Sourcing in China, Alternate Amazon Marketplaces & Mistakes to Avoid with Danny McMillan
What are the benefits of going to China to connect with manufacturers and source? Should you? Should you not look into getting into other Amazon marketplaces such as Europe and Japan? What about launch strategies and reviews? What about PPC and those alternative marketplaces? We cover these questions and more with a special guest in this episode.
In this episode we have a special guest, Danny McMillan from “SellerSessions.com“. Danny actually hosted Liran on his show recently. He has a ton of experience with different Amazon marketplaces and actually going to different events and fairs in China. There he learns about sourcing and meeting manufacturers.
We start off by asking Danny some questions and getting a little bit about his background and getting started in E-commerce world. We discuss how you can become a better Private Label seller and some of the pitfalls that you definitely are gonna want to avoid.
Liran: The first time I heard of Danny McMillan was reading an article that seems to kind of get sort of kicked-up and spread around every so often. It is about your experience and mistakes and lessons learned from going to the Canton fair. I see you speaking in a lot of places not just events in the US but all over the world. So I would assume, sort of have a different perspective on what’s going on within different Amazon marketplaces. Welcome to the show, I know you just came back from Hong Kong.
Tell us more about that experience and a little bit about yourself as a seller.
Danny: Okay, cool! Thanks for having me guys. I’m based in the UK. I originally come from the music industry. And then, in 2008 I went online, got my baptism of fire. Fast-forward to 2015 is when I discovered Amazon and that was like when the light bulb came on. Because of Fulfilled by Amazon and the fact that you can literally run everything from a small office. That you can size up your team whenever you need to depending on the task at hand. So, I’ve been sitting on Amazon since March 2015.
Then early this year, we launched Seller Sessions which is a marking show for Amazon sellers. We do 20 a minute show each week bringing in different guests like yourself, which come in and provide 2 episodes. We just try to focus on the marketing side of the industry and of course there’s a little slice for us to kinda sit in. You know, if people wanna learn about marketing, then they can gauge on the content, basically.
Liran: Awesome, I see you always speaking internationally. You just came back from Hong Kong and you went there to speak and probably to source.
Tell us a little bit about what kind of shows did you attend. And what’s the experience like going to China and sourcing?
Danny: This time around, it was just Hong Kong only. I got invited back to Global Sources to speak there. Global Sources is a bit like Alibaba but more of a controlled environment. Where everyone who goes through Global Source’s platform are verified and had background checks on them. So what you end up with is just like a smaller version of Alibaba, more of a controlled environment. But they do their own sets of shows. They do “Home & Kitchen”, and they’ll do an “Electronic” shows and they do those both in April and October.
I was speaking about launching in Japan, we might wanna cover that later. We’ve done an audience way of seller sessions with the Global Sources people. We also done a Mastermind. So we booked some of the guys for our agency and I’ve got an agency called FBA speakers. We are over there and did some speaking and shows etc. and so while I’m there, I managed to fit in 2 sets of shows there. Because they have HKTDC and the Mega Show which is at the opposite end of the island.
The difference between Canton Fair and doing Hong Kong, Hong Kong is a more refined version. So you go to Canton Fair and you are going to look for certain say “Kitchen products”. You might find 50 stands with the similar kind of thing to negotiate with. Whereas in Hong Kong, they are more slim down. So you might only find 2 to 5 for those and in some cases you pay a little bit more in Hong Kong. Plus the level of innovation is higher in Hong Kong, as well.
So, do you think when you’re saying, “You’re paying higher”, are you in return getting a better quality supplier factory products?
Danny: Yeah, You can do. But also, the key is that you, you don’t negotiate there straight away. Because what you don’t wanna do is pay for the stand for them. Your MOQ and unit price is gonna be based in and around that time. So never discuss pricing right there and then. Give it a couple of weeks, let them follow up with you. And then, they’ll start dropping their prices once they start to cover their excess in terms of their stands and stuff.
