Steve Simonson On Avoiding Sourcing And Supplier Mistakes
Steve Simonson has been in the E-Commerce game since the ’90s. He’s been selling on Amazon since 2001, and has imported literally hundreds and hundreds of containers since then. You won’t want to miss his experience in sourcing and supplier mistakes to avoid! All coming up in this episode of the Amazon Seller Podcast.
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Steve Simonson has been in the E-Commerce game since the 90’s. Selling on Amazon since 2001 and has imported literally hundreds and hundreds of containers since then. You won’t want to miss his experience on some of the top sourcing and supplier mistakes to avoid all coming up in this episode of the Amazon seller Podcasts.
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What’s happening everyone, this is Andy Slamans here from Amazing Freedom. If you are part of our group, we thank you for hanging around and listening to myself, to Liran to Nathan. We appreciate, your support. We always appreciate your encouragement. I often tell people, I’m around a lot of folks in the Amazon seller space and I often tell people that Liran helps as many people in the Amazon space that I know, but I’m going to introduce you to somebody today that I think is comparable with Liran and is an amazing Amazon expert.
I just had the privilege to spend 10 days with Steve in China. He led a trip that I got to tag along and my mind was blown with the level of knowledge and expertise that Steve has when it comes to all things sourcing worldwide, especially in China when it comes to all things e-commerce and when it comes to all things on Amazon. So we’re going to get right into it now and folks, I just want to tell you, there is nobody in this space that I would push people to or let me rephrase that. I want you to go to Steve’s content, we’re going to get to that at the end where you can go to consumers content. You know why? Because it will save you thousands of dollars if you take the time and listen to the podcast that he puts out and then he’ll share with us the other places that we can go to listen to the content that he’s been able to deliver.
It was honestly a mind-blowing, life-changing experience and trip for me just to be able to sit at the table and then have Steve share all of his insights around all those things that I’ve talked about. So, Steve, thanks so much for taking the time out of your day today. I know you’re an Austin, Texas. You’re getting ready to present at the billion-dollar summit with Kevin King. So super excited about that and I think you guys are going to do a reveal a little bit later. So, Steve, let’s just start out, just tell us a little bit about yourself, how you got into this e-commerce Amazon game.
Well first, thank you for that very generous introduction. I almost feel like it’s like, Hey, I can’t go anywhere but down from here. So I’m out of here. But no, I started in E-Commerce in 1998. Literally I made my first secure shopping cart sale in 1998. And then along the way we’ve had some points of luck and I think I started selling on Amazon. We were first invited by Amazon and around 2000 or 2001 I don’t quite remember the exact timing but really we got serious about it around 2009 on Amazon. We were quite serious about e-commerce right up from 98 to all the way through.
Wow. So 2001 you started selling on Amazon?
Yeah, so Amazon invited us, I was in Seattle, we bought a company called www.cornerhardware.com and Amazon was in the business development model at the time and some guy recruited us. We went over to the Amazon headquarters. This is, it’s changed now, but back then it was an old hospital. And I just remember going in, we check-in and there goes Jeff Bezos bopping by and we’re like, Hey Jeff. And he was still famous even at the time and he does his famous laughing and skips away. Then we ended up listing 15,000 drop shipping items that we had. And it was okay, but it was no home run. And, and you know, over time it actually fizzled out, when we sold that company. So yeah.
Wow. So you would like one of the original sellers then probably to jump on the Amazon platform cause I think they didn’t start till 98 or 99 correct?
Yeah. So Amazon itself began, you know, selling, you know, I think they incorporate it in 95 and, and started selling seriously in 96, 97 but from outside we were a vendor at that time. They got outside the book and media category in that 2000, 2001 time frame and started getting into electronics and you know, we were selling home products and again, 15,000 drop-ship items that were all, by the way, electronic. We have an EDI set up so that we never tested anything. Amazon would place the order with us. We place the order with the distributor and the distributor automatically ship it out, provide the confirmation and shipping, tracking all of that back in 2000 2001
No, I, I just, I’m, I’m guessing it, but I imagine that the interface of seller central probably looked totally different back then than it does now.
