January 27, 2020
How to Source Profitable Product from China The Smart Way with David Hoffman

How to Source Profitable Product from China The Smart Way with David Hoffman


Hey everybody. Welcome back to another episode of the Bright Ideas Podcast. As always, I’m your host Trent Dyrsmid, and I’m here to help you discover what is working in eCommerce today by shining a light on the tools, the tactics, and the strategies in use by today’s leading entrepreneurs. And in today’s episode, I am joined by Dave Hoffman. Dave is a serial entrepreneur building multi-million dollar companies. He’s led the international trade powerhouse and global Regency shipping products worth over $200 million to over 40 countries as CEO for the last 15 years and is considered an expert in China sourcing supply chain, private label and brand licensing. Dave, thank you so much for making some time. Welcome to the show. Thanks for having me. Happy to be here. Yeah, no problem. So let’s start off with just in your own words. Um, who are you and what do you do? What do you spend your days doing? Um, so I’m David Hoffman, um, moved out to China about 16 years ago from South Africa. We went in the consumer electronics business and we came here really because we were sourcing rusted off product to China and it was just necessary to kind of have a physical presence. Yeah. So you know, since I got here, we built a really big supply chain business sourcing products, do quality control and managing bigger supply chains. And our recent project, which is what occupies Matama ski is we started global TQM, which is business where we help entrepreneurs and small businesses to source products and manage their supplier relationships, handle their quality control. And literally most of my day is spent dealing with things around that and talking to people, you know, around those things. All right, well so with respect, so you’re in China, you’ve sourced a product or two during your period of, during your career, what are some of the biggest mistakes that you see people making when it comes to sourcing products from China? I think it’s expectations. People are fond, myself included, at least certain it is at the beginning where you kind of put this expectation that um, product quality is always going to be perfect and their delivery is always going to be perfectly on schedule and that samples are going to be perfect when you’re dealing with manufacturers. And I just think that whole expectation is, is N w was so wrong. Um, and I kind of quickly learned that sourcing parts from China, dealing with Chinese manufacturers, Israeli, an ongoing challenge and requires a lot of patience and a lot of attention to detail in Australia and long process. So for someone who’s new into sourcing from China, I’ve done a little bit of it, but not very much. The go to website to be Alibaba is that still a great way to go or are there, are there other more effective ways? Trent there’s lots of websites like Alibaba, China sources, there’s trade show websites that global sources as well. There’s made in China. There’s some many websites. I think the challenge in why while we said to me for our own product sourcing have our own team here on the ground in China and while we ended up diverting into a business of offering services around it is because it’s really challenging to really vet your suppliers and know who you’re dealing with and build that relationship with the supplies and the trust. Because you know, there is a transfer of money, um, of deposits or final payments before goods ship as well, and you don’t really know what you’re getting. So I think, um, I’m, I’m a massive advocate of, you know, caught in the net wide to find suppliers and Alibaba is a great resource for that. Um, but I think you’ve got to go deeper. You’ve got to go deeper than just that to build the relationships, understand who you buying from your, what you’re buying because it’s dangerous. Um, but you can be successful if you’re patient. So going deeper, how do you go deeper? Is that working with a buyer’s agent, is that toppling on a plane and going to the Canton fair? Like what do you suggest people do? Yeah, it’s odd. It’s either of them. I think everybody’s journey is different. Um, I’m a massive advocate of hopping on a plane, um, coming to China and visiting your suppliers. I think once you see the manufacturing facilities and you meet them face to face, um, it’s quite a game changer in terms of communication, in terms of understanding their capabilities in terms of just knowing what you’re going to get and also just having that relationship where they want to support you and help you. So I think that’s huge. Um, using agents and companies like us for example I think is very, very helpful. Of course if you, if you don’t have Tom to travel and to do some background checking, I still personally believe that this thing is to come out on your own. Um, and I think trade shows is another really great way began to, could have trade shows, trade shows where you can meet multiple suppliers face to face at the same time and really touch and feel products and you know, get a lot of exposure and new ideas. So back in 2005 I made my first trip to China, not really having a clue what I was doing. We spent a couple