Chinese New Year – Amazon Shipping Restrictions and Product Logistics with Francois Jaffres from Noviland
Today we bring back Francois Jaffres to talk about Chinese New Year, Amazon FBA restrictions, and more in-depth product logistics. Logistics is a critical part of your Amazon business. Learn about how Noviland looks at logistics with Amazon.
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Chinese New Year – Amazon Shipping Restrictions and Product Logistics with Francois Jaffres from Noviland
Hello everyone and welcome to episode 52 of Two Amazon Sellers and a Microphone. Today, Kris and I have one of our favorite guests to come on with us, Francois Jaffres from Noviland. Francois, what’s happening?
– A lot, a lot. We talked briefly before this, so for starters, love the energy, love the morning energy. Kris, I saw that you have a new, a new little workout set.
– Yeah, it’s small over here.
– Some great new year’s plans, I’m sure. And, but now it’s the supply chain, it’s been insane. And with Chinese New Year coming up and I mean, we’ll talk about things like logistics, FX, sourcing, you know, how to interact with manufacturers, everything. But I guess to sum it up in a nutshell, it’s been nuts.
– Yeah. Add it to the list of all the crazy things that have happened.
– Isn’t that right, yeah.
– Yeah, I know. Well, that’s why we’re glad to have you on because this is very important information for sellers. I mean, and we’ll talk about Chinese New Year, just in general, how that can surprise people that are newer sellers, especially. I’ll never forget when I first started selling, I just needed to get my second order and it was right during Chinese New Year and I couldn’t even get in contact with anybody. So we’ll talk all about that in a little bit, but for those who don’t know you or if this is their first time listening to the podcast or checking out, give us a little background on you and Noviland, amazing, amazing company.
– Yeah, well, I appreciate that. So I’m the director of business development here at Noviland and I oversee a lot of sales, marketing, customer experience, a lot of what we’ve developed on the operation side, I took firsthand and a lot of just customer interactions and, you know, making sure everything is timely on our platform. And so we have a centralized platform that sort of links the entire supply chain together. Thank you, and we are getting a facelift to that. So that was one of our first iterations to the website. But so yeah, if you just went to noviland.com, you would immediately start being able to get sourcing services, QC, shipping logistics, new into fulfillment and warehousing as of this past year, just started opening up more capacity also. So a lot of exciting things that we have going on here and in general in the supply chain, a lot of what’s needed, a lot of what 2020 was helped, really helped foster, I guess, in this new environment that we’re experiencing with e-commerce.
– Fascinating. Yeah well, I’ll just, I can tell everybody out there, I mean, I haven’t made my first order through Noviland yet, but I have, which we can talk about afterward, but I have signed up for it. I do plan on doing that really soon. Their interface is unbelievable. It’s nothing like, I mean, when we first had you on, I was just, ’cause Kris and I have done a lot of sourcing in the past and what we saw through your platform was a game-changer. It just made it look so much easier, so much more trustworthy, just all that stuff that you’re doing is fantastic, but-
– I appreciate it, and we just came out with new features, sorry to cut you off, but we have a new multi-user feature. This is insanely important to every business. I mean, if you have a VA or both of you are working on a venture together, both you need access to it, right? Whether Kris is doing the accounting and you’re just doing the sourcing. So we just released this new multi-user feature we’re very proud of, so yep. Every different position can actually interact within the platform itself.
– Very nice.
– I’m gonna have to use this one these days, I’m about to get in here, it’s looking a lot different than what I remember, like with different products in here now, they got different things on here. So this is looking, I mean, there’s a lot of interests I’m seeing here.
– It’s fun stuff, fun stuff.
– Well, let’s talk about some different logistics things now. Why don’t we start off, you tell us about Chinese New Year. I mean, just in general, what does that mean to a seller, and what they have to deal with in logistics?
– Yeah, yeah, definitely. So, it starts on February 12th, that is the calendar date that it starts for. And it goes for about a week or two. Now, you might read some blogs out there that says, oh, you know, they’re shut down for two weeks. But in reality, this is why I started talking about this back in July of last year, for any new sellers or anyone that hasn’t experienced Chinese New Year in the past. It is one of the most impactful times to the global supply chain because we need to remember there’s, you know, markets outside of the U.S. So it really is this global supply chain that’s impacted with it and factories typically start to shut down about two weeks prior. So we’re usually looking around the beginning of February. That’s when factories will cut off communications, workers are gonna start to leave, management might stay behind, they might have somewhat of a labor, local labor force, depending on the size of it, right? A smaller one typically has a more local labor force where they can work closer to the end of Chinese New Year, whereas a larger, medium to large size factory, which are the ones that we work with, work with workers that come from western ends of China. And China is doing a great job at trying to expand manufacturing out west, but it’s still a logistical challenge, so all of these workers need to travel back to their families. And as they travel back to their families, remember, we’re talking about over a billion people here, right? I mean, I think last year or two years ago, it was logged at over 3 billion trips, just for Chinese New Year alone.