Gosh, you know, again, we were some kind of vendor, but I’m not even sure I was the one logging in. We were doing almost everything by APIs.
So our programmers,
maybe they didn’t even have an interface back then.
I don’t even remember. I certainly wasn’t involved in that, but I just know that our programmers talked to their programmers and we got the communication. Basically, I don’t know if we used EDI or what the process was at the time, but it was all a hundred percent hands-off electronic, which was the best part of that deal.
Right, right. Oh, that’s awesome. Well, I know that there’s still a number of successful sellers that do the drop-shipping model. There are inherent risks in it, like every selling model. Right. And it seems like it may be getting a little tougher for them. So what did you do this? So you started by drop shipping and then, so what did you transition to?
Well, dropshipping was certainly our way to kind of understand the top-selling products, understand the market to some degree, generate cash flow and turnover. Even some scale to a certain extent, but the margin was razor-thin and it was so fickle, the market, right. You know, you get a few returns, a little bit of bad luck and, and the whole thing could really work against you. So in around 2001 I started buying from private label items that we would basically figure out what was hot and drop shipping and we would knock it off and make our own brand, our own iteration. Iwould say this, we tried to make it some demonstrably way better. And that was around 2000 when we started buying from China. And in 2000..
2001 when you started sourcing in China,
I remember my first container from China. I was terrified and I tried to get one of my friends who had big companies to split it with me. They were more scared than me. And so finally I got one of them to agree to let me drop the container at his big warehouse. He, his team and staff would unload it. And then I begged my sales team, I’m like, whatever it takes, we gotta get this stuff sold. And this was all E-commerce at the time. They ended up selling the container pre-selling it before it actually even arrived, and within, I would say within 12 months for sure, we were doing about 20 containers a month of that single product.
Oh my goodness, 20 containers a month?
It was a big product, but yeah, we, we would destroy that. And the, my friend who was so afraid to split the container was just gobsmacked. Every time, more and more containers. We had our, we ended up taking over a third of their warehouse and ended up having to move into our own giant warehouse. It went very well, let’s say that.
Wow, that’s incredible. And what year, what time frame was that?
That was around 2001 to 2002 and we got so good at it that I started traveling to China in 2002 to really try to figure out how to solve the Rubik’s cube, as I like to say. It’s, you know, we had all the same problems that everybody else does. Right. One shipment varies from the next, we had this specification or we had this expectation and then the product looked a little different. Every problem anybody’s ever had in China, I had 10 times and probably at a hundred times this scale. So, it’s it they leave a mark because and they hurt.
Well, it’s funny cause I, I know you just commented, someone put a post in our group that they have toys, have container of toys that are stuck right now at, at the port because unfortunately he didn’t get the proper testing done. And so those are the kinds of mistakes like you just said, that can really hurt if you don’t do your proper homework. Right? Prior to importing. And I know you’ve probably heard a number of horror stories, I’ve heard a number of horror stories as well, which is why I think like the trip we went on is so beneficial and I was so happy. There are a number of sellers that went on that trip with us that they’ve never imported before. And so for me, that’s a great use of their money. Being able to get that knowledge, that foundational knowledge so you don’t end up right with the container stuck at the port and really, you know, you’re waiting for that supplier and it may take 14, 15 days and when you have a container stuck at the port, those storage fees really go up. So Steve, you’ve been in the game longer than anybody I’ve ever talked to. Share with us some of the things that you think have shifted or changed, you know, just let’s just take, not even from 2001, because that’s like, that’s OG right?
Let’s go from 2012 to a modern-day. Like what are the things that have changed and what do you think that people really need to be aware of when it comes to importing private labeling? Brand-Building?
