wins games but defense wins championships”

Let me share with you a true story where an Amazon seller came to me with a problem.  Let’s call him “Carter.  

He created a custom product using a supplier he found on Alibaba.  He put a ton of personal time into modifying this product so that it was DIFFERENT from anything else out on the market.  He did careful customer research and found ways to improve upon the competition.  

In the beginning he had good sales to start.  Reviews were mostly positive.  

There was, however, one minor mistake with this product and several customers contacted him about it.  He acted on their feedback and decided to fix these problems in his product by working with his supplier.  At the same time, he was ready to place a larger reorder.  

Sounds good right?  

HOWEVER, soon after that, he noticed a new competitor that offered the SAME product with the SAME modifications he made, with the SAME MISTAKE, but at a lower price.  He went back to Alibaba and found out that they had COPIED his design.  

And the worst part of it was – he had a contract in place with the supplier that they couldn’t sell his designs to anyone else!  But they still did it anyways.

What would you do in this situation?  And how would you protect your product designs from being copied and listed all over Alibaba like what happened to “Carter”?

Good news I’ve invited trademark attorney Amy Hsiao to give us a rapid fire Q&A session on the 7 must-ask questions when signing an agreement with a Chinese manufacturer.  She is a partner at Partner at Swanson & Bratschun, LLC.  In her work, she’s worked with hundreds of US clients who manufacture in China to help them protect their intellectual property, trademarks, patents, and designs and help them win cases when needed.  

This advice is based on her real-world experience so I’m sure it will add a ton of value for you.  

 

 

 

 

 

Here’s Amy’s guest post:

7 Must-Ask (and Answered) Questions When Signing an Agreement with A Chinese Manufacturer

One of the most common questions I’ve received is about PO (“purchase orders”).  Specifically:

  • Should I sign a formal contract with my Chinese manufacturer or is a PO sufficient?
  • Must the contract be written in Chinese?
  • Is a PO better or a contract better?
  • I am not a Chinese company – am I protected under the Chinese law?
  • I am not a Chinese company – what are the key differences between Chinese and Western contracts and the key terms I must know?

What is a Purchase Order or “PO”?

A PO is an offer; if you respond to a PO, it’s an acceptance. An offer and an acceptance form a contract.  

It is similar to me going to Lowes or Home Depot to buy a washer and dryer. Once I pick out a SAMSUNG or LG washer and dryer, the nice friendly customer service representative will give me a printout with all the specifics – that is a PO.  Once I take the PO to the cashier and pay, that’s acceptance. I now have a contract with Lowes/Home Depot for a specific set of SAMSUNG / LG washer and dryer.

So, is a PO better or a contract better?

Well, it depends (I hate to give a lawyer’s answer, but the answer truly depends on a number of factors).  The variables include: is this a one-time thing with this manufacturer? How big is the purchase? If the contract is US $300 million in value and will govern the parties’ behavior for the next three years, I will opt for a formal contract – a Master Purchase Agreement or a Distribution Agreement (once it’s done, multiple POs will be spun from these formal contracts).  

If, however, the relationship is one-off, a quick PO would probably be sufficient.

Typically, if there are recurring deliveries and you expect the relationship to last and you want the supplier to be absolutely (and legally) dependable, I would opt for a formal purchase agreement or distribution contract.  

Just FYI – There is a UN treaty governing this aspect of legal exchange. So, if you do not want a UN treaty to be meddling with your business in China, it is important to have a clear disclaimer specifically saying so in the contract.

Must the contract be in Chinese?

The quick answer is – NO.

However, despite the clear answer, the issue I’ve seen the most is “people simply don’t know what they don’t know”.  Ignorance does cost money in this instance.  Unfortunately, the ignorance here may also cost your brand, your market share, or even the supply chain to the rest of the world.

This is usually what happens – the contract is being translated and reviewed in English; however, the contract that is actually being signed is in Chinese.

So, when legal troubles start to arrive in paradise, guess which language version the Chinese courts will review to make a decision? Chinese!

However – and this is the sad part – a lot of the Western companies / business owners do not pay attention to the quality of translation.  A lot of them either rely on Google translation, grab the first person they see in Chinatown or call whatever Chinese friends they happen to have to provide a translation.  This logic makes no sense just as if I relied on someone I grabbed on the street in LA to give me translation of a legal document written in English!

Needless to say, there IS a difference in the way things are written in a legal Chinese document versus the everyday conversation Chinese – if we could not expect the average Moe and Curly to understand legalese in English, why would you rely on the average Wang or Lin to decipher the Chinese legalese when a mistake could easily jeopardize your factory or supply chain to the world?

By the same token, Google translation is great when you want to shop online or understand roughly what a Chinese website says – it is, however, not the tool I would rely on if the life or death of my business hinges upon the quality of this very translation.

To complicate things even more, the meaning of Chinese character changes based on context. A lot of the translation tools, however, offer translations based on the FIXED meaning of a character – there is simply NO fixed meaning of characters; it’s a fluid language.

Here’s an example. The whole point of a NDA (Non-Disclosure Agreement) is to make sure the parties will not disclose confidential information; and will use the HIGHEST standard to safeguard the information when disclosure is required.

The NDA English version says this:

“if A is required to disclose any confidential information related to this transaction in response to a valid court or government order, A will use the highest level of protection available to ensure disclosure is under confidentiality terms that are no less protection than this Agreement”

This, however, is what the Chinese NDA actually says when translated correctly:

“if A is required to disclose any confidential information related to this transaction in response to a valid court or government order, A is only required to use appropriate level of protection.  available to ensure disclosure is under confidentiality terms that are no less protection than this Agreement”.

Let me complicate things a bit more:

Unlike the clean and above-the-table ways Western law firms handle comments to agreements (usually by redlines so you know exactly what has been accepted/rejected in the last draft), the Chinese lawyers do not usually use track-changes.  So, most of the time, you send them changes to a draft, they simply send you back a clean copy.  On the surface, it appears that ALL comments have been accepted – but this cannot be farther from truth.  To make matters worse, they may change other parts of the agreement that are totally not related to the current discussion topic or a topic that has ever been raised for discussion before!  

For example, just recently, my client and his Chinese supplier were exchanging documents about the right amount of liquidated damages if there was a late delivery, or consistent “epidemic” failure to the delivery of the products. The parties have exchanged multiple drafts and had calls about this topic – however, in the last exchange, the manufacturer took out the entire reps and warranty section.  Without a careful review, the client would have signed a contract where the supplier gives absolutely no representation nor warranties!

So, what are the seven important questions that you must ask and have them answered when it comes to negotiating a contract with a Chinese supplier:

Here you go:

  1. What to do when there’s a delay in delivery? (especially during the Chinese New Year holiday time)
  2. What to do where there’s a shortage of supply? (i.e., are you absolutely your supplier’s favorite customer or can they supply the materials to other customers first and leave you high and dry? Bear in mind that your supplier – just like a contractor building a house – typically juggles multiple clients at one time.)
  3. What to do when your supplier repeatedly fails inspections?
  4. What to do when your supplier’s products result in personal injury back in the US? (remember those lithium cell phone batteries that simply blow up and set a house on fire?)
  5. What to do when there’s a dispute? Should the parties resolve the dispute through Chinese courts only or is there an alternative forum – such as an arbitration in say Switzerland – that may be more neutral? (Enforcement is a big issue when it comes to an agreement with Chinese parties. Are you willing to subject yourselves – and your business – to the Chinese courts and the decisions?)
  6. What is the specific governing law? (if your contract simply says “the appropriate international law applies”, you might as well delete the whole section)
  7. Is the language broad enough to protect your IP rights in China? In the rest of the world? For example, if the manufacturer does not copy your exact trademark or logo, but yet sells the same products with the exact color combination or unique packaging – is that a violation? (remember, China – unlike the US – does not have trade dress law)

Amy can be reached at amy@sbiplaw.com.  She also has a blog Last Week in China which covers China trademark news and best practices.

There we have it. It makes sense to sit down and spend some time asking yourself how you would answer these questions before signing or amending your contract with your Chinese suppliers.

Remember offense wins games but DEFENSE WINS CHAMPIONSHIPS.  

