Are you frustrated sourcing from China? Do you find communicating with Chinese suppliers daunting? As Amazon FBA and PL sellers, online sellers, and small business importers you know that time is at a premium. By applying the 80/20 rule, I will teach you how to effectively and efficiently source from China. Learn best practices from the pros, avoid common mistakes, and find out what NOT to do so you can build a 7-figure business
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.
I know that there has been a lot of fear and concern about Coronavirus around the world. First off I hope you and your families are staying safe and healthy during these times.
Secondly, I’d like to share this first-hand experience from a Chinese factory that has recently reopened following the Coronavirus shutdown in China.
My friend Jared Haw runs a factory in Shenzhen, China and they were one of the earliest factories to reopen in early February. Jared wrote this piece about what it was like from a factory’s perspective to try to resume business while keeping 100% of their employees safe. I think it’s a very fascinating look at how factories are dealing with the situation from both a business as well as a human perspective.
Please see his article below. Also, I’m curious how has your business been affected by the Coronavirus?
Good luck and stay safe,
Gary
The Coronavirus from the eyes of a factory
The outbreak of the coronavirus has been out for a couple of months. However, the uncertainties of what will develop next are still unknown. One main uncertainty is how the coronavirus will be affecting the supply chain. If the supply chain in China will be disrupted, how should you proceed?
Let’s start with the good news, the number of people being affected by the coronavirus in China is decreasing. You can see less and less people getting infected which can signal the worst is over. As a result, more factories are starting to open which theoretically should mean the supply chain will be improved.
With having a factory, I would like to share our experiences of what we have done and where we are going in the next few months. After the Chinese New Year, we were supposed to open up on February 3rd. However during the holiday, China was on lockdown and people were not able to move freely like they were before. This meant delaying the re-opening of the factory.
Luckily, due to our reputation and being able to quickly evolve to the tight safety standards, we were the first factory to be granted permission for the local government to open. We officially re-opened our doors on February 10th, about one month ago.
Being able to open weeks and months before everyone was very humbling but it was also a huge responsibility to keep 100% of our employees safe. If one of our workers were infected by the virus our factory would be shut down and perhaps it would still be shut down.
During this time, we have taken drastic steps to keep our 350+ workers safe. For an example, we had to re-organize our offices, meeting rooms and production lines to ensure that no one was within 1.5 yards from each other. Also, how people move around and transported parts had to be re-designed. We had to limit the amount of people in the warehouse and also limit the number of people on the elevators to just one! We even had to ensure that appropriate space was given going up and down the stairs. If you have been to China, you know that lines aren’t the norm, huddling around elevator doors and pushing is very normal, but not now.
Opening up our doors early was a huge success. However, as a contract manufacturer that develops and manufactures some of the most complex projects in the world, there was very little we could do. Since we don’t have all the production lines for all the different materials, we are dependent on the support of our suppliers to provide us with parts and subcomponents. If we don’t have all of those subcomponents, we can’t assemble. If we can’t assemble, we can’t ship. If we can’t ship, you can’t sell.
As usual, before Chinese New Year, we built up inventory because we knew that our suppliers would be delayed and that it was healthy for us to have some inventory so we could assemble without our suppliers producing parts. However, no one, especially us, expected factories in the manufacturing hub of the world to be shut down for more than a month.
Most of our clients have a force majeure clause in our contract which will take into account if something terrible happens to us, such as a fire. But no one asks what would happen if our facility and 100% of your suppliers also have a fire, or a virus.
During a time like this, there is not much anyone can really do. I guess this will verify whether or not you did an acceptable job of auditing your supplier.
If you are selling a commoditized item with little tooling investment, the correct thing is always to diversify. This is the right thing to do anyways as one factory might get shut down for failing to comply with environmental standards, lose critical workers, etc… For this case, you might have one factory open earlier which can start producing more orders for you.
However, this is not the case if your product is a bit more complex and requires a larger investment for tooling. If you have a unique product that requires multiple tools, diversifying your supply chain might not make sense due to the investment.
To proceed, you will need to figure out when it makes sense to open up production with more than one factory. If you have not scaled up your sales, investing into more tools won’t make sense. However, if you have scaled up sales, investing into additional tools at different factories can make more sense.
Mostly everyone that does not keep a lot of inventory is getting close to being out of stock or are already out of stock for their product. The question now turns into, when can I get products and can we produce a little more to take into account for the lost time?
The good news is that most factories do not operate at 100% efficiency. If you have been to an average Chinese supplier, you will see why. This means that scale up is quite simple to achieve if the owners have a little understanding of management and planning.
Since I can’t vouch for all suppliers, I’ll talk specifically about us. My factory is known for scaling up production. For an example, we moved into a new factory in August of 2019 that was 5x larger than our old factory. We are also buying machines once or twice a quarter. We understand that when we are nearing full optimization, we need to invest into facilities, production lines, talent and more to reach future demand. This is why right now we have already 100% guaranteed each of our customers that we will easily be able to ship out their 2020 sales forecasts.
This will not destroy the supply chain, it’s just a minor bump in the road. You can use this time to reflect on whether or not your supply chain needs to be re-analyzed. The top suppliers should be doing anything to get up and running again. If you feel like your supplier is not going that extra mile then it might be a good time to start from scratch and speak with some others.
If you’re sourcing products from China then the Coronavirus or COVID-19 is affecting your business. As you’ve seen on the news the Coronavirus has been declared “a global emergency” by the World Health Organization as the outbreak continues to spread in and outside of China.
There are over 2,200 deaths and 76,000 confirmed cases reported as of now.
Where is the impact?
As you can see from this map illustrating the effect of the Coronavirus, it is mostly concentrated in China (Source: Johns Hopkins University).
The city of Wuhan in the Hubei province is where the disease began and entire cities have been locked down with people holed up in their homes.
Which parts of the supply chain have been affected?
Factories
Originally scheduled to close for Chinese New Year in late Jan and return to work in early/mid-Febuary, now given the Coronavirus scare, factories are waiting for government approval before they can reopen.
Some factories in southern China have allegedly already gotten the go-ahead to reopen but they face a new challenge. For factories to resume production, they need to instill safety precautions in the workplace to prevent the spread of the Coronavirus.
According to my sources, the main issue is the lack of MASKS. There is already a severe shortage of masks to protect against the spread of infection in China. So if factories were to reopen they would need to make sure to have a stock of masks to protect their workers who would work in proximity to others and work in an enclosed area.
Another challenge is that most factory workers are hesitant to return to work and risk getting infected. This is because the majority of factory workers in China returned to their hometowns during the Chinese new year. And their hometowns normally are not the same town as where the factory is located.
In order for the worker to return to the factory, they must brave the trip which would entail traveling to a crowded train station, sitting in a train car most likely for a 10-20 hour trip before they can get to the factory. All of these instances may risk infection.
Moreover, even if they do arrive in the town of the factory, they may risk being quarantined for up to 14 days. Government policy is not transparent when it comes to this.
All in all, this means even when factories get approval to resume production, they will face a labor shortage in that most workers are hesitant to return to work, especially during these uncertain times.
