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Isaac Kuhlman joins the show today in a special extended episode to talk about everything from product sourcing, building a team in the Philippines and how to scale an ecommerce business. Isaac and his business partner Paul have sold over $20 million dollars worth of private label products on Amazon over the last several years.
Isaac also shares how at one time they were selling $300,000 per month on Amazon before getting shut down. The story of what happens after they were shut down and how they were able to get back onto Amazon is worth listening to this longer episode alone.
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Show Notes and Links
Intro: Hello everyone, Chris Guthrie here, host of Sellercast. In today’s episode, I speak with Isaac, who at one time was selling $300,000 per month on Amazon and got it all shut down. It’s a crazy story and we get into it. And we talk all about what you can do to protect yourself and how you should make sure you follow the rules of selling on Amazon. So Isaac has been selling on Amazon for the last several years along with his business partner Paul Sinclair. And together they’ve sold well over $20 million on Amazon with private label products that are mostly sourced from China. They’ve been to China multiple times, visited the factories. And in this episode, it’s going to be a little bit longer. But overall, I think that you’re going to like it. Isaac has a lot of experience, and I know that you’re going to pick up several tips that you can apply in your business as you go through this episode. So let’s start the show.
Chris Guthrie: Hello everyone, Chris Guthrie here, host of Sellercast. And today, I have a good friend of mine Isaac on the podcast as well. Isaac, welcome.
Isaac: Yeah, hey, Chris. How’s it going?
Chris Guthrie: Yeah, doing well. So I’m excited that you’re here because I know you’re an expert at selling on Amazon. I know that you’ve been selling for quite some time, millions of dollars in sales. Maybe you can tell us a little bit more too. You’ve been to China multiple times. You’ve visited the factories in person. So you’re much further along in this game, I guess you can call it. Some people that may be listening… So I’m really interested in kind of diving into the nitty-gritty of that sourcing aspect and just in general what you’ve learned through growing this business.
Isaac: Yeah, definitely. I guess it’s been about three years now. So it really hasn’t been that long, but it’s been a lifetime, pretty much. When you’re selling online things, it doesn’t take long to become an “expert”, as long as you keep at it and make it your full-time job. It’s surprising how much you can learn in one year of just doing something.
I started this business with a business partner now, who actually wasn’t a business partner at the time. I worked with a guy named Paul Sinclair. He and I met through my former job where actually, I was working as an operations manager at a go-cart facility in Las Vegas. And you know this story, Chris, because I remember that we were actually at a live event with you. And you mentioned that you were a champion go-cart racer because you’d beat everybody that was there. And I kind of chuckled and looked upon. And I was like, “Oh, man, we smashed these guys.” So what happened was basically, I was working at this go-cart facility. And me being the, I guess, very friendly, customer server, the outgoing kind of person that I am… Even though in my regular life, if I’m outside of a work or kind of a talking environment, I’m kind of not shy but just reserved, don’t really say much unless I know who I’m around. But when I’m at a job or in a meeting area or a networking or social setting, I just go out of my way to talk to people.
And I guess what happened was Paul came in with a friend of his. He was actually his business partner at the time. And they were racing. And I noticed that Paul was actually not too bad. I was like, “Okay.” I was just watching him and noticing a few things that he was doing pretty wrong. So I basically just instructed him how to race faster. And from that, basically, he got into another cart. He only bought one race, but then because I showed him how to race faster, I basically drew the map of the course, told him where to break. And he was like, “Why would you break?” I was like, “Because actually, if you break, you can carry your speed in the corners and stuff like this.” Told him some of the basic details of how to be a faster racer.
So then he went out there in his next race. And his slowest lap was faster than his fastest lap from the previous race. So he immediately saw that there was benefit into what I was telling him. So basically, we just became friends from there. He was telling me what he did for a job or for his work. And he used to tell me how he sold on Amazon. And I was like, “Well, that’s pretty interesting.”
