Episode 24: Sourcing Inventory From China and the US

We discuss our experience with shipping and importing product for inventory today. Most people make the assumption that importing from overseas like China is the best solution. But we are going to explore all the options of shipping both foreign and domestic.

Everybody normally begins by stocking their inventory with a local vendor. There is nothing wrong with this approach and it does have some advantages, but hopefully we will inform you enough to make the right decision for your business. Just as domestic supplying has its ups and downs, so too does getting your supply from China or some other part of the world.

Some of the points we discussed today are:

• When to ask for white labeling or private labeling
• Pallet pricing vs. truck load pricing
• How to handle losing a shipment
• Why you should maximize your order
• Why you should always order in bulk
• The pros and cons of air shipping
• How to be ready for the hidden fees and costs

This episode is going to be a 2 part series. We have tons more to cover and we will do that in a future video.

Resources Mentioned During Today’s Episode:

 

Unishippers

Clear Lane

If you have any questions or anything you’d like us to discuss on the podcast please go to ecomcrew.com and fill out the contact form. Also we would really appreciate if you would leave us a review on iTunes. Thanks for listening!

Mike:   Hi, this is Mike.

Grant:  And this is Grant.

Mike:   And welcome to the week’s edition of the EcomCrew podcast.  Welcome, everybody.  This week we’re going to be talking about sourcing – sourcing things from China primarily but also from other places as well.  Before I get into that, I just want to mention real quick again the promotion that Grant and I are running right now for a free hour of consulting.  If you head over to EcomCrew and comment on this podcast episode or any of the previous three episodes.  We will enter you into a free drawing to win an hour of consulting.  We’re going to be doing a drawing in May and the only stipulation is we get to record the hour of consulting with you.  We may or may not use that for promotional purposes, but if you’re interesting in getting a free hour of advice from Grant and me or you just want to chat about ice cream sundaes, any of that stuff is fine.

So, with that out of the way, like I said, we’re going to be talking about sourcing this week and Grant and I, combined this year, will be bringing in seven figures in cost and inventory, mostly from China but we’re almost importing things from Canada, Guatemala.  Grant, I think you bought something from South America.  Is that right?

Grant:  Yup, Brazil.  I’ve brought in stuff from Italy and Japan, China, and it’s going to be also Tunisia now.

Mike:   Tunisia, cool.

Grant:  So yeah, getting every continent down.  Just need some penguins are we’re set.

Mike:   Cool.  So I wish that this podcast was going to be about 30 seconds where we basically would say importing is easy and just go ahead and do it and there’s nothing to worry about, and sign off and we’re done, nothing’s gone wrong.  But that’s pretty far from the case.  So I think that we’re going to probably just use most of this time today to talk about a lot of horror stories, I mean things that we’ve been through ourselves.  Some of this stuff for me was just kind of in a hurry to get things done, you’re excited to get products in, you see some success and you want to just get more of it, and you start to hit the ground running and then some of the other stuff is, even being prudent, there’s still a lot of things that can go wrong.

Actually, Grant just shared with me earlier this week an inspection report – we use a company called Asia Inspection, highly recommend them, and they do inspections for you on your behalf and have the products shipped – and it probably is the worst report that I’ve ever seen.  Like I didn’t know whether to laugh or cry for Grant.  It was pretty poor.  I think they had like a 60% failure or something stupid in that report.  Grant, what was –?

Grant:  Oh, 2 out of 20.  That’s kind of while the sun shines twice, right?

Mike:   Yeah.  It was pretty brutal.  So yeah, what do you think, Grant?  Let’s start off I guess just talking about where to even start, like finding people to import products.  Where did you first look?  Like if you kind of look back to your first products, where were you looking to bring your first items in?