Well, the first obviously and the most obvious is that the tariff situation is a very clear and present risk to our ability to import. And that specifically impacts, you know, things coming into the United States from China. That’s where most of the effort is. But there are tariffs being passed against Europe for things coming into the United States. Then, of course, there are counter-tariffs being applied by these various countries. And so there, that trade kerfuffle or trade war or however you want to think of it is that’s a risk that needs to be managed. That’s a somewhat unique, but it’s, I would just tell people to be patient and just kind of stay the course and, and be calm about their reaction to it because we have seen these types of things with anti-dumping or other various trade equation changes. And this too shall pass, would say what,
What are some, what are some of the things that you would counsel folks that are watching this to stay away from? Because there are some things that folks will try to do right, to, to skirt around that which could end up really biting them in the butt. You know, can you think of anything off the top of your head?
Well, probably the first thing your Chinese supplier will recommend to you is, Hey, we’ll just amend the commercial invoice and make it a smaller amount. And I say, man, you can’t cheat death. You can’t cheat taxes. Don’t screw the government. They will get you in the end. So never, ever changed the commercial invoice amount to, unless it’s gotta be the real amount. If for whatever reason your price goes down and you’re actually transacting at that volume, find it should be accurate, but never change a commercial invoice.
Never change the HS code to something that’s not. I had a friend one time, we were importing this product for many years. We decided to buy it through his agency. He’s a, became a sourcing agent. He had a good price, a good package. And we told them, we said, here’s the HS code that we’re using. And he says, no, no, I found another one at 0% duty. You guys are paying 8% duty. And I said, well, you know, we’re, we’re not stupid. We didn’t pay 8% because we’re nice guys. We paid 8% because that’s what the code and product match up to. And he’s like, yeah, you don’t know what you’re talking about. I’m like, Hey, you’re the, you’re the importer of record. You’re the agent knock yourself out.
A year and a half go by and he gets a bill for $170,000 because they finally did an examination on one of the containers, determined that the HS code he declared was wrong. And then they just retroactively applied the correct HS code to all his prior imports. And by the way, that has no end in the lookback period. It’s infinite. You’ve been doing it one year, 10 years, 20 years. It can, they can go back forever. So never mess with the HS code. Never mess with the CI, the commercial invoice.
And I’ll just add to that because what, what could potentially happen to if you’re building your brand and you are, you know, skimming the system like that and you want to sell your brand, the company that purchased your brand is probably gonna. You know that they’re going to accept that liability and if they’re good and looking under the hood, they’ll figure out, they’ll be able to follow the numbers. Right. And their goal is your ability, to sell your brand.
Yeah. Even worse, if you get a transaction, you think you’ve crossed the finish line, even you get a big pile of cash if when you sell a business, there’s something called reps and warranties, representations or warranties you make in the contract. Then say, I didn’t break any laws, I didn’t do anything wrong. And they can come not only after you and get all the money they gave them or they gave you to begin with. They can get after you personally if it’s a violation of the law.
So I just say never break those laws. I, you know, breaking rules. I don’t really care about certain things that Amazon tells me to do or not do. Honestly, I, yeah, I had stayed within TOS, but if they say, you know, don’t manipulate sales ranking, it’s like, so I should sell less stuff that, that just seems idiotic to me. So rules, I’m less sensitive about the laws. I’m, I’m a big believer in it. And also don’t fall victim to this idea that you can simply transship stuff. So people say, Oh, just, you know, you’re in South of China. Just ship it across the board of the Vietnam market made in Vietnam when you manufacture and ship it on over a, a huge company. In fact, Patrick, our buddy in Shanghai share this huge nail distributed in The United States just got 17 or 18 containers. I don’t remember exactly how much seized by customs because they lied and said that ship was made in Vietnam when it was in fact made in China. The government is, they’re stupid, but they’re not dumb. And so you’ve got gotta just, you know, stay the course, do the right thing, consider alternatives. But China will always remain a viable manufacturing base for the foreseeable future.
Yeah, no, that’s actually, because what I see happening is I see a lot of sellers panicking, you know, when they when they’re getting hit with that 20 or 25%. But I know, I think Steve would say this too. You got to remain calm and understand everybody is experiencing that same amount of pain. So you need to try to find solutions other than cutting corners. And one of Steve’s famous lines and I learned after traveling with him 10 days is he’s competitive and he will go to war but he will not go to jail.