This does not mean that factories will be totally offline. In fact sales staff who can work remotely and not needed to physically be in the factory are likely to answer emails and phone calls from clients. This means that you can still get quotations, get questions answered and such but just not begin production until things resume some semblance of normalcy.
Logistics and Shipping
One of the commonly overlooked parts of the supply chain is trucking or moving goods from the factory to the Port. As of mid-February, freight forwarding and shipping companies have faced a huge headache in the lack of truckers that are available to move finished goods from the factory to the port where they can be loaded onto an ocean vessel.
This means that even if your products are finished at the factory, there may be delays due to the lack of truckers to deliver these products to the port.
So this is one of the weakest links in the supply chain as of now.
What can you do as an ecommerce seller?
I recommend if you’re sourcing from China to stay in constant communications with your suppliers to be aware when they will be able to resume production.
Also, it’s a good idea to ask about shipping schedules and how much of a delay they would expect.
In addition, I’d be curious how things are going in their hometowns or factory towns because what we hear on the news may not be accurate as getting an actual on the ground perspective.
If you’re just getting started, even though factories haven’t resumed production yet, it still is possible to begin the sourcing process of requesting quotations and learning more about your suppliers and doing the due diligence that doesn’t involve physically being in the factory or having the factory operating.
This way once things resume you will hit the ground running to quickly get back on track.
The short answer is nobody knows. The closest scenario that we’ve seen in recent years was the SARS epidemic in 2003. I was living in Shanghai at the time and witnessed firsthand how a megacity of over 20 million people became a ghost town seemingly overnight. For several months people were afraid to leave their homes, businesses took a “time-out” for safety reasons, and basically the whole economy stopped for several months.
However, once the virus was under control, people were eager to resume their normal lives, business picked up quickly and with much vigor.
Fast forward to 2020, optimistically speaking if the virus can be controlled in the next month or so, then things could factories could be back online in the next few weeks.
On the other hand, if the outbreak continues then we will have to wait and see.
We have already seen numerous trade shows canceled (in Europe) or postponed.
In my opinion, we will have a clearer picture in the next few weeks as workers travel from their hometowns back to the locations where they work. This migration of hundreds of millions of people could trigger another spike of infections or it under control OR it could be the confidence boost China needs to restart its economy and day to day life for its people.
In any case, the best we can do now is to prepare what we can and wait and see.
I’m curious if you’re sourcing from China, how have you and your business been affected by the Coronavirus? What’s your plan?
Hit reply and let me know!
Stay safe everyone!
-Gary
PS: TLDR? Here’s a short video I shot summarizing my thoughts about the effect of the Coronavirus on sourcing from China
“You are the average of the 5 people you spend the most time with” – Jim Rohn.
Taking this quote to heart, I wanted to learn from successful Amazon sellers and ecommerce experts how they built million-dollar businesses. What I learned was surprising at times and yet commonsensical at other times.
At the end of the day, these successful entrepreneurs aren’t superhuman. In most cases, they are just like you and me.
Yet they had certain common threads running through them in the habits and mindsets they built, the blueprints they created to scale their businesses, the marketing and branding strategies they implemented, the special attention they paid to profitability, and the ways they built up their businesses to sell them.
If you haven’t already, you can watch the full interviews at the 2020 7 Figure Seller Summit where we deconstruct each of these elements from multiple perspectives from 7 Figure Sellers and E-commerce experts. Not only do we learn their best practices and benchmarks for successes, but we also learn from the mistakes they made along the way and what we can do to avoid them.
Here’s a summary of the top 10 things I learned after interviewing this amazing group.
#1 Successful Entrepreneurs Get Around Excuses
One of the sure things in running a business is that you WILL face problems, challenges, and setbacks. 100%. No doubt about it.
What sets these 7 Figure Sellers apart is that when faced with trials and tribulations is that they found ways to get around these “excuses”. They did not throw in the towel when hit with these problems that may cause some people to fail and give up.
Case in point, 7 Figure Seller Chris Davey, shared that it was a pain in the butt to deal with European VAT (Value Added Tax) and the bureaucracy and administrative work it entails. He spends dozens of hours if not more on fulfilling all of these cumbersome requirements so that he can legally sell on Amazon European marketplaces. Some people may have given up if they faced these challenges and made the excuse that it’s not worth it or that they don’t know what to do but Chris was determined to get around these excuses and find a way to get it done.
And the main takeaway here is that he sees these challenges as barriers that keep out his competitors! Especially competitors from countries like China where he feels they probably aren’t willing to go through this process. So this means MORE BUSINESS FOR HIM!
Furthermore, Nick Katz, a 7 Figure Seller that sells in Amazon Japan and Europe, revealed that you don’t necessarily need to set foot in a country to sell there. To learn about the cultural differences in Japan for example, Nick used an example of Japanese kitchens which are designed differently from Western-styled kitchens (smaller size, different types of appliances, etc.). He shared that rather than flying to Japan to see these kitchens in person, you can learn what a Japanese kitchen looks like by searching on Youtube!
There are more examples than I have room to list and you can view the full sessions at the 7FSS but takeaway #1 is that successful entrepreneurs find a way around excuses!
They always find a way to get things done.
#2 Get off of Amazon to find profitable products
What may have worked in 2016 to rank and sell on Amazon doesn’t work as well today.
The old way of ONLY relying on research tools to come up with product ideas doesn’t work the same when millions of sellers are using the same research tools and same methodology.
As the saying goes:
If you start out from the same place as everyone else, you end up in the same place as everyone else.
What may look like a profitable product opportunity now can be a flooded market 3-4 months later when the hundreds of other competitors using the same tools, the same criteria as you are sourcing the same product and shipping them to Amazon’s warehouses.
According to 7 Figure Seller Tim Jordan, looking on Amazon alone can lead to saturated niches. Now Tim uses external sites such as Pinterest and Cratejoy to find profitable product ideas and keywords.
Tim loves subscription sites such as Cratejoy because they source new and trending products that can be months or years ahead of mainstream demand found on Amazon. They are early in the product life cycle and if you get it on this then you are able to capitalize on the demand before everyone else.
After getting these ideas Tim uses research tools such as Helium 10 to check keyword search volume to make product decisions. Even though there is early demand for these products, the products are not there yet on Amazon.
Note that he does not start out on Amazon like everyone else because that means that he will be stuck looking at saturated niches.
Similarly, Chris Davey uses non-Amazon sites such as Etsy in his product niches to find out what customers are searching for to gauge interest and product demand.
Not only that, he also uses Sub-Reddits to get feedback on new product designs… before he manufactures them. This is akin to the Lean Startup methodology’s Minimum Viable Product principle where you invest in the minimum amount of time and capital in a hypothetical product in order to test it. If you can validate it using substantive user feedback without committing to thousands of dollars in a purchase order and months to manufacture it in China and ship it, then you are shortcutting this process and taking a lot of risk out of the equation.
Moreover, these million-dollar sellers are not just sitting in front of their laptops or phones to find products. They GET OFF THEIR BUTTS to find products.
Nick Katz says that every time he travels and boards a train to Tokyo, he spots at least one new product idea just observing other people.
Tim Jordan finds endless new product ideas from trade shows such as the Yiwu Marketplace in China and the Delhi Fair in India.