And two to three months later, basically from first meeting each other, we kind of became friends, kind of hung out, had some drinks together, got to talk more. And he was like, “Well, why don’t come work for me? You’re too good for this place.” And I was like, “Well, that’s probably true, but I don’t really know too much about what you do, to be honest with you. I mean for all I know, you could be selling illegal firearms or something online.” So basically, we had an actual conversation about it, learned about his business. And then he was like, “You can be the manager of my business.” And I was like, “Well, that’s kind of funny because I don’t know your business that well, but okay.” So literally, the next week, I said yes because I was like, “You know what? I can’t stay in this job forever. It’s not going to pay the bills. It’s not going to take me where I want to go in life.” I mean it paid the bills but just barely kind of thing.
So I said yes and started to work with him. And the funny thing is literally, the week after I said yes to start working with him, our main selling account, which was doing over $300,000 a month, got shut down. So I was like, “Oh, man, I…”
Chris Guthrie: [Laughs] I’m laughing now, but…
Isaac: Yeah, I just quit my job, and I’m probably not going to have a job here. So I was like, “Well, I just screwed myself really bad.” But it probably took us about six months to really recover. And then by the holiday season of that year, we had actually done $500,000 in a single month, which was our all-time record, which is a great month. I think it was like $506,000 in December of that year.
Chris Guthrie: That’s awesome. Well, that’s cool. I didn’t know about that aspect of the story. And actually, I have to step back to that go-cart story. I guess we’ll clarify for people that I can beat other people that don’t normally race go-carts. But if you’re an expert, I probably can’t beat you [laughs]. That said, I would like to have some of your tips so I could further advance my beating of new racers.
Isaac: Yeah, I’m an expert go-cart racer too, just in case you want to know that [laughs].
Chris Guthrie: [Laughs] That’s awesome. So I’d love to just kind of dive into that aspect of the Amazon account shutdown. I don’t know in how much detail you want to get into it, but that’s really helpful for people, especially for people that aren’t yet up at that stage where they’re doing multiple six-figures a month. Having that happen is a tragedy. So finding out how to avoid that and some of the things that have come along from that experience would be a good starting point that we can kind of dive into.
Isaac: Yeah, sure. I mean basically, it was my first initiation in Amazon. It was, “Hey, you know what? All that money that I was just making, now it’s gone. So now we have to figure out how to remake it.” You know, your heart sinks into your chest a little bit. And you’re like, “Oh, my God! This is the worst possible thing that could’ve happened.” Basically, what had happened was that Amazon had said at that time that the account was, I guess, flagged for manipulating reviews. And it was kind of a tactic back in the early days of when people were really getting a lot of reviews quickly to incentivize for free reviews. So you put emails out, or you’d send inserts in the packaging saying, “Get a bottle for free for a review.” And I think it’s not against Amazon’s terms of service to give out free products for reviews. You just have to say that there has to be honest feedback. And I guess at some point, there might’ve been some flyers or emails or something out there that Amazon caught that account for saying, “Give us a 5-star review for a free product.” So that’s essentially what got that account shut down. And I will tell you that you do not want to do that. It did get some reviews pretty quickly. But at the same time, it wasn’t really those things that got the reviews; it was the quality of the product and just selling a lot of them. I mean that’s more than anything. You can get as many quality reviews as you want just by having the right products. So in the end, it was kind of a fool thing to do. But when you start doing a business, you take as many risks as you can until you get to the point where you’re making a lot of money. And then you start to lower and minimize the risks.
So that’s kind of how that happened. The worst part was obviously we had 90,000 units in inventory at Amazon. If you guys know anything about when happens when you have to remove inventory from Amazon… Because obviously, they’re not going to keep it there. They’re going to destroy it or they’re going to send it back to you. It’s 50 cents per unit to send it back to you. So we had to spend $45,000 just to get our inventory sent back to us.
Then we took the inventory. We did open up a new account under a business LLC, through a private business LLC that didn’t really have names or any kind of membership. I guess I call member-owned names on there, anything like that. This is something you can do. I mean anybody can do it. There’s a service called Wyoming Agents or Wyoming Company. And you can set up a private, confidential. Even in Nevada, you can do it. So there are ways to set up an Amazon account under business LLC. So we had to do that.