Don’t let a gaping hole in your defense cause you to stumble on the way to building a 7-figure business.  

Which questions are your struggling with with your supplier agreements?  Hit reply and let me know.  I will choose your top questions and bring back Amy to answer them!   

Talk soon,

Gary

“Winter is Coming” – China Sourcing Outlook 2018

As we’re getting ready to close the year and enter holiday party mode, there are two important things to consider as we prepare for the new year in 2018 so we don’t start off the year with a hangover!

China is getting clean and the new regulations are here to stay

The China EPA’s stricter regulations are here to stay.  Contrary to what some believe was a temporary measure to clean up the air during the major government meetings in Beijing in November, this time the government is serious about cleaning up the environment.  So factories are being forced to live with these new rules.  

There are numerous industry categories that were targeted this year.  This means that this could be the first round of cleanup targeting the “dirtiest” or most polluting industries.  Factories that emit volatile organic compounds or pollutants that are released into the air were the main targets.  

In order for factories to comply, they would need to invest in equipment that would reduce these emissions.  As a result their costs of operations of rising.

What does this mean?  

Expect your costs to rise in 2018!

Traditionally suppliers may absorb small cost increases throughout the year in order to facilitate business.  If raw material costs grow then they may not immediately pass the cost increases on to their clients (in this case you) right away for the sake of doing good business.  If you have a good relationship or “guanxi” with your supplier this is normally the case.

However, they will not absorb these costs forever.  Businesses in China will evaluate their profits and losses and settle all debts by the end of the lunar year, aka Chinese New Year.  Take for example the restaurant industry. Typically prices will maintain steady throughout the year but after they return from Chinese New Year, the prices on the menu will be readjusted and expect your lunch to cost 10-15% more.  I’ve seen this year on year in my time in China in nearly all industries from manufacturing, hospitality, real estate, and the service industry.  

This is one of the elements of Chinese culture that dictates business practices.  

So I would expect product costs (i.e. FOB and EXW quotations) to rise in Q1 and Q2 so be prepared and review your margins to make sure your business is profitable.  

Winter is Coming – Chinese New Year

Chinese New Year is approaching.  It will be from mid-February to late-February in 2018.  The exact dates are less important because factory workers typically leave their jobs days if not weeks before the start of the holiday.  And they don’t return until much later after the official end date of Chinese New Year.  The reason is this is the largest human migration in the world.  According to government sources, 3 BILLION PEOPLE will be making trips during CNY.  So that means there’s a good chance that train, bus, and plane tickets will be sold out so workers need to leave before the rush.  

This is a nightmare for many factory owners who have orders to deliver and are trying to manage their workers during this turbulent time.  

So the key thing to remember is that your factories will be shutting down from 2 weeks to up to a month in February to early March.  This article I wrote goes in more detail into Chinese New Year best practices to minimize disruptions to your business.  

What can you do?

Smart business owners plan ahead.  In terms of inventory, they will place orders in advance and have additional stock on hand to sell during Q1 while Chinese factories are shut down.  

If you have orders pending delivery in January, I strongly recommend monitoring the delivery dates.  Be vigilant!  

What normally may be a 30 day lead time could longer because factories are slammed pre-Chinese New Year trying to finish all their orders before they leave for the holiday.  

It’s common to see quality take a dive in order to meet these deadlines.  So be sure to have a good quality inspection or QC process in place.  3rd party inspectors such as Asia Inspection are a great way to check your orders before they leave the factory floor.  

Consider a China +1 Strategy

As a long-term view on China, given the increased scrutiny on environmental protection, steady cost increases, and a shift away from manufacturing low cost, heavily polluting commodities, it makes sense to consider sourcing from other countries.  

India and Bangladesh for example, are strong in textiles.  Vietnam is another target that many multinational corporations such as Nike have already entered.  This is the natural evolution of the global manufacturing game.  

Be aware however that skilled labor and productivity levels in these countries will be lower because China has the advantage in experience.  

Logistics in China is more developed as well so the shipping process tends to be smoother.

Also, China has more experience with the whole export process.  

We are seeing that large corporations are not be leaving China outright because China still offers a wide breadth of product manufacturing and it has the entire supply chain available.  

However, when there are disruptions from policy changes to extended holidays, it makes sense to have a backup plan to shift manufacturing to fill in any gaps so your business will run like a smooth oiled machine well into 2018.

Recently, I was interviewed by Mike Jackness from EcomCrew about my outlook on sourcing from China, Chinese Amazon FBA sellers, and best practices for 2018.  EcomCrew is one of my favorite podcasts when it comes to e-commerce and you can basically take any of the episodes and implement the tactics discussed to grow your business.  Check out the interview here.

 

Happy holidays everyone and stay safe!

-Gary

PS: On the bright side, this fall in Shanghai, the skies were the bluest they were in recent memory.  I only had to turn on the air purifier a couple of times, which was much less than before.  Overall the air quality has improved in my view which is a positive sign for China and the rest of the world!

A Guide to Product Safety & Labeling For E-Commerce Startups

Did you know that when sourcing products besides quality, price, and finding a trustworthy supplier there’s another important factor that a lot of online sellers overlook?   That is product safety labeling and certification!

Here’s a letter from one of my readers:

“Another concern of mine with sourcing products is whether there are any statutory requirements by USA or Canada for specific products before they’re imported. Some manufacturers know and they’ll give me a heads up but some don’t and It’s up to me to find out if a specific product requires any special testing or certification.

Its tedious and misleading sifting through a plethora of forums and posts trying to find credible info after googling… I have a morbid fear of sinking money into a potentially winning product and having it all ready to go only to find out at the last sec (or worse, at US customs!) that this product needed special clearance/testing.  -Sameer”

The worst case scenario would be as Sameer said, finding out at the last minute if you’re product is missing some sort of certification for a safety standard that you’re lacking.  This could mean that your whole shipment will need to be taken off the market!  And you probably will have to write it off as a loss until you get your product certifications in order.

Good news, I’ve invited Fredrik Gronkvist, Co-founder of Chinaimportal.com and AsiapropertyHQ.com to explain what every Importer must know about mandatory safety standards when importing from China.  He is one of the most knowledgeable people about product safety and labeling I know and he’s also a Shanghai-based entrepreneur from Sweden.

 

Take it away Fredrik!

-Gary

A Guide to Product Safety & Labeling For E Commerce Startups

All products are subject to regulations of some kind. Be it a simple label, or more complex regulations that involve lab testing, safety standards and documentation.

Importing non-compliant products is illegal, and can result in heavy fines or a forced recall. Further, Amazon and other marketplaces are increasingly strict – and in some cases their own product requirements are even above what the law requires.

Keep reading, and learn how to find out which regulations apply to your products, how to check if your supplier can even make compliant products – and much more.

What is product compliance?

The foundation of product compliance is that all products sold in a certain country or market are safe. For Importers, there are 5 pillars of product compliance to keep track of:

a. Safety Standards

For many products, there are mandatory safety standards that sets requirements affecting the design and functionality of a certain product.

For example, toys must not have loose parts, and phone chargers must be designed according safe electronic construction principles.

A product must be designed with a specific standard (or set of standards) to be compliant. Most products sold for the domestic market in China are not.

b. Chemical and Heavy Metals Restrictions

A product may not contain excessive amounts of lead, cadmium, phthalates and other restricted chemical and heavy metals. Some materials are made to comply, while others are non-compliant.

c. Labeling Requirements

A product must carry the correct labels, which may include compliance marks (i.e., FCC or CE), material descriptions and country of origin (i.e., Made in China).

d. Document Requirements

The Importer may need to issue a set of documents, such as a CE Technical File or Children’s Product Certificate.

e. Lab Testing Requirements

Lab testing may or may not be mandatory, but it’s the only way to verify that a product is compliant with all applicable safety standards and chemical / heavy metal restrictions.

Some product regulations only cover simple labels, while other are more complex and require the the Importer to cover all 5 parts.

Why do I need to care about product safety?

As an Importer, you are responsible for ensuring that your imported products are fully compliant. If you import a product that is non-compliant (i.e., incorrectly labeled), the customs authorities, or other market surveillance agencies such as the CPSC, can seize and destroy the cargo – or issue a forced recall.