Speaking of the Delhi Fair, if you want to fast-track your sourcing from India, I highly recommend the India Sourcing Trip organized by Meghla Bhardwaj. I’ve attended this trip and it really helped fast track my sourcing from India. I was able to find several new product ideas that I’m sourcing now. India Sourcing Trip is a sponsor of the 7 Figure Seller Summit and you can find out more details here.
#3 Apply the 80/20 rule to save time and increase profits
One of the biggest pains entrepreneurs face is the lack of time.
That’s why I was so shocked when I interviewed Jason Vander Griendt, to learn that even though he runs a million-dollar one-person business, he’s NOT busy all the time!
He shared that he applies the 80/20 rule to decide on what tasks to work on. More specifically, he follows Steven Covey’s 7 Habits of successful people and he cranks out the Non-urgent, Important tasks – this way he doesn’t give them a chance to get bigger. And this saves him time later.
I also found the 7 Figure sellers apply the 80/20 Rule to work SMART to gain more profits.
Big Profit Formula = Small Work x Big Smarts
Brandon Dupsky built a one million dollar, one person business, selling one product, and working one hour per day by applying this Big Profits formula.
Brandon focuses on the SMARTS and tasks that MAKE money and outsource the tasks that are moving money.
For example he focuses on tasks such as creating videos featuring himself and his children showing customers how to use their products which help boost his sales and his brand
I found that 7 Figure Amazon sellers Alex and Jerry Mills focus on launching new products and optimizing PPC campaigns and outsourcing the rest of their work to free up their time
In other words, they outsource the other tasks that are moving money so they can focus on the SMART tasks that are making money and creating Big profits.
Remember Big Profit = Small Work x Big Smarts
This leads us to the next point
#4 Build a superstar team
When I was traveling in Chiang Mai Thailand I met Nate Ginsburg, a 7 Figure Seller, who’s a digital nomad who spends much of his time traveling Southeast Asia, sold his Amazon business for nearly a million dollars.
When I asked him how he built his business to sell it for nearly 7 Figures, he said it was because of his superstar team. He couldn’t have done it himself.
He hired for his weaknesses. Nate is an ideas person and not so detail-oriented so he hired people to build a team that was detail-oriented to fill in those gaps to make his business stronger.
I wanted to dig deeper into learning the benefits of working with a superstar team and learned that your team not only supports you but you can learn valuable information from them.
For example, CJ Rosenbaum, who runs a successful law firm to help Amazon sellers protect their brands and get their accounts back from suspensions, meets with his team every day to learn what’s working and what’s not because they are interfacing with customers. CJ’s team is on the frontline with customers everyday so they know the customers’ key pain points and goals. This valuable information helps CJ tailor his services to meet their demands and grow his business.
One of the struggles with running a team is to motivate them to perform better. To build a strong relationship with his remote team, Mike Jackness visits his team of virtual assistants in the Philippines every year and spends time with them in person. He works with them in the same office and spends time socializing with them outside the office over meals, karaoke, and team building activities.
Similarly, Jason Vander Griendt visits his team in Europe and even goes to celebrate the birth of their children! One of the beautifies of running an online business is that James is able to make a trip out of it and runs his business while traveling.
#5 Building a brand is more critical than ever to rank products, get reviews, and sell your business for a higher multiple
Building a brand is more and more important now given the increased competition and the fact that Amazon gives more weight to external traffic that drives sales.
Dave Huss has spent over $400k on Facebook ads for his own ecommerce businesses and he works with a number of 7 and 8 Figure Ecommerce sellers to rank their products on page 1 on Amazon. In Dave’s experience, he shared that building an audience or list on Facebook is like bringing a gun to a knife fight. You can launch to that list and rank new products on page 1 of Amazon.
Also you can use your list to get reviews in a “white hat” way that is compliant with Amazon Terms of Service.
Chris Davey shares that his Brand is a roadmap that helps him decide what products to launch to market. He can map out his product portfolio based on what products would complement his brand and what products to avoid.
Having a tight brand of products helps you get a higher multiple if you decide to sell your business according to Coran Woodmass, the FBA broker who helps Amazon sellers exit for 7 and 8 figures. He says that this is in contrast to having a “hero product” that generates the lion’s share of sales and some other minor products that trickle.
Takeaway: Build a brand to beat your competitors and sell for a higher multiple
#6 Keywords for PPC campaigns – need to balance data with common sense so you don’t pay the “idiot tax”
When it comes to Amazon Sponsored Search or PPPC, many of you including myself are struggling to run profitable PPC campaigns.
Enter Stefano Starkel – a 7 Figure Amazon seller and founder of ZonTools. Stefano shared that in the initial 6-12 months of running a PPC campaign he aims to only breakeven. The goal is to mine valuable Keyword data from Amazon for search terms that convert. The reason in terms of profitability is the lack of market data and that Amazon is a “pay to play” game. The more you pay in PPC, the better the ranking of your product. Only after this initial 6-12 month period will he decide whether to shift the aim from breakeven to profitability.
Furthermore, when it comes to keyword selection he recommends using your brain and not just relying on a formula based on the number of clicks, conversion rate, etc. He says that every week you need to download your search term report and manually review each keyword to decide if it is relevant or not.
In other words, focusing on “F* yeah” keywords that make sense when people search for your product rather than diluting your budget across less relevant keywords with low conversion rates… and wasting your money and dragging down your CR at the same time
David Bryant agrees and when I interviewed him on how he increases his profitability in his business, he shared that he cuts out 80% of potential keywords and focuses on 2-3 keywords for his PPC campaigns to get higher ROI.
Takeaway: 80/20 rule focuses on the most relevant or “F* yeah” search terms by using your brain to decide whether they are relevant or not.
#7 Whatever gets measured gets managed
Interviewing these 7 Figure sellers, the #1 quote that was repeated over and over again is Peter Drucker’s quote “Whatever gets measured gets managed”.
Chris Davey’s products have over a 30% margin and he says that you should ask yourself if your product has enough margin for PPC? If so then you can afford to outspend your competition and buy your way to the top. The key is he knows his numbers!
Chris Rawlings shared that now he gets very granular when launching a new product. Everyday he and his team are tracking all the metrics in a 35 day honeymoon period – How many rebates are given out, how reviews are given out, sales numbers, etc.
Robyn Johnson also tightly tracks her Amazon product Conversion Rates. Every week she pulls her Amazon session reports and studies to learn what’s working well and what’s not.
And you can automate this process by using tools such as SellerBoard to track sales and SentryKit to track keyword ranking and monitor your listings to save you tons of time.
John Cavendish shared that when selling internationally keep an eye on your Amazon fees to bring your international sales revenue back to your home country and home currency.
In fact, I made this mistake the first year I sold internationally when I used Amazon’s default currency exchange and money transfer service. I mistakenly thought that they would be a good option and later discovered that I had wasted thousands of dollars in the exchange rate and money transfer fees paid to Amazon. Amazon was charging up to 3.9% in fees!
If I were to give myself advice when starting to sell internationally, I would tell myself to use a payment transfer service like Ping Pong to lower these fees from 3.9% to 1% or lower.