And then the problem was we could only send back 5000 units at a time because that’s what your new inventory stock is. It’s 5000 units. So we tried to figure out what our bestselling ones were that we were selling at the time, send our best products in there, and send a thousand in at a time. The problem was at that time, some of our products were selling 300 units a day. So even if we sent in 1000 of that product and a thousand of other products, we couldn’t keep enough in there. So we’re having to ship every single day. Not to mention we have products coming back to us. The way Amazon works is because they have so many fulfillment centers, maybe each one has 20 products out of those 90,000 units. So they’ll take one box, and then they’ll just drop everything in there randomly, ship that to you. So it doesn’t come organized. You actually get just random boxes – probably close to 300 boxes or more – of just randomly sorted products. So we had to go in there. And these were all small products, thankfully. But if there were boxes, it would’ve been a real nightmare because we didn’t have enough storage at the time to really handle big products. So we had to go in there, sort them all, repackage them, and then send them off in case-packed units back to Amazon, so that way we could get into the fulfillment centers. So just that one process of getting all the products back, to resorting it and shipping it back in, probably took six months. It cost us $45,000 in the return fees. Then we had to pay for the shipping back, which was maybe $5 to $10 to $15 per box. You’re looking at multiple thousands there, maybe 15 grand there or something like that – plus all the labor, the hourly employees that had to actually do that.
So just to recover from that one thing, minus all the sales that we lost – because it took a while to reestablish our seller, our sales because we couldn’t even get that many products in the stock – it probably cost close to $2 million in the six months, if not more, to get back on track.
So six months and $2 million lost later, we are finally back in the game. But it was an absolute nightmare.
Chris Guthrie: Wow! Yeah, that’s like a trial by fire, your first 90 days. A week into job, basically, and you’ve got this happening. I spend a lot of time talking to people, sellers. And especially to people contacting me about Salesbacker, they’re always asking different questions about the TOS. And there’s really a reason why you should follow that. And it sucks that that one thing of saying, “Hey, leave us a 5-star review,” is what led to all that. Well, fortunately, you were able to recover though and get back to it and get that going again.
What are you guys doing these days? That was kind of in the past when you first started going. What are you focused on now, and maybe some of the other challenges that have come along? And frankly, because you’ve been selling for so long, we can probably just talk about different mistakes that have been made. And then that is already the stuff that people could learn from. But let’s just kind of see where it goes.
Isaac: Yeah. It becomes a problem when you get to that big of a… When you scale too fast or you start becoming too big too fast… We started building our team up really fast. The problem was that we weren’t building our product line as fast as our team. So really, we weren’t diversifying our sales. And that would be one of the biggest traps I can tell you about growing an online store, i.e. if you only have one or two products, eventually, they’re going to stop selling. And when they do, you’re going to really miss out on other opportunities, and you’ll probably feel like you failed. So we’ve had some massive failures and some massive successes. We had to go back to the drawing board because in the last two years, because of the competition through Amazon, and just because of – I wouldn’t call it arrogance, but at the same time – the confidence that we knew that we could sell basically any product that we wanted if we put our minds to it, it kind of put us in a little bit of a stalemate because then we were like, “Okay, what about this product? What about this product?” We had so many opportunities that we didn’t pick enough. We literally only picked one or two every six months at some points. And the ones that we picked didn’t work out as well as we wanted.
So I would say keep your same bootstrap mentality. Don’t try to grow too fast. Even if your sales are massive, you don’t necessarily have to build your team up because building your team doesn’t mean that your sales will increase. It’s actually going to be increasing your product lines and increasing the different ways, the platforms which you use. So instead of just looking at Amazon, you can look at Amazon.co.uk, Amazon in Japan, Amazon in Germany, Amazon in Canada, and so on and so forth. And you could also look at building a website off Amazon. But I would say that generally speaking, if you’re not doing at least $30,000 a month on Amazon, you’re probably not going to make very much money off Amazon. So it’s one of those things that you can put a lot of time and effort on your own website. But you might not get a lot of reward in the end.
So what we had to do was we just had to go back to the basics, relearn what we did at the start, and then just do it again. So now we have products that we can get 50, 60, 70, 100 units a day. But we just have to stay on top of it. We have to scale back how many products we really were focusing on because at one point, I think we had more than 250 SKUs that we were trying to concurrently run. And out of the 250, 200 weren’t very good. So you’re putting a bunch of time and effort into these 200 products that don’t get any sales.
