Kris and Dustin are excited to have Sajag Agarwal from Movley join them and discuss product inspections and why Amazon sellers MUST do them!
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– Hello everyone and welcome to episode 42 of Two Amazon Sellers and a Microphone. Today Kris and I have a very special guest. Sajag Agarwal from Movley is on with us. What’s happening, how are you?
– I’m good, I’m good. I hope that you guys have been good too, enjoying the things.
– Yeah, we’re hanging in there. Yeah, we’ve been good. You were telling us that you’re down there in LA right now.
– How’s everything there?
– Yeah, it’s been good. So, normally based out of Chicago, but LA weather is pretty good and everybody is well so I love to come down here in the winters and just kind of hang out.
– Yeah, I’m sure. It’s probably gonna snow here tomorrow in Kansas City so we’re a little jealous of your weather but…
– Come down.
– We’re excited to have you. This is gonna be a lot of fun to talk about Movley and what you do with inspections. I know this is gonna be great for people that listen. I mean it’s something that gets overlooked a lot I think when people are starting to sell or even, you know, we’ll dive into it all, just existing sellers, mistakes they’re making in this regard. Before we dive in though, you just wanna give us, tell us your story, give us your background. What brought you into this space? How you got started just in the Amazon world, and then what made you take the leap of starting your own company?
– Yeah, that’s a great question. So I actually got into Amazon by accident. So I was out shopping with my mom and you know how long girls take when they’re out shopping. It just takes hours and hours.
– Oh my gosh, forever.
– Exactly, so I was just sitting around, I was bored out of my mind, I was on the phone and I needed an iPhone charger because my cable just broke. So I went on eBay and I was just bored around so I was fooling with the filters and things like that and I happened to do sort high to low instead of low to high. And I found out I could buy like a hundred of these cables for like a hundred bucks. And then when I did low to high, these same cables were selling for like $7 apiece. I was like, all right, well, this is too easy. And I was like, all right, well, I did some, you know, napkin calculations and then I was like, all right, whatever and I went ahead and bought the hundred units and then I actually sold those on eBay and I flipped those in about two weeks, sold all a hundred and I was just able to like multiply my money. So then I put some more money back, put some more money back and I started trading a bunch of stuff on eBay. But what ended up happening is that I was just basically kind of selling trash, to be honest, you know, it just, I wasn’t too happy about the quality of the products and it was not like something I can like go to people and say, yeah, you know, I flip cables on eBay and you know, that’s my career choice. So, you know, I was like, all right, you know what, I need to kind of make this more legitimate. So then I started looking into like, okay, how can I start my own brand? And I went into cables first, electronics, that was my first brand on Amazon. And I started that out and it worked out really well so we actually custom-engineered all of our products so we worked with the factories hand-in-hand, did a lot of customizations and I ended up starting that brand and that brand, we started originally on eBay but I kinda knew eBay was not gonna give us a lot of volumes because we were tapping out on the top keywords for a lot of our products and only getting like 20, 30, 40 sales a day with my eBay business. So I looked into Amazon and I was like, oh, okay, here. You know, we have some volume here. And I went on Amazon and started selling my products there. And we started growing really fast. So actually our first year we did $40K, the second year we did a million and on our third year, we were on track to do about $2 million that year. But what ended up happening is we started having some extreme quality control problems. So some of our new suppliers, we were having quality control problems from the get-go. Some of our old suppliers after one and a half, two years of working together, we started having a lot of quality control problems, customer reviews coming in, we went from a 4.9-star product, one of the best-rated products in the industry for our top seller to about 3.8. So it was a pretty, pretty steep decline. And what ended up happening is I moved to Shenzhen China and I lived there for six months and I basically watched my own inspectors mess up my products. I did my own inspections in my own in-house team in Shenzhen, which actually ended up taking bribes from our suppliers themselves. So it just became this crazy, crazy, crazy situation and just went downhill. And that’s actually how I got into Movley right now and my goal with Movley is essentially how can I streamline the process for manufacturing as much as possible without being the middleman. And we started with quality control inspections, just because that was kind of the biggest thing that killed my brand. And we saw a lot of value there. So that’s kind of how I ended up here.
– One thing, you moved to China. I mean, that’s not an easy decision to make. What happened there, like why all of a sudden, like I’m gonna leave and go? Was it because the quality was getting poor or what was that like?
– Yeah, so when you’re working with Chinese manufacturers it’s just really hard to like, know what’s happening. Like we were always having difficulties, problems, coordination problems, things like that. We hired, you know, we had some in-house people working on the ground. I mean they just were not able to manage things. And then we were still getting these passed inspections getting defective products. And our lead time for our bestseller product was actually about two to three months. So after you factor in about a month for shipping, a month for selling, you know, we’re talking like a four to five-month turnaround time, which is a ton of time. So when we started finding out we had quality control problems, I had like five months of inventory stacked up at once. So I knew like if I was not gonna fix this properly, my minimum hit, I’m taking is like five months and my maximum hit could be, you know, years if it takes like three, four months to fix this. So that’s when the kind of the alarm bells started going off and I was like, okay, hey, I really need to figure out what’s going on here and I don’t think there’s any way I can do it better than if I was there myself. And…
– That’s an amazing story. I mean, just, I’m still blown away that you just decided to go to China and moved out. But I think Sajag, you did it because you were trying to better your business. You had to find out what was going on. I think a lot of us as sellers, you know, we just treat that as a part of the process. We order from our supplier, they ship it to us and we don’t treat it as if there’s a lot of areas to be more efficient, better, more productive, better in that regard there or how we can save ourselves money and be in, like you’re talking about, quality control issues. I’ve had products where it’s been a successful product for a long time, dealt with the same supplier, decided to start negotiating the price and because I did that they changed the materials on me and changed the quality and I don’t know that if I’m not getting inspected. I thought I had a level of trust there from partnering for a long time and so I didn’t continue the inspections. And now, I guess I’ve gone straight to FBA with, that’s getting bad reviews. So I can see just the leap that you took to do that. And so at that point, you’re in China. And then is that where you decided to just launch your own company, launch Movley and go with it?