At the end of the day, price is important, quality is important. And the more you beat on price, the less quality you’re gonna get. Not everyone is in that luxury position of say, negotiating in terms of building materials and then the percentage afterwards. Unless you’re a big company. It’s a waiting game really. As long as you can sit it out and show you’re not desperate, you can get the price back down. Whatever the price they gave you at the show, you probably shave off 10-20 %.
Liran: Got it, Okay! And what would be your advice to sellers, what is your experience on going to a show like that versus souring on Alibaba. What… I mean obviously, you go to speak but you also go to attend the show.
What benefits do you find that you get from physically being there as opposed to not…
Danny: There’s plenty, so if we name the first one will be, is you look at product online. That’s the product that we wanna get. We then do our calculations. We feel that we can rank it, etc. And then we go to that next stage. We gonna speak to a lot of people, we do the round-robin emails and then they send this samples. Which looks shit. Then you go “Why did I spend all of that time doing all these different things when in fact, it’s reversed engineering.
When I walk a show, I’m like hawk-eye I walk down the aisles and if something catches my eye, that’s generally because of quality. Then I walk up to the person and then I’ll have a conversation with them. What I would say is that, when you go into a live environment is that you get to look at the quality first then work backwards.
Whereas normally, you’ll find a product and then you find the level of quality very late in the game. So you could actually waste 3 weeks doing this round-robin until you decide on getting on the samples. But you get to see the samples, and you get to meet the people in flesh. You look them in the eye, you can see body language, they can see who you are. They can size you up there and then. You can start to build that relationship online when you get back.
So, would you say you’ve done most of your sourcing that way?
Danny: What I tend to have done is that I’ve not necessarily done actual clear business for someone at the fair. It’s a great resource for ideas and then you give it to your sourcing agent and they’ve gone a different route with it. You know because you’re allowing them and then respecting their decisions. So if I’m honest with you, I’ve gone to all this fairs and most of the time it’s generated the ideas what I need to do. And then when I got back I’ve intended to work with them. It has not always the case but still, it was fruitful. Far more fruitful than me looking for a website and going on to tools and stuff and just purely relying that way.
You hit on sourcing agents so I’m assuming then you work with a sourcing agent in China?
Danny: It varies. So basically I’ve got 2 partners we work across 7 accounts like I mentioned. And one of my partners has got a sourcing agent. I’ve used sourcing agents in the past on certain things. And some of the stuff we do we’ve crossed direct with factory. And with my other partners they may have already done the sourcing, if that make sense. So it does vary. But across the 3 of us, there’s consistency with my partner Luke.
We use a sourcing agent there which isn’t just a sourcing agent. He actually compiles the product like the manufacturing process. So he orders in all the stock and the materials and stuff. And basically the processing and manufacturing when everything is put together is done there. He acts as a sourcing agent but he’s also, in theory, like the factory as well. So he’s an independent. He is known as a sourcing agent. But some of the products that we do, he’s actually assembly working his offices, or his factory if you like. But he’s more known as a sourcing agent.
Nathan: Hey, Danny. Obviously, you guys have been over the years building your processes and your systems and improving them.
What would you say a couple of years ago that kind of allowed you to first get started. Was there anything as far as you know that you feel like was important especially for sellers that are just kinda getting into this. Any advice for that based on where you came from?
Danny: I think first thing’s first, one piece of advice I give to anyone. You do inspections from day 1 to the day you die. Okay, you never skip an inspection. You don’t have that great a relationship with any factory, any person, any sourcing agent. I never miss an inspection. Sometimes I double down on an inspection. I’ll do a 2 or 3 day inspection. It don’t matter, there’s some of this guys are 200 bucks some are even a $100. It’s got to the stage where I’ve had last Christmas I pulled a product off the shelf doing 80 units a day. Even I didn’t inspect it and everything blew up. I pulled it from the UK and US and it’s sickening to do that.
I’m getting to a stage now where I’ve got cost effective inspection but other companies that charges $105 per day per men which I’m thinking of now doing pre-inspections so I send 3 of those guys in over 2 days to inspect every unit basically because then it’s gonna cost me 600 bucks and then I’ll send in the proper inspection team which will cost me 200 bucks so a shipment that you might do 3-4,000 units on maybe in total of $800. Now, you might think that’s a lot of money, I’ll tell you what’s a lot of money, having all thousand units already on the ocean that you realize are screwed and there was no way you’re gonna get your money back unless you’re able to leverage your factory to get a discount of your next order.