So there is something to be said about how fast and how much you want to scale. You can diversify all you want, but at some point, you need to stop growing, even with your product line. Say, Chris, you’re a seller on Amazon. You might get to 20 products and be like, “Okay, this is the perfect amount. I can make $5 million a year with these 20 products.” That’s great. Now use them on other platforms. Build a team to help you expand by increasing the number of ways you can sell those 20 products, not necessarily just increase your number of products. So it’s all about diversifying right there, and that’s what we’ve found out, again, the hard way [laughs].
Chris Guthrie: That’s interesting. I think there are a lot of different ways we can take this from some of what you said there. I want to actually go back to that. You talked about going back to the basics after the Amazon account shutdown. What are the basics would you say that people really need to nail down? Let’s direct it to salespeople that might be just first starting selling. And then let’s shift to talking about when you think those expansion opportunities should occur for those people that are listening that are already selling and doing pretty well.
Isaac: Great question. You get to a point where you get so much jaded by all the things you can do that you forget all the things you should be doing. And the thing you should be doing, first of all, is finding the best-quality product you can. And the reason why this is important is not because the product is the only thing that matters. You could market a bag of dirt and people will buy it. But if you market a bag of dirt, people will complain as soon as they get it because it’s a bag of dirt. So you have to think of your product as your initial piece of marketing because if you have the best product you can get, when people receive it, they’re going to be happy to receive it. So that’s your initial, I guess, point of contact physically with the customer, i.e. when they touch your product and say, “Oh, my God! This is a great product.” Now you can create the greatest packaging in the world, but it might be overkill. So you want to just make it good enough so that people are going to be amazed by the packaging. But it doesn’t have to be expensive. So get great-quality product, really good, nice packaging, but it doesn’t have to be too expensive. I mean we have some things which we just put in a nice polyethylene bag, I guess it is. But it’s got a matte frosting on it. And it’s got some bold colors and nice fonts. And that’s all it has to be. It stands out from the competition because they’ll put it in like a little Ziploc baggie kind of thing and just staple a little cardboard hanger on it. And they think that that’s good enough.
So just those two things right there can start out the basics. So you have your product. You have your packaging. It doesn’t have to be super fancy. It just has to be good enough so that when somebody receives it, they’re like, “Nice!”
Chris Guthrie: That’s good too. I like that. Typically, once you do your packaging for a product, are you of the mindset where you get some basic packaging. And then after you’re proven in the market and you’re getting some sales, then you use a better packaging? Or does it just depend upon whatever that you might be selling?
Isaac: Yeah, I mean that’s how it always works out. You could always make things better. You don’t want to put all the time and effort into it right away if you don’t know what people really even want because if you think that they want gold-plated foil on their packaging, they might not want that. They might be like, “Why do I have to pay extra for this? I would rather pay a dollar for this exact same thing. But because it’s got this gold-plated foil on it, I’m sure that I’m paying extra for that.” So people have a certain amount of perceived value.
To be frank, it’s what I call polishing a turd. You can’t polish a turd too much because if you polish a turd, then they’re just going to be like, “Well, I’m paying for the polish, not for the turd.” You know what I’m saying? So it is a blunt but accurate statement, I think. So you just have to understand the perceived value and how much you can really make it better. But at the same time, yes, it’s an incremental growth thing where you don’t want to start out too high and spend a bunch of time. I know people that have taken a year to develop a product. I know people have done 8 months without even picking a product. So they sit there and just worry themselves to death. Just make it as simple as you can at the start, really. That’s the key goal.
Chris Guthrie: That’s good, okay. So moving forward then, if people are past that stage, and they fear the horror story of growing too big too fast and all those things, when do you think in their monthly revenue would you suggest adding a second product or a third product, and how to manage that aspect?
Isaac: That’s a great question because I don’t think it’s about how much you’re going to be making. It’s about how much you would be losing if you didn’t expand. That’s how I look at it. So if you’re up to $30,000 a month, and you see that you’re still growing, well, that’s great. But think about how much more you could actually make and how much you would lose if you didn’t expand to another product.