Grant:  Yeah.  So I’m thinking maybe we could talk about going from the lowest hanging to the highest hanging, so in that regard maybe talk about domestic first.  Because a lot of people kind of skip the idea of domestic sourcing and think straight to China, but I think the reality is that most people probably get locally and then they go internationally.  So I think when CuttingBoard first started, I mean we were pretty much looking at all local manufacturing and the easy answer is Google, and Google gives you a lot of results, but there’s a lot of manufacturers even in America that aren’t on Google and that kind of blows a lot of people’s mind.  But I think it’s the trick of the trade because if you can find the people that aren’t on Google, then you get access to a lot of people that are probably not doing a very maybe high volume or just aren’t very well known or they’re a little bit more willing to work with you because, let’s face it, everyone is pretty much trying to source from like anybody that can nowadays.  How did you get all your IceWrap vendors?  I guess maybe they came with the previous list, but how did you find your new guys?

Mike:   Yeah, I mean we did get actually everything through our previous list.  Not everything.  Let me kind of think through that.  I mean some of the stuff now that we’ve been bringing in actually in from China so yeah, we were lucky from the aspect that we bought IceWraps.com and we had 13 manufacturer relationships in place and some of them we’ve now worked to create white label products with them.  And they are a manufacturer so it’s worked out great.  And in addition, we have I guess two manufacturers now that we’re working with in China and we’re getting ready to head over there actually in a couple weeks and looking to find some more manufacturers over there.

It was actually interesting.  At the last Canton Fair, there was a huge health section over there but there weren’t a lot of ice wraps related kind of things over there.  so I’ve definitely found that certain things China’s like really good at and you’re just not going to beat them in price, and certain things it seems like they just don’t do.  I mean, for instance, paper for like our books or doing things like that is just not their thing, like high-end, origami or artist type paper just doesn’t exist there.  Obviously there are other places in Asia but then like something like neoprene, it’s just like good luck trying to get that done in the United States for remotely the same price.

Grant:  Mm-hmm.  Yeah.  I know China, and leather is actually something they don’t do much of either and most people kind of think, “Well, why not?  Like everything else comes from China.”  But the reality is like all that leather that comes from China – and I don’t mean all, like 100% but probably 95% – is all like PU leather, which is polyurethane, which is a stretch to even call that leather.  It’s really PVC or plastic on top of like something that you could barely call leather.

So yeah, like going to what you’re saying, though, about like white labeling and private labeling, I think that’s actually where a lot of ecommerce type businesses can really go and source domestically because even though you might have a lot of existing vendors or whatnot, asking your vendors that you have right now just to expand what they’re able to do I think is really just the natural outset of sourcing.  And that’s what I’ve done.  I think that’s what you’ve done.  and we’ve just approached our own vendors and said, “Hey, can you do some private labels for us or can you make some new product?”  And I think if you do enough volume they’ll say yeah.  And even if you don’t so enough volume, I think some people will say yeah.  Have you like had any experience with what requirements they’ve had for you to do private label?

Mike:   Yeah.  And it’s actually interesting you bring this up.  I think it’s really important actually when you have a site like IceWraps or CuttingBoard for instance, where you already have existing relationships with manufacturers, you’ve got to be really careful here because like you can create a conflict of interest really quickly.  Let’s say that you have a manufacturer that makes a shoulder ice wrap for instance and you’re already selling three or four different manufacturer’s shoulder ice wraps and you’re already having to deal with the personalities.  Everybody wants to be the number one ranked shoulder ice wrap on your site and they’re all competitors as it is and then you’re going to go behind the scenes and go off to China and make your own ice wrap, then that’s just going to, again, have a conflict of interest with those vendors.  I think it’s a very delicate position.

So we’ve been very, very careful up to this point to not develop any product that conflicts with any product that we already sell from an existing manufacturer going out to China to get that done.  what we have done is gone to them and said, “Look, we don’t want to create this conflict of interest.  Like we want to white label products because you guys aren’t doing a good job of controlling that pricing.  We can do a better job marketing our products than we can marketing your products because you already have people out there competing with us and we’ve been able to show that we’re good at what we do.”  We have rankings in Google, we buy six figures of product every year from every vendor that we work with, and some pieces even in the seven figures.  And you go to them and say, “Look, we don’t want to create this conflict of interest.  We’d rather have you make this item for us than us go behind your back and make this in China.  Let’s work together.”  And it’s worked really well for us to this point.