of days, quote and quote touring factories, but my assistant at the time set it all up and thinking back now, we really were just visiting sales offices. So I don’t know, I I, in hindsight, I don’t think it was a very well planned trip. So if someone is planning, they’re thinking I’m going to do all my, I want to be serious about this, I’m going to do all my research and I’m not, you know, taking a stab at this, I am going to be successful in this business. For those people, I think a trip to China probably is a pretty darn good investment of time and money because I’m, I’m guessing there’s a whole lot of benefits, like again, going using my own experience. There was emails going back and forth and samples and delays and takes forever. Walk me through, first of all, how do you prepare? Let’s assuming that you’re going outside of the window of the camps on fare, which is a turnkey experience. You just go, you show up to talk to everybody. Assuming you’re going outside of that window, how do you prepare first of all for the trip and then when you’re there, I mean how many days should you go and how, what is the best practices for making sure that you really get the best bang for your, your, your book? Okay, that’s a good question. So I think, um, this person actually, I think trade shows are the way to go. Um, and I will, I’ll talk about outside of a trade show, what to do, why, why do I love trade shows? Because I don’t think there’s a better opportunity to see multiple suppliers at one time. If you’ve got two, three, four days, you just be able to visit them, sit with them face to face, see their products, meet their people, and then go to the next booth and the next supplier and have the same conversation over and over a day. And I just think that’s the most productive use of time. What I would suggest is if you’ve made, is maybe come a few days off to the trade show as well. So you meet a couple of suppliers, you can spend your whole day meeting supplies to narrow it down, fond a few things of interest, see who you, who’s kind of coming up with the rock product, the rock prophecy you can communicate well with and then spend, you know, a couple of days at the end of the trade show going to visit and they’re always more than happy to take you to the factory. I think, um, with the factories if you’re very specific and said to them, I want to come see your production or on, I want to come see your production facilities that will take you not just to the sales office but to the factory where you can see the products being produced. Because I think it’s very, very helpful to understand. Um, I liked how they had it, just how they set up their production line and organized themselves and you get a real good feel for how they run their business and how they make the product. And understanding how the product made will also help you a lot because you get ideas, you understand more what goes into the product. You become a little bit more patient or tolerant of certain things. Um, I think that’s, that’s really the right way to go. If you’re not going to do a trade show, what I would do is I would just do my research and advance, you know, fond a whole bunch of supplies that I wanted and um, just plan a trip to go to their factories and uh, know if it’s three or four factory visits. You know, I would go to the factories, I would insistency may show rooms and the factory facilities, um, and I’ll do exactly the same thing. I’ll just do like a bit of a circuit that call it the chat. The challenge with the circuit like that is it really is time consuming because it distances in China can be really far and you don’t always know where the factories are located. You could, you could spend, you could, you affect your day, which is really low productivity. You know, at a, at a trade show you can meet 50 factory the day, and then at the end of it, go visit two of them that you really like. Oh, product. You’re really interested in stealing products is key chains. Let’s stick with, we’re going to go to trade shows. Um, how many, how often are trade shows taking place? I’m guessing there happen happening pretty regularly. Every single month is a trade show, so there’d be no reason to go and not go the trade show route if there were every month. Absolutely trade. We’ve built businesses off the back of finding products at trade shows. We’ve had no idea what product to do. Sometimes we just found stuff in. Oh wow. That’s great. And we’ve launched a product in a couple of months. Really. And was that product and sold on Amazon or was it sold through your own channel? Different channels. Sometimes just Facebook ads into a sales funnel. Other times on Amazon. In one case we built an entire business, which was an online store direct to consumer, which was literally just filled with products we found at trade shows all the time. Yup. Okay. Um, yeah. When you’re there and you’re the newbie and you probably, it’s almost like you’re glowing cause everyone knows you’re a newbie. How do you determine if the person you’re talking to is the actual manufacturer or is there just a trading company and why does it matter? Um, I think just it’s hard to determine with certainty, but normally when you talk to the suppliers and you just face to face and you