– I mean, nothing that we see even for Christmas or New Years’ or Thanksgiving, nothing close compares to the U.S. So it’s hard to wrap your mind around sometimes. But that’s why they do end up leaving about two weeks early. Now, one thing that, you know, it’s hard to forget for everyone is that COVID still exists and it very much still exists in China. And they’re actually starting to see a few outbreaks in the more populated cities up north closer to Beijing as well as, you know, down south closer to Hong Kong. And so what that means is for a worker that let’s say they’ve been working these nine, nine, six or from 9:00 AM to 9:00 PM, six days a week schedules and they need to travel back to their families, they’re worried that the Chinese government is going to restrict travel or that, you know, different just, there’s gonna be logistical challenges, right, for all this transportation. So now they’re starting to leave as early as this week, so you might not even be able to get a hold of your suppliers starting this week. Now, it varies. You know, they could talk to you all the way until a few days before Chinese New Year, depending on who you’re working with and the size of them. But in large part, don’t expect them to, you know, go above and beyond to try to reach out to you because they’re struggling with massive amounts of orders working overtime like none other. And at the same time, they’re trying to coordinate the shipping and logistics. They’re trying to coordinate the manufacturing and the quality control, getting QC inspectors in, and inspecting the products. It just slows down the entire process. So with factories starting to shut down now, don’t place an order right now and expect it to be done before Chinese New Year. I guess that’s, for starters that is the baseline, right? We’re midway through January. And it’s, if factories are starting to shut down now, there’s no way they’re gonna squeeze your order in unless we’re talking about maybe 10 containers and where they might be able to produce one container. You have to be a really valuable customer to them. Another thing, definitely do not expect them to be very receptive to fully-customized items right now. That is the last thing that they wanna be worrying about, they wanna be worrying about mass production, they wanna be worrying about their current customers. They’re not necessarily looking for a new business to take on immediately. They’re looking for a new business to put in their pipeline but not to manufacture on the spot. Definitely not to develop for you. And this is a big thing that I tend to see with Amazon sellers, but really a lot of businesses that don’t have experience around this time, is if you don’t come to them with a proper RFQ, an RFQ being a request for a quote, let’s say you just ask them for a catalog, or you say “I want this beautiful tumbler and it just has to kind of look like this but I want the top to sort of slide a different way.” They’re not gonna develop that for you. They’re gonna say, “Hey, give me the CAD files. I’ll see, you know, how many molds that might take, how complex it is”, but they might not even be able to do that because their engineers are on the floor. And they’re inspecting, you know, the quality assurance which is different than quality control but is important to know. So quality assurance is essentially quality control inspections throughout manufacturing, whereas quality control is an inspection on the final product. So in a nutshell, I guess, don’t try to get anything manufactured or expect too much from your factories right now, now is the time for relationship building and it’s a time for planning and forecasting. That’s really where you can spend a lot of your time and be most, I guess, efficient with your time.
– I remember this going back and forth with trying to get an order out, especially after the holidays, you’re like, “Oh, I need to get another one in.” And it’s a headache. Like this whole logistics is just a whole new like, department for itself as far as you know, you’re planning your order out, let’s say it’s July. You’re not even thinking about Chinese New Year. Like, you’re just worried about Q4 and the holiday. So, you know, when I was dealing with Chinese manufacturers they would say, I’d give them an order, you know, let’s say in July for, you know, October and they’d say, “Okay, what about your Chinese New Year order?” I’m like, “Oh, I have time, I’ll give you that later.” Then you get burned, right? Like, ’cause you sell out in Q4 and then you’re like, “I need inventory”, but you’re not gonna be able to get it till like March or maybe even later. So when your supplier comes to you and says, “Hey you know, we’re gonna close down the factory”, they’re not blowing smoke, it’s actually true and like, they’re gonna close it down, so you better get that order in.
– Right, right. I mean, too many times I have had people call, I don’t know if you can curse on this, but BS, basically, and saying like, “Ah, that’s not gonna happen. You know, my supplier is gonna be the best supplier out there, they’re gonna make my order.” And I tell them just very straight up, “Look, this is your first Chinese New Year, we’ve been doing this for a while, all right.” Our own branders come from China, they have backgrounds in manufacturing, we have a full team out there, this is what’s happening and this is what’s going to happen, no matter who you are or who you think you are. They’re not, you know, playing favorites. They’re just saying, “Okay, these are the largest orders that I need to fulfill first, these are the most lucrative ones and this has to hold me over until I get back from Chinese New Year. So if we’re shut down for, let’s say three weeks, it has to hold me over capital-wise for those three weeks. I have to pay my workers, I have to make sure that, you know, I can incentivize them by giving them bonuses to bring them back after Chinese New Year.” Because that’s another issue. Factory workers tend to leave and not come back. They might find new opportunities closer to home. They might say, you know, “Screw this, you know, they worked me like a workhorse, they didn’t pay me well, I’m gonna find a different factory.” They might just try to go into a different profession all around, so that’s another thing to look out for. And that itself comes with issues, right?