Let’s just say you’re selling a baby bowl. And you do $10,000 in your first month, $30,000 in the second month. And you’re kind of growing but not as fast as that anymore, right? So you’re looking at maybe $35,000-$40,000 in the next month. And then it kind of stales out over time there. Well, the reason why you’re not making more money is because you only have one product and it can only grow. And the worst part is once you get it to be the right product, where you have the best conversion rate you possibly can, the best listing optimization, the best packed product, the best packaging, there’s a ceiling. Amazon doesn’t just magically induce 10 million more customers every day looking for that one specific product. I mean there’s a ceiling as far as how much you can just all of a sudden sell, I guess, and how much you can exponentially grow. So that’s the point when you start going. Even if it’s at $5000, if you just kind of stale that up $5000 dollars, you need to expand your product line. Find another way. Even if you’re only selling 3 to 5 units a day, if you’ve done everything you can, you’re beating your head against the wall, you need to expand. I know it might be crazy to think that you’ve “failed” because you’re only getting $5000 to $6000 per month or whatever. But you haven’t failed. You just haven’t found the right set of things.
So everybody always says, “Okay, well, my first product is going to be this awesome thing.” Well, that’s great. That’s what you think when you first start. But really, your first product is your worst product. And it’s not because it’s the worst idea; it’s because you’ve executed it the worst. Your marketing is going to be the worst because it’s the first time you’ve done it. Your images, your product descriptions, your bullet points, your titles, everything is going to be the worst because it’s the first time you did it. You can then take that exact same product probably and find a way to rerelease it and do better. I wouldn’t necessarily recommend doing that. I’m just saying if you had a second chance, you would probably have done it better. So that’s when I say look to expand your product line because really, you can now make it as good as you want. You can take a little bit more time. I wouldn’t take too much time because you don’t want to spend three months on developing a new product if you already know the processes. It should take you 45 days roughly to really source your products, get the packaging right, get the designs laid out, and then order the product. Now it might take another 20 days or whatever for it to get mass-produced and then shipped, but that’s okay – just so long as you can get the product process done in 30 to 45 days.
Chris Guthrie: Now that’s great. And you know, I’d like to talk a little bit too about sourcing. And I want to get to some other topics as well. When you’re sourcing your products now – and I think that everyone kind of has a different way to do it – I’m very curious to hear about what you’re currently doing since you guys have been to China. You’ve got a team in place that you’ve been building in the Philippines, correct?
Isaac: Yeah, we have employees in the Philippines and China. A couple here and there in Europe as well. It’s mostly outsourced, obviously.
Chris Guthrie: I believe that really, in any business – it doesn’t matter what it is – a lot of what can dictate someone’s success or failure is in the systems that they put in place in terms of where they found the levers in their business to help get some initial success and then how can they continue to scale that. So I’d like to talk about the sourcing aspect and then also about the team. But from a sourcing side, what are you typically doing now when you’re trying to decide on a new product? I mean how many samples are you getting? What type of testing do you go through? What are some of the things you do on the sourcing side that people that are either already selling or aren’t selling maybe just haven’t thought of?
Isaac: This process for us hasn’t really changed much because Paul actually started sourcing in Hong Kong and China about 10 years ago for a mobile phone business that he had. And this has pretty much been the process that I learned from day one. And it really hasn’t changed much. But basically, what you want to do is you don’t want to just sit on Alibaba.com because as most people know, there are a few fatal flaws of Alibaba. You have a lot of middlemen or trading companies that basically are trying to find English-speaking representatives that work for multiple factories to find the right products for customers. And while that’s great and they can help you, they’re not actually giving you the factory’s information. I mean it’s not like you’re actually working with the factory. So if you say, “Hey, can I get this in this size, this quantity, this price?” They’ll just say yes because they want you to just say, “Okay, I’m going to work with you.” And then at some point, they’re going to change. You’re going to switch over to where you’re talking to the factory. Or they’re going to actually be working with the factory directly. And you’re going to find out that what they promised you is not what they’re actually going to get. So that’s fatal flaw #1.