– Yeah, kind of. So when I was in China I was basically doing my own inspections regardless because I was like, hey, I need to check my products. And I actually watched my own inspectors, I hired a pretty large multinational company. They came to the factory while I was there. And I literally watched them completely botch up my inspection. I did the same inspection myself with everything I told them, took me nine hours. I thought an inspector was gonna take 12 hours for that. And the inspector went to the factory then his company told me, yeah, we can do it in eight hours. And I was skeptical, I was like, whatever, you know, we’ll see what he does. And I showed up and I was waiting there for five hours. The guy showed up five hours late to an eight-hour inspection and then proceeded to basically just visually check all the products. So we asked him to, you know, do some product tests, take a look at the products, make sure it works. You know, regardless of what product you have even if it’s like a cup, like a paper cup or if it’s like electronics, you need to have some product tests to make sure the products work, you know, cups not leaking, things like that. And you know, so I gave him a product test to do, he just did that on two to three units and that’s about it. So when I got the report the next day it was a passed inspection. And that was kind of the experience that I had when I was like, you know, is this like for real? Like, is this actually what’s going on here? And then I went ahead and I started my, I brought in my own team in China. So I hired a team out of Shenzen, we opened an office in Nanshan and we had a couple of full-time people and we were doing our own inspections and things like that and I was training them but what ended up happening is that they didn’t really do a proper job because they started building too close relationships with their suppliers. And what ended up happening is our suppliers were basically you know, able to get past bad products. This guy would go to the factory and would not even check the products like we asked him to for like our primary person. So at that point, I moved back to Chicago because at that time I was kind of in that dreamland, like okay, hey we got our own team, we got our own people. Everything should be good now. And I moved back to Chicago and I was still having some problems after I left, all of a sudden it came back up. So at that point after that area, basically I had to shut that company down because I was like, all right, hey this is not gonna work out. I have way too many, you know, too many units of bad products here and it’s just not gonna work out. So at that point, that’s when I said, okay, hey, what can I do to help other people not have the same issue? And that’s when I went in and I started working on Movley to figure out, okay, what can I do to improve this process?
– Nice. I like that story. That’s crazy. That’s, I mean, I’ve done inspections and I’ve got to the point now where I just use a different person each time because I was fearful that like the second time that the company went back it was just gonna be a quick glance and I didn’t want them to create a relationship with my supplier ’cause I didn’t want them to be like, oh yeah, we’re good, we’re good to go and go on and move on without it. So whenever we talk to sellers we’re always like, make sure you get an inspection, but you know, keep your supplier on their toes, you know, get somebody else in there and then hire somebody else the second time. Change it up on them ’cause you don’t want that you know, that bribery, like you mentioned, you know what that’s, it’s obviously happened. So while we’re in China, is there anything like a good funny story or anything that, like you remember about being at a, maybe the good things, not so much the bad things but anything good over there?
– Yeah, definitely a funny story. So the first time I went there, I didn’t wanna go myself. So I was actually talking to my mom and she was like, you know what? So my uncle is based out of India. And so he actually, he works with a factory himself, he runs like an apparel manufacturer. Like they do like clothes and fabrics. So he had some familiarity with factories and things like that. So my mom was like, all right, you know what? If you’re gonna go to China and you’re gonna live there, like for your first month maybe you should have like somebody there, like family to be with. And she called my uncle. My uncle was like, yeah, you know what? I’m down to come, okay. Now my uncle is like, you know, 40, 50 years old. He’s an old guy, I’m a young guy. All right, so we went to these factories and he would always kind of shadow me. He’d be there, I’d be like doing everything, talking with these factories, you know, building the relationship. But he’d just kinda be in the background. So every time we went to the factory they always thought like he was the boss. And like, I was like his employee, and even though I was like kinda doing everything. So at one point, we went to this one supplier and they really wanted our business. So at the end of our like discussion, they were like, okay, let’s go out for dinner or whatever. And our sales rep actually went and got like every single, you know, girl in the office to come out with us. And then they were all crowding around my uncle and no one was talking to me. So we were in this restaurant, my uncle is sitting here, he’s got like these three girls on him. I was like taking videos secretly. I was like, these are some great photos. I’m gonna send it to everybody on the family group chat about what’s happening down here. And my uncle is just here and these three girls are like crowding around him and I’m just kinda chilling so I guess that’s a pretty funny story.
– Sure your uncle loved it, he was like hey, thanks for bringing me.
– He didn’t wanna look like the old dude for the photos.
– Yeah. That’s awesome. That’s a great story, I love it. It’s just, that’s just fun that you just took that on and I mean, really great advice by your mom. Take someone with you to make it more comfortable and yeah, you got it, it was perfect. You got to play him off as the big wig, you were his employee. It’s a perfect way to do it. Well, we were talking a little, we’ll transition now talking a lot about the inspections now and the inspection process, but we were talking before, we went live here just about how one bad order. One order that you make, maybe take a $3,000 order of a product and it comes back with bad quality could pay for years and years of inspections if you’d have just done it right the first time.