– Yeah and that’s happened. Like I’ve worked with, you know, you work with somebody, you get that relationship going and everything’s going good and boom, you’re hit with a new person and you got to rebuild that relationship up again. You gotta, you know, they got to know your product, they’ve got to know your demands and how much quantity and you kind of get blindsided and you got to start all over again.
– So you know, you’re right. That does kind of come out of nowhere and you’re like, “All right, well, we gotta start from scratch again and kind of keep it rolling.”
– Right, right. Because I mean, once they leave, also remember, they have to rehire all new, you know, workers to work, to manufacture and when you hire someone new, they’re not gonna have the same output as anyone else that you had that had a whole year of experience, right? So what they’re gonna do is they have this little learning curve of how to manufacture the product. They have a learning curve with the quality control measures behind it because the same workers that might’ve been making your past five orders might, you know, be split in half with brand new workers and experienced workers. And now those brand new workers might say, “Oh, in my opinion, that’s a good enough quality based on my previous experience.” And you know, they might ship that out as much as you tell them, “Hey, look, these are my QC guidelines.” They’re gonna ship it out regardless a lot of times. They’re gonna say, “Hey look, we already manufactured it, we’ll deal with this on the next order, we’ll give them a discount”, or they sometimes have these things planned out, sometimes it’s just, you know, a lack of relationship-building both on the buyer and the supplier side. And there might not be clear and concise specifications or key quality control measurements. And that’s why it’s so important to document all of this. And that’s part of what we do here at Noviland. We make sure that we keep everything documented, all the way from once you got your sample and the improvements that you wanted to make to your sample through the detail of the Pantone color on those products and making sure that after Chinese New Year, they still match and that’s just vital.
– Look, let’s imagine it’s July and I have to, you know, I got my order so I wanna get them lined up for Q4. What’s the correct way in your opinion, how would you snowball this? Like, you know, it’s July, I wanna get my order in for October, when should I place my order before, you know, if I wanna get it delivered the first part of January? Like how does that, how do I make sure I don’t miss out and lose out on sales if my stock’s gone?
– Yeah, I would say September is actually, September, October at the latest to try to get something out, almost guaranteed by January. Depends on the lead time, depends on the complexity of the product. I’m also someone that’s very adamant about better safe than sorry, so where that might affect your capital, completely understandable, they have less to spend on PPC, which you guys know all about. So I understand that it affects the business but there isn’t a business without a product. That’s something that everyone also needs to understand, right, without having those goods in a fulfillment center, whether that’s Amazon or a 3PL, you don’t have PPC, you don’t have any form of market and you have no revenue stream.
– That’s big.
– So, better safe than sorry. And I always recommend Octoberish. October orders should not last you through Chinese New Year, they should actually last you up until May. And it’s hard to get those forecasts sometimes. And it’s hard because, you know, you’re worried about FBA storage fees and you know, what if I send it all to FBA now, they decide to increase their IPI again to 500 and now I have too much excess. So I understand there’s a lot of moving variables but there’s a lot of options out there, right? There’s fulfillment centers that you can partner with, you can talk to your supplier about storing it in their warehouse, maybe paying them a little bit extra. There’s fulfillment centers in China that can just store it also and just ship it as needed. So there’s a lot of options out there, you have to know what they are and know who you wanna partner with to keep the supply chain moving and keep those sales going, keep that business alive, ultimately.
– Yeah and you just wanna get that order in the queue. You wanna be in queue because if you’re not, I mean, they say they, suppliers will say they’ll move you up the queue, I mean, who knows if that actually happens or not, but you know, you’re better too, and I’m with you, it’s all about money right, yeah. But I’m with you like you know, it’s hard to forecast in September how much inventory you’re gonna need to last you till May, especially if your product is, you know, just starting out or you’re not really sure if it’s gonna continue or you’re kind of on the fence of, you know, if I should scale it up. So yeah, you gotta know that, but I think where we’re getting at here is put that order in the queue and if something changes, you may be able to split that up in two different shipments, you know. You could do, you know, a quick shipment now and then maybe extend the life of another shipment and pay the storage with your supplier or something like that. So I agree with you. Just get it in so that they can at least know that you’re committed to it.
– Right, right. And I mean, we have this, I dunno if the acronym is the right word, it’s when you have letters that stand for something larger, is that an acronym?