I’d like to take this chance to thank our sponsors Ping Pong. As you scale your business if you’re selling internationally and need to bring your payments back to your home currency, OR if you’re paying your suppliers abroad in China or India, or if you need to pay for VAT, then Ping Pong offers very competitive rates and you’ll save thousands of dollars compared to using Amazon’s own currency exchange and money wire services. Visit Ping Pong to learn more.
#8 Split Test ideas cheaply and quickly
Nowadays when you want to validate a product idea, rather than committing to a purchase order with a foreign supplier for thousands of dollars and months waiting for it to arrive – you can shortcut this process by testing it quickly and cheaply using online tools.
Jason Vander Griendt registers for a domain cheaply on Godaddy to build a simple website. He then drives about 100 people to the page using FB ads to see the conversion rate to validate his idea whether it’s worth pursuing or not.
Split testing and Pickfu especially is one of the tools of titans that ecommerce sellers like Mike Jackness and Richard Ren use to rapidly test their product images, copy, variations, packaging, and more. I’d like to take a moment to introduce and thank our sponsor Pickfu.
You can run a poll and get up 50 replies and comments for $50 in as little as 15 minutes. This can help you decide based on actual customer data which color variation to choose, what’s the best image or infographic that will increase your conversion rate on Amazon product listings, and which type of packaging resonates best with your audience so you can get a better unboxing experience and better reviews… before having to commit to a purchase order with your supplier for thousands of dollars.
So Test drive it today as PickFu is offering a 50% off discount for running your first poll! Check them out at www.pickfu.com
Anna Hill who’s a CPA who specializes in helping Ecommerce sellers with their accounting says that the biggest mistake sellers can make is trying to grow their business only by increasing sales
Top-line revenue doesn’t necessarily mean you’re profitable. In fact quite the contrary. Some 7 figure sellers she works with are actually in the RED – they are not making any profits but taking a loss. So you definitely want to KNOW YOUR NUMBERS
Nate Ginsburg says that the 80/20 rule doesn’t apply here. He recommends hiring a bookkeeper (can be part time) to track your finances and to put together a Profit and Loss Statement (P&L) and balance sheet.
Brandon Dupsky agrees and he reviews his profitability dashboard every day. This way he knows exactly how much profit is made in every transaction. It also helps him recognize the product life cycle as the data will tell him if a product is shifting from a growing product, to mature product, to declining product.
And knowing your numbers is one of the most important aspects if you want to sell your business someday. Dave Bryant shares that when he sold his business the business value is based on PROFITS, not on revenue. By cutting his expenses he was able to significantly add tens of thousands of dollars to his business’ selling price.
Takeaway: Know your numbers so you can profitably scale your business and sell it – the 80/20 Rule doesn’t apply here!
#10 Selling a business – need to be smart to get a higher multiple
If you were to mention that you wanted to sell an Amazon business back in 2015 or 2016 people probably thought you were crazy. Who in their right mind would buy an Amazon business?
But now the landscape has shifted significantly. More and more Amazon businesses are now considered a legitimate investment vehicle as more investors are getting in on the action from retirees to institutional investors.
But there is one thing that you might not be aware of and this is a big problem if you’re thinking of exiting your Amazon business.
As of today, there is an abundance of Amazon businesses on the market according to Coran Woodmass the FBA broker.
AND there’s only a 23% sell-through rate. That means that less than one in four Amazon businesses that go to market are actually sold.
In other words, there are more sellers than buyers on the market today.
So what can you do to increase your chances of selling and to get a higher multiple? Besides Coran, I asked Mike Michelini who works on the buy-side at Alpha Rock as well as Mike Jackness and Nate Ginsburg who each sold his Amazon business for 7 Figures respectively.
First, you need a tightly focused brand portfolio of products. Not just a hero product and some scattered lesser products. The products should be appealing to a common target audience and the products should complement each other.
Next, buyers like to see Net profit margins of 30% or higher. Thin margins are not attractive to buyers and may cause your business to be skipped over by potential buyers.
In addition, buyers like to see diversification of sales away from Amazon – at least 30% – so it’s less risky for them. Don’t have all your eggs in one basket. This can be in the form of selling on different platforms such selling on your own site, Walmart, etc or selling in different marketplaces such as Europe.
Finally, give them something that they can improve on. By having some upside to your business that the buyer can take action on, this will increase your chances of selling your business and increasing your multiple according to Mike Michelini.
For example you may have a few more vetted products that you haven’t been able to develop because of lack of cash flow. But the buyer can come in and get these products manufactured and sold to immediately boost sales.
Takeaway: it’s a buyers market now so make sure to have a tightly focused brand of products, have net margins above 30%, diversify your sales away from Amazon, and give the buyer some upside to increase your chance of selling and to boost your multiple.
In conclusion, building a 7 Figure Ecommerce or Amazon business takes the right mindset, the right strategies to scale, to build a brand and market it effectively, and to know your numbers and profitability so you can ultimately look to sell your business if you want to.
These are my personal top 10 takeaways and they are only the tip of the iceberg from valuable knowledge and practical experience in the 20+ interviews I had with these top ecommerce entrepreneurs. To learn more how you can view the interviews and to get a free 7 Figure Seller Playbook PDF visit the 7 Figure Seller Summit here.
I just got this warning this morning in my email inbox.
The WHO has declared the outbreak a “Public Health Emergency of International Concern”.
My family and I traveled through Hong Kong this week and everyone on the streets, subways, and airports were nervous and wearing breathing masks. And masks were sold out everywhere.
This is fearful time and a time of uncertainty but this is what we know so far. The Chinese New Year Holidays have been extended.
Traditionally I recommend that you planned your suppliers to be closed for up to a month for Chinese new year. But this is uncharted territory things can last a lot longer depending on how the virus plays out. If the outbreak continues, look for the return to be postponed.
And I wouldn’t doubt that China has the ability to do this. For example in China, they’ve closed down the city of Wuhan with over 11 million people the size of Chicago! The streets are empty with trains stopped, planes grounded, and roads closed.
In HK and China the public schools had their holidays officially extended as well.
Factories and companies in Shanghai are mandated to continue closures until Feb 9th (for now).
So the short answer is nobody knows when factories can expect to come back.
At the same time, one of the number one mistakes sellers make according to the 7 Figure Seller Summit is running out of stock. Not only do you lose thousands of dollars in your business by not having any inventory to sell, you are also hurting your chances of selling your business at a higher value because you are leaving money on the table and less profit.
Due to the virus in China my product is not available at the moment… Do you have any suggestions on websites alternative to Alibaba for sourcing from India, Pakistan, SEA, Korea and Japan?
Smart businesses have a backup plan including sourcing from other countries such as India Vietnam etc. as well as accurate inventory forecast and a backup stock to account for these types of uncertainties.
Global Sources offers limited listings for suppliers outside of China in several of those countries. But their coverage is no means as complete as Alibaba is for China.
Unfortunately in my experience, Indian suppliers are not well represented on Alibaba. In an informal poll of 50 Indian suppliers, I met in Delhi, when I asked only about 4 of them were listed on Alibaba. The way to meet them is to visit India and the Delhi Fair for example.
This week I’d like to answer some reader questions, a heatmap of China and Southeast Asian countries GDP growth so you can see which countries may be benefiting from the trade war, as well as a chance to meet me in Bangkok next week.