But it gets worse.

If anyone is injured by your product, you are looking at possible millions of dollars in fines, or even prison.

The stakes are high, to say the least.

But this is my supplier’s responsibility, right?

No. Suppliers in China are not legally required to comply with overseas regulations. US laws are not applicable in China or Vietnam – and of course vice versa.

As such, US regulators cannot enforce product safety standards effectively in foreign countries, which is why the burden to ensure compliance falls entirely on the Importer.

This is also the case in the EU, Australia and other regions around the world.

And, would it even make sense for a Chinese supplier to hire lawyers to keep track of product regulations in countries all over the planet?

Definitely not.

For the same reasons you shouldn’t expect your Chinese supplier to design your website or manage your marketing campaigns – don’t assume that they will keep track of the regulations in your country.

In a best case scenario, a supplier can confirm that they have the capability to make a compliant product. However, to ‘make a product compliant’, you need to:

a. Let your supplier know which standards and chemical regulations a product must be compliant

b. Create all labels and documents

c. Book lab testing with an accredited third party

How do I know if my product is regulated?

All products are regulated, because all products must be safe for the consumer to use. This is the case even if no product specific safety standards or regulations apply.

In addition, labeling requirements tend to apply broadly to all products. In the US, all products must carry a country of origin label – which is why you see ‘Made in China’ everywhere.

That said, some products are more strictly regulated than others. This includes, for example, children’s products, electronics, cosmetics and food contact materials.

Product Regulations Overview

a) United States

US importers must comply with both Federal and State level regulations. Below follows a non-exhaustive list of standards and regulations:

  • CPSIA: Children’s Products

  • California Proposition (CA Prop) 65: Restricts 800+ chemicals and substances in all consumer products

  • Country of origin: All products must carry a country of origin label

  • FCC: Electronics

  • UL Standards: Electronics (Voluntary)

  • 21 CFR: Food Contact Materials

  • CA TB 117: Furniture fire safety standards

In the US, most standards are not developed and implemented by the government, but by industry associations such as Underwriter Laboratories (UL), ASTM and ANSI.

Even though many of these standards are voluntary to apply, you are strongly recommended to do so.

b. European Union

All EU member states use the same set of harmonized product regulations. You don’t need to keep track of different regulations in each member state, which makes life a lot easier for business owners.

Below follows a non-exhaustive list of standards and regulations:

  • REACH: Restricts chemicals and substances in all consumer goods

  • EN 71: Toys

  • Low Voltage Directive, RoHS, RED & EMC Directive: Electronics

  • CE Mark: Mandatory for many products, including electronics, toys, bikes and machinery.

  • EU Food Contact Materials Framework Regulation: Kitchen utensils etc

c. Other countries

Most developed countries in the world have their own set of product regulations, that are to a varying degree based on EU and US standards.

For example, the Singaporean government is even referring to EU and US standards on it’s website for product safety standards.

In Australia and New Zealand, most regulations are largely based on European ISO standards.

You must learn the compliance process for each country you intend to sell in. While the fundamentals (and sometimes even the standards themselves) are the same as those in the EU or US (mostly EU though) – there may be differences.

Case Studies

So, what could possibly go wrong? Quite a lot it seems.

Amazon Hoverboard 2015 Crackdown

Still remember the hoverboard craze? I used to see them in Shanghai all the time, until the government banned them.

In late 2015, several reports concerning exploding Hoverboards (or their li-ion batteries, to be specific) in the US, Europe and Asia.

Amazon reacted in December 2015 and suspended every single Hoverboard seller – and forced them to provide UL test reports, proving that the batteries are safe.

Most sellers didn’t have those documents. Probably they assumed that ‘product safety’ is a minor issue best dealt with by the supplier.

How wrong they were.

Amazon listing rejected

A few months ago I received an email from a client. They had recently imported a private label product from China, and had to unlock the product category on Amazon.com before they could start selling it.

Before unlocking the category, Amazon did a manual review of the compliance documents.

The Importer did their homework. They had already obtained a test report and a declaration of conformity from their Chinese supplier.

All clear then?

Not really.

Amazon don’t just accept any compliance document they get. In this case, the Importer submitted old test reports issued 2 years prior to their own order.

And, the Declaration of Conformity wasn’t even issued in the right company name.

Amazon didn’t buy it, and the listing was rejected.

I never heard back from them since this summer. Assuming they did get their product lab tested (and it passing), it’s possible that they eventually succeeded.

This sounds scary. Should I just get a 9 to 5 job instead?

Product compliance may sound overwhelming, but luckily, you only need to get your head around the regulations that apply to your product, in your market.

Let’s recap on the 5 pillars of product compliance (I should trademark that):

1. Confirm all applicable safety standards

2. Confirm all applicable chemical and heavy metal regulations

3. Create all label files and send them to your supplier

4. Create all mandatory documentation

5. Submit your products for lab testing to obtain a test report

That said, some products are more complex than others. Personally, I would stay away from cosmetics, children’s products and electronics. But that’s just me.

We also cover product compliance in our Starter Packages for Importers, that you can learn more about on www.chinaimportal.com.

China “EPA” crackdown shuts down tens of thousands of factories… with no end in sight *UPDATE*

UPDATE

As you may have heard recently China’s EPA has shut down tens of thousands of factories with no end in sight.  Not only are factories being fined for not following the new laws, in some severe cases people are going to jail for this!  You can read more about it in this NPR story where they interviewed me.  

China Shuts Down Tens Of Thousands Of Factories In Unprecedented Pollution Crackdown

After speaking to other industry experts on the ground in China, here are some important takeaways that I’d like to share with you especially if you have a business that is sourcing products from China.  

The good news is that China is cleaning up its manufacturing.  

This is positive for both China and the rest of the world.  Beijing is known for its legendary levels of pollution. In China, lung cancer rates are climbing astonishingly fast.  Also the impact of the pollution can be felt as far away as Japan and even North America!  So all in all these stricter environmental regulations are a positive development.  

The air seems to be cleaner these days in Shanghai, Shandong, Guangzhou, and Shenzhen.  Some have told me that they “can’t remember the last time the skies were so blue!”

Previously it was cheaper for factories to pollute than to cleanup.  

In the past the main problem was compliance.  Because fines were small and loosely enforced,  from a business perspective it was cheaper for a factory to continue operating and paying a small fine than to rehaul their operations and invest in new equipment and processes to cleanup.  

But this time the new EPA laws have TEETH.

Local leaders are pressured to force local factories to comply or face stiff fines and penalties. These may include daily fines, cancellation of business licenses, and even criminal enforcement.  

What does this mean if you’re sourcing from China?

Unlike before the new laws are here to stay

In the past, these cleanup efforts were temporary due to large socioeconomic and/or political events such as the 2008 Beijing Olympics, 2010 Shanghai World Expo, and 2012 Hangzhou G-20 Economic Summit.  

The difference now is that the government leaders have issued direct orders from the top down.  We understand that the environmental cleanup is as important as the anti-graft campaigns in China.  This is serious stuff folks.  

Factories that have been closed may stay closed

I have heard reports of dying mills that have been shut down by the dozen because they cannot comply with the new EPA laws.  In other cases factories have been shut down indefinitely.  

On the other hand other factories have gone through their audit and passed inspections with a minimal disruption to their operations.  

The takeaway is that it depends on your industry, your product, as well as your factory’s operations and level of pollution.

Even if your factory wasn’t affected, their subcontractors may be shut down

One important note is that if your factory wasn’t affected you’re not out of the woods yet.  This is because their subcontractors may be affected by the crackdown.  This means that if your product is dyed or treated with chemicals – this part of the production process may become a bottleneck that may delay your delivery.  

Or some factories may even switch out or even eliminate certain processes altogether.  

I’m not necessarily saying that factories are dishonest.  But desperate times call for desperate measures and for some factories it’s a fight for survival.  It’s not unheard of for factories to forego a certain chemical treatment when that treatment may jeopardize the shipment’s delivery date.  