– Expand on what you mean by that.
– Definitely, so we did a really simple calculation just a few weeks ago. And when we were working on revising our marketing messaging and what we actually found out is if you have about $3,000 of defective products, that alone is enough to pay for about 10 inspections. But when you factor in the product costs, the freight, the packaging, the shipping to the customer, if the customer returns a product you might have an FBA administrative fee. You might have other costs involved. And then you add in all those different costs, the warranty claims, the customer support and I’m not even talking like $20 an hour customer support, I’m talking like five, $7 in the Philippines. Like you start adding in all those expenses for warranty replacements, returns, not even including brand damage, negative reviews, or re-ranking your product, stuff like that. Seven, you can essentially with about $3,000 of defective goods by adding in all those additional costs, you can pay for all your inspections for about seven years if you do them quarterly, which is absolutely ginormous and that bad order can happen anytime. So like in my case, we had it happening on the first order, on the second order. Also, you know, on the 10th order or the 15th order just randomly, you know, two years down the line. So whenever that order hits, you know, that one bad order, that’s enough, you know, on a very small order to pay for all your inspections for a couple of years. So if you don’t do your inspections right and you don’t have that in your process, when something goes wrong, like in my case, it can just wipe you out. And you know, when you’re cash tied and you know, you’re putting all your money in a couple of orders.
– Go ahead, Kris.
– Yeah, I was just, that’s a lot to bring in there. One thing that I wanted to touch on is, when do you think that sellers should be doing these inspections? Like, you know, we’re negotiating with our suppliers back and forth. You know, we get those products ready to roll and ready to ship. What volume does a seller need to be and at what volume does a seller need to be ordering for an inspection to make sense? ‘Cause you know, some people order like 500 units and they may not have the funds to do the inspection or they may not have the time, they’re ready to get rolling. Is there a specific volume the seller needs to be at before they do inspections?
– I mean, to an extent, yes. If you’re doing like a very, very small order, we’re talking like maybe under a thousand dollars then it may not be worth it but anytime you’re getting into above a thousand dollars I would say it’s worth it. And it depends on how much money you’re putting at risk especially as well because if you’re starting a brand and let’s say you’re putting, you know, your product cost, your startup cost is like $5,000 and 3000 of that dollar goes to, you know, inventory. That inventory, that $3,000 of inventory is bad. You’ve lost not just $3,000, you have to start over from scratch and you’ve lost several thousand dollars. So I guess it really depends on the volume. When you have like all your eggs in one basket, which is just, you know, one or two products, your risk is much, much higher. So in that case, you know, for small sellers, inspections are even more important than for large sellers but for large sellers, the financial impact of one bad order is so much higher than it also balances out. So I wouldn’t say there’s really a threshold to start doing inspections unless you’re doing an order that you know, is like under 500, maybe a thousand dollars where it just absolutely does not make sense to do an inspection because it’s more of a test order and you’re more of just checking the products and you know, you’re maybe not using it to sell on Amazon. That’s when it might make more sense not to do an inspection.
– That’s interesting how you brought up and it’s not just the product costs that you’re out and it makes total sense. I mean, if you’ve got an order coming in, now you’re invested in images, you’ve spent a lot of time on your listing, you’ve spent a lot of time on marketing, your product generates those sales and now you already got a product that’s got a bunch of bad reviews. So you’re out a lot more, not to mention just the product cost. So that’s a really good point you bring up. Now I wanna touch on also ’cause obviously I think it matters who you choose as your inspector. I mean, just like with anything, there’s gotta be all kinds of cozy relationships that inspectors have. I mean, for most sellers, for Kris and I, our suppliers are exactly halfway across the planet earth. I mean, it’s impossible for us to get in there. We don’t know what’s going on day-to-day. So is there like, is a fraud, bribery, is all that rampant in that industry? Or is there, just touch on that a little bit.
– Yeah, that’s a really good question. So it’s really hard to tell because a lot of people have this misconception that fraud and bribery is like a zero-sum game. So the inspector goes to the factory, they get paid 25 bucks and then they pass an order for example. That’s actually not how it works. So a lot of times an inspector may not even take a bribe and might pass a defective order, you know, just by not paying attention, not doing a good job, not really caring about your products. But also in the sense that, you know, when an inspector goes to the factory, like think about it this way. You know, they’re still human at the end of the day. So if they go to the factory and they’re like, okay, hey, you know, the factory rep is super, super nice. Like, I’ll actually give you an example from my real life. So I actually went to a foot doctor here in Chesterton, that’s my hometown and it’s in Indiana. So it’s a suburb of Chicago. So I went to my foot doctor here locally and I talked with him. I met him for the first time and I had some flat feet. So I was having some shin pain, I thought I might need some orthotics. So I met with him and we had a really good conversation. He liked me, I liked him. And it was a really solid conversation. And after that, he basically said, “Okay, hey, Sajag, you know what you need? You need a pair of orthotics.” And he went to the back, got me a $50 pair of orthotics, came back, and then said, “Hey, try these on.” So I went ahead and tried them on and I was like, oh, you know, these fit well. He was like, “Awesome, I want you to have these for free.” Yeah, you know, “I’m not gonna charge you for that.” And I was like, you know, oh, okay, well thanks. And then like five minutes later he showed in with a nurse and he’s like, “Okay hey, Sajag, I’m gonna need you to follow this nurse out because they don’t like me giving away shit for free.” And I was like, you know, he works for this billion-dollar hospital group. So I was like, you know, hey, you know, this like just an orthotics is 50 bucks. Like, no problem I’ll pay for it, it’s fine. But then he was like, no, no, no, I insist. You’re not gonna leave here without taking them for free. So I took them and I left but you know, that’s like kind of the same thing. His mentality was, you know, what’s an extra few dollars to this billion-dollar company? That’s the same thing that can happen when you’re doing an inspection. So when the inspector goes to the factory the inspector rep treats them super nicely, buys them lunch, you know, helps them with the inspection, at the end of the