Reader Questions
Do you think it’s still possible to find off-the-shelf products and bring them to the US market? I have actually customised most of the products that I sell or have sold in the past but I was thinking about shifting my strategy more towards selling pre-existing products without customising. Shorter lead time and less time and capital invested being the obvious reasons. This of course most likely requires searching in places where the big masses are not.
-Antii
Hi Antii,
It’s getting harder and harder to sell off-the-shelf products and bring them to the US market to sell on Amazon. The main reason is the competition. Many many sellers from all over the world (including Chinese sellers) have made taking a me-too product without any modifications and selling it on Amazon extremely difficult.
In the past brands like YETI were able to do this with products like their insulated mugs which they sourced from Yiwu. But they have the right marketing team to support them. And the landscape has changed as this was probably at a time when there weren’t over a million new amazon sellers joining the game every year.
That being said if you are able to source off-the-shelf products from places where most competitors are NOT looking that this is still a viable opportunity.
For example at the Delhi Fair, I identified numerous products with great potential and are not easily found on Alibaba or in China – lower level of competition.
Hope that helps!
Gary
1) How should I trust to pay online wither to Alibaba or any other known website (which might not be known for us in Middle East)? And what if they delayed in delivery after the payment or what if it a fraud factory? I mean what we should keep in our mind before placing the order and pay.
2) I will be attending my first visit to china for the canton fair and I will buy really small amount of varies goods, as am just staring not yet aware our market requirement, so how should I trust the export agencies who will ship my goods to Dubai (factory will not deliver I think, coz i think they don’t deal much with small quantities order)?
So what if they (Agencies) have fake license and they disappear with goods and money? And I will be in Dubai then how to follow up : $ .so what do you advice on this?
I know business is always risky but I believe with some expert advice we can reduce that.
Thanks and appreciate your time reading this.
Latifa /Dubai
Hi Latifa,
1) Alibaba offers trade assurance as a way of protecting the buyer.
Also, it’s smart to negotiate payment terms so you have leverage in case anything happens to your shipment.
2) I would due some due diligence on the trading company before anything changes hands. Ask for client referrals and speak with them.
Ask them to visit their offices and showroom to see if it fits what they are claiming.
Also you may consider hiring a 3rd party inspection agency like QIMA to research this business.
Hope that helps!
Gary
2018 GDP Heatmap of China and Southeast Asia
Also I’d like to share this Interesting heatmap showing of 2018 GDP growth in China and surrounding countries in Southeast Asian.
You can see that certain regions in China have stronger growth in RED and other regions are weaker in BLUE.
Vietnam and Cambodia, two beneficiary’s of the trade war, are both growing by 7% GDP in 2018.
Credit to Marco Förster from Dezan Shiras & Associates
Meet me in Bangkok next week
Finally, I will be attending the Sellers World Conference in Bangkok, Thailand on Dec 6, 2019. It would be great to organize a meetup to meet some of my readers if there’s interest. If you’re going and are keen to meet up, please hit reply and let me know when you are free.
Along these lines I was interviewed recently by my friend Chris Thomas, “The Australian Seller”, where I breakdown the pros and cons of China sourcing vs India sourcing. [Podcast] China vs India Sourcing
Finally as we are approaching US Thanksgiving, besides gearing up for Black Friday….
I wanted to thank you for being a loyal reader. You have a lot of things in your life vying for your attention so I’m very grateful for you spending your time with me. And I hope this is valuable for you and your business.
As the trade war continues and nobody knows how things will play out, some experts say that the winner is neither the US nor China. But they claim the biggest winner is Vietnam.
Whether or not that is true is beyond the scope of our business, but the reality is that given the uncertainty many businesses have already shifted their sourcing and supply chains out of China and Vietnam is one of the hot spots right now.
Today I’m excited to interview Mr. Jim Kennemer, founder of Cosmo Sourcing, which is a sourcing agency which specializes in sourcing products from Vietnam.
In this 46-min masterclass about sourcing from Vietnam you will learn
What products can be sourced from Vietnam
What products are BETTER made in Vietnam than in China
How to find suppliers in Vietnam (Hint: don’t waste your time on Alibaba)
Why relationships don’t matter as much in Vietnam
Common rookie mistakes that will sink your business
Last month I had an amazing experience traveling to India for the first time. India was a blank slate for me. Previously I was only able to experience India from a distance – I had only tasted their delicious food, seen their festivals on TV, and admired their colorful clothes from abroad. Now I was about to experience it firsthand.
Like most e-commerce entrepreneurs, I sourced nearly all my products from China. Some may say that I’m a “China sourcing expert”.
But before we get into my trip and what I learned let’s first take a step back and ask:
Why source from India?
Four main reasons
Circumvent China tariffs and increased costs
Take advantage of India’s lower labor costs
Differentiate your products from competitors
Diversify your sourcing and supply chain
Perhaps the strongest reason to source India stems from the recent US-China trade war. Chinese manufactured products have been slapped with a 25% to 30% import tariff on top of existing import duties when importing into the US.
This means that a product’s landed cost is going to be a lot HIGHER than before which makes it more difficult to maintain profit margins.
By sourcing away from China, you can circumvent these tariffs and potentially lower your product costs drastically.
Secondly, India produces many handmade and customized products. They rely less on machinery and more on manual labor which makes it easier to make customized, high-end products that can potentially be sold at a higher price point.
Thirdly, India has an abundant labor force. Their population is 1.3 billion people and will overtake China as the largest country in the world in the not so distant future.
Moreover, India’s labor rate is much lower than China. According to a study done by my good friend Dan Krassenstein who heads the Supply Chain for a major American bag company, he sources his products from China, India, and Vietnam. With Dan’s permission here’s how the three country’s labor costs stack up in 2018.
According to his study in 2018, India’s labor rate is 37% less than China’s. Obviously, your mileage may vary depending on your product and niche but we can make an assumption that India’s labor costs will be significantly less than China and Vietnam’s.
Finally, it makes sense to diversify your sourcing and NOT put all your eggs in one basket. Besides the tariffs, China’s labor costs are rising. China’s material costs are rising. China’s environmental regulations are tightening up. And policywise, China is encouraging manufacturers to move up the value ladder and rely less on cheaply-made products.
In fact, many of the big players such as Walmart, Uniqlo, Nike, etc. have begun diversifying their supply chains away from China since 2014 or even earlier.
So given the above reasons, I decided to take the plunge to India!
In Oct 2019, I joined the India Sourcing Trip hosted by Meghla Bhardwaj. It was an amazing action-packed week where we visited Delhi and Agra. The trip included a 3-day guided tour of the Delhi Fair, a 1-day conference on best practices sourcing from India from e-commerce sellers and service providers, as well as several cool cultural excursions including a Delhi city tour and a tour of the Taj Mahal (one of the 7 wonders of the world!). More on that later.
It was like a crash course on Indian culture, language, sourcing, and doing business all rolled into one!
As the saying goes, business before pleasure so let’s start with that.