Another fatal flaw is that most of the companies that list on Alibaba are either big enough to have their own English-speaking representative or they’re big enough to really figure out the processes to be a top seller or a top factory on Alibaba. So that means they’ve got overhead. They’ve got expenses. And you’re probably looking at people that have a lot of big clients, which means you’re going to be the small fish in a big pond. And I’d rather be a big fish in a small pond.
So a couple of things we do to source is we work with sourcing agents. Now I’m not saying that you have to go out and get a sourcing agent. I would recommend somehow working with somebody that knows Chinese if you can. If not, there are a few websites out there that are not Alibaba.com, like 1688.com and MadeInChina.com, GlobalSources.com. Those ones actually are more middle-level factories, especially 1688.com, which is actually a Chinese business-to-business factory. Sometimes a business here might say, “Okay, I need promotional goods. There’s a convention I’m going to have. So I’m going to go work with this company because I know that they’re local to the place that I’m going to have the convention.” Well, it’s kind of similar to that, only it’s just that really, any factory that you can imagine list on 1688. It’s actually an offshoot of Alibaba.com. So we actually have a Chinese representative. The problem is it’s all in Chinese. Now you can Google Translate it and try to do it yourself. I can recommend you do that. But then the problem is when you’re going to contact the factory, they might not have an English-speaking representative.
So we go out of our way to kind of work with the translator or sourcing agent now. Again, you don’t have to get one. It’s just a recommendation. It’s just what we do to find the best products, have our factories work, we be the big fish in their small pond kind of thing. And we get best products, best pricing, best service kind of thing.
Chris Guthrie: Yeah, so those websites you mentioned, I’ll make sure I link too in the show notes. So if you’ve finished listening to this episode, I’ll give you that link at the end. But I do want to talk about a few things. On the sourcing agent side, where do people find that? Would it be something where they go into like Upwork.com and they’re searching sourcing agent? Where would they do that?
Isaac: Chris, it’s a great question because it’s not exactly an easy thing. Now we do have a business associate. He actually used to be a sourcing agent of ours. He’s actually got his own shipping and logistics company now. He’s actually set up a find a sourcing agent service kind of thing. We actually did it. And we didn’t want to do it anymore because it wasn’t worth our time. We weren’t making it worth our time. So we basically just said, “Hey, can you take this business over from us and go do it?” And he was like, “Yeah, I’ll do it, whatever, okay.” And he’s a Chinese guy. He lives in Shenzhen, China. That service is called ensignsourcingservices.com. And I think you can get three candidates for $300 U.S. And then you basically select your candidate. Now there are a lot of other logistics behind that. You have to pay them a monthly fee, whether they’re part-time, full-time, whatever. If you want to even just talk to that guy, his name is Andy. He can maybe help you in other ways as well. He’s a great contact. We’ve known him for five years. I haven’t personally known him for five years, but Paul has known him for about five or six years now. And he’s a great guy. I’ll get you those links as well.
But to kind of expand on how you know you’re getting the good products, the good prices and stuff, obviously, you get multiple quotes, right? You can go to Alibaba.com and compare quotes that you get from a sourcing agent or from one of these other websites and see if they’re actually good prices, see if you’re getting the best products. Once you get the samples, we usually get what we call the best sample that they can provide. We don’t ask for a custom sample. We just ask for what’s called an on-hand sample, which is different than a by-hand sample. We didn’t know that there was such a thing. But sometimes, especially when you’re dealing with packaging, they actually might make a sample by hand. We had a couple of boxes where some poor guy in a factory had to replicate the custom box that we were sending him because they didn’t want to run the machine for one sample. And we were like, “Okay, now that’s not what we want because this looks terrible. We just want a version that you consider close to ours that you might have on hand and send it to us.” So that was a waste of two and a half weeks for that packaging mishap.
Chris Guthrie: And that’s a good tip too, just the on-hand sample… So that’s good.
Isaac: And a lot of times, the people that are quoting on Alibaba are quoting you for a custom sample. So if it’s $70 for a sample, it’s because they expect that you want your logo on it and that you are going to ship it separately or whatever. A lot of the times, if you just ask for an on-hand sample, they’ll just make one or have one on hand already made that they can give to you for free or for really cheap because you’re not asking for customization of any kind. So that on-hand sample is definitely worth getting.