That’s true. Yeah. My least favorite idea is for me to go to jail. So I have no problem getting dirty when it comes to fighting with the competition or being creative or just working, you know, just sweating really hard to come up with solutions. I’m very good at creative ideas and, and you know, we’ve moved some stuff to Vietnam, we moved some stuff to Malaysia and things like that, but the reality is calm, as Andy said, that’s really important and be methodical, you know, are you thinking longterm? Or are you just panicking about your next shipment? Cause that’s not gonna help at the end of the day. Just, you know, stay the course and really think what are your points of leverage with your current supply chain. Can you get a lower price? Can you get them to share the burden of the tariffs? Or can you get them to deliver terms to you as a result of some of these external pressures? Then the answer is on all of those. Yes, you can do it cause we’ve done it and other people I know have done it.
Absolutely. So Steve, tell us a little bit, cause this is what I found fascinating again, after traveling with you for 10 days and I don’t know if you’re going to do a trip like that again, but if anybody is watching, I highly recommend if Steve ever does a trip like that again, that you, you as soon as it comes out, you want to pay and you want to immediately go, I learn more just by sitting at the table and listen to this man. Then I’ve learned in the previous five years of selling on Amazon. So just incredible knowledge. Share with us a little bit. And this is what I found fascinating. Just how the whole relationship with a supplier works. You know, and again, from we come from a Western mindset of Western culture and I just found your whole understanding of being civil, but understand in the day it’s war.
Yeah. And so I think although those constraints are a good way to, to start the conversation, which is I’m always going to be professional and I’m almost always going to be absolutely polite. And you know, there are times where I’ve stormed out of a room, but half the time that’s for show.
But I’m, so I’m going to maintain my professionalism and I put my name on anything I do. And so I’m gonna make sure that I’m representing the way myself, the way I want to be represented. But I know that it’s, it’s an adversarial situation. They want as much money as they can get from me and I want the best product at the lowest cost they can get from them. That’s a true situation, this idea that suppliers are partners or this or that, it’s an academic conversation.
If anything, they, they’re, they can be great. And I have many, many long term suppliers, but don’t forget for a minute that the moment they find some advantageous point that they don’t take that advantage to hurt you. They take it to enhance their own margin and they don’t know or don’t appreciate the levels that that could trickle down into hurt negative reviews. Right.?
I had a case or a product we made one time and we didn’t specify this one component. I don’t know why that’s, we certainly know better. We get it. We send it out to 200 of the top Amazon reviewers and you know, half of those reviewers come back and go, Hey, the hinge broke and we go to the factory. We’re like, Hey, w the hinge broke immediately. This is like a really expensive iPad keyboard, you know, Bluetooth, expensive electronics. And they’re like, Oh, well, you know, you might consider using a metal hinge. And we’re like, we always wanted metal. They’re like, well, you didn’t write it down and it’s going to cost you. And so we’re like, okay, well what’s that going to cost?
Where we kind of getting ready for the big you know, gotcha. And they’re like, you know, it’s like 25 cents more per unit. We’re paying $20 a unit for 25 cents. We can go from a plastic case to a metal hinge, but their mind wasn’t, I’m going to screw Steve. Their mind was, I’m going to save as much cost. Steve said he wanted the lowest cost and so that just know that you have to really be responsible for it and I always recommend reading the book “Poorly Made in China” by Paul Midler. That’s 15 years of my, my life, even though it’s not about me. It’s a shared reality in China and I think any Chinese trader, somebody who’s an expert in China will tell you the same.