asked them out of 10 that quite honest about it. I think in the old days they used to be a lot of lying and covering up leave. It’s really changed a lot if you just actually asked the gauze. Now if they’re a trading company or if there’s the manufacturer already thin most of the time I’ll tell you now, um, that’s also the benefit of doing the site visits. If you really got to go to the next level with a supplier, if going to the factory, you’ll get a good field straight away that the factory or not. Because if they, if the guys work there all the time and that’s where they base and that’s where they’re located, you’ll go there, you’ll see they have a desk, they know all the people that walk around freely. If that are trading company, you’ll probably find they go there and then somebody else joins the party and stuff and you’ll feel like visits it too and being shown around the factory so you can get a good feeling for it. And when you build that relationship and travel with him and travel to their factories, they tend to feel more comfortable to open up more. Um, you know, there are ways to do many supplier checks and audit and some background checks. You know, we’d do stuff like that for people, but I think the truth be told, if you build a rock relationship and talk to them, well you’re going to get to the truth. And if you asked them out rock, that will really lie. Okay. And I’m assuming they all speak pretty good English or good enough English. Good enough. Exactly. Yeah. Sorry, I just said creepy. One thing I’ve learned is you’ve got to deal with these gods that you’ll supply. Then you take a relationship and if the English is not good enough for many reasons, I think you want to move on, you need to be able to communicate with your supplier. So how do we find a good trade shows to consider going to. Trent there’s so many, I mean the biggest one is the Canton fair. I mean when you go online to Canton, fade.org I think it is, and every April and every October they’ve, they run three phases like consistently for the last 20 years. So those three phases on massive and depending on product category you’re in, you got a phase one or phase two or phase three each phase last a week. So that alone there’s almost nothing you can’t find on is three weeks long, three weeks long, three phases, two different categories of products. They actually run a week that shut down for two days and then all those exhibitors move out and new exhibits and, and, and it is massive now. It’s, it’s actually, it’s slightly messed up. I don’t even know how they do it. It’s easy to be overwhelmed, I’m going to guess. Exactly. And then, yeah. And then uses that, that the HK TDC website, they’ve got shows all over the global sources website. They’ve got sources all over. I mean they were trade shows all over. Say like if you go to trade shows for industries you’re interested in, you’ll find tons of, there’s a few major show organizers like global sources, um, [inaudible], Skype, TDC and Canton fair. I mean, just between those three alone, you don’t need more. You just need to get out there and find stuff. All right. How about preparing for the trade show? What are some of the most important things to do prior to jumping on the airplane? I think the homework, I think you’ve got to have an idea of what product categories you’re interested in. I think you need to have an idea of, um, process. You know, what processes are locked in the market. I think you not need, I think you need to not have to do your costings because it doesn’t really help, you know, what I think we do at a trade show is we can walk around from booth to booth, need supplies. You know, we could find a product, you know, iPhones or whatever. I didn’t say, you know, how much is the gossip? $2 you know, I can take the calculator and in 20 seconds calculate what that’s going to land me at and what I’m going to sell it at so I can straight away make a decision. I think, what if that’s going to retail at $20 I’m out of the game. So move on to the next product. Is there a quick rule of thumb? Is, sorry to cut you off. Is there a quick rule of thumb for that? Or you look at something that’s small fits in your hand and it’s two bucks. Do you know right away, well it’s gotta be a 14 bucks at least? Or was there a multiple? Yeah, yeah. Normally it depends on where you shipping to, but if you’re doing enough costing, you can detect it is both the plot exchange rate at X percent for, um, for shipping and freight and handling. So you know what your, your shipping costs going to be. So I think just for example, Ana, when we do practice that actually kind of works out every time. 11 two yeah, $2 times you live in, I’ll get my land cost costing South African Rand and Wait a minute. So you pay, you pay two bucks for something, your landed cost is going to be $22 and then you still have to sell it for like 40 on Amazon. it’s going to be 22 Rand because my effect includes my exchange rate. Some buying in some books, some buying in one currency in a different currency. So in Australia our conversion rates different. Yes. So just being able to do a quick costing look, Tom’s exchange rate, Tom’s whatever percent we believe is going to cost you to ship and to distribute and then cause you want to sift