Now once you get your samples, how do you actually vet them to see which ones are the best? This is probably the most important thing about “sourcing” your product. You have to know the quality.
So you actually have to be somewhat of an expert on your product. You actually should go out and buy your competitors’ products, either from Amazon or in retail. Obviously, you’re going to get multiple samples from multiple factories. We usually get the best on-hand sample, at least one from each factory. And we’ll get from 5 to 10 factories. I’m not even kidding you; I’ve probably hand-tested 200 samples in a week by myself.
Chris Guthrie: Wow! For the same product or for multiple?
Isaac: For the same product. Well, I’ll just tell you. It was a screen protector. I literally had to install 200 screen protectors in one week. And that was one of the products we were trying to make the absolute best. Now I’m not going to tell you that you should go with screen protectors because it is what I would call a race to the bottom. People are driving the profit margins down. It’s one of the most competitive markets on Amazon, so much so that we absolutely hate it now. But I had to test 200 different samples of screen protectors in one week. And the reason I knew that ours were the best is because they didn’t have the bubbles that everybody else had. It was easier to install. It would take me two seconds to do it versus trying to sit there and spend 20 minutes on some of them. So you have to be an expert. That’s the main thing. You go out, find your products that are like your competitors’, buy some samples, and then make sure yours is the best.
Chris Guthrie: So let’s step back just a second. The people that are listening that are newer, and even people that maybe are further along, if you’re just getting started on Alibaba, try and get the first product going, learn the process, is it still something people can do, that works well?
Isaac: Absolutely. I wouldn’t suggest changing that process. What I would just suggest is don’t settle for the first person that contacts you back. Go out of your way to get 5 to 10 products to answer some questions that you have. We personally have a 15-point factory questionnaire, which I’d be happy to let you guys have as well. So I’ll send you a link to that as well, Chris. It’s 15 questions that we basically have every one of our factories that we interview or whatever that answers. So that way, we can put the answers in a spreadsheet and then just basically kind of compare from there. So we definitely make sure that we don’t just settle for the first person that’s coming back to us.
Let’s put it this way: If you happen to get the best product, the best price, the best service, from the only factory that ever contacted you back, you’d be the luckiest sourcer in the history of the world.
Chris Guthrie: [Laughs] That’s a good point.
Isaac: It would be the sourcing lottery [laughs].
Chris Guthrie: And what about the Canton Fair? At what stage do you think someone should be at in their business before they consider going to China and participating in that feast? I suppose I don’t even know how to describe it. I’ve never been there, but I should go.
Isaac: Yeah, that’s a little bit insane. It’s definitely eye-opening now. I think if you’re at the point where you are willing to expand your line, maybe if you’re third product or fourth product in, that’s when you can possibly consider it because at that point, you’ve kind of shown that you’re serious about this business and you’re not going to give up. When you get to that point, you could start considering a trip to China. Now it’s not cheap. It’s not that expensive either, really. If you think about it as a business expense instead of a personal expense, you could probably get to China and back and be there for six, seven days for maybe $2500. I mean obviously, you have to get your visa and everything with your passport. So there are some logistic problems. But a plane ticket round trip is maybe $1500 bucks for most places in the world, really, but most places in the U.S. Maybe a little bit further from maybe the East Coast, but you can get that plane ticket for about $1500 or $2000 round trip. And the accommodations are not very expensive there if you don’t stay right at the Canton Fair. You can get a hotel room for $60-$70 bucks a night and be there. The food is cheap. I mean everything is a lot cheaper. And the area right there is a little bit more expensive relative to China. But it’s pretty cheap compared to most places in the United States. So it’s really not going to bust your bank. It will maybe deter you from spending money right away on another product.
But what it can do is it can open your eyes to what else is out there. I mean you can potentially talk to 100 different factories on a niche that you’ve been wanting to work with. Say, you wanted to go into baby products. Well, guess what, there are a thousand vendors there that sell baby products. And if you can find three or four that are really good, you’ve just condensed your sourcing from a month down to like two days. And that can be worth your time and investment right there.