inspection, they’re saying, “Hey, inspector, I know this order is gonna fail by 5%. But if you don’t pass this order, I’m gonna lose my job.” And the inspector might think, okay, hey, on this side here you have this billion-dollar organization, an American company, whatever. What’s an extra few dollars in a few defective units to them? This guy here is gonna lose their job. So I’m gonna help this guy out and I’m just gonna maybe take a bribe or I’m going to do whatever and it doesn’t mean necessarily I’m gonna pass the inspection. It could be, instead of having 30 defects, I report 20 defects, which is still a fail but it only fails by very little to the point that, you know, you’ll still kind of pass. So that’s really what happens with fraud and bribery. It’s not like a cut and dry thing which makes it really difficult to kind of track and figure it out. So there’s a lot of different ways you can tackle that. But what we’ve seen actually work out the best is actually humanizing the whole inspection process. So when it comes to, for example, inspectors, they think, you know, your companies that they’re working for are these huge American foreign companies, tons of money, you know, Americans, they just have that, you know, name to it, you know, all around the world. You’re like, oh, you’re American, you’re rich. You know, that’s kind of like the connotation you have. So we always try to give it to the inspectors at a holistic perspective and tell them, hey, you know the companies you’re working with, some of them are doing hundreds of millions in sales but also a lot of them are on the other end of the spectrum and they’re just individuals starting their business. And when you’re an individual starting your business, you borrowed all this money from your friends, your family, your parents and you maxed out your credit cards, maybe sold your house. When you pass a defective border, even if it’s by one or 2%, that’s enough to just completely hit that threshold where it can’t be sold on Amazon, the buyer rejects it and you’re not impacting a billion-dollar company that’s losing a few extra dollars. You’re impacting an individual just like yourself that can lose the food on their table. And that’s what’s paying for their food, for their kids, for their wife, for their husbands, you know, whatever it might be, that’s what’s putting food on the table and you’re directly responsible for that. They’re trusting you to be their last line of defense. So humanizing that inspection process, giving inspectors the bigger vision and then also enabling them to do a good job. Like for example, with my inspection company that I was working within that one story I mentioned, they gave the inspector eight hours to do what should have taken them maybe 12 hours. And if the inspector goes to the factory, they’re like, yeah, management gave me eight hours to do this 12-hour inspection, I don’t have enough time. They clearly don’t care if I do a good job, then why should I care if I do a good job? Then it kind of just cascades down and your inspectors end up not caring about your products, you know, taking bribes or committing fraud, even without bribes. And that’s what ends up happening when it comes to fraud and bribery.
– Man, that’s good stuff. So something I’ve learned in working with suppliers is like being upfront with them in the negotiation process, like saying I’m going to do an inspection, it’s going to happen. Like I have standards that need to be met. And the term I hear a lot is AQL, what’s a good example of a good AQL, what does that mean? Are you doing those at the port? Are you doing your inspection at the port or are you doing it at the factory? When I was negotiating, I would put that in like the notes section and say these are my AQL standards that we need to hit. And then they would know, okay, this guy is serious, he’s playing hardball, he’s gonna have somebody come out and inspect the units and they gotta hit these standards. For new sellers, they may not know to include this in their negotiation. What do you suggest there for that?
– Yeah, that’s a really good question. So, to, first of all, answer your first question which was whether you wanna do it at the port or factory, that’s a really, really interesting question. And a lot of people actually don’t ask this so this is a really fantastic question because we do inspections, for example in Movley at the factory and there’s a reason for that. And the reason is that, a couple of things. So first of all, when you do an inspection at the port, you already paid your final payment to your supplier. So you’ve kind of lost your leverage at that point. So if you find defects, you have to ship it back to your supplier and negotiate with them. They essentially have the leverage at that point and they’re just kind of doing you a favor because you’ve already bought the goods. And the second problem is that if you have machines, you wanna test the product, you wanna have a good inspection on it. A lot of the time you’re using the factory’s machinery to actually test the products. The factory’s weighing machines, the factory’s production machines. Like for example, when we were manufacturing cables for example, in China, they had bend test machines which were like automatic wear and tear tests that you can do through a machine on the product. So all those machines are at the factory and the inspector can use them. But if you’re at the port, you can’t do that anymore. And what ends up happening is all the inspection companies that are inspecting at the port, they’re in reality freight forwarding companies. That’s usually what they are and they don’t really understand how to properly do inspections, how to make them statistically significant which lowers your cost and also increases the effectiveness. And also at the same time, they have an incentive to make sure the products pass because if they don’t, they’re gonna lose that volume that they booked on that freight next week out. So, you know, that’s what ends up happening. So that’s in regards to port and factory. And then in terms of AQL, that’s also a really awesome question. So with AQL, I would say that, so there’s kind of three levels. So AQL runs off a spec called ISO 2859 and that’s essentially a statistical model. So the statistical model basically lays out how many units should I inspect in an inspection while still being statistically significant? So we have three levels to that, level one, level two, level three. And level three, level two actually is what generally is recommended if you’re selling at Walmart or Target, you’re selling to brick and mortar, they’ll ask you for a level two inspection report often. A level three inspection report is when you, level three is kind of the highest tier in that model. And that’s really what we recommend for Amazon sellers just because you have a higher risk of quality control problems, higher risk of, you know, returns for X returns on Amazon versus a brick and mortar. So we always recommend doing at least level three as a little bit of risk mitigation. So like in a thousand units, level three is about 125 units. And in terms of AQL, so AQL is a part of that standard called acceptable quality limits. Essentially it lays out what is the number of units that you can allow that are defective while still passing the inspection. And there’s three types of defects. So I know I’m throwing a lot of information, so…
– Keep going.