– I think so, okay. We have three-w acronym here where it’s working, water, warehouse. So the three W’s. Working means something is always in production. Water, something is always on the water or should be on its way to the warehouse. The warehouse is the inventory that you have to fulfill your customer’s needs. And that’s vital to this sort of just-in-time supply chain that we’ve moved towards over the past 10 years. Right, and without that, without keeping that philosophy in mind with your supply chain, you’re either going to run out of inventory and not be able to make sales, your BSR is gonna go down, you’re gonna have to spend more on PPC when you get back in stock, there’s so much that comes with that. You don’t have anything on the way to the warehouse, you’re gonna run out of inventory, that next link is broken. You don’t have anything working, then as soon as you run out of inventory, your lead time is twice as long because you’re looking at 45 days on the water, you know, at most. You’re looking at another three, four weeks at least with the manufacturing. So you always wanna have this production cycle and if that means potentially paying a little bit more for lower, lower quantity orders, then that’s just what you have to do. Everyone manages the risks accordingly but it’s not about pinching pennies. That’s not what the business is about, right. It’s about profitability and finding new ways to be profitable. So that’s my suggestion, the three W’s. If anyone takes anything away from this, I would say, you know, the working, water, and warehousing, 100 percent.
– That’s great and just what you talked about, just in time in for it, because for a long time my main goal was, how can I make bigger and bigger orders so my per-unit costs come down? That was sort of what I thought was the right philosophy. But what you just mentioned, makes a whole lot more sense. You know, making sure that whatever you need, you’ve got that working, water, and what was the third one?
– Yeah, you gotta have those three, definitely keeping inventory in stock opens up more doors, right? You don’t have to stay a one-trick pony staying on Amazon, you can also go to Walmart, you can expand onto Shopify if you have the inventory available. You could try to do, you know, B2B sales also, which B2B e-commerce, I truly believe is the future. But that’s another option that you can always look into. So there’s so much that you can do with your model, 100 percent it’s all about capital. A lot of Amazon sellers don’t tend to have the capital to be able to place those larger orders to get that unit costs down or they might not know the resources, you know, “Hey, which 3PLs can I partner with? What are those carrying costs? And the holding costs, what are the direct to consumer shipping costs from those fulfillment centers? But when you do have inventory, you also mitigate a lot of those risks, right? You don’t have to worry about those extended lead times or running out of stock necessarily. But you have to find that balance, the three W’s and you know, having excess inventory sometimes.
– Well, I got a question real quick. So, with Noviland, how do you help a seller arrange all this? Do you help that negotiation process with the supplier to where there’s systematic shipments coming out so that we can maintain this working, water, warehouse plan?
– Yeah, so since we’re fully integrated in supply chain all the way from the factory through the logistics and the fulfillment, so we have our own fulfillment centers, we’re able to help every seller in that way. So we can negotiate those different quantities, of course, but also let’s say they did wanna place an order for a larger quantity, let’s say 5,000 units as opposed to their traditional 1,000 units. And they get a better price tier then, the manufacturer’s happy, they see this customer growing at the same time. And so when they see that, we help them cut out those unit costs, then we talk about logistics and warehousing, right, that’s the next step in the supply chain. We have our warehouses in China that we can offer them much better rates than here in the U.S. So now let’s say out of those 5,000, they only want 1,000 to go to Amazon FBA. We’ll have the factory actually prep 1,000 units for FBA with all the labels, the master cartons have to be under 50 pounds, but that might not be the most optimal for shipping or sea shipping. So in that case, we might work with them and say, “Okay, let’s keep the other 4,000 in China and we’ll ship it as needed” or “Hey, we see logistics prices soaring, and right now is a really good time because we’re expecting a general rate increase.” And what are general rate increases? Basically, the shipping carriers are imposing increases on the freight forwarders, just saying, this space is more lucrative now, so we wanna sort of balance out that supply and demand side. But then we would help them, you know, transport all those maybe to the U.S. and we’ll store it at one of our fulfillment centers here. And so they’ll still have that warehousing. We can have the manufacturer continue making the product unless that customer knows 5,000 is gonna last me six months, we don’t need it until three months from now. Our product specialists will follow up in three months and they’ll say, “Hey, you know, how’s everything going? Is your order gonna be ready to be placed?” You know, factories need to account for the currency exchange rate, which again something else that we’ll dive a little bit into. But again, it’s you know, this just-in-time manufacturing has really, really put a strain on the supply chain as a whole and it relies on every link working in order for the next to work.
– Are you seeing a lot of like split shipments of like let’s air it and then let’s do the rest on the water?