Awesome. Hey, so I see some folks that are just joining us. If you just joining us, this is Steve Simonson. He is a gentleman I just went on a trip with, in China. I was hanging out with them for 10 or 11 days. He is the most knowledgeable person I’ve ever met when it comes to sourcing in China. When it comes to building brands, not only to have Steve built brands and sells on Amazon and other E-Commerce platforms, but he also builds products that sell in big box stores like Costco and some of the other major retailers, he’s been doing this since 2001, so he is an original gangster. He is an OG. And we’ve talked already about tariffs and how a lot of people are panicking. Then we talked about how you need to look at the nature of a relationship when you’re working with a company in China, a factory in China be civil right you know, have a good attitude, but understand it’s always adversarial.
And then the last thing, Steve, if you don’t mind, I’d like to cover Steve is in Austin, Texas. He lives in Seattle. He’s at the billion-dollar summit with Kevin King. They’re actually getting ready to do a big reveal of a project that they’re working on there. If you could just share the last thing and you segued into it and your last piece there about how important specking out products are. Because I’ll be honest, I think the majority of smaller Amazon sellers, what we do is we contact on Alibaba. You know, we may get the sample right, we look at it and then, you know, as long as we’re okay with the sample, then we just tell the supplier, okay, go ahead and make it and, and what I learned from you during this 10 day trip in China, that is not a good way to do it, you know? So talk to us again. Let’s end on this and then we’re going to talk about where we can point people to all your awesome content. How important is specking out?
To me, it’s the most important thing. My general rule is if it’s not written down, it doesn’t exist. And it doesn’t matter how many polite conversations you had or you went to dinner and you talked about how quality is important to you. That’s all nonsense. It’s, it’s absolutely useless. The only thing that matters is what’s written down on your specifications, on the purchase order or any purchase order related attachments. And I, I truly want you to think of each purchase order like a contract. And if it’s not written down like every component, what it’s made of, what’s the thickness, what’s the material? Chemical composition, length, height, width density. Even, we have some products that we have gloss meters to detect the gloss level and there’s a range, you know, it’s eight to 15% gloss level. If it’s outside that range, we can reject the product.
So I want you to really think about every level of spec and that I know that seems like a nightmare. And it probably seems somewhat overwhelming. It’s actual work. And the first thing you do is you start by asking the factory, “Hey, what are the key differences between your product and somebody else’s product? And they’re most likely to talk about some element of the product that you go, well how do I measure that, right? Cause everything has to be quantifiable. A specification means you can measure it later and then it becomes an objective conversation if something is off-spec, right?
If you made a spec and they delivered on the spec and the products still sucks, that’s your fault because you made bad specs. But if they don’t keep the specification consistent throughout the production, that’s on them. They didn’t do it right. And so there are laboratories in China, they are lots of ways to get specs. You don’t have to get it right the first order or two or pen, but just make it a natural evolution. Still to this day, we’ll find things on products that we’ve ordered for years ago. You know what we should, we should add an additional specification for this just so there’s no misinterpretation because you know, humans have a lot of different perspectives and specifications above all else are what will keep you with consistent product supply over the long haul.
Yeah, that’s awesome. I highly encourage you guys to do that. I’ll give a personal example. I had a product and it had a power cord on it, but working with the supplier for two years, they sent us a shipment. 500 of the power cords were good and then 500 of the other power cords that they sent us were bad. And so they tried to switch out and I know what they were trying to do, you know, people call it quality pay. They were trying to save, like you said, probably 25 cents a cord and they give it, they gave us 500 inferior power cords.
Now what I failed to do, but after that shipment, then all the ones going forward, I wrote down every single piece, took a picture of every single piece. So they knew that and all future shipments, right. Every single piece was mapped out to what was in this document and it does take work. But at the end of the day, as you said, it could potentially save you thousands of dollars. And in my case, the bad chord. When the customer would go to pull it out, it would actually cause a spark. So if you touch on fire right now, again, like you said, in their mind, they’re thinking, Oh, it’s just a little bit different. You know, my, the buyer, me, the customer is going to be okay with this switch.
But you, you know, obviously we know that you cannot do that, so make sure you get those specs right. So this was just like this much, right, that I was able to share and really listen and glean from Steve over the last 10 days that I was in China. Steve, I hope that we can have you on, I’m sure probably Liran will come on and, and he’ll interview you, but I know Steve, the, you left some amazing content out there.