We’re in the process right now of actually developing another product with a manufacturer and it’s good for everybody because we’re not pissing off that vendor, we’re getting a product that we already know sells well and gets good ratings, we’re just going to change the name to our name, and then we have complete control of the channel and don’t have to worry about someone selling on Amazon for half of MAP pricing.  So yeah, it’s worked our really well for us, Grant.

Grant:  Yeah.  And I fully agree with that and I’m actually doing that tactic with actually – they’re not a domestic supplier, but one of my international suppliers, and I actually wanted them just to do my own label and I just said, “Well, you guys don’t have what I want.”  Same as you.  And, “You guys make a good product.  I’d like you do this and that way I’m not competing with you.”  And I was actually surprised.  You know, most people kind of think your vendors are just making hand over fist and whatnot, but sometimes you can get some pretty darn good deals out of it and you can always most likely shave margin by going around them and direct to the manufacturer itself, but the reality is that if you’re a smaller shop or you’ve got limited resources, you don’t necessarily want to get into the import/export logistics.  I mean that’s a whole realm of headache that somebody is just going to take 15 points from you so that they take care of that and hey, maybe it’s worth it for every 15 cents on the dollar for you not to have to worry about that kind of crap.

Mike:   Yeah.  Yup.

Grant:  So let’s talk just a little bit on sourcing in terms of the domestic shipping, and then we can kind of talk about China shipping before we talk about China sourcing because I think shipping is really kind of the horse before the carriage kind of deal.  A lot of people get in trouble when they just go, “Oh, it’s cheap in China.  I can get this for $1.  It costs like $5 from my vendor over here.  I’ll be able to like kill it with a $4 difference,” and obviously that’s not true.  So let’s talk about shipping a little bit.  And since, Mike, you do a fair amount of shipping, why don’t you talk about like LTL pricing.  I know you’ve got some like crazy Amazon pricing that you get but like I know you’ve probably got vendors from the East Coast and generally like do probably more pallets than I do.  So do you want to talk about maybe like domestic pallet pricing and truckload pricing?

Mike:   Yeah.  I mean we’ve been bringing stuff in from basically all over the country.  We either ship it to us here in California or directly into Amazon.  So it’s based on a combination of weight and the number of pallets.  Mostly weights.  So we’ll pay anywhere from $70 to get a pallet shipped to us if it’s really close to $300 is pretty much the max.  And again, it depends on the weight.  I mean one pallet of books weights like 1,200 pounds so it’s a pretty heavy pallet, and ice packs are really heavy as well.  And then your cost savings goes up or down, whichever way you want to look at it, significantly whenever you start adding a second, third, fourth pallet.  So we try to now consolidate as much as we can and forecast as much as we can to be shipping in at least three or four pallets of anything that we order from our manufacturers, and you might take that $300 shipment and it might only go up by $100 to add 100% more to it.

So that’s kind of the rates that we’ve been paying.  We use Unishippers to do our consolidated freight and basically, depending on where it’s coming from or even the time of the day or the week, the carrier changes all the time.  So we see things like UPS Freight, we see Essential Freight.  There’s a bunch of them.  You can run them all down.  FedEx.  All the ones you can think of and then there’s like ones that I’ve never heard of before.  Sometimes I try to stay away from those because I don’t know them.  I’m not sure that they’re really reliable.  But they just spit you a number out and I think a lot of it is that they’re kind of bidding almost in the like the Priceline kind of model.  It’s like if they have trucks that are empty and going on that particular route, they give you a really good rate.  So we’re getting Fortune 500 rates for a small company that we are and it’s worked out pretty well.

Grant:  Yeah.  Clear Lane would be an example of one of those and I’ve learned the hard way about Clear Lane and they usually get – for example, if I have UPS Frieght and I’ve got like a load going from across like three zones, let’s say from the Midwest to Florida and if it’s like a full-on pallet, like 500 pounds of something, UPS Freight might get that for $350 with a lift gate.  R&L Might be right around that price.  YRC might be a little cheaper.  But Clear Lane might be like at $200 flat and it’s like, “How on earth are they doing that?”  And then I realized six weeks later, when my shipment hasn’t arrived, how they’re doing it because they just buy the empty spots on every truck.  Yeah, they are like the ultimate Tetris player of the LTL industry.  And you’d think I’d learn my lesson.  So I only use Clear Lane when I ship to myself and one time I was like, “Well, it can’t take more than six weeks to get to me.”  Ha-ha-ha.  Like seven weeks later, I’m like, “Oh my God.  Where is my product?  Did it get lost?”  And funny story.  This is the first time I’m telling you but I actually had a $12,000 shipment going to Brooklyn on YRC and that one actually got lost.