– Oh yeah, oh yeah, definitely. So usually I would see like 20 percent going air, 80 percent water and they’re like, “Hey this will just cover me to not go out of stock.” And, you know, and talking to them a little bit more, they might cut back on their PPC or any marketing spend or advertising spend. And they just wanna keep those units in stock to sort of satisfying Amazon, right. It might impact their sell-through rate a bit but not as much as if they went out of stock. And of course, that also has to do with, you know, what time of year they’re ordering. So right now we’re seeing logistics insanely expensive. This is the most expensive, I think, I’ve ever seen it in my time here at Noviland and working with our partners, it’s the most expensive they’ve probably seen in the past decade. So Lisa and I both spend a good amount of time in the Amazon FBA community, just you know, looking at messages, answering them, going to those groups. So it’s, if you’re not already in those communities, I would highly suggest searching Amazon FBA in a Facebook search, and you’ll see over a dozen groups. But a big thing that everyone is talking about are their shipping prices and those lead times for just shipping, not manufacturing. And so I did wanna address those as well. So shipping itself, to put things into perspective-
– Uh oh, I think we lost him.
– It’s all right, he’s coming back, he’s coming. He’s shared some good stuff there. I mean, all that logistics and stuff that we were talking about, here he is.
– Hey, what’s up?
– Something went wrong.
– That’s all right.
– To put things into perspective just to catch myself back up. Put things back into perspective, the Long Beach Port has thousands of containers that aren’t able to be brought into the U.S. just because they’re so backed up in customs there. So now we’re putting a strain at the ports and we have a container shortage, right. So this container shortage, and again, I get called out where people think this is complete BS also. Keep in mind that China has continuously been exporting product throughout the entire year and not just your product, I’m talking about PPE, right? Everyone thought, “Oh, it’ll be fine, right after PPE, the supply chain will pick back up.” Well guess again, everyone wanted to ship their masks. Everyone wanted to ship their sanitizer from China to the U.S. and globally in these 40-foot containers. So we’re seeing this massive shortage and the shipping carriers realize that. So they’re increasing their prices. Freight forwarders have to book those containers at least three weeks in advance. If you’re trying to book a freight forwarder or a container a week out, two weeks out, it’s almost guaranteed that no matter what they say, no matter what promises they make, you’re not gonna make that happen. And so what we’re seeing a lot of companies actually do, is where they were previously going with FCLs or full container loads for the 40 feet, they’re now going with smaller LCLs. So they’re, LCLs are less than container loads. And they’re okay with sharing that space because those are quicker to get on the ship. The freight forwarders pay the shipping carriers a bit more because they charge everyone a bit more, right. Especially if you’re shipping, let’s say half a cubic meter, you’re still paying that 800 to a $1,000 flat fee that they’ll charge you for that full cubic meter. So they have better margins than if you were to go with full container loads, so that’s, I guess, one tip for anyone that might be moving container loads. Another thing that a lot of freight forwarders are moving towards is this, and I know Flexport is pushing this a ton, I see it everywhere, priority shipments. And what that means is the, you’re gonna be paying a premium, first of all. It’s not gonna be cheaper, and it’s already expensive, you’re gonna be paying even more, but you’re paying a premium to try to lock in a space, lock in a container, and lock in a spot on that ship. And so they will pay the carriers a ton more to actually get that guaranteed. Even though in the shipping and logistics world nothing is guaranteed. With enough money, most things are. And so they’re able to do that, but I mean, that’s again where you have to really weigh your risks. Are you okay with going out of stock or are you willing to pay eight to $9,000 for a container to go to the East coast? Which again is way over double what most are paying usually and we’ve seen this happen. And then just to sort of touch on the next step of that. When it gets sent to fulfillment centers, fulfillment centers are also tremendously backed up. So when it’s going through that last mile trucking, you might get hit with accessorial charges, trucking wait times, or demurrage or pre-pulls from the truck yard. These can add up, right? If you’re doing a lot of volume, then they can add up tremendously, a few hundred dollars for every accessorial charge. That’s not your 3PL charging you, that is the freight forwarder charging you because they can’t get it into the 3PL itself. That’s why it’s so important to actually have a good partner. But yeah, I mean, that’s just a little bit about what makes logistics so insane right now. Also keep in mind that everyone that was wise enough to order their inventory back in October, September, to try to fulfill before Chinese New Year, they placed massive orders again, to last them through May because once factories come back, there’s gonna be a lag time, you’re not gonna be able to get it by May. So as they place these larger orders, again, this is a global scale, not just the U.S., everyone is aware of this. So everyone’s trying to get that spot in. So that’s why it’s really a supply chain and there’s always that metaphor of, you know, the chains or the links, and if one link breaks, then you’re only as strong as the weakest one. So whether that comes to manufacturing, logistics, fulfillment, it’s important to know your stuff. And that’s really what I’m trying to get at here today.
– Yeah and as a seller, like if even a new site, you could try on with one product, but you start scaling up, I’m telling you, you’re gonna need somebody in your corner to help with logistics because you’re gonna lose focus and then your product will go slip a little bit, then now you got to get that back up. So as you scale, it’s always good to have somebody in your corner as a supply chain manager so that they know what’s going on, they’re keeping contact with the manufacturing, they know where your shipments are at, they know when they get to the port, and they’re gonna help you with getting inventory into Amazon. It’s just something that I wish I would have like outsourced when I first started, so I didn’t have to worry about that, because it’s a whole different deal.