– As you probably know. But yeah, with AQL there’s a setup and there’s three types of defects in an AQL that at least most inspection companies use including us which are critical, major, and minor. Now minor defects are things that are, you know, very controlled, you know, small scratches, things like that. You know, your customers are not super happy it’s there, but like they probably don’t really care. But so that’s more of a minor defect. Major defect is something that okay, customers when they see this kinda problem, they’re not gonna be happy. They’re probably gonna return the product so it’s something that you want highly controlled but still allowable because not everybody’s gonna return the product but this is something that would make you consider returning the product and it might get you a four-star review instead of a five-star review or at lowest a three-star review. A critical defect is something that cannot be sold at all. Like this is a guaranteed return. This is like a broken product, this product does not function, there’s a clear problem with this product especially for higher-priced products. If you have any sort of functional issue, that’s a critical defect and generally critical defects are not allowed at all on the inspection. So if they find even one critical defect in the sample size, the whole inspection fails. So you can essentially set up what the tier is. So telling your factory in advance, hey, you know, we’re gonna use, you know, to this AQL. The factory can’t really do much with that information unless they know what is the classifications on the AQL, like what do you consider a major defect? What do you consider a minor defect? What do you consider a critical defect? Because if you’re selling comb and you consider flimsiness, you know, not a defect but in a wooden comb, if it’s flimsy, you know that’s a little bit of a problem. You can’t sell that product. So that might be a critical defect for you. Then the factory will get two different perspectives. So it’s important to kind of classify to the factory that, hey, this is what I consider in, you know, the defect tiers. And this is what I consider a defect in each tier. And we’re gonna be looking out for this. But you also have to be super careful because oftentimes when you’re testing and doing inspections, you’re testing symptoms, you’re not testing the root cause. So for example, if the machine is loosely calibrated for knitting and you’re having a knitted product, there’s a lot of loose threads, then if they cut off all the threads because you’re looking for loose threads, then you don’t know the machine didn’t properly, you know, put together the product unless you actually monitor the production. So there’s a little bit of a distinction there which can make it a little bit more complex.
– If I ordered samples, if I’m getting a sample of a product and I love the sample if I just said that the finished product has to be exactly like the sample, is that an easy way to get, like just to say like, if it doesn’t fit the sample, then we’re not taking it or do I have to specifically say this is what needs to happen when I negotiate or can I say that you know, the final product has to meet exactly the same standards as the sample.
– Yeah, so that’s a really good question. So a lot of times factories will send like the best samples and let’s say you’re doing a shelf and the shelf might have a weight limit of 150 pounds. But as long, if you didn’t discuss that specification with your factory then they might create a product that looks exactly the same and it looks just like the sample but maybe the weight limit’s you know, 80 pounds instead of 150 pounds. So it’s really important to kind of understand the specs in advance and just kind of keep that in writing. And that can also help you limit, you know, your quality issues or your, you know, what kind of quality differences there’s gonna be in the product if you start negotiating the price. So what I always recommend doing is talking with the supplier and asking them, okay, what are the specifications you use to gauge this product? Like, what are the specs you use internally for this product versus other products and how do you structure the manufacturing for those to meet those specs? And ask the sales process when they wanna sell you and when you ask those same questions to other factories as well then you have 20 different factories. Even if your first factory or your first 10 factories are not totally transparent on the specifications they use, the other 10 factories might be transparent. So you can eventually aggregate all those specifications from all these different factories and then at least know hey, these are the specs that I should be looking for and then talk with your supplier regarding that. Can you tell me the specs for this product in regards to all of these categories?
– That’s good. That’s helpful.
– This is why I love having experts on the show.
– I know, right?
– We learn something every single time we have someone and you’re just giving us a wealth of knowledge. I mean, just, I mean, I think for a lot of people, I mean, my myself included to some degree the inspections that we expect or we think of in the past, I mean, I’ve had inspections where I just get a bunch of pictures and some videos of them walking around the factory and showing me so basically I’m verifying that the packaging looks right. They just simply, it’s in the correct boxes. That’s the scope of my inspection. Just hearing you talk about criteria and I’m not even, I didn’t even, I mean, a lot of ways I don’t think about this often, but I mean if you have something that’s stretchy, is it the same stretchiness, does it snap at a certain poundage? If that’s, I can see where you’re coming at where if that’s not quantified upfront then you lose your recourse. Like if you say it gotta, this can’t snap for up to 20 pounds of tension, that would be a critical flaw where the whole thing is void. This is interesting. I’ve actually never been that detailed in my inspections and that’s, I will for sure be starting because that makes perfect sense to me. I mean it’s just so fun to learn stuff like that. So going on now is a couple of things. Do you need to get an inspection for every single order? Is there any reason why once, you know, do you need to continue to get inspections every time you make an order? And then what do you do when an inspection fails? What happens at that point?