Mike:   Oh, lovely.

Grant:  Yeah.  They scanned it in Seattle though.  So yeah, that was pretty fun.  And –

Mike:   And that’s when they tell you that they have like basically 3 cents per pound of insurance so you get $200 back of your $12,000?

Grant:  Pretty much.  I was like, “You’ve got to be kidding me.”  So I’m still dealing with that one.  They’re supposed to call me today to see if they’ve actually done a locate and tracked it down because I had to give them the pallet description at this point.  I’m like, “Yeah, look for the $12,000 countertop and then let me know.”

Mike:   Oh man.  Brutal.

Grant:  Yeah.  So yeah, like you said, LTL, it’s all about the volume and with CuttingBoards, I mean we’re the same way.  I don’t ever ship anything unless I’m like at at least 1,000 pounds of product on there.  And I know that’s very product-dependent.  If you deal in stuffed animals, you’re never going to get 1,000 pounds of it but you need to load up your pallet, and every once in a while I have to take a shipment that’s like barely on the pallet volume, which is like 150 pounds essentially.  That’s at the point that it becomes more worth it to ship on a pallet.  And it’s really sad to get a pallet that’s like two feet high and you’re just like, “Why did I pay $200 to ship this?”  And you’re like, “Well, because UPS would’ve charged me $220 or $250,” but it’s really just a huge waste of money.  And so in terms of like an order volume, I try to order at least $3,000 to $5,000 at a time (and again, it’s product-dependent) because it makes the shipping worthwhile and when you think about it, like your inbound shipping, you don’t want that to be anything more than 10%.  Otherwise, you’re just like killing your margin completely

And I always wonder at these trade shows.  People always talk about a $250 minimum order and I’m like, “If you buy something for $250, that’s going to go by small parcel and you’re going to be paying probably –” yeah, I don’t know how much product you get for $250 but for me, at least, $250 is cutting boards, that’s going to cost you probably $50 in shipping to bring it out on dealer rates.  So then you’ve got to ship it back out.  So nobody’s winning at that point.  It’s just a huge error.  So buying in bulk is always the way to go.  Being a bootstrapped, cash-strapped business is very bad in that regard because you’re just always scrunched up on your margins.  And, so that said, let’s talk about –

Mike:   Just real quick, Grant.  I mean we’re paying an average of 50 cents a pound.  We’ve been averaging that out over all our shipments.  And because of the bulk aspect that we do for shipping, we’re average about 50 cents a pound so we always look at that as we’re factoring in our cost of goods.

Grant:  Is it really 50 cents for you?

Mike:   Yup.

Grant:  Wow.  That seems kind of high.  But then again, you’ve probably got a large volume of products.

Mike:   Yeah, I mean we don’t have cutting boards necessarily –

Grant:  Right.

Mike:   So I mean a lot of the ice wrap stuff is a little bit lighter.  So yeah, it’s averaging about 50 cents a pound.

Grant:  Yeah.  Because I think I got something like a 10,000-pound order over here for around $350 or something.  That might’ve been a Clear Lane order so I’m not really sure.  But yeah, like 35 cents or something.

Mike:   Well, a lot of our stuff unfortunately is coming from the East Coast.  I think that’s the same for you though, isn’t it?  Like aren’t you shipping stuff from like New York or something like that?

Grant:  Yeah, but luckily I’ve got that East Coast warehouse and –

Mike:   Oh, right.  Right.

Grant:  Yeah, and that’s one of the reasons I’ve got that warehouse.  The amount that I save in shipping I pay for my rent essentially.  So I save about 20% in shipping costs per month, which I think nets me around $500 to like $800, which my rent over there is right around like $500.  So it kind of works out.