through stuff very quickly. You don’t waste time. You know what you go on to do is collect tons of information and then go back and track cost at all. And in reverse you want to cut through all the rubbish. You want to get straight to what you’re interested in and fond a little things that you know are going to work and then go deeper. All right? So when you walk into the booths, I mean, I’ve been to a reasonable number of trade shows here in the US and they’re, they’re busy. You’re busy. For the folks that are new, they’re going to walk in. They don’t have that. They don’t, they don’t have that confidence in their stride right away. That’s going to not make the greatest impression on a supplier because they’re thinking, Oh man, do I really want to talk to this guy? He’s maybe not going to vary by very much from me or whatever. What are some of the sayings, some of the clever things that you can do to make sure that, you know, the first 30 to 60 seconds, you make a good first impression on a potential supplier. So what I do is, um, physio to woke up with confidence. Say, hi, how are you doing? Do you work here? Can you talk to me? And I let them see that you’re confident and they kind of know what you’re doing. Um, I just stopped talking to them about the product. So a couple of things to really make it feel like you know what you’re doing. It just asked a couple of key questions that they can relate to. Like what’s the MOQ on this? That’s a minimum order quantity cause it’s straight away and I know that, okay, you understand what that means and I feel good about it. It’s okay. So you got to take right. So what’s the process for 5,000 pieces and then then we’ll be willing to tell you that because you’ve kind of stayed at that precedent that I don’t really start lowballing then yet if I’m only into the 500 for example, you know, off top, talked to him a little bit and I see it’s a bit warmer, then I might say, well look, you know, if we were to try this at 500 pieces, you know, what, how much extra would it cost? And very often we’ll say, look, we import loads of products. I mean we do shoot imports, exports, but what I will say to them sometimes see, they’ll say, look, this is a new category for me. We haven’t done it before. Just caught my interest. I was walking. This is really interesting, Tommy about it. Right. And I feel happy and that I feel like people love recognition. I look, this is my category, but I love this. This is great. And then if we can sell it, tell me more. You know, we’d love to talk to talk about it. I think there’s lots in it up of it, you know? And um, to be honest in a, in a, in a way that doesn’t make you amateur importer. Yup, yup. Um, and Australia simple as that. So that covers your first impression. And after that obviously just asks more questions about the product and what it’s going to cost and how long it’s going to take and so forth. Are there any, are there any kind of things that a new person might forget to ask when they’re in the booth? When they’re making their and they’re in the booth and they’re making their short list of suppliers they’re going to follow up with afterwards. Yes. I think the most important things to really understand, we already spoke about the minimum order quantities. I do think that’s important to understand and their flexibility on that because if the God really does have an MOQ of 10,000 pieces and they never willing to budge on that, even at a surcharge or an extra price, you do want to move on you, you can waste time on that. And I don’t think you should be shy about addressing that. A lot of people in the order below the MOQ and need to be sharp. I think the biggest thing to ask about is compliance. Um, most people will get excited. I was guilty of it years ago to a fond product gets so excited and I’ve never asked about compliance in terms of, you know, every country’s got different safety standards or requirements that are necessary to import the product. And it’s easy to get caught up, excited in a product, but holding the guy of the safety certificates for the US or Australia or wherever you selling it to. And a lot of the factories, that’s where they come short. You know they might be selling to one country, loads of volumes they’ve never shipped to the US for example. And then they don’t have a compliance and other the certificates and that whole conversation became dead. So I think I always spend time talking to them about where they, which countries that currently shipping to because if they’re shipping to Western markets and more sophisticated first world markets where regulatory requirements are higher, that makes me feel more comfortable. But then it doesn’t make me, it doesn’t guarantee that I have a good loads of people import stuff without the right compliance documents. So, and the fact she doesn’t even know sometimes. So then, then I always ask them, you know, what compliance do you need? What safety certificates, what regulations are there? And if they are knowledgeable and can tell me that and tell me they’ve got it. Obviously I feel more comfortable if they go, Oh, I don’t know, my customer takes care of all of that, you know, then I hesitate to, but you know, hopefully part of the research you’ve done is, is just knowing if a