– Yeah, that’s a good question. Just to go back on your first point real quick there, I just wanted to mention because a lot of people, when I mentioned, you know, get into the details, get into the specs, they get super overwhelmed and I wanna say is that it’s not as hard as it might look, you know, just talk with the factories, you don’t have to go about and do your own research and become an engineer in your products. Just ask other factories that are producing similar products and ask them what specifications they use to gauge their product. So let the factories do the work for you and then just add it all up so it’s super easy. So that’s what I would always recommend there. But then to answer your next questions, could you just repeat those questions real quick?
– Yeah, no. Just touch on what happens when an inspection fails and before that is, should you do an inspection every single time you make an order?
– Got it. Okay, awesome. Yeah, so when an inspection fails the first thing you wanna do is talk with your suppliers and just tell them, hey, you know, we’re not happy with the inspection quality. So there’s actually two types of inspections. There’s a during production inspection and there’s a pre-shipment inspection. Those are the most common types of inspections. The pre-shipment inspection is done at a hundred percent. So you’ve already produced all the products. So if there’s something wrong and it’s something widespread like the wrong color or something like that then a lot of the products might have to be reproduced. So the during production inspection is really helpful, especially on first orders. Do those as you need essentially and that goes in at about 20% of production completion. And you also get some documentation on the production line which is a little bit of a benchmark in production so you can benchmark it to other orders. But if you do it during production inspection, essentially that’ll help you gauge like, okay, hey, there’s problems here and you can tell the factory before they produce all the products that, hey, you know, these problems need to be fixed on the other 80% of production. So those can be really helpful but like let’s say you get it at pre-shipment an inspection and you find some problems, addressing it with your supplier is really the best way to go if they’re really severe problems, they’re really widespread and it’s kind of a gray area like no one can really take fault at it. Maybe there was a miscommunication or something like that. You might have to end up splitting some costs to repair those products. And I would recommend being amicable about that especially when you wanna build a long-term relationship with the supplier, if you want them to value you you have to also kind of value them that, hey, they put money into this product. They’re gonna lose money on this order. So maybe we can, you know, if it’s a thousand dollars to repair the product maybe we’ll split the product cost 50-50, like I pay 500 and you pay 500 but let’s get these products fixed and we wanna work with your kind of thing. So that might be really good but either way, you know, you’re gonna probably end up spending a little bit more time as the factory fixes those problems if you find problems after all the products are produced but most factories are pretty amicable if they, you know, they wanna work with you long-term so they’ll fix the problems. But I would recommend, you know, having some flexibility there on the price because a lot of factories may not agree unless you contribute a little bit.
– I wanna shift gears a little bit and talk about Movley. You know, you’ve created this company. There’s a lot of inspection companies, right? So there’s a lot of other people doing this. You get in any Facebook group somebody’s gonna hit you up and say they can do, you know, inspection and negotiation. I mean, it just happens.
– What makes you guys different? I mean, I can hear the passion in the voice. I’m pretty sure it’s clear but what makes you guys different than any other inspection service that I’m gonna be able to contact?
– Yeah, that’s a really good question. So it comes down to a lot of areas. So one area that I really wanna highlight is that first of all before I start, Movley is not gonna be a perfect inspection company. So just like every other inspections company we have our pros, we have our cons and we have our flaws but that said what we do differently, we try to be about two to three times more effective right now than the next best competitor just with our processes and the way we do things. And we’re actually working on building our tech to get to that 10X level. So we’re actually working to build out a tech platform where you can get real-time data insights as your inspector’s on the factory ground, get data analytics on the inspectors so you can see which ones are passing more inspections, which ones are failing more inspections, how good of an inspection they do. We’re also working on potentially getting body camera footage to actually lower auditing costs. So you can get that and sync it up so you can see each part of the inspection as a little clip all spliced up for you in our portal. So we’re working on a lot of tech to get to that 10X level. Right now, you know, we’re not gonna be perfect as I mentioned, but we, I would say we are about two to three times more effective than the next best competitor. So what we do differently in our inspection reports is one of the biggest impact areas is kind of what I was mentioning earlier with fraud and bribery. We really try to humanize that whole inspection process. So we’re actually the only inspection company that actually calculates the time for the inspection on the basis of exactly how much you want to be done. So depending on the number of units and also depending on the number of tests. What most inspection companies do is they just look at, hey, you know, you have 200 units you wanna do today. Okay, you wanna do all these tests on 200 units? All right, let’s do it one day because they base it on the number of units. We actually base our times on the number of tests, the number of units, things like that… Average basis and we’re always improving that. So that’s one of the biggest things that we do differently is we make sure our inspectors have enough time to do their inspection and then we humanize the process and we use tech to actually streamline it to audit them and improve the function like our data analytics and things like that. Also one of the biggest things with Movley is our back office is actually in the Philippines. So we’re the only company for inspections that actually has a back-office there. And what’s super awesome about that is that it’s about six times cheaper than working with a back office in China and we’re also able to speak native English. So when you work with us, we can actually make sure that, okay, hey, you know, you tell us X, Y, Z, we understand X, Y, Z. We understand your slang. And it also allows us to give you more service for the same price. So we’re actually able to look at your booking documents before every inspection and give you suggestions, feedback, ask you questions and then make sure your inspection was done properly. Because when that one bad order comes, you know, everything that, you know, that’s where you wanna get those inspections so that’s our job. And with reporting, we also improve that. So we’re working on that tech platform, we’re always working on innovations there but all of our reports are 40 pages standard. We always include hundreds of photos, we include videos of each test instruction, product overview videos, and just, in general, a lot more detailed information. So one of the things we also do standard with every inspection is actually a factory overview report. It’s not like a factory audit where it’s like 50 pages on a deep dive in the factory but it’s like one or two pages just so you can keep a pulse on your factory between inspections. So we look at employee count breakdown by department, we look at the business license so you can kind of see between, you know, my first order, between my second order. Did the factory grow by 30%, did they shrink by 30%? Do I need to do another audit? So we do that standard with every inspection because it takes the inspector 15 to 20 minutes and it really helps you understand, you know, what’s going on in your factory. You know, with an inspection you’re gonna do either way so you don’t have to go and do a factory audit every few months.