So yeah, let’s talk about now China shipping.  So we’ve talked about 10% domestic shipping give or take.  And now we’ll talk about China shipping.  So just to like maybe surprise our people, as a percentage of the actual cost of goods coming from China, Mike, what would you say the shipping cost would be?

Mike:   Oh man.  25%?  It’s substantial.  I mean it’s gotten away from getting all goo-goo gaga for someone giving me a price for China, thinking about all the money we’re going to make because I know better and I know how much it costs to ship it.  And we’re going to start talking about some of the things that we’ve done to significantly cut that down, and the biggest thing is that we’ve pretty much gotten in the habit now of just ordering a container of whatever it is that we’re doing at a time.  Once you’re at about a third of a container, maybe 40% of a container, it’s cheaper just to buy a whole container.  And then you’re like, “Well, crap, I’ve got 60% of the container left open,” and you’re kind of like in this position of, “Let’s fill this up.”  So we’ve been trying to consolidate shipment and get things in a container like that.  It basically works out to free shipping when you start filling out the rest of the container.

But yeah, I mean it could be – like if you’re doing air shipping, you know, when we first got started, it was as high as 50% of the cost of goods.  So it can be really substantial.  I’m kind of curious to hear where you’re at with that.

Grant:  I would say when you’re doing small parcel, it’s practically 100% if not even more.  I mean we’ve got those great DHL rates and I’ve taken in like small boxes of stuff and if it’s like light but large in size, like a $100 order might cost $100 to ship out over here.  So you’re at 100% and one you go –

Mike:   I agree with that for sure but we’ve never done anything that small.  But yeah, if you’re doing – like some manufacturers, like AliBaba, it’s like the absolute minimum order quantity is like 100 of something for $1 apiece and it’s a $100, yeah, easily it would be $100 to ship it over here.

Grant:  Yup.  And so that’s pretty much small parcel, and then jumping up to the next stage should be air cargo, and like you said, that’s when you get like a pallet and you get that on an airplane.  I think the going rate, if I’m not mistaken, is about $2 to $3 a pound?  It’s probably more than that.

Mike:   I think it’s more than that.  I mean we only got that quoted once and I was just like, “Holy crap.”  I mean it was like six times more than sticking it on a boat and you’re obviously saving time.  The air cargo stuff gets here and through customs typically, I guess, what?  I don’t know, within a week like all in?  And on a ship, it seems to be for me between three and five weeks.  Just like, “Okay, well, yes it’s going to get here quicker,” but it just wasn’t worth it.

Grant:  Yeah.  And now that I’m thinking about it, I think it’s actually $7 a pound if I’m not mistaken.

Mike:   Yeah, that sounds about right.

Grant:  Yeah, I was probably thinking single LCL.  But yeah, like air cargo is $7 a pound and I should know because when I brought in a pallet from Italy, I mean that practically costed me $2,000 for a pallet.  And I mean that was pretty painful but I ended up marking up my products to reflect that but –

Mike:   And that was air cargo?

Grant:  Yeah, that was air cargo.  But the problem was that was EXW.  And we’ll talk about [in-code? 22:23] terms too but EXW means that the manufacturer, they don’t get it to the dock or the airport, they just put it out of the factory and say, “Well, come get it.”  So I had to arrange for a truck to drive out to the middle of the lovely hills of Tuscany and pick up some products over there, then bring it out to the airport, schlep it on a plane, have the plane land here, and then schlep it out to my place.  So it ends up costing.  So I think the two truck trips each were probably about $250.  So that’s like $500 right there, and then the air cargo itself was probably another $1,200, $1,300 that you get customs, paperwork, and your broker fees and everything on top of that so now you’re at $2,000.  And that was from Italy too.  It’s an EU country and they’ve got some tax rules and everything over there.  But even if you get from China, I think you’d probably be somewhere around like $1,400 for an air cargo pallet.