specific category you want to import, what are the regulatory requirements. Okay, now the show’s over. I’ve done my shopping, I’ve got my short list, what should I do next? Tell me what the follow up process. The followup process. It actually where everybody falls short, everybody goes to trade shows and they get so exhausted by 70 products, 70 suppliers and they, that’s where I think most people fall short is the follow up because you think you’re going to remember everything and you don’t and you really believe you guy with all your heart. I wouldn’t forget this. This is so interesting. I love this product. So at 50 you gotta write every single thing down when the unit meetings make notes, notes, notes with the catalog, just heavy information. Well organized. What I try to do is at the end of each day, send that email to those suppliers so that you just, at the end of the day, you take what you shortlisted, send out an email to those supplies of what you law, what you want, what you need, and they can send you a formal quotation because if you do that off to the show, which you can, it just depends on time, really off to the show you to sit down and start sending an email to the suppliers and asking for product sheets for formal quotation or pictures so that you can just recap it and build a catalog or do some testing or whatever you want to do. So, Mmm, you, you need to just get all those emails out just to reconfirm the information and get them communicating with you. And then you want to move into sampling stage and you need to start ordering samples of the products, um, you know, based on your requirements or colors or specifications. Um, so that you can just get them, touch them, feel them, and you know, make sure it’s all correct before you order. So, yeah, Let me jump in with a quick little hack that I found works really well when I have a great conversation at a trade show with somebody. Yes, I take, I take a selfie of me and the person will say, and in my followup email I include the selfie, helps them remember me, helps me remember them. It’s a great hack. A lot of the factories do that to us now as well. They’d got, can we take a picture with you? And when they email you and follow up, they put a picture of themselves at the booth that you can remember them. So you said samples, there’s probably some best practices for getting samples and some gotchas and so forth. Walk me through that. Well firstly, but it’d be very clear what you want in terms of specifications. Um, if you really want the sample in the right colors, in the right sizing, et cetera, or whatever the requirements are, you’ve got gotta be very specific about that factory. Generally we’ll send a sample and it’s not the best product. Everybody thinks, Oh, the salt was going to be perfect. And it’s actually rarely locked at the samples. Normally not perfect. The mass production is normally better quality. So I think understanding that the beginning is important. Um, we do a lot of samplings that like we get all the samples into our offices, we get all our samples into office in China because it saves a lot of time. And then we start using the product, testing it, playing with it and seeing what the quality’s like and what the, you know, the durability like. Um, and then if you notice problems, we started communicating with the supplier and stop telling them this, we don’t like this. Can you change what can, can you change these things? And actually that process is, is just what I call building your spec. You just slowly step by step building your spec and requirements, which I highly recommend you document every little detail and get a new song pole to tick off all those things. You know, before you actually place and finalize the order, you want to make sure that the supplier can do it and not just say they can do it. Yup. Fair enough. Now do you have any standard operating procedures for the sampling process? Well we do. Um, so what we do is, and by the way, can we do this for clients as well, cause we’ve got offices are Shinzen which is um, really convenient. So we get all the salt pulls into our office and then what we do is once I, which is great because it saves time, you know, there’s [inaudible] inside China can send a sample in one or two days, you know, this Korea or anything, it was shipping them and very often effectual artists ended for free or they’ll cover the shipping cost if it’s domestic, cause you can always send it back if it’s not right. So it’s really a foster efficient way of getting things done. Um, but what we do is once we get the sample, we book it in, whether it’s our sample, somebody else’s, it doesn’t matter. And then we book the sample in and then we do photographing of the whole unboxing so that we, you know, cause we want to see the packaging of came in the accessories as the unthought to actually do a whole unboxing of the samples as they come in and take close up pictures so that, you know, whether it’s us or clients or, you know, if I’m traveling, my boss send it to me, you can have guides on all the details to check, you know, with the sample came out like. If it looks good, the minute we’ve that we send it to our cost to test. So we, we’ve got engineers at our office, so they’ll actually, we were testing