– That’s amazing. I mean, I love just what you talked about I mean, where you are and what the steps you’re taking to really go above and beyond to make sure the inspection is done properly. And then just what you mentioned about the future. I mean, the idea of having a body cam on somebody while they’re doing it. I mean, ’cause really the whole point is we’re just trying to improve the transparency between what we’re getting, ’cause we’re not there. So you have to have someone that’s hopefully as invested as you are in what’s coming. So it’s amazing, I love what you’ve set up. I think the integration with tech that’s really cool what you guys are doing there. So in your terms, you know, the average costs probably was like $300 a day, something like that for an inspection but you can get them cheap, there’s like Kris was talking about, there’s lots of companies out there that offer cheaper, I mean, what corners are they cutting to get the price down like that? And I mean, are you really, is that risky to take that cheaper one like that?
– Yeah, definitely. I can speak a lot on that because I went that same route in my experience as well. But I always like to say, because a lot of people don’t believe me when I say this because they’re like, oh, you’re from Movley, you’re blue biased, I agree. But take a look at Alibaba inspection services and they’re probably gonna, they probably hate me right now because I shit on them quite a bit. But just go on their website and check out the table they have on their website. And they literally say, okay, our inspection’s like a hundred bucks, 200 bucks, 250 bucks. And they’ll say, we’ll do a workmanship check which is the same thing as a visual check. We’re just gonna look at your products. They look good, therefore they pass, which is not enough. And then for product function test, product conformity test, they’ll only test between one to three units and that’s like the max they go. So if you have a product like a paper cup, you wanna make sure all your paper cups are good. They don’t leak, they don’t have holes in them. You wanna pour water in each cup real quick, they’re only gonna check three cups to make sure that they work. So if you have a 20% defect rate every time they pick a unit you have an 80% chance essentially of picking a good unit. So essentially almost an 80% chance of your inspection passing with no defects with a 20% defect rate. So it just makes absolutely no sense. So one of the things that cut-rate companies do is they, first of all, don’t actually check all the units for function, all the units for product conformity. We have that in our booking form where we actually allow you to specify exactly how many units you wanna test. And we actually do that because we account for the time to do those tests. And even other inspection companies like cut-rate ones, they make their money actually doing two to three inspections in the same day. And each inspection is essentially an hour to two hours long because there has to also be transported between the two factories. So if you tell them, hey, you know, we need to do this inspection even on 200 units or a hundred units during that inspection in two to three hours, it’s just not possible. You can’t even visually just check the products and make sure they’re good unless you’re just speeding through it and when you’re putting the inspector under that much pressure, putting them under some extreme time limits and time quotas, they just can’t do a good job and they don’t care about your products. And that makes such a huge impact. So a lot of people have this misconception that inspector labor in China costs maybe three to $5 an hour. And that’s really not the case. It costs about 13 to $19 an hour for the inspector’s time after benefits for a well-trained bilingual inspector. And then you also have to consider travel costs to the factory. So you’re already spending about a hundred, $150 on the inspector labor and you have to consider travel costs, you have to consider administrative costs, you have to consider training costs, fraud and bribery auditing costs, accommodations, things like that. And then obviously a margin for the inspection company. So when you factor in all those costs it’s pretty transparent and pretty clear. It’s just simply not possible to do an inspection that’s good in that little amount of money, anything under like $300 is just almost impossible to do an inspection and do that consistently. So that’s really where it comes down to it’s just straight-up margins and quotas. And you know, it’s like Wells Fargo, you put a very extreme quota on the inspectors. The work will still get done and people will just turn a blind eye to it. Like, oh, all these accounts are being opened, whatever. But at the end of the day, the results are not what you’re expecting.
– Yeah, You’ve covered a lot. This has really been good. We’re gonna have to have you back on especially next year as 2021 comes around. I’m sure things are gonna change, you know, with the trade wars and COVID and all that kind of stuff. I’m sure that things are gonna change so we’re definitely gonna have to have you back on. In closing, I wanna talk about like a good tip or a good, like, hey, I’m a new seller. I got new sellers. What would you give us as a suggestion? Like I’m sourcing a product now, what would be your advice?