Mike:   Yeah.  The numbers to me just don’t make sense.  I mean there hasn’t been a situation, even if it’s something that we’re out of stock on, like I just can’t justify sending it out air cargo.  Because first of all, we’re going to have to break up the shipment because we’re not going to ship a whole container full of stuff air cargo.  So we would split up one or two pallets of it and get that over here quickly and ship the rest of it over on a container.  The problem with that is that, like I mentioned, we’ve already paid for a container so like our shipping cost doesn’t go down for the container part of it.  We’re just taking out two pallets worth of stuff or basically three cubic meters of stuff out of the container and putting it on an airplane and it’s just really, really painful.  So we try to not get ourselves in that situation.

Grant:  Yeah.  So one thing that is good about air cargo, though, is that it’s very clean in terms of not needing like a whole ton of crap involved in terms of paperwork.  Like the customs is paid for all air cargo.  It doesn’t land in customs.  Like everything that pretty much clears – I mean you need it to get cleared by either DHL or FedEx or whoever brings it generally and so it’s obviously a lot faster because of the transport time but it’s also just a faster product period because a lot of things need to get checked off before it goes on a plane really.  And you kind of know your fees at the end of the day.  When you work with a broker especially, I mean when you pay for it, that’s kind of the final fee coming out, whereas opposed to oceanic cargo, you suddenly get into like a little bit more tricky situation because a lot of fees start adding up that you don’t even realize at the end of the day.  Most of the time when people search for oceanic, they look either on AliBaba or they look at some broker site that says, “Hey, $500, $600 to bring a container over.”  And what do you think about that, Mike?

Mike:   Yeah, well, it’s funny because I actually, in preparation to talk about this real quickly because you were starting to talk about it, I pulled up my list.  My latest shipment’s invoice here, we have a $3,000 bill to bring over I think this was six pallets of stuff on a boat.  And the freight portion of it is $600.

Grant:  Ta-da.

Mike:   So yeah, I’m trying to think of an equivalent.  I think it’s like when you get your cell phone bill or your cable bill and there’s the paperwork fee and there’s some cooper wire fee and the battery disposal fee or you know.

Grant:  I’m going to interrupt you here because I’ve got my bill too for my container and I got you beat, man.  My oceanic freight was only $397.  So I’ve got a whole container at $400.  But let me go over the other little nickel and dimes that I’ve got over here.  So I’ve got an automated manifest system.  I think that’s the printer to print out my bill of lading or whatever.  That’s $25.

Mike:   [Inaudible 26:20], man.

Grant:  Yeah, exactly.  I’ve got my CFS fee and I’m going to be honest, I’m not even sure what that is.  I’ve got two of them: $50 and $65.  I’ve got a [chassy? 26:28] fee: $40.  I’ve got a customs clearance.  That’s so that they can make sure your goods are good for arrival.  That’s $55.  I’ve got another customs clearance for $135.  I’ve got DDC prepaid.  That’s $235.  What does that mean?  I don’t know.  Doc fee: $50.  Probably to print out this document.  Export license fee: $20.  HC, that sounds like handling charge: $60.  But I’ve got handling charge right underneath there for $40.  I’ve got an ISF fee, which is funny because I know I’m already ISF bonded so it looks like they actually charged me $65 extra.  That’s $65.  Messenger fee: $30.  [Pisan? 27:10] fee.  That sounds Chinese to me, or Greek.  I don’t know.  That’s $70.  Pier pass: $48.  Truck charge: $25.  Another truck fee: $420.   So I’m at $1,857 for my container.  So that’s a little bit of a jump from $600 I’d say.  That’s about 300% if my numbers are right.  This stuff’s –

Mike:   I’m jealous.  You didn’t get the harbor maintenance fee that I got.

Grant:  Oh, hey.  You get the dolphins with lasers fee?

Mike:   No.  Oh man, it’s brutal.  But yeah, I mean obviously, the point is that the freight part of it or the container part of is miniscule compared to the total bill that you will get.