Perhaps more importantly, it boils down to Chinese culture where social harmony is more important that speaking up and causing problems.  Often times these problems will be kept to themselves and only brought up when the sh*t hits the fan.

China is moving up the value ladder

On a macro level, China is moving away from the low end and super cheap products that takes a significant toll on its environment.  This makes sense as pollution levels have skyrocketed in the past 20 years since China’s economy has boomed.  

To put it bluntly, China is willing to let the “dirty” business go to other countries such as India, Bangladesh, and Southeast Asia.  At the same time China is focusing on more valuable products whose manufacturing processes depend more on skilled labor and automation.  Case in point the Apple iphone.  

What can you do?  The three C’s

Communicate with your supplier

Remember don’t expect your supplier to give you an advance notice.  Remember Chinese culture does not encourage one to make waves.  So it’s your job to be proactive in checking with your suppliers if they’re impacted by the new environmental laws.  

It’d be smart to check if your delivery schedules are guaranteed as well because you don’t want to miss out on Q4 and the holiday shopping season.  

I recommend also asking how long they expect the closures to last so you can plan ahead.

Contingency Plan

Don’t put all your eggs in one basket.  It makes sense to have backup suppliers to refer to if your primary supplier goes offline.  These can be either other suppliers in China or in other countries.  

Contrary to popular belief, not all products are made in China these days.  Other countries such as India, Bangladesh, and SE Asia may not be prone to these increased pollution laws.  

I recommend also sourcing new suppliers as a long term strategy.  

In fact we are in the middle of trade show season right now.  I’ve written several articles about how to attend a trade show like a pro. Trade shows are a great way to meet suppliers in person, kick the tires and get your hands on a sample right away so you don’t have to wait for weeks for it to be shipped to you, as well as learn about new product trends and spot new product opportunities.

Change – learn to embrace it

A wise man once said “The only constant thing in business is CHANGE”.  So learn to embrace it.  

One must adapt quickly or be left behind.  If you’re factory is affected it’s up to you to find a supplier that can deliver the right product, at the right price, at the right time.  

Short term outlook – Longer lead times

In the short term I expect longer lead times during the shakeout since certain factories are being closed indefinitely.  

Long term view – Prices to rise

In the long term, expect prices to rise.  Just as California has stricter tailpipe emissions laws which resulted in higher car prices and gas prices, so will China’s stricter environmental laws result in increased costs on suppliers.  And these costs will be passed down as price increases onto you the buyer.  

It costs more to get clean and expect the price increases to be passed on to you sooner or later.  

Moreover raw material prices are rising as well.  

But on the bright side, the cost increases will affect everyone equally so you will not be at a disadvantage.  

Quick favor

I’m doing an informal survey of businesses who’ve been affected by the China EPA factory closures – Can you take 5 minutes to share with my your insights by filling out this short survey?  I’d appreciate it.  

Click here to take my 5 min survey

—

A hard stance against “heavy polluters”

If your company is sourcing products from China then there is a major disruption that may be flying under your radar.  Since June of 2017, China’s new Ministry of Environment is taking a hard stance against Chinese factories that are “heavy polluters’.  In fact in the most recent round of factory audits, China’s environmental crackdown has shut down tens of thousands of Chinese factories with no end in sight.  

The effects of decades of massive manufacturing growth has taken its toll on the environment.  Now China has some of the most polluted cities in the world.  Air purifying equipment and anti-pollution masks sell out often. Groundwater is polluted making safe drinking water a big concern.  Now the government is doing something about it.

What’s different this time is that a hard stance is being taken in making sure that factories are compliant with environmental laws.  Previously when policies were passed there was little to no compliance.  Many factories were unaware or unwilling to comply so they continued operating in their old polluting ways.  

Now some factories are being forced to cease their production immediately and indefinitely.   And if they don’t comply their power could be shut off leaving them in the dark.  

Power trumps Guanxi

And in this case power trumps “guanxi”.  Decisions are coming directly from the top levels of government so it overrides any relationships factory owners may have at the municipal levels.  If they are noncompliant they will definitely face the consequences if they are audited.  

Lack of transparency with no end in sight

One of the issues the factories face is a lack of transparency.  Government policy details are quite opaque and many factories are not aware of the exact policies that they must abide by so they may unknowingly continue to operate in noncompliant ways and risk being shut down.  

So they face an unpredictable and ongoing risk of being suddenly told to shut down.  And there is no clear timeline which means the factories don’t know when or if they can resume production.

So all of this makes it a very challenging time if you are sourcing products from China.  

Who’s affected?

According to my research, affected industries include but may not be limited to the following industries.  

Affected Industries

  • Textiles
  • Rubber
  • Leather
  • Chemicals
  • Carbon
  • Metal
  • Coating
  • Plastic
  • Dying, Painting, and Printing processes

The environmental audits have been implemented in rollouts that have begun in certain regions mostly centralized in and around Northern China.  The later phases will reach other regions.  Again it’s difficult to pinpoint exact areas due to lack of transparency.  

So far we understand that factories in these regions have been affected

  • Shandong
  • Henan
  • Hebei
  • Tianjin
  • Beijing
  • Zhejiang
  • Jilin
  • Jiangsu
  • Sichuan
  • Guandong

Why is the clampdown happening now?

In 2013, China passed the “10 Measures for Environmental Protection” which outlined measures to improve China’s environment.  This was monumental as China began addressing admitting the environmental problems head-on while in the past China was more focused on developing its economy with manufacturing while paying a huge expense in air, water, and ground waste pollution.  My sources tell me that the newly appointed Minister of Environment is demanding stricter compliance from the factories thus the extensive auditing and review of these tens of thousands of factories.  

Moreover if we look at the macro level, China has an important government meeting in the 19th Plenum, the most important government meeting which takes place every five years.  Taking place on Oct 18th, 2017, the main objectives are to select the top leaders and policies to put in place as a road map for the country going forward.  

Environmental Protection is one of the key issues to be examined.  It would make sense to do a bit of cleaning before the meeting to drum up the numbers and also product some blue skies for them to take credit for.  

Similar supply chain disruptions in China related to major economic, political, and social events have happened in 2016 in the months preceding the G-20 meetings in Hangzhou as well as in 2008 before the Beijing Olympics.  

Other speculators say that another reason is because of a major sporting event and competition at the national level happening in north China in the fall.  In my opinion this is a less probable cause than the 19th Plenum which is the most important event that will set the stage for the future of China in the next five years.  

What do you do if you are sourcing from China and risk being affected?

If you’re factory has not been affected (yet) then now is the time to check with them to ask if they will be affected.  

It’d be smart to ask if their component suppliers are being or will be affected as well.

Note that even if your factories themselves have been audited and approved for production, their component subcontractors may not be so lucky.  If their component suppliers get shutdown then your factory will not be able to follow the normal production process and your product may get delayed as they are left scrambling to find a replacement.  This makes it more difficult to predict delivery lead times as these external factors may be out of their direct control.  

For example if you are manufacturing a mason jar and your glass factory passed inspection but their metal lid subcontractor gets shut down then your factory will have a hard time delivering your product on time as they will need to search for a replacement.  Remember you’re only as strong as your weakest link!

Best practice: Be proactive in communicating with your suppliers!  

It’s important understand that Chinese culture doesn’t encourage people to reveal bad news until it happens.  Often bad news is swept under the carpet until it absolutely has to be revealed.  So it pays for you to be proactive to communicate with your supplier and learn about and minimize the disruption to your supply chain.  

What if your factories are being affected now?  

“Our production scheduling is in total disarray and our suppliers literarily have no idea when they can re-start production.”

Case in point – A friend of mine who has 20+ years experience in China sourcing from a deep base of suppliers is facing a huge headache.  He sources from Chinese suppliers who’s products fall under one of the monitored industries and are based in the Shandong province.  Even though they are compliant, several of his suppliers have been shut down and they have not received any word about the next steps nor when production can resume.  This makes it next to impossible to plan purchase orders for the 4th quarter and pre-Chinese New Year period.  His company headquarters is giving him a lot heat for this.  What can he do?  

Going out of China

One solution is to go out of China.  Since my friend’s industry is one of the targeted ones in the new environmental policy regulations, he’s shifting his production to India where their production has not been impacted by environmental policies.  