protocols with, depending on what the product category is. Um, we’ve got different ways of actually testing. I said it’ll go into a little lab and alcohol ads will start, you know, going through functional tests, performance tests, or liability tests. You know, not all products are that complicated, but you know, when you get into consumer electronics for example, it really is do hot temperature tests, hotpot tests, different things. You know, if it’s more homewares products, you know, we’ll do things like drop tests, we’ll do rubble tests to see how good the silkscreen printing is and just general end user testing. And once we’ve done that whole report with our checklist, we tickle the points off. Some of the checkpoints we got part of the way subjective, it’s just that we asked questions like, um, how do you enjoy using, or what did you lock about, what didn’t you like about it? And then we make an assessment from there. So you mentioned the word clients. I’m guessing that means then if I don’t want to go to China, uh, I can work with your company to basically be my eyes, ears and feet on the ground in China. And then all my communications are going to be with you. You’re going to leverage your network of factories and suppliers that I’m sure you’ve dealt with on many times in the past to help me source my product with actually having to make that huge trip. Exactly. So we do offer that kind of your team on the ground in China. Um, we, we go, we’d go one step further than that. Um, we don’t kind of necessarily become your communication channel if people want us to. We can, but we, we, we kind of see us thousands of your team on the ground in China where we say, you know, you need an office in China where that, but we don’t want to, we want to keep their relationships transparent and visible. We believe strongly. Um, and that was kind of one of the founding values of global TQM when I decided to go that route was you have to own the relationship with your suppliers. Nobody else can own that for you. And that’s really important. So, so like when we do sourcing jobs, for example, we introduce everybody to the factories. They include in the communications. Um, we just want to beat it to add services because we’ve got resource in China. So if you need to check a factory and negotiate with a factory of that experience, the paperwork, the documentation, receiving Psalm polls, going to samples on Scott with you, facilitating all of that and taking all of the heavy lifting. But we don’t want to own the relationship between you and the factories. That’s radiating importance. I think that, um, I think that’s where a lot of people have gone wrong in this industry. Yeah. So, so maybe I can use you if I’m, you know, if I’m on a tighter budget or maybe I still have a full time job and I’m trying to do a moonlighting gig, maybe I can work with you until I get my first product and I’ve got some cash flow coming in. But ultimately you’re still saying at some point you got to go to China and develop those relationships yourself. And we’ve heard from other people that there’s really great reasons to do that in your business. Yeah. I mean, I’ll practice what I preach, you know, a highly, highly recommended offered loads of people that start off just, you know, saying look, just handle it for us. And we do and we copied him in communications and if sometimes we get them a few ice Copco with him in the supplier and you know, they launched their first product and then, you know, a couple of months later let’s say, okay, I’m ready to come to China and meet some new suppliers and we love that. That’s really, really important. Um, and, and it’s not that they stopped to use us once I have the relationship, they still use us just in a lower capacity. There’s a ton of, I don’t need your handing that anymore. I just just received the samples for us, run through them quickly for us. Um, or uh, stolen an account manager to do the daily communication cause I’m working, you know, but I want to come home once a day and just talk to my account managers that, okay, what were the feedback here? They okay, get them on the line for me. I’m going to talk to them tomorrow. It’s like Kevin, almost kind of like a VA office in China. Right. You can delegate stuff to, we’ll send people to factory or do a final inspection, um, you know, and just do the paperwork and admin. Get all that out the way. All right. Wonderful. Well David, thank you so much for coming onto the podcast and sharing with myself and the audience from your years of experience, the best practices in sourcing products from China. In the show notes, we’ll have links to your website. We’ll have links to you or a LinkedIn profile. So if anyone wants to get a hold of you, that will be easily done. Great. Thank you Trent. What I’ll do as well for your train is clear. We told you something about trade. So I actually did a virtual trade show tour where I went to a trade show and settled suppliers, negotiated with them, visited factories. So I’ll actually, I’ll send you a link to that as well. If you want to share with people, you’re welcome. It’s a good watch, actually. It’s eight. Does it have trade shows? All right. Wonderful. Thank you so much.

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