And so I wanna encourage all of you that are listening today. If you are in this game, if you are importing from China or any other country, I’m telling you right now, there is no greater source than this man right here that I’m interviewing. And he has put out hours and hours of content. So where can we go to find your content, your groups, or whatever you’re involved in?
Well, the first thing is, again, thank you. I, you know, I love entrepreneurs. That’s why I do this stuff. It really is rewarding, fulfilling to me to see people like take some of the experience and maybe skip some of the pain that I’ve gone through. That’s, it’s the ultimate hack, right? Are they the, there’s an old saying that there is no compression algorithm for experience, but this is as close as you can get to it. You have to listen to somebody who’s got experience and try to avoid the same traps they fell into. So you can go to awesomers.com, that’s a podcast that I do. So you can find that on any major podcasts.
How many hours, how many hours do you have? Like 150 or something, right?
Yeah, it’s at least 150 hours, something like that. Also, if you go to empowery.com that’s an e-commerce cooperative. Every month I do a call with the Empowery shareholders and we also produce.
Hey real quick, can you just give us, give us information about Empowery?
Yeah. So here’s, here’s the elevator pitch if you will. We, we created a nonprofit member-owned cooperative, so, it can become an industry institution to work on behalf of e-commerce sellers around the world. So we have a buying power element to it. A buying group, right? Hey, you need better logistics, you need better access to photos, you need better copy, you need better this, that, the other, we’ve probably got a guy, right? Gal doesn’t matter. And so that’s the buying power. We also have reporters and we have press and we have government relations actions to try to make sure that we lobby for things that are going to help.
We just met with our reporters from the Wall Street Journal when we were in Hong Kong. Right? That was your connect.
Yeah, I got a guy. And then, of course, there’s also the, just the elements of community. Somebody has solved this problem, why not let the community help us solve this problem? And we do it again in a cooperative way. So…
And working on the tax issue too, right?
Sales, tax income tax, state tax, EU tax. We know the pain points and individually the Amazon can squash us the tax man can squash us. But together we have a much higher chance of survival. So it’s, it’s truly a passion project and setting it up as a nonprofit member on co-op was a strategic choice. I could have made it a, you know, profit-driven buying group with all these extra things. But we said, no, let’s make this an institution that will stand the test of time. And I hope that people really take the opportunity to check out the Empowery e-commerce cooperative, www.empowery.com.
Awesome. All right, so we’ve got the Awesomers Podcast and Empowery. Do you have any like public Facebook that people can check out?
Yeah, the Awesomers Professional Amazon Sellers Group. It’s a little wordy, but that’s what it is on Facebook. I often answer questions there. You know, anything that I can do to engage a group of people one on one I don’t do. Yeah, I and, and everybody should understand why my time is very tough, right? But I, anything that can have a network effect. So if you have that question, somebody else says that question. And if we can get an answer and get a systemic solution, everybody can benefit longterm. I’m a big fan of that.
Awesome. All right. Well when this is over, I am going to drop the links where you can go to, to find a consume Steve’s content again, if you are in this game long term before you listen to anybody else. All right. Promise me, trust me. Before you listen to anybody else, you need to consume every piece of content that Steve has out there. This man is the real deal. He has more knowledge about sourcing and China and other countries and e-commerce and brand building. He has more knowledge in his belly button than I have in my entire body. All right, so you, you want to check them out, Steve. Thanks a lot. I know. Again, you’re getting ready to go to the billion-dollar summit. You’re there in Austin. Good luck with your reveal that you’re having with Kevin. And again, I just appreciate so much. I just want to say thank you for taking the time to share so much knowledge with us while we are traveling with you and China.
It’s always my pleasure. You guys were great. I know that the folks who came along with us were blown away, not just by the content, but with the relationships. I love it, and I thank you guys, and as always, I’m at your service.
All right. We’ll see you stay out of jail.
That’s my goal.
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