– It is, it is. I mean, working with one product is a lot more manageable than working with 10. I mean, even working with five, I see that it is a tremendous struggle trying to coordinate with all the different suppliers. Luckily, that’s what our team is really good at. And having boots on the ground and building those relationships and once you build those relationships, you actually get a lot more honesty from the factories, where they’re not gonna BS you and say, “Yeah, we’ll try to get it done before Chinese New Year, this might happen.” You know, once you have that relationship, they’re like, “No, and come on, I told you this five months ago, place your order, this is not gonna happen.” Now, of course, we have to relay that in a kinder way. But that is the reality of it, right? It’s, again, no one is playing favorites or this or that, it’s just the reality of every year, this is going to happen and every year you should not be surprised that this happened. You should listen to the Sellozo podcast and listen to this episode and realize that this is gonna happen in 2022 also.
– Well, it’s funny how, like us as just humans, like we always think the bad, the negative, like it’s like somebody is blowing smoke up, you know, and giving us the BS. And it’s like, well, maybe if you just, maybe if we just turned our mindset differently and just started to put more trust in people who do this every day, we wouldn’t have all these headaches and chasing our tails around and just, you know, go with it the first time and then if it burns ya, you know, maybe you’ll learn the second time around. But it’s funny how we always have our guard up because we just don’t wanna get burned. And sometimes I let that guard down.
– Yeah, yeah. I mean always trust, but also verify, right. I have no idea who coined that term, but trust but verify is hands down, that is our job, right. We’re meant to do that for all of our users, all of our customers. So yeah, that’s essentially what’s going on with logistics, with sourcing, manufacturing, Chinese New Year coming up in about a month for the calendar date. But another thing I did wanna touch on slightly, and we very minorly talked about it beforehand, but it’s the foreign exchange rate. And that’s something, I mean, Kris, I saw your face when you took a look at it before our conversation. China has devalued the RMB or the Chinese Yuan, whichever you wanna call it, tremendously. And I’m talking about a nine percent change from six months ago. Now, for those of you that might not know, two percent is the average, plus or minus two percent in fluctuation is what a supplier accounts for because suppliers typically run on low margins regardless. Yeah, if you do that for a year and just look at how that has dropped, I think it started at 7.07 somewhere in June or yeah, somewhere around there and then just nine percent and so what that means is that the value of a dollar, if you had $1 back in June and you’re paying your supplier that, it’s worth 7.07RMB, right. Now that dollar is not worth that 7.07. Now it’s worth 6.47, let’s say. So you’re gonna have to pay a higher U.S. dollar currency if your terms are in USD and that’s just gonna be the nature of it. If you see a dramatic increase in your pricing, again, I’m talking about that nine percent, it is natural. You have to look at the global exchange rates and this is natural in international business. Again, this is part of that sort of blowing smoke stuff. It’s not necessarily something that your factory’s making more money on, they may be charging, you know, one percent extra just in case for that fluctuation if it drops even below, but it’s out of their hands. It’s not manufacturing costs increasing. It is the foreign exchange rate of the U.S. dollar to RMB changing. So if it’s possible, when you travel to China, lock in rates at RMB for your orders but also keep in mind that quotes expire. And this is something that I think a lot of businesses that are new to the international supply chain don’t keep in mind or don’t keep top of mind, is that quotes do expire. They might last 15 days or 30 days or 90 days. But even if you’re within that expiration period, if the FX changes, let’s say they gave you a six-month validity for the quote, and in those six months, it’s changed nine percent, they are going to increase at nine percent. They’re not saying that the quote itself is locked in, guaranteed, no matter what. They’re saying that “Hey, our manufacturing costs, we can lock that in at this rate.” And so if you see that FX changing, you should expect your rates to also change, plus or minus 2 percent. Don’t worry about anything over or below that, 100 percent worry about and make sure that you also worry about it in your favor. If we see this skyrocket 7.5 or back to 7 and they changed at one time, make sure they change it back and stay on them for that. That’s another thing to keep in mind, especially after the Chinese New Year. We’ll see how this really fluctuates throughout that time.
– Is this something you guys keep your eye on, the Noviland team?
– Yeah, yeah. Our platform helps out with a lot of those exchange rates and but a lot of sellers, obviously, if you’re not using a trusted partner and you’re just working with suppliers directly or through Alibaba, it’s something that they have to keep top of mind.
– And one other thing that I think a lot of times sellers forget about is tariffs on coming in. What are those look like right now? Are they, I know there was, you know, recently there’s been talk about much higher tariffs and how is that looking? And what’s the future look like for those as well? Because those can be big costs.