Delhi Fair, the “Canton Fair” of India
The Delhi Fair is probably the largest trade show in India focused on showcasing locally made products for export. It takes place twice a year in April and October. Over 3,000 vendors are at the fair and they have both temporary exhibitors and permanent booths. While not as large as the Canton Fair, I suggest to spend several days there in order to see everything.
Some of the product categories featured at the fair include:
Home Furnishings
Furniture
Lighting
Bathroom accessories
Carpets and Rugs
Sustainable and Eco-friendly products
Wood handicrafts
Leather
Ethnic crafts
Art and Frames
At first I was looking for replacements for the products I was already sourcing from China at the Fair. I wasn’t too successful at that because those products are more along the lines of mass produced machined products commonly found in China.
However, after walking the floor I realized that there were products there that were NOT FOUND in China due to different materials, different customizations, and different types of craftsmanship. More on this later.
In any case, my key takeaway is that I was surprised to find numerous new product opportunities at the Delhi Fair that are NOT commonly found in China. And they are NOT commonly found on Alibaba as well. In fact, in an informal poll of about 50 Indian suppliers I asked how many of them listed their products on Alibaba and only about FOUR of them raised their hands. This is not a scientific poll but if we assume that this is a good enough sample size then less than 10% of Indian suppliers are listing their products on Alibaba.
This means if you find these suppliers at the Delhi Fair most of your competition will not unless they fly to India. This puts you at a tremendous advantage in terms of finding suppliers for products that your competitors cannot easily find.
This is one of the key traits of a 7 Figure Seller – “Building a moat around your business.” For more on that please checkout the 7 Figure Seller Summit.
Indian Factory Visit
After the 3 days spent at the Delhi Fair we visited a leather goods and apparel factory in Delhi. This factory specialized in leather products such as leather jackets, bags, purses, etc. They also had a second factory that produced clothing and apparel for major US and European brands.
I always love visiting factories because this way I get to see “how the sausage is made”. This may sound nerdy but by visiting the factory I was able to get a sense for how things work in India.
I saw that the factory was clean and workers were engaged and friendly. The factory was heavily dependent on manual labor and less so on machine and automated production.
For example I saw the workers cutting, shaping, and sewing pieces of leather by hand and traditional sewing machines people have used in the past 100 years.
Indian leather goods factory in Delhi with workers operating traditional sewing machines
In a similar type of factory in China, you would see fewer workers and more automated machines, for example, digital sewing machines where you can program sewing patterns.
Chinese travel bags factory in Shenzhen. Note the LCD monitor on the sewing machine! This machine can sew all by itself with minimal human input needed.
In terms of their equipment, I saw that they are virtually all imported. In fact of the key embroidering machines was made in China!
Sourcing from India – what I learned
After my visit to the Delhi Fair and tour of an India factory, here are my key takeaways.
First, the advantages of sourcing from India:
No tariffs! This can immediately save you 25% off your product landed cost if you’re sourcing from China to the US!
India is strong in handmade and customized products – I witnessed very high-quality lighting fixtures, furniture, handicrafts, bags, and more unique products that aren’t commonly found in China or on Alibaba.
Given that most e-commerce sellers source “me-too” or similar products from China via Alibaba, this can be a fantastic way to differentiate your product away from competitors.
India is strong in natural materials such as artisanal wood, certain metals, natural fabrics (cotton, jute, silk) an eco-friendly products (Recycled PET, products made of leaves, etc). In fact, China imports a lot of natural materials from India such as artisanal wood, cotton, and leather to manufacture their products. So by going directly to the source you can potentially have a better selection and at a lower cost.
Many of the products are surprisingly high quality! I’ll be honest – before going to India I expected to see cheap and poorly made products. But at the Delhi Fair and at the factory I visited – the majority of the products were very well made.
Note: This is what I observed in my short time in India and please don’t assume this means that all products in India are high quality. Within any country, there will be a range of products that fall on the higher and lower marks on the quality scale.
More environmentally friendly products. Besides being strong in environmentally friendly materials such as organic cotton and recycled materials such as recycled PET and materials that use leaves,, I was surprised to learn that Delhi has adopted a policy of not allowing any plastic bags to be used in the city.
This is especially shocking to me because in Shanghai when if I ordered breakfast takeout from KFC, I counted at least FOUR plastic bags and several more paper bags for two sandwiches and two drinks!
Moreover in terms of logistics and shipping, I learned that shrink wrap is NOT allowed when palletizing. Though India has some of the worst air pollution in the world, they really emphasize environmentally friendly products and behavior.
No language barrier – Most everyone speaks or at least understands English in India. Whether their promises can be upheld is another story, however!
To give you a balanced view, here are some of the disadvantages of sourcing from India
Expect slower delivery times – up to 10 weeks! This can be more than double the delivery times you’d expect from Chinese suppliers. So you need to plan your inventory forecast more carefully or else you will be out of stock for several months.
The main cause of the long delivery time is the reliance on manual labor in India compared to reliance on automation and machinery in China.
Certain products can be more expensive in India than in China – While India has an advantage in natural materials, it is disadvantaged in synthetic materials such as polyester, nylon, and blended materials.
This is due to the lack of equipment needed to make and process these materials effectively.
In certain cases, if you wanted to have a polyester bag to be made in India for example, the supplier may have to import the material from China. This adds to the time and cost of the final product. Not surprisingly, I was quoted a higher price from an Indian supplier for sourcing a comparable bag made in China.
Certain materials may not be available in India – for example, a few of the private label products that I sell are made out of aluminum alloy and food grade “304 stainless steel”. Based on the metal product suppliers I met with at the Delhi Fair, none of them were able to make this product out of the same materials. Either the materials were not available at that quality level or they simply lacked the process to make them. So for these products, I decided to keep production in China
Lack of export experience – According to the logistics experts I’ve spoken with, on the whole, Indian suppliers are less experienced with the whole export process than their Chinese counterparts. So expect a longer delivery time as they get their licenses ready and all the shipping details worked out.
Again I’m generalizing but on the whole, China commands a lead in the manufacturing and exporting game by about 10-15 years. So I would expect more bumps in the road when dealing with the export process when sourcing from India given their relative inexperience.
Indian suppliers may lack experience with Amazon FBA packaging requirements. Unlike their Chinese counterparts, most Indian suppliers have never dealt with Amazon FBA before. So it will be your responsibility to show them how to create barcodes, packaging size requirements, and palleting instructions to make sure everything satisfies Amazon FBA’s requirements.
It’s ironic that just four years ago, most Chinese suppliers were not familiar with FBA as well and in fact, I remember having to teach my suppliers how to fulfill these requirements. Nowadays Amazon has offices in China and leads huge conferences that teach Chinese sellers and suppliers thousands at a time how to package and sell on Amazon.
Looking ahead in my crystal ball, I wouldn’t be surprised to see a surge of Indian suppliers selling on Amazon.com in the next few years. I had the privilege of speaking to a group of Indian suppliers and they seemed more interested in learning to sell on Amazon themselves than learning the best ways to work with Amazon sellers like us!
Expect delays due to transportation, Indian Customs, Monsoons, etc.
Aaron Hughes, an American whom I met in Delhi and has spent 5 years living in India and working for a sourcing agency shared with me that “monsoon and the major festivals occur in the fall around September and October and cause BIG delays”.