Depending on your industry, some products can be manufactured in other countries such as India, Thailand, Vietnam, etc.  This will circumvent the problem until the the disruption passes.  Also a general rule of thumb, it’s a good idea to diversify your risk by not putting all your eggs in one basket in China.  

In summary, China can be a non-transparent place for doing business.  Social-economic and political events can and will affect your business here.  So it’s your responsibility to have a backup plan to reduce the impacts of these events on your supply chain.  Now would be a good time to talk to your suppliers to find out the extend of the problem and work out solutions.  And if you’re facing the impact of these problems head-on, it may be time to consider other countries so you don’t put all your eggs in one basket and have them all break with one sudden jolt.    

Have your suppliers been affected by the environmental audits in China?  If so, hit reply and let me know what happened and what you’re doing about it.  

-Gary

 

The true story of how a parking spot gave away a fake “factory boss”: China Sourcing Diaries

It was a brisk spring morning in Jiangsu province as we stepped off the bullet train arriving at the station. China has some of the most efficient transportation in the world with its trains that travel over 300km per hour (180 mph).  We arrived in the dusty town and a gregarious Chinese man named Mr. Chen with closely cropped hair welcomed us to his shiny black Audi.  In China having an Audi means a “big shot.”

In China, having an Audi means a “big shot”

The backstory is one of our clients was looking for help sourcing solar air conditioners from China.  There was a great opportunity in their marketplace with their plentiful sunshine and high energy costs.  Based on our research this was a new technology in China and there were only a handful of factories in China at the time.  One of our partners identified a potential supplier and suggested we visit.

So as Mr. Chen drove us to the factory, he bragged about the quality of his products, exports to Australia, and his remarkable factory.  I smiled and nodded as I listened on.  Once we arrived, he stopped the car in front of the factory and asked us to get off first.  Then I watched as he parked the car around the corner outside the complex.  We did as we were told and waited in front of the factory as he parked.

A few minutes later he returned and gave us a tour of the factory.  Walking through their workshop, I saw only electric air conditioners on the factory floor and none of the solar versions he claimed to manufacture.  Solar panels or other related components were nowhere to be found.  In fact there was no equipment nor any trace of anything solar-related that would leave me to believe that this factory manufactured solar products.

So I asked Mr. Chen about this.  He said that they received a large order of electric A/Cs, which they were busy producing to meet an upcoming delivery deadline.  Thus there were no solar units on the factory floor.  However, he claimed we could view them in the showroom.  We nodded and walked on.

Along the way as we were passing through a holding area we saw a man sitting on the floor tinkering with a stray solar air conditioning unit which was our target product.  My partners had a look at it and Mr. Chen gave us the spiel about how great it was.  But I felt that this product seemed out of place since there wasn’t equipment to manufacture or assemble it.  

Later Mr. Chen took us upstairs to view the showroom.  Along the way we passed the office with their staff.  Several people passed him by with no acknowledgement.  Not even a nod or smile.  Not exactly how a Chinese boss or “laoban” should be treated.  Nor were we introduced as potential clients.

I felt this was very strange because in Chinese business culture it’s customary that employees respect and acknowledge their “laoban” (or boss).  Chinese businesses are very hierarchical. To put it bluntly, factories are ruled by dictators who make all the decisions and control everything.  Nothing gets done and no decisions are made without the laoban’s approval.  

The “laoban” is in fact the emperor of a Chinese factory.


A Boss in the West (left) vs. a “Laoban” in China (right)

Moreover when clients visit they are considered guests.  Normally they’re warmly welcomed with an exchange of business cards, serving of tea, and small talk of where they’re from, what business they do, etc.  None of that here.  It felt cold.

Finally we went to the showroom.  Similar to the workshop we saw various models of electric ACs.  But tucked away in the back was a model of the alleged solar air conditioning unit that Mr. Chen claimed to manufacture.  He gave us an overview of it as we listened on.

Let me share you a dirty secret in this business.  Factories have a very loose definition of “samples.”  In fact it’s common that even if they DON’T manufacture a product themselves, sometimes they will take samples from other factories, other (prospective) client’s samples, or retail models from other companies and present them as their own.  Their thinking is that while they do not currently manufacture it, they could and this is “representative” of what they COULD do.  In my view this is optimistic thinking at best since manufacturing a new product is not so simple for a factory.  It involves many variables such as different raw materials, quality standards, testing, worker training, production & assembly, packaging, inspections, etc.  It’s not so easy as they would claim.

Nor do they feel it’s necessary to reveal this. Chinese business values tend to emphasize harmony and avoiding problems so they may conveniently not mention this fact.  So when offered a sample, DO NOT assume that they are currently manufacturing it.  You have to at least ask, if not have some investigative work done. Never assume anything!

After the meeting, Mr. Chen invited us to lunch, which is customary for a Chinese factory to offer to its prospective clients.  As we were served an elaborate course of appetizers, various main dishes including seafood, pork, beef, soup, noodles, etc.  He asked about our client’s background.  We explained the client’s strengths in their local marketplace as well as the favorable market conditions with plentiful sunlight and high energy costs.  As we asked him about his business, he boasted of having an Australian client who would place large orders blindly without even needing to visit the factory. I shuddered.

Later as we reviewed the visit, my partners asked me about my impression. Not only did the capabilities of the factory not match the product, the product also seemed out of place in the showroom.

Looking beneath the surface, employees didn’t show any respect or give any face to this alleged boss.  And the thing that seemed most out of place was the parking spot.  A laoban’s parking spot would never be around the block forcing him to spend time to make the unnecessary walk themselves.  It’s basically their birthright to have the prime parking spot with the shortest walk to the entrance RESERVED for them.  Always.  Rain or shine.  If you put the pieces together, this didn’t add up.  This man was not the factory owner!

So after presenting my case, we concluded he was a middleman sourcing the product from somewhere else pretending that this was his factory.  And in fact he didn’t want to reveal the real factory to us.  This lost our trust in him and we decided to proceed with another factory where in fact we witnessed the actual products being assembled and everything else adding up.

Long story short, lesson learned!  Even sourcing professionals can be fooled but if you know the warning signs and red flags, this will save you from the risk of getting scammed or at the minimum losing money to a middleman with questionable added value.

Finding a trustworthy supplier requires reviewing the product and the facts as well as reading between the lines.  Have you experienced anything like this when dealing with Chinese suppliers?  Let me know.

How to Win Q4 as an Amazon FBA seller: When to place your orders from China and ship them out so you don’t miss out on the holiday shopping season… Hint: Be prepared for exorbitant freight charges!

What’s the first thing that comes to mind when you think of the holidays? Maybe it’s the stress of visiting family and hosting relatives and friends. Or maybe it means being able to unwind and take some time off to go on vacation.  Or maybe it means it’s time to go shopping for some retail therapy.  

As online sellers, when we head into the fourth quarter or holiday shopping season a couple things come to mind.  

As a seller, going into the 4th quarter, I think of it as “WINNING TIME”.  According to Amazon’s quarterly sales reports, 4th quarter sales increase at least 30%!  

Notice a trend here?  Amazon Q4 sales revenue spikes about 30% or $8-$10 BILLION dollars every Q4! It truly is the “Most Wonderful Time of the Year”!

Amazon sales spike on average 30% in Q4 or $8-10 Billion dollars!  

So as the saying goes “As the tide rises all boats will rise.”  This means that by simply being a part of this action, there’s a great chance your sales will go up!

But in business as it is in sports, you don’t just jump into the 4th quarter without a game plan and expect to come out on top!  It’s not so simple…

So I’d like to share with you some best practices from the sourcing, purchasing, and logistics side so you can WIN your online sales 4th quarter whether you’re an Amazon FBA seller or an importer or wholesaler.  These are accumulated from my experiences as on ecommerce seller and sourcing products from China as well as my research and interviews from different experts.  

Best Practice 1: Make sure you have enough inventory in stock for the holiday sales spike.  

One rookie mistake that I often see is failing to anticipate the increased sales demand from Q4. I’ve made this mistake myself when starting out.  