– Right, right. And I guess we’ll really have to see in about a week and in the first a 100 days of the new administration, right, how that’s gonna be impacted because a lot of times they don’t try to, or an administration might focus on politics or they might focus on economics or relationship building and they have these focuses. But today we’re seeing this political-economic environment and foreign trade all sort of be this trifecta that is being left behind or that’s being left for the new administration to take care of. Based on the policies that I’ve seen, I don’t think we’re gonna see those tariffs go away. I don’t think we’ll see them increasing, but I think that does give the U.S. a bit more bargaining power with China on any foreign policies. I don’t see those going away. So I know I’ve spoken to a lot of sellers that have said, “Oh, you know, in about a week, I do expect my 25 percent to go down to what it was or 28 percent, to get back down to three percent.” Unfortunately, that’s not gonna be how it works. It’s not, you know, the new administration comes in and reverses everything. It’s a lot more complex than that. So I think that’s another thing to definitely keep top of mind. And with Brexit, I mean, Brexit is another very hot topic and I’m sure you guys have followers in the UK. A big part of what’s going on right now, it’s probably gonna be going on for the next six to 12 months, just like we saw with the trade war when it first started, there’s a lot of chaos, is we see that there’s a lot of uncertainty with how the UK is gonna be handling imports and certifications and tariffs on Chinese goods. And there, just from what I was reading, the relationships aren’t necessarily the best. So that’s another thing to definitely keep in mind. Kris, I know I got you going with the fingers there, I’m sorry about that.
– I’m just trying to make this look really good, man.
– But with that, we have to keep in mind also Amazon, right, which is the whole point of this. And how Amazon is gonna be impacted by the UK leaving the EU, so now from what I read, products that are stored in the UK can’t be shipped to the EU through Amazon, the Amazon fulfillment network. So you don’t see the Shipped By Amazon badge anymore. So that’s gonna create its own logistical concerns for a lot of sellers that are in the EU that might have products that are stored in either the EU or in the UK. And we’re gonna have to see how the tariffs are also rolled out with Britain and what they impose on China for imports and import duties. I think we’ll see maybe a rise in domestic manufacturing there. I don’t wanna give too much of my opinion on it. I think that it’s gonna be a difficult situation nonetheless, I think there’s a lot of power that China is able to hold with their exports to the UK and that the EU also exports to the UK, that it’s gonna make that transition very difficult. That just took into effect two weeks ago and Amazon is gonna feel that strain. And it’s gonna be more difficult to expand into, there’s two different sides, the UK and the EU.
– So interesting. And I think just to, Kris hit on this earlier, but I mean, we spend a lot of time managing our business and this is a lot to be on top of. And that’s why it’s so important just to let experts handle this for you and that’s what you guys do there. And I mean, so I’ve got a selfish question in terms of my own business.
– Let’s do it.
– If I work with you guys and do an RFQ right now, what can I expect? ‘Cause, we’re coming up on the Chinese New Year. So, is it a good time to put in a request for a quote? Or is it, you know, am I not gonna have any contact for a while with somebody? Or what can I expect if I tried to do something now?
– So, I guess two answers to that question. One, if you’re doing it yourself through, let’s say, you know, an open-marketplace like Alibaba. I would not expect too much or I might expect a few empty promises or a bit of smoking blown, or just the start of a great relationship. You can, I mean it’s, I’m not saying that there’s all bad suppliers on Alibaba, there’s amazing ones. It’s where a lot of companies have started and where they’ve been able to grow, right. But I’m saying it is gonna be a lot harder to communicate with those suppliers. Now, if you came with Noviland, it’s a little different, because we are not a factory. We don’t have to worry about that manufacturing representative leaving or traveling back. So as your partner, we would take a look at your RFQ first, definitely learn a little bit more about your business, learn about what your goals are, what else you need in the supply chain, whether that’s the fulfillment or you might be struggling with logistics right now, see how we can help you out. And we would assess that RFQ, make sure that it’s completely setting you up for success with our factories. So again, if you came to us and said, “Hey, look, I think I wanna make this tumbler and I just wanna change the top a little bit.” We might say, “Hey, you need a CAD file for that top” or “Do you have an example of how that top works?” or you know, talking about your budget, which is a difficult conversation that sometimes it’s sprung up on an Amazon seller and just say, “Hey, with these expectations that you have, look, you can’t start with $2,000. If you wanted to buy something and white label it, maybe. But this is a customized product, it requires these types of molds based on this plastic, in our experience that cost $5,000 for the molds plus, you know, 2,000, 3,000 unit MOQ.” So there’s still a lot of planning to do. And that’s a lot of the upfront effort that we put into all of our customers and all of our users. Now on that same note, you likely won’t get a quote. So that’s one of the biggest aspects about Chinese New Year is that it just shuts down or it sort of puts RFQs out of commission with factories because they don’t necessarily want the new business for right now, they want it in their pipeline. So setting you up for success is important with that RFQ and it’s important to us also with those relationships with our, the factories in our network, making sure that they can quote it accurately, quickly and that they don’t sort of, again, this term BS, the quote itself, they could pay proper attention to it. So with every RFQ, there’s still a little bit more planning, even if anyone thinks they’re an expert, we can always give more advice. But you likely wouldn’t be able to get a quote or you might be able to get a quote in the next two weeks but we would have to reevaluate that quote post-Chinese New Year. And we would have to reevaluate the lead times and the availability and making sure that that factory is even still gonna be making those products post Chinese New Year. Because a lot of factories during that time, they’ll say, “Hey, look, this particular market is booming and we have all the right tooling machinery for it. So we’re gonna focus on this, we’re gonna let these projects go.” And it’s just, it’s a conversation that has to be had, right, and sometimes we’re the bearer of bad news for it. But keep in mind that if we didn’t deliver it, then someone might be ghosting you on the other side if you’re trying any other way. It’s all about honesty and relationship building. I hope I answered your question.