From the entrepreneurs whom I’ve spoken with who have sourced products from India, the consensus seems to be to add a TWO week buffer time from the promised delivery date. This is to compensate for “Murphy’s Law” – anything that can go wrong will go wrong.
Now let’s switch gears and look at what I learned in terms of…
Doing Business in India
First and foremost, this is by no means a complete guide to doing business in India. This is based on my initial observations having spent a week in India and meeting with numerous vendors in and around Delhi Fair.
Relationships matter
All of the Indian suppliers I met were very cordial and eager to get to know me better before we discussed any business and numbers and figures.
For example, I met a sourcing company in Delhi and they invited me to lunch and to visit their office to learn more about their business and their product line. As we chatted we learned about each other’s families, backgrounds, and hobbies. In addition to that, they were kind enough to drive me back to my hotel afterward. This is all without any expectations to immediately place an order with them. In fact, we only talked business about 30% of the time.
I sensed that building the relationship was important before potentially doing business together. This is similar to building “guanxi” or relationships in China,
In India for instance, it’s a wise move to ask factories about their history. Often times it could be a multigenerational business involving fathers, sons and daughters, and brothers and sisters. Moreover, I found that Indians are typically proud to share their history. As a result, this helps to lay the groundwork to build a better business relationship.
Regional Differences in India matter
One of the biggest surprises for me was that not all Indians speak the same language! Most everyone understands English, however, they also have native languages which they speak with their friends and family. However, these languages differ depending on the region. For example, I learned a few words of Hindi and tried using it with some new Indian friends I met. I was shocked to learn that they didn’t understand Hindi at all! In fact, they were Tamil from Southern India (Chennai) and Hindi is not used in that region. So when they traveled North to Delhi they only spoke English. I believe they have a native language to their region as well.
Secondly, different regions in India have different manufacturing strengths and specialties. Certain parts of India are strong in leather, handicrafts, wooden products, apparel, etc. And it makes sense to source a certain type of product from a certain region to make sure you are getting the best quality.
For example, if you were sourcing leather bags then the key regions to focus on would be Chennai, Kolkata, Kanpur, and Jaipur. Even within these regions, there will be differences in types of leather. Sometimes you can notice in Jaipur they use a lot of goat leather which is more thin and brittle than other leathers used in Chennai or Kolkata.
Moreover, there are certain environmental conditions you must take into account when manufacturing in certain regions. For example, in high humidity areas, you need to be careful with the risk of mold in your packaging so a dehumidifier is recommended when exporting this product.
Also when shipping your product, you need to pay attention to which PORT you will export from. India has a west coast and an east coast. For example shipping from the Kolkata port to Long Beach, USA will take 38 days. Conversely, if you shipped from the Nheva Shiva port to New York it will only take 21 days. This will save you several weeks of time in delivering your products.
There are NO RULES in India
The perfect example can be found in the streets of India. Even though there are four lanes in the streets of Delhi, you will see SEVEN rows of cars driving through them. Mark Palfreeman from SBI summed it up perfectly by comparing it to water flowing in a river. This system, while chaotic, gets the job done. No rules!
Traffic seven cars and rickshaws deep on a four-lane road in Delhi!
A second instance of this is in my pre-registration for the Delhi Fair. Even though I pre-registered for the trade show several weeks in advance and got a confirmation email, I was still forced to stand in line for 30 minutes to get my badge to enter.
However, others in our group received a BARCODE in the confirmation email and they were able to quickly scan the barcode from a self-service kiosk and printed their badges in seconds.
Why did some people get the barcode and others did not? I posed this question to the staff at the fair but nobody could give me a good answer. No rules!
“Pakka” Rule, for sure?
Mark also explained that when scheduling a meeting with Indian acquaintances the concept of time can be loosely interpreted. For example when you schedule a meeting with someone for 2PM they may show up a lot later. This was explained to us that when two people meet they will devote their complete attention to that person. And even though another commitment may be coming up and they risk being late, they will continue the prior meeting until they completely finish their conversation. This way, when they come to your “2PM” meeting they will give you their complete attention rather than worrying about unfinished business from their prior meeting. I believe it’s a matter of respect in some ways. Obviously, the unspoken trade-off is punctuality.
Mark also shared with us however there’s a way to make sure that the meeting time is confirmed. The key word is “Pakka”, or “for sure”? So when scheduling a meeting with someone and you want them to be on time, you ask them “2pm Pakka?”. Then their eyes may slightly widen and then they will tell you if they really can meet at that time or suggest a more realistic time.
Switching gears, now let’s turn to the cultural side of my India trip.
Indian Culture
All work and no play doesn’t make Gary a happy camper. Fortunately, we stayed at the Delhi Shangri La Hotel. The rooms were clean and comfortable, the service was great, and the food was awesome. Also, I especially enjoyed their 24-hour gym so I could get in my early morning workout to start the day.
In terms of cultural excursions we went on a ½ day Delhi tour and visited Qutb Minar Complex, Humayun’s Tomb, and drove by the Prime Minister’s office as well (I guess it’s the equivalent of the White House for the US).
I learned a quick history lesson in that India besides being ruled by the British, also were ruled by Mongolians, Muslims, and Persians at differing times. And there are various buildings and sites that reflected this diverse heritage that made India what it is today.
But the most amazing thing that I saw in India was the Taj Mahal. It’s one of the seven wonders of the world and just seeing the marble building from miles away was amazing. And it’s so vast that as you approach it, the building seems to stay the same size even after your walking and walking and walking.
Once inside, seeing all the intricate designs and carvings in marble was a feast for the eyes. If you haven’t gone yet I highly recommend you visit it someday.
The trip to Agra to see the Taj Mahal was a long bus ride which took 5 hrs EACH WAY! Fortunately, we had some good company and fun games (Hitman anyone?) to pass the time away.
Tripgoers passing time on the bus while enjoying a game of “Hitman”
My close friends know that I love enjoying local food and I was really conflicted about this. On one hand, I wanted to try as many authentic Indian food as I could but on the other people told me to be careful of “Delhi Belly”. Many visitors experience stomach issues. But I was able to try some amazing butter chicken, samosas, and “egg curry”. So good!
Mmm, samosas!
What I learned about myself and my Mindset
Taking a trip to India was really taking a step outside my comfort zone. I’ve never traveled to India before and many people have told me about the good and bad things there such as “Delhi Belly”, getting ripped off as a foreigner, the dirtiness, safety concerns etc.
In addition, as some of you know, I became a dad for the first time last year and this was my first business trip away from my family. So it wasn’t easy.
But India was a blank slate for me and I was very curious to learn more about the business, culture, and the people there.
I’m really glad I did the trip, I learned a lot about the fundamentals of sourcing from India, made important business contacts, and made some new friends and contacts from India and all over the world.
Next steps:
At the trade show I identified a number of new potential product opportunities.
After the show, I did further research to “run the numbers” to validate whether they would be good products to sell. Several of them have great potential and I will send more formal Request for Quotations (RFQs) and have samples made to test them before deciding whether to place an order.
And finally I’d also like to send a special thanks to Meghla Bhardwaj for organizing such a fantastic trip to help us learn about her amazing country.