Sure some sellers brag about selling out but when you sell out it’s actually NOT a good thing because you’re losing out on potential profits.  In other words, you’re leaving money on the table and your competitors are taking it from you. So the goal is to keep enough product in stock to capture all the potential sales you can.  

On the other hand you don’t want to keep too much inventory in stock either because that would tie up your cash in inventory.  If you don’t move your products fast enough you will incur Amazon’s long term storage fees as well as hurt your cash flow from having too much cash tied up in inventory.

How do you know how much inventory to keep in stock?  Depending on whether you’re an established seller or new seller there are two ways.  

First you can look at your past sales history.  For example if you’ve been selling for at least a few years you can refer to your Q4 2015 and Q4 2016 sales history as well as your sales history this year to forecast your sales.  I won’t get into too much detail here but having these past results can be a good indicator of the number of units you should keep in stock.  

As a general rule Amazon’s sales volume in Q4 increases about 30% so you can expect your product to experience a similar sales bump.  

Note, this doesn’t consider a changing marketplace as new competitors are coming in.  Also beware of product improvements.  For example if one of your competitors “one-ups” you on solving one of your market’s pain points, they are likely to take market share away from you.  

Word of caution, if you’re product is a seasonal product that has peak sales in the summer then you probably won’t get the same sales spike in Q4 unless it can be a great gift.  For example watermelon slicers that sell like hot cakes in June, July, and August will have slower sales in October, November, and December.  

A second way is to look at Google Trends.  This is especially useful if you’re a new seller of a certain product and don’t have the luxury of past sales numbers to refer to.  

The fancy term “big data” gets thrown around alot these days, but in a nutshell you can use Google Trends’ “interest over time” history to get an idea if a product will they a sales bump in the 4th quarter.  

For example if we ran a search for “gloves” on Google Trends we would find a chart that looks like this.  We can very clearly see that interest skyrockets in Q4 so we can assume that a sales spike would go hand-in-hand.

Google Trends tells us that interest for “Gloves” peaks every Q4 based on search history from the past 5 years. So expect more sales during the holidays!

Therefore analyzing your sales history and Google trends will help you understand how much inventory you should keep in stock for the holidays.  

But knowing how much product to order is only half the battle.  The next step is to decide…

When should I place my orders so my SKUs will be shipped and arrive in time for the holidays?

To answer this question we will need to work backwards.  First we need to figure what are the cutoff dates for your products to be delivered to Amazon’s Fulfillment Centers (or your 3rd party logistics warehouse) so that they can be delivered in time for the holidays. In other words, if you miss the cutoff dates, say goodbye to holiday sales!

Though Amazon has not yet released their cutoff dates for Q4 2017, we can use last year’s cutoff dates as a reference point.  

So to make sure that your inventory arrives in time for Black Friday, Cyber Monday, Christmas and the rest of the holiday shopping season here are the key dates.

NOTE: In 2017 here are the key holiday shopping dates:  

  • Nov 24: Black Friday
  • Nov 27: Cyber Monday
  • Dec 25: Christmas.

CASE 1: CUTOFF DATE FOR BLACK FRIDAY AND CYBER MONDAY IS NOV 7 (based on 2016 data):

This means that your inventory must arrive at Amazon’s FC for delivery by Black Friday and Cyber Monday (note: this is Amazon’s 2016 shipping deadline and I would assume a similar deadline this year)

If you were to ship by sea then I would aim to ship them at least 5 weeks beforehand.  This is assuming a 30 day delivery window, additional time customs clearance, and ground transportation and last mile delivery. If you are shipping to your own warehouse or 3rd party fulfillment center before moving the goods to Amazon’s FCs then I would allow for even more time.  

If shipping by air I would aim to ship them at least 2 weeks in advance or before Oct 26. This is assuming 5-10 day (or longer) delivery, customs clearance, etc.

CASE 2: CUTOFF DATE FOR CHRISTMAS DELIVERY IS DEC 2

If you don’t want the grinch to steal your Christmas or have your competitors take away all your sales, then make sure your inventory arrives at Amazon’s Fulfillment Centers (FCs) no later than Dec 2nd for delivery by Christmas (note: this is Amazon’s 2016 shipping deadline and I would assume a similar deadline this year).  This gives Amazon enough time to inbound your SKUs, sort them, and pick and pack them for delivery before Christmas.

This means that landing your shipment the week before Christmas won’t cut it.  Based on Amazon’s guidelines you will need to get the products to their warehouses more than 3 full weeks before Christmas to ensure delivery before Christmas.

Now that we know the deadlines for our products to arrive at Amazon’s FC’s the next question is…

When do we place our Q4 orders to our suppliers?

The simple answer is right now.  Here’s why:

Every year Chinese factories are slammed with increased orders leading from late summer all the way through the holidays until Chinese New Year.  This is their busiest time to year.

BEST PRACTICE: If your factory promised a lead time of 30 days in July, you’d be smart to check with them about their delivery times in Q4.  In my experience it’s not uncommon for delivery times to slow down to 45 days to even 60 days leading up to the holidays!  So be prepared for longer wait times for your order to ship in Q4.

This is because there may be a queue of orders already placed in front of yours.  First in, first out.  So the earlier you place your Purchase Order, the earlier place in line your shipment will be.  The early bird catches the worm!

Moreover delivery lead time is not only about the factory’s own production time.  They need time to source their raw materials, dyeing/printing the materials, as well as the cutting and sewing process.  All these are parts of the supply chain may be disrupted when the tide rises in Q4.  

To give you an insider’s look at the manufacturing process – you’re only as strong as your weakest link.  If your factory subcontracts the dyeing process and their dyeing mill is backlogged 2 weeks with a ton of orders, it doesn’t matter how fast your factory can pump out your products.  They have to wait until the dyeing mill is finished before they can proceed with production.  

So the key takeaways are to 1) Check factory lead times for Q4 and expect the worst (i.e. Murphy’s Law) and 2) place your orders early so you are not stuck trying to ship your product during peak periods.  

This leads to the next insight I’d like to share with you.

Expect Shipping costs to skyrocket in Q3 and Q4!

Just as leaves change color every fall, so do the PEAK PERIODS come every Q4 for freight forwarders.  This means that your shipping costs will INCREASE leading up to the holidays.  This includes both shipping by air and by sea.  

I’ve talked to several freight forwarders and logistics professionals and they all have warned me that “Peak Season should be pretty tough this year.”  

For ocean freight, the cost of shipping a 40’ full container load (FCL) from Shanghai to Los Angeles have already risen $300 per container since July!  

If you’re shipping smaller shipments of less than a container load (LCL) word on the street is to expect “25% price increase” during the peak shipping season in Q4.  This means to roughly about a $5 increase per CBM if you’re shipping less than a container load (LCL).  

To give you an idea of how cyclical the ocean freight peak season and slack seasons are, here’s a nifty chart from Freight Crunch.  


So the takeaway is this.  Be prepared to recalculate your margins in Q4 because shipping costs are going up.  

And not only that…

Shipping lead times in Q4 may become longer as well because logistics providers will be slammed with shipments before the holidays.

This means longer lead times.

CASE 3 – In Dec 2016 one of our fashion accessory products was ready for delivery.  We were already late for Q4.  This was a lightweight and compact item and we normally shipped it by Fedex International Economy which normally takes about 5-7 business days from China to the US.  However when we contacted Fedex in early Dec, we were surprised to find out that because of their huge shipment backlog, Fedex economy air needed a 20(!) day delivery lead time during the peak period of Dec 2016.  This was 4x longer than their standard 5-7 day delivery lead time!

So the takeaway is this – be prepared to eat higher shipping rates in Q4 if you’re late and still want to get your product to shelves in time for Christmas.  A 20-day delivery window shipping in Dec would have meant that our product would not be able to be sold and delivered to our customers before customers.  

Therefore we were forced to use the more expensive Express option to qualify for their 3-day delivery and make it in time for Christmas. We had to pay a 40% price premium!  Lesson learned… don’t wait until the last minute to ship!  

And if we look at Amazon’s fulfillment centers the lead time to inbound products is getting longer as well.  As of August 2017, seller support informed me that they can only honor a 14 day time window after the goods arrive at the Amazon fulfillment until they will be available for sale.