– Yeah, so if you’re sourcing a product, I think if you’re on that stage like you’re just getting started you’ve not like actually even placed an order. My suggestion would be to build a good relationship with your factory. So I feel like a lot of people look at it too transactionally like, hey, you know, we need a supplier, we need our products, build the products, here’s the money, take it, give us products. And that’s true but in China, especially and even another country the supply chain in general as an industry is very relationship-based. So take some extra time to invest and build a relationship with your factories and do that from the start. Think of them as a partner to your company and not so much as just an expense or as a supplier. So like when you’re actually going out and talking with your suppliers, you’re meeting with your suppliers. One of the things that, you know, when I was in China they would do all the time and the same thing we started doing as well is when we go talk to a new supplier on that first meeting, we have a PowerPoint deck that we actually put together and it talks about our brand, we have the brand logo, how we started, who’s the founders, you know, we give them a presentation like they’re partnering with us, hey, this is who we are. This is who you’re working with. This is what we do. These are the products we’re making. This is where we’re going. And we’re looking for awesome suppliers to join on our journey and we wanna work with you. So that’s why we’re having this conversation. So giving them an introduction to who you are, who the factory is, not like an interview but you know, not like you’re going for a job interview but you know, you’re going for like a partnership kind of thing. Giving them a holistic perspective of who you are, that goes a far and a long way because then they understand, okay, hey, your brand is all about quality products. If we give you cheap products you’re not gonna be able to sell those, right? So your brand is about selling to customers who are using these, you know, let’s say you’re doing outdoor backpacks. These people are using their outdoor backpacks to go hiking. You know, these are not just regular outdoor backpacks, you know, look at where the people are using it. These are the reviews for the products, right? We can’t go give you a crap quality backpack that’s gonna break apart while someone’s climbing a mountain with it, right? So when you read that introduction you give them that holistic perspective. It sets that relationship off on the right foot and it’ll impact your sample quality, it’ll impact your relationship and they’ll also take you much more seriously because they’re like, okay, hey, you recognize how we look at things and you know, we wanna give you a good experience and you’ll really wanna work with us to build a brand. So they understand that you have that perspective as well and that will really double down on your relationship.
– I think that’s a great tip because a lot of sellers do look at that as like a transaction. You know, if you work with a supplier long enough you’re gonna find out like they’re gonna send you gifts. Like I’ve had this buyer send me gifts for the holidays. And if you just trade, create a relationship with them, you’re gonna get more out of it. It’s going to be better for both of you so that’s a great tip.
– Yeah, and I’ll touch on it a little bit more because I think that it’s so important what you brought up. I mean, I’ve had suppliers who’ve flown out and visited me in the States and they’re sending like Kris’ talking bout out, we’re emailing back family pictures and they really like that relationship and once you developed that relationship, just like any relationship, but once you develop it stuff starts happening a lot quicker. You’re at the top of the list when your email comes in, for sure.
– You get first dibs on a new product.
– Exactly, they send you the new products their factory’s designing. I mean, yeah, that’s a really good point. And I think just to touch on it even further like with all these things that you described are making me rethink just to enhance that relationship, having all this stuff upfront, like what you’re expecting from the product and have it really laid out will just solve a lot of potential problems. Cause they could, like you said, it’s not necessarily intentional that they are giving you an inferior quality product, they may not have known that you’re expecting something better if it’s not laid out.
– Yeah. And I wanna double down on that real quick with what you were saying. It’s extremely important to set expectations upfront and then follow through on them. Like for example, if you’re gonna do inspections on every order, which you should be doing, like, you know, obviously I’m biased, but you know, every fortune company does it, every major manufacturer does it. If you’re doing inspections on every order you don’t wanna work with a supplier for like a year and build this relationship, share family photos and then say, hey, we don’t trust you, start doing inspections. That’s something you wanna do from day one. And that’s what you wanna build in. So you want to say, hey, you know, we know what we’re doing. We have a process. We also wanna build a relationship with you but we also want a follow-up process and, you know, create that standard and set that standard in advance so they understand what’s expected of them from day one. So you’re not throwing at it and stressing the relationship after a few months or a few years of working with them. So, you know, start as early as you can and set those expectations and say, hey, you know, we’re expecting to do this. You know, our investors are asking for this, our insurance company’s asking for this, whatever. You know, we need to make sure that we get proper processes in place and think about it from a relationship perspective, not just a transactional perspective, exactly.
– That’s great.
– Yup. I mean, I think that’s a good mic drop right there.
– So going on from that, let’s say we’re sellers out there we’ll be contacting you shortly, don’t worry, ourselves, Kris and I but for all the people listening, they’re in the process right now of getting products and they’re talking to their suppliers. How do they reach out to you? What are the steps to work with Movley and work with you on getting the inspections?
– Yeah, definitely, so you can always visit us at movley.com M-O-V-L-E-Y.com. And we have some awesome resources there. We’re building them up every day. And we also have a get-started form. So whenever you guys are ready to book inspections or you’re about to place your order, et cetera, you start having some questions relating to that, you can book an intro call with us and it’s about a 15 to 20-minute call, we’ll answer any of your questions on inspections, get you all set up and ready to go and then connect you with our bookings team. So whenever you’re ready to book inspections you can just email them and they’ll take care of it.
– Go call him, you’re gonna get more info than you need but it’s gonna be helpful.
– Yeah, we’re sold on your passion and just your story and just the pride you take in what you guys are doing with those inspections, I know it’s gonna be a major help, it’s gonna save people a lot of money and a lot of headache down the road if they do it. So everyone listening, go to movley.com get set up, start working with them on your inspections. And we can’t thank you enough for coming on the show. It’s been an absolute blast. And so anyway, just real quick, some housekeeping notes, for everyone out there that’s listening. If you like this content, you love what we’re doing, we love what we’re doing, we’re learning. We like our own content, we’re learning stuff every day. So we like it. If you’re listening to the podcast, please subscribe to us on the podcast, leave us a review rating, if you think it’s good. Also, we go live every time we do our podcast, we’re live on Facebook, LinkedIn, and YouTube. So go to the Sellozo page on either of those platforms, like the page, you’ll get notifications when we go live so you can get great content like this. We learned so much. Sajag, thank you so much for coming on this show. It’s been fantastic.
– Been great, thank you so much.
– Thank you so much for having me guys and I hope everybody listening found this really valuable.
– Oh, they better.
– For sure, for sure. All right, we’ll see everybody on the next one. Have a good day, see ya.