As we are trying to figure out what a “truce” to the trade war really means, this week I’m attending the Delhi Fair to learn more about sourcing from India.
For those of you unfamiliar with it, the Delhi Trade Fair is probably the largest trade show in India with over 4,000 suppliers. You might call it the “Canton Fair” of India.
Given the ongoing trade war between the US and China resulting in tariffs as high as 25-30%, as well as increasing labor costs, environmental compliance costs, material costs in China, many businesses are looking to source away from China.
Now India is one of the key hotspots to source product from with a seemingly endless supply of low cost labor.
At the Delhi Fair, there are over 3,000 Indian suppliers who focus on the following industries
Lamps and Lighting accessories
Lawn and Garden accessories
Fashion jewelry, bags, and accessories
Home furnishing carpet, rugs and flooring
Christmas decor, incense, candles, potpourri
Furniture and accessories
In terms of materials India is strong in the following:
Leather products
Wooden products
Natural fabrics such as cotton
Overall here are my quick takeaways:
India is strong in handmade, labor-intensive products. Think wooden handcrafted trinkets, wooden furniture, and wooden products used in the home. Conversely, they are less able to compete in products that require machine processes and automation that are usually mass produced in China
Expect low MOQs. While 500pcs is a standard minimum order quantity from China, you can get MOQs of 50pcs or less without any pushback from Indian suppliers. Though as a general rule, the lower the MOQ, the higher the price.
Expect HIGH prices – this really surprised me. I was expecting to find lower prices in India but quotes for metal-mixed material products (e.g. Wood and metal) and leather products came in a lot higher than I expected. I will share more details in a future post.
India is strong in NATURAL materials such as cotton, silk, leather, etc. Don’t expect to find high quality nylon, polyester, and other manmade fabrics made in India. This is because of the lack of equipment needed to manufacture quality synthetic materials. For example I was sourcing a nylon bag for my product was told that I shouldn’t expect to find it made for a good quality and price in India. They said to get it from China instead where the necessary machinery can be found.
I’ve spent two days at the fair so far and have been learning a lot.
Meanwhile, I met with several 80/20 Sourcing readers and 7 Figure Seller Summit viewers here in India which was amazing. Several of them said that they started their Amazon businesses and decided to come to India after viewing my content.
Thanks for being a loyal reader Stuart! Stories like this keep me going the highs and lows of running this business.
Also, a special thank you to Meghla Bhardwaj from Megadi who organized the Sourcing from India trip that I attended. Their weeklong trip was like a crash course in learning to source from India and learning about Indian culture.
I will write more about this once I get back from my trip but I highly recommend you check out their April 2020 trip if you’re interested in sourcing from India.
Talk soon,
Gary
PS if you’re interested in sourcing from India. I highly recommend you check www.indiasourcingtrip.com. They are now taking reservations for their April 2020 trip and you can get a super early bird discount and save $1000 if you sign up by Oct 20th 11:59EST.
As we ecommerce sellers continue to watch anxiously from the sidelines as the US and China fight like two elephants in the trade war, it seems that the small business owners and ecom sellers are the ones getting TRAMPLED.
Case in point – My products have been affected in Section 301 List 3 and are now subject to the additional 25% tariffs as of Sept 2019.
And I know many if not most of your products have been affected as well.
So what do you do?
Raising prices is usually the first thing that comes to mind. And it is a short term solution to offset the sudden increase in tariffs and in the cost of importing your product from China to the US.
However many savvy sellers are looking to broaden their horizons and source away from China to countries not affected by these tariffs at this time.
One of the hot spots is INDIA. India is the world’s second largest country with 1.3 billion people and is rapidly closing in on the #1 spot.
Besides that India and President Modhi has been investing tremendously to grow it’s manufacturing sector. Some people compare the state of the supply chain in India now to China in the early 90s. Though not as advanced, costs are lower and expect more bumps in the road.
Here are the top reasons to source your product from India:
1) Circumvent China trade tariffs!
If you’re feeling the pinch from the 25% tariff slapped on your product imported from China then you know what I mean.
And you may have even tried asking your factory to share this cost with you to no avail.
2) Avoid Chinese labor costs, material costs, and environmental costs which have been rising for years
It’s not uncommon for factory workers in China to request pay raises of 10-20% a year. Otherwise they quit.
Studies have shown that there are labor shortages in China in recent years because many people don’t want to work in a grimy factory anymore as standards of living (and costs) rise in China.
Similarly raw material costs continue to rise year on year.
And China is enforcing environmental regulations more strictly in recent years, shutting down tens of thousands of the heaviest polluting offenders (who incidentally can shave their costs this way).
The result is that China’s product costs are not as cheap as before.
Many supply chain experts have already diversified their sources beyond only China for nearly a decade now. This includes many of the big players such as Nike, Apple, Walmart, Target, etc.
I find that it’s useful as an entrepreneur to read what the big players are doing.
3) India has an abundant supply of low-cost labor
The same labor and environmental costs in India are much lower overall than the respective costs in China.
Studies have shown that you can experience a 37% cost savings sourcing a product from India than from China.
4) From an e-commerce seller perspective, you may be able to find UNIQUE products that your competitors cannot find by sourcing from India.
Rather than finding dozens of me-too products on Alibaba, sourcing from a different supply base can potentially make it harder for your competitors to copy and sell the same thing.
This can help build a moat around your business to ward off competitors and maintain your competitive advantage.
5) Embrace your sense of Adventure
I’ve spent over a decade of my life living, working, and studying in China. It feels like second nature to me (sometimes).
Many of you have sourced from China, attended trade shows in China, and even gone sightseeing and made friends in China.
On the other hand, India is a blank slate for me. It could be the next frontier.
So I feel it can be a great opportunity to learn about a new culture, taste new foods, experience new sights and sounds, and potentially find the next big thing along the way.
But visiting a foreign country on your own can be intimidating. I’ve heard horror stories about the pollution, Delhi Belly, and safety concerns there.
Also when doing business in a foreign country one of the keys to success is to find a trustworthy local partner.
Meghla Bhardwaj. She has over 19 years experience in the sourcing industry in India and China and is leading a sourcing trip to India.
I will be attending her India Sourcing Trip in Delhi, India from Oct 14-20, 2019.
The reasons I that I joined and I think could be beneficial to you are:
Learn from experienced Private Label sellers who are sourcing from India how they did it
Learn what type of products to source from India
Guided tour of the Delhi Trade Show which is the biggest trade show in India to meet suppliers face to face and shortcut the sourcing process
Tour a local Indian factory
Network and mastermind with a group of motivated ecommerce entrepreneurs
Bonus 1: Sightseeing – visit the Taj Mahal (one of the 7 wonders of the world) and Agra Fort
Bonus 2: Taste real Indian food – and I’m a big fan 🙂
Finally, Meghla is someone I’ve worked together with in the e-commerce and sourcing industries for many years. She is someone I trust so I’m confident you will be in good hands if you decide to attend.
While this doesn’t mean the end of sourcing from China, as no country or countries could displace the entire supply chain there, it does mean that you should diversify your sources and India is a great opportunity to do that.
If you’re interested, you can learn more and apply to join the trip here:
It is an investment but I feel it can be worthwhile if you want to take your business to the next level!