When you’re launching a product, do you generally always launch it like in the UK market first or in the US market first when you’re bringing in a new product or do you launch in all marketplaces at the same time?
Danny: We base it on the cash flow where our cash flow is at the moment. So let’s just say the path least traveled if you like. So for instance, this product that we just launched in Japan. Which now brought down now because they said it’s $5.90/unit, we’re saving $1.40 a unit now. We have an option of “OK, do we go all across all the European marketplaces and hit them one at a time or do we go back into the US?”
Sometimes people forget is that, they get excited about their first shipment. Then they forget they got to calculate their giveaways. Then when a product takes off like a rocket ship, you gonna get the next order in. And the order behind that and the cheapest way of doing that is normally bring it by sea so. So that budget you might have put aside and you got a unit priced at $5.90. And you got a sustained 2-3,000 units a month in a marketplace. Plus back up shipments and dealing with timelines . It’s all those deposits balance and everything to consider.
Has your experience been any different with those as far like how important they are to helping your product convert into sales?
Danny: Yeah, I mean I’ll give you a breakdown market by market. Obviously, we all understand US, we don’t need to cover that. Interesting thing about Japan, they neither like leaving bad reviews or leaving good reviews. So it’s very difficult to get reviews. I mean I’ve done a presentation last week and showed I think it was the Salad spinner. Best seller in the US 2500 or so reviews, in Japan 355. And then the garlic press, 2,500 in the US, and then 79 in Japan.
And so Japan’s great in the sense that you just need quality reviews and you don’t need a huge amount to get off the ground. We ranked our product to position # 16 before we pulled it out in the defects on 4 reviews. Now, you’re gonna get your backside handed to you in Germany if your product is not up to scratch. The Germans are very very particular about their products. So don’t be start going in there half-assed with a re-badged item of China and its cheap and it’s plasticky and flimsy and stuff. Because you get hammered. So make sure that anything you do in a German market, you’ve tested your product everywhere else and then they will still complain, God bless them.
I think as far as translation for creating a listing I would think it would be a lot more important to get a good Translator who can translate a good copy writing in…?
Danny: They need to be everything, They need to understand cultural and technical aspects of the marketplace. Need to understand conversions and keywords and stuff like so it can be quite difficult. To give you an average price, to get a listing, we talk about translation. What you’re looking for is technical rewrite from the ground up of your listing to cover the culture aspect as well. Let’s be honest, we can be quite open about, you know in the US is a lot more shiny in terms of the copy you can write. In the UK may be a little bit more reserved and in Germany, it’s a bit more high brass. You have to take in to all the cultural things of tonality, the technical aspects and the culture aspect.
If you wanna maybe again talk about the differences that you’re seeing in other marketplaces as far as ad spend goes compared to the US marketplace?
Danny: It can be seen this way, “ok so PPC that sells my product, job done”. And it isn’t. There is 3 parts to PPC, PPC where you make a profit on it, PPC where you break even, and PPC when you lose your ass. So when you lose your ass, you need to move on to something else.
And a lot of the time now is what we’re doing is with using less in the PPC and we’re doing more in terms of giveaways. So doing giveaways, discount codes, running Facebook ads. And then utilizing URL’s so that they are effective in and around the keywords that we need to rank for.
I would say that generally PPC costs are higher in the US than in the UK but I don’t think it’s too far behind. I see AMS cost creeping up as well. Most people get into AMS that starts to get more. But I think ultimately what we do with PPC is you got to remember it’s just a tool for visibility. It doesn’t make your product any better. You can get as much visibility as you want but if you don’t have a good product, with the right price, with the products surrounding it, and it doesn’t resonate with the customer, that’s gonna be the truest answer you’re ever gonna get.
Because we can fall in love with that products. You see a lot of time where people term in and go “Oh, I need to change my images and tweak the title or blah blah blah. It might just be that your product just isn’t that good. And that’s the hardest thing in the world for us to accept.