– Absolutely. No, that’s great. And then, typically, when do, ’cause I don’t, I know we talked about when Chinese New Year starts, when, what date typically do factories start coming back on after the new year?
– So it starts on the 12th, we’ll probably be looking at them coming back two weeks later, this is very, just based on historic knowledge. About two to three weeks after Chinese New Year starts, you can expect most of the workers to start to be back and production starting to ramp back up. One factor that is gonna be interesting to see play out is how COVID has impacted, and this is something that’s kind of been top of mind for me. I haven’t seen anything out there for it, but how COVID has impacted the mentality of workers over the past year. So when they see that they’re heavily reliant on staying at these factories and they had to quarantine and they’re away from their families and they risk not being able to be closer to the families, is that gonna increase the factory turnover rate? And it’s something that I’m gonna not ask, but ask, I guess, our operations team to sort of look more into. But at the same time, if we see COVID outbreaks and travel restrictions, that can impact it, just like we saw it be impacted in 2020. And we saw Chinese New Year be extended by a week, maybe two weeks, I think in 2020. And then we’re still looking at that one to two week lead time for all of them to get back. So if they extend Chinese New Year, there’s another extension with the travel. So it’s gonna be vital to really keep an eye on what’s going on, try to keep in touch with your suppliers, try to keep in touch with your freight forwarders, any boots on the ground, those are all important aspects to make sure that you’re gonna have a product in a month.
– Man, that’s so much information and-
– I just dumped it on you.
– But I mean, it’s, you have to be aware of all of those factors. I mean, and we still appreciate your time to come on and go over all of that with us. I know it’s been invaluable. So real quick, someone wants to get in touch with you. They wanna get started with Noviland. What do they do? Where do they go? Where can they find you?
– Yes, you can DM us on Instagram, which we’ve been getting a lot of, @Noviland Inc. N O V I L A N D I N C. Follow us on Facebook, facebook.com/novilandinc. You can shoot us an email, firstname.lastname@example.org. You can connect with me on LinkedIn, I love answering questions on LinkedIn. So definitely connect with me on LinkedIn. Or you just go to Noviland.com, sign up, create an account, completely free to use and I’ll have a conversation with you as soon as you sign up. Or when you submit an RFQ, we’ll review it, make sure we’re, you know, good for each other. The last thing I wanna do is waste anyone’s time. So there’s a lot of ways to get in touch with us. If I’m starting out as a seller, I am definitely going to Noviland. I mean, I’ll just tell you from experience. I’m sure Dustin can vouch for it, it’s a different animal and if you don’t know what you’re doing, you can lose your shirt and you do not really know what’s going on. So if I’m starting out as a new seller, I’m going to Noviland. If I have a product, I’m going to Noviland because I wanna know what’s going on and you’re gonna have a team like Noviland to do that for you. So I don’t know if, Dustin, you wanna vouch for that?
– Thank you.
– For sure.
– We try to make it simple. That’s the biggest thing, take an enterprise-level service and make it available to everyone, that’s sort of our mission, that’s our goal, so.
– Well, I’m excited. We’ll be in touch with you for sure within a week or so to get something started with an RFQ. So I’ll let everybody know how amazing the process is.
– I appreciate it.
– It’s gonna be great. Oh man, thanks so much. And everyone who’s listening, if you love this kind of content, if you wanna see more of it, you can find us on Facebook at the Sellozo page on Facebook. Sellozo on LinkedIn. Sellozo on YouTube. We go live on all of those with all of our podcasts. Of course, please like our podcast. Leave us a review, subscribe to it.
– That’s what they do, they point at it like this. Subscribe right here, yeah, where it’s at. Oh man, Francois, thanks so much for the time today. Just great information and we’ll be having you back on soon.
– Appreciate it, guys, looking forward to it.
– Thanks, man.
– See ya.