In summary, remember that Q4 is a golden opportunity to have huge sales for your business.  But don’t let the grinch steal your Christmas!  Make sure to place your purchase orders early and consider longer lead times as the entire supply chain is at peak capacity leading up to the holidays.  Also, check your margins to make sure you can absorb the higher freight costs during the peak period.  By doing this you will be a strong position to WIN Q4 for your business.

But wait… it’s not over yet.  The next big challenge is Chinese New Year.  Factories will get their turn to celebrate their holidays and shut down for up to a month in Q1.  Stay tuned for more updates…

Are you an advanced seller who’s selling on average at least $5,000 revenue per month?  If so, can you do me a favor and complete this short 5 min survey so I can better understand your challenges and how I can create content that best helps you?  Thank you!

-Gary

PS: Sharing is caring.  Who do you know that would benefit from this article?  Please forward it on!  

 

Getting EXW pricing versus FOB? Which is “better”?

Reader question – about getting EXW pricing versus FOB.  Is one “better” than the other?

 

Hi, I’m Julie and have been following the Million Dollar Case Study. Thank you for your information. During the webinar you shared a sample RFQ. At the end of the RFQ you had some questions. Question number one was for photos, specifications, and EXW Quotation. What does “EXW” stand for?  Thanks, Julie S

 

First let’s take a step back and look at the big picture why we are requesting quotations in the first place…

Če ste ljubitelj igralništva, potem ste zagotovo že slišali za različne casinoje po svetu. Vendar pa so casinoji v Sloveniji nekaj posebnega. Če razmišljate o tem, da bi obiskali kakšen od njih ali pa bi radi izkoristili možnosti, ki jih ponuja spletno igranje, potem je ta članek pravi za vas. V nadaljevanju bomo pregledali najbolj popularne casinoji v Sloveniji ter podrobno opisali spletno igralništvo in kaj morate vedeti preden se pridružite.
Casinoji v Sloveniji so postali zelo popularni med turisti in domačini. Povpraševanje po igralnih avtomatih in mizah za igre na srečo je ogromno.
Najbolj znani casinoji v Sloveniji so Casino Bled, Casino Portorož in Grand Casino Ljubljana. Vsi trije ponujajo obsežno izbiro iger na srečo ter vrhunsko zabavo za svoje goste. Če želite doživeti popoln večer v družbi prijateljev ali partnerja, potem so ti casinoji prava izbira.
Če pa iščete boljše možnosti za zmago, potem lahko poskusite s spletnim igranjem. Najboljše spletne igralnice v Sloveniji so CasinoSlovenija10, 888casino in Bet-at-home. Preden se pridružite katerikoli od teh spletnih igralnic, je pomembno, da preverite njihovo licenco in varnostne protokole.
Če želite biti prepričani, da boste igrali na varni strani, izberite spletno igralnico z licenco MGA ali UKGC.
Ko ste izbrali spletno igralnico, se lahko prijavite in začnete igrati. Večina casinojev ponuja široko paleto iger na srečo, kot so ruleta, blackjack, poker in igralni avtomati. Poleg tega pa imajo najboljši casinoji tudi različne promocije in bonuse za nove in obstoječe uporabnike. Bodite pozorni na pogoje in določila bonusov ter jih izkoristite le v primeru, če se vam zdi smiselno.

Az online kaszinózás egyre népszerűbbé válik világszerte. Az emberek kényelmesen játszhatnak otthonukban, és élvezhetik kedvenc játékaikat anélkül, hogy el kellene hagyniuk a házat. Azonban az online kaszinózás felvet bizonyos pénzügyi kihívásokat, például a biztonságos fizetési lehetőségek hiányát. Ezért szükség van olyan megoldásokra, mint a revolut casino.
A Revolut egy pénzügyi szolgáltató cég, amely forradalmasította a pénzügyeket. A revolut kártyákkal és alkalmazással bárki könnyen és gyorsan végezhet tranzakciókat bárhol a világon. Azt is lehetővé teszi, hogy az ügyfelek valuták között váltsák át a pénzt az aktuális árfolyamon.
A Revolut most bevezette új termékét – a Revolut Kaszinót -, amely lehetővé teszi az ügyfeleknek, hogy egyszerűen befizethessenek és kifizethessenek nyereményeiket az online kaszinókban. A Revolut Kaszinóval az ügyfeleknek nem kell aggódniuk az adatvédelem és a biztonság miatt. A Revolut szigorú biztonsági intézkedéseket alkalmaz, hogy megvédje az ügyfelek pénzét és adatait.
Az online kaszinókban való fizetési lehetőségek között a bankkártyák használata a legelterjedtebb. Azonban a bankkártyás tranzakcióknál fennáll annak a kockázata, hogy az ügyfél hitelkártya-információit ellopják. A Revolut kaszinó kiváló alternatívát jelent ezen problémák kezelésére. Az ügyfeleknek csak egy virtuális hitelkártya-számlát kell létrehozniuk az alkalmazásban, amelyen keresztül könnyen befizethetik vagy kifizethetik nyereményüket.
A Revolut Kaszinó további előnye, hogy lehetővé teszi az ügyfeleknek, hogy bármilyen valutában fizessenek. Ez segít elkerülni az átváltásokkal járó költségeket és veszteségeket. Az ügyfelek akár 29 különböző valutában is nyithatnak számlát a Revolutnál.
A Revolut Kaszinó használata egyszerű és gyors. Csak néhány perc alatt létrehozhatja számláját és virtuális hitelkártyáját az alkalmazásban. Az ügyfeleknek csak a szükséges adatokat kell megadniuk, és a Revolut ellenőrizni fogja az azonosságukat. Azt is lehetővé teszi, hogy az ügyfelek gyorsan befizethessék a számlájukat bankkártyával vagy átutalással.

Kasyna online to miejsce, w którym można znaleźć rozrywkę i szansę na wygraną. Jednak dla wielu graczy najważniejszym aspektem są szybkie wypłaty, które pozwalają cieszyć się zyskami bez czekania na przelew przez wiele dni. Dlatego też temat kasyn online oferujących szybkie wypłaty jest bardzo ważny dla wielu miłośników gier hazardowych. W tym artykule dowiesz się, co to są kasyna online z szybkimi wypłatami, jak stać się ekspertem w tego typu grach i co warto zrobić, aby mieć szanse na wysokie wygrane – https://pl.kasynopolska10.com/szybkie-wyplaty/.
Kasyna online oferujące szybkie wypłaty to takie, które przetwarzają żądania wypłat graczy bardzo szybko – często nawet w ciągu kilku godzin lub jednego dnia roboczego.
Takie podejście do obsługi klienta ma na celu przyciągnięcie nowych użytkowników oraz utrzymanie lojalności obecnych graczy. Kasyna te mają również dobrze opracowane systemy płatnicze, dzięki którym transakcje finansowe przebiegają sprawnie i bezpiecznie.
Aby stać się ekspertem w kasynach online oferujących szybkie wypłaty, warto przede wszystkim zacząć od poznania podstawowych zasad i strategii gier hazardowych. Dzięki temu będziesz miał większe szanse na wygraną oraz lepiej zrozumiesz mechanikę działania poszczególnych gier.
Warto także regularnie śledzić informacje na temat kasyn online, takie jak nowe bonusy czy promocje, aby w pełni wykorzystać swoje szanse na wygraną.
Aby mieć szanse na wygranie dużych sum pieniędzy w kasynach online o szybkich wypłatach, warto pamiętać o kilku ważnych zasadach. Po pierwsze, należy grać tylko w renomowanych kasynach, które mają dobre opinie i licencje potwierdzające ich legalność. Po drugie, trzeba uważać na swoje emocje i nie grać pod wpływem stresu lub złych nastrojów – to może prowadzić do podejmowania impulsywnych decyzji i strat finansowych. Po trzecie, warto korzystać z bonusów oferowanych przez kasyna online – ale trzeba dokładnie zapoznać się z warunkami ich otrzymania oraz obrotu.