Grant:  Yup.  All of this doesn’t even include – I mean even though I listed off customs fees and clearance or whatnot, you still have your actual customs, like when it lands over here, and then you need to pay whatever percentage.  And if you don’t know what the fees are for your product that you’re bringing over, you might get stuck with a huge-ass bill.  For example, I brought in some clothing and t-shirts and I don’t mind admitting it: I didn’t even know what it was.  I just assumed it was going to be kind of tin the same category as my cutting boards, you know, 3%, no big deal.  You know, bringing over $5,000, what’s another 3%?  Well, I got hit with a 30% fee, which, add in your 25% shipping cost, now I’ve got another 30% on top of that so now my cost of goods is actually 30% higher than I thought it was going to be.  And suddenly, I was like, “Why on earth did I not maybe use a domestic guy?”  I mean it was still cheaper but not by the margin I thought it was going to be.  How about you, Mike?  Have you been hit with any surprise fees?

Mike:   Oh yeah.  Yeah, we also do clothing.  We also found out about anti-dumping tax the hard way.  There’s a 114% anti-dumping tax on some items.  So the real moral of the story for us now – maybe a more smart person (and obviously they would probably say that in a proper way in English) – but I think the lesson that we learn is before I bring anything in, I just spend more time now asking questions.  I’ve always taken an approach in business where I see something working and I’m just going to go full stream ahead and not worry about some of the details because you can spend a lot of time and end up with analysis paralysis and never do anything.  And I absolutely hate that, but I’m on the other side of the spectrum where probably people look at me and probably go, “What the heck is he thinking here?”  And this is probably the boat that Grant and I fell into, where you’re like, “Ah, well, it seems like import duties are 3% to 5%,” and then all of a sudden, you show up with a bill of 30%, 114%, or whatever it might be.

So I just ask.  I ask the manufacturer first, and a lot of times they’re honest with me.  But after I get the answer from them, what they expect the duty to be, then I ask my shipping company and they give me the actual real answer.  Sometimes it’s not the same, so never really trust the manufacturer but it is a good place to start.  And now everything that we do, I men every single time, it’s like the first thing I’m asking before we set up a deposit on a pro forma invoice.  What’s the duty going to be?  And what’s our like total all-in cost going to be on an item?  And not getting super excited about the margins that they look like they’re going to be because there’s a lot more to it.

Grant:  Mm-hmm.  Yup.  And there’s a whole bunch of like little details in shipping and our goal here isn’t to scare you or to say don’t import because obviously, we are.  But it’s not as simple as going on AliBaba and clicking Checkout with PayPal.  And they kind of make it seem that way, you know, you’re secure and your protected but the reality is there’s a lot of things that can go wrong and if you just kind of jump in – I’m sure like 70% to 80% of people that do that are completely fine; they just kind of bumble their way through.  But it’s kind of like if you’ve got a sewer grate that happens to not work in the city, most of the people will not have any problems if they drunkenly walk around, but every so often, some random people just fall in there and get eaten by like a New York alligator or something like that.  Like these things do exists and you do need to know how to look out for them when it possibly is ahead of you.

So let’s talk about just sourcing.  Like how much – I think we might be getting a little bit close to our time here, so I don’t know if we want to sh–

Mike:   Yeah, I think that this is probably turning into a two-part episode, which is great because I think there’s still a whole lot more to talk about with sourcing in China.  It could even be possibly three parts.  There’s definitely a lot to it.  So to recap just the takeaways here, I mean I think lessons learned: number one, always ask about import duties and the total shipping charge ahead of time.  What do you think, Grant?  What’s another really good takeaway from this episode?

Grant:  I think don’t get too excited about shipping.  Or don’t get too excited about the –

Mike:   The initial price they give you.

Grant:  Yeah, the cost that you see.  You need to get excited about the landed cost, or not excited as you might be.  Never do any kind of calculations unless you know what it costs once it’s in your hands itself.  Otherwise, you’re just fooling yourself.

Mike:   Yeah.  I think that’s definitely really good advice.  So yeah, we’ll leave it there for this episode and we’ll just continue this next week for part two of importing from China.  Maybe we’ll even hit a three-part episode in this one.  We took some notes before recording this and we still have a lot to hit on and obviously, it’s a pretty big and complex topic.  So until next week, everybody, hopefully you guys enjoyed this episode and are looking forward to part two.  And if you have a change to leave a comment on iTunes, we’d definitely appreciate that and until next week.  We will talk to you then.

Grant:  All right.  Take care, everybody.

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