 

EXW vs FOB
EXW vs FOB

The key question is whether the product will be shipped by air or by sea. If by air then most likely it will ship direct from the factory to the US. In this case you will want to request EXW means that the supplier will factor in only the cost to manufacture the product and have it ready for delivery at the factory.

EXW stands for Ex Works where the supplier is only responsible for making the products ready for delivery from their location.  Normally this is the factory.  And the buyer (you) are responsible for all transportation costs the rest of the way.  In other words to ship it from the factory to your destination.

On the other hand, if shipping by sea then we would request for FOB quotations, or free on board. This means that the supplier is responsible for manufacturing the product, moving it to the port, clearing customs, and getting it onto the boat.

In cases of FOB, the buyer is responsible for transportation costs the rest of the way from the boat to the final destination.

For example if we wanted to ship lightweight electronics from Shenzhen to our fulfillment warehouse in Los Angeles by AIR, then we would request EXW quotations.

If we wanted to ship heavy tables from Shenzhen to Los Angeles, we probably would ship them by SEA to save on freight costs and request FOB quotations.

Going back to the Jungle Scout case study I assumed that the towels will be small and lightweight enough to ship by air there I requested EXW quotations.

Here’s my answer to another reader who had a question about shipping to Germany.

https://www.dropbox.com/s/omnh2z7bxsvggja/Airshipping%20EXW%20DDP.m4a?dl=0 

I hope that helps!

Trump’s first meeting with Chinese President Xi Jinping… is the trade war truly over and what does it mean for your Amazon business?

President Trump hosted Chinese President Xi Jinping at Trump’s private residence in Florida last week and this marked the first time the two leaders have met.

While there were enormous expectations going into this first encounter between two of the most powerful leaders in the world, this was in fact an informal meeting and not an official state visit.  It was designed for the two men to get to know each other in a more informal and casual setting.  It was not at the White House but at Trump’s private residence Mar-a-Lago.

Trump and Xi in their first meeting in Florida April 2017
Trump and Xi in their first meeting in Florida April 2017

It did however begin to set the tone for US-China relations and trade going forward.  The main issues discussed were economics, trade, security, law enforcement, and cyber security.

What can we learn from this meeting as small business entrepreneurs and Amazon sellers who source product from China and sell into the US and other markets?  

First off, Trump definitely has China on his mind.  No past US president has met with his Chinese counterpart so early in his presidency.  In fact looking back while Clinton was president during a relatively strong period of Sino-US relations, Clinton didn’t meet with the Chinese President until year two of his presidency.

Trump meanwhile met with President Xi within his first several months of his presidency.  So clearly the US-China relationship is high on his list of priorities.

Secondly, from the Chinese perspective, China’s number one goal going into this meeting is to avoid a trade war and a major crisis with the US.  

As you may remember, during his campaign before taking office, Trump had made accusations of China stealing jobs, being a “currency manipulator”, and even “raping” the US.  Trump threatened a 45% import duty on all Chinese imports in Jan 2016.

So China would like to reset the dialogue between the two countries.  It would like to refocus from a zero-sum game to opening up new US-China dialogues on the issues at hand.

So what are the outcomes from the meeting?

The main takeaway is the agreement on the 100-day plan.  What will happen in the next 100 days?  Well it’s a plan to have a plan.

It does sound vague but the idea is for the US and China to develop an agenda in order to incrementally rebalance trade between the two countries.  This doesn’t necessarily mean to cut down trade from China but possibly to increase and allow more US imports to China.

Take for example US beef imports into China.  There has been talks of China lifting the ban but as of today, it still has not happened.  In my purely unscientific research while shopping in the supermarkets of Shanghai, I’ve searched high and low for a juicy American cut of rib-eye steak but no luck!!  The market is dominated by Australian beef which is very expensive (and not as good in my opinion).

But the important thing is that there will not be a trade war in the next 100 days.  I do not expect tariffs to be increasing substantially any time soon which is good news for Amazon sellers sourcing product from China.  You’re import costs will not be spiking in the near future so you’re safe for now.

Since taking office, Trump’s tone has softened on China as the US’s attention has been embroiled with problems North Korea and more recently in Syria and the Middle East.

In my opinion, the US cannot afford to go into a trade war in China right now given the other more immediate problems at hand. So this meeting will be a stepping stone to rebalance trade between the two countries and agree to begin working on an economic plan.

Moreover the second takeaway is the beginning of a relationship or “Guan Xi” between President Xi and President Trump.  In China building better relationships builds better business.  In fact without a relationship it’s next to impossible to get anything done.  This principle was clearly evident since the format of the meeting was a casual one and held at Trump’s private home (and not a formal one at the White House).

This is similar to business meetings in China held over the dinner table rather than a conference table.  The two sides must first get to know each other and learn who they are dealing with first before they can discuss any serious business.  And most often this is done in an informal setting.  Without this important step, I wouldn’t expect any substantial outcomes to be reached whether it’s negotiating business or personal relationships.

And Trump is clearly aware of importance of the relationship in the “Art of Making a Deal”.  In fact Trump has shown Xi and First Lady Peng tremendous American hospitality by inviting them to his residence.

Moreover, in a bit of “Sound of Music” diplomacy, First Granddaughter Arabella even sang a traditional Chinese song in Mandarin to President Xi and the First Lady during their visit.  Trump definitely knows Guan Xi!

First Granddaughter Anabella Trump singing in Mandarin to President Xi
First Granddaughter Arabella Trump singing in Mandarin to President Xi

After the meeting Xi has invited Trump to visit China which Trump has accepted.  And Trump feels that has developed a friendship with the Chinese leader.

Overall I feel positive from this initial meeting because it does set the right tone for a more constructive US-China relationship.

And perhaps more importantly, I don’t expect a trade war to breakout any time soon which is good news for everyone.

The Chinese have a saying: “After 100 days you can predict the next 1,000 days”.  We shall see as we move forward into this critical period in US-China relations and how it affects our businesses.

Webinar: The Good, the Bad, and the Ugly sides of Sourcing from China: How to find a trustworthy supplier, The Art of Alibaba, and how to negotiate pricing for your next product

I had the privilege of being invited to Jungle Scout’s Million Dollar Case Study with Greg Mercer to share sourcing best practices on how I would source their product. Here’s the replay in case you missed it.  We covered a ton of high value material on what to look for in a good supplier (and how to avoid the bad ones), how to use Alibaba, and how to negotiate pricing and payment terms.

I’m curious – what’s the #1 pain point you’re facing with sourcing right now? I’d like to help.

-Gary

Outline:

 

  • [07:00] Finding a trustworthy supplier is like dating.. how to be successful
  • [09:44] What would a supplier look for in a buyer?
  • [10:32] Gary’s surprised that nobody mentions one of the key factors that instantly gets the attention of suppliers
  • [13:25] The 3 parts to a Request for Quotation (RFQ)
  • [15:07] Gary breaks down a RFQ for baby towels
  • [18:35] How to evaluate suppliers and responses… 80/20 rule!
  • [20:00] Where do I find suppliers?
  • [20:45] The Art of Alibaba
  • [21:15] The Yin and the Yang of a Good Supplier.. Hard Skills balanced with Soft Skills
  • [22:36] What to look for in a good supplier on Alibaba
  • [25:33] Signs of a bad supplier fit
  • [30:30] How to negotiate pricing – Gary and Greg’s views
  • [33:45] Walkthrough of how to use Alibaba to find baby towels
  • [39:23] Gary finds a trading company on Alibaba
  • [44:50] The common thread test
  • [46:00] What are the top things Gary looks for in a supplier on Alibaba?
  • [48:30] Don’t believe what you see – Pictures online and even samples in the showroom don’t necessarily reflect the supplier’s manufacturing capabilities
  • [50:47] How to track responses from suppliers
  • [52:00] Communications best practices – Alibaba, email, WeChat
  • [53:50] How to reduce risks when paying suppliers – PayPal and Bank Transfer (T/T)
  • [56:33] How to negotiate payment terms
  • [61:00] How many responses would you expect if you contacted 20 suppliers on Alibaba
  • [62:28] How to arrange Quality Control – Order inspections

UPDATE: Get your sourcing bonus pack and signup for my free newsletter here