Chris Guthrie: That’s great. I know we’re going a bit longer than we typically go. But there’s so much that we can really cover. And hopefully, you have a little more time here to talk.
Isaac: I’ve got nothing else to do, Chris. I’ve slotted the whole evening for just you.
Chris Guthrie: [Laughs] Awesome. Well, if you were nearby, I’d say let’s go get some go-carting at the end [laughs]. All right, so let’s talk briefly about the team building. Again, this is higher level for people that are further along in their business for them to consider this. But you now have a team that you’ve built in the Philippines. Can you talk about some of that process to actually get that set up?
Isaac: Yeah, really, the complicated process of setting up a team in the Philippines is not something I’d recommend for anybody. To be honest with you, we actually had to set up a domestic corporation there. We purchased office space. We interviewed people. We got them signed up through the Philippines government and contract signed. That is an absolute nightmare. I would not recommend doing that. For everybody out there, you could outsource people on Upwork, especially in the Philippines. It’s probably got one of the top English-speaking equivalencies of any country that’s not the United States. And it’s got one of the lowest wage rates. Now I’m not saying you should pay for slave labor or anything like that. But I’ve been in the Philippines five or six times now. I’m telling you when I say this, that if you paid somebody $1000 a month – which equals $12,000 U.S. a year, they would be living very well in the Philippines. And they would be extremely happy to even work for that much. So a salary of even $4 an hour is very well-received in the Philippines. Look at it like you’re helping them better their lives because really, that’s how we look at it. We don’t look at it like we’re taking jobs from American workers because we can’t afford American workers.
I mean we actually did have a U.S. office, but we had to reduce that staff because we weren’t getting benefit out of it, really. I mean we were paying $20 an hour per person in salary. And the sales didn’t increase. Really, all that it was is it’s kind of like building a bureaucracy of stuff. You have to then work around taxes. And there are obviously benefits that you have to try to think about. You want to make everybody’s life complete and make them happy. And American workers just aren’t as happy working for even $15-$20 an hour as a Filipino worker would be working for $4. And it just works out. As a small business owner, you want to make the most of the capital that you have on hand. I suggest outsourcing to the Philippines. I’m not saying you want to take jobs away from the U.S. employees. In the end, if you can actually build your team in the Philippines, you can actually build your team in the U.S. as well. So it really helps to create your jobs.
Now as far as training them, we had to go over there and basically walk them through selling on Amazon, walk them through sourcing products from China, product research, how you actually do product selection, how you market on Facebook, how you build an audience through Facebook and gather reviews and get emails, all that stuff. So it’s just like if you’re training an actual employee in the U.S. or anything like that. I basically went over there and trained 20 Filipinos how to do my job for me. And it freed me up from doing 80 hours of work a week to doing almost nothing, to be honest with you, at that point because at that point, I was like, “Wow! Now what do I do? Then I had to go out and find more stuff for myself to do, which is great because then we could actually start incorporating this into… You know we actually did a sourcing course called sourcing profits. I was able to do stuff like that because I had the time to really develop that process because we had a team in place. We had other people that could really help us establish our main Amazon business. So that way, we could then work on other business ventures as well. So it really freed up time. And now we’ve got other businesses that we’re actually currently even expanding on as well.
Chris Guthrie: That’s great. So coming back to when you said, “Basically, just don’t do what we did,” it’s very telling, I guess, that the challenges must’ve come up from that process. I guess if someone is doing millions of dollars a year, contact me and I’ll put you in touch with Isaac if you can’t find him through Facebook or something. Maybe in that case, it’s worth looking into.
Isaac: I’ll tell you. Even if you’re doing millions of dollars a year, cash flow is almost always tight because you still have to reinvest it into inventory. And it’s not fun when you have to then pay $2000 for rent and $6000 in salaries. And you’re like, “Wow! $8000 for a staff in the Philippines, it’s getting a little out of control.” [Laughs]
Chris Guthrie: [Laughs] That’s true, that’s true. It’s a good point.
Isaac: Like I said, you can outsource anything that worked from home. I shouldn’t say they have great Internet. They have established Internet, most of them. So they can actually work from home and do their job just fine. So don’t try to build an office in the Philippines unless you really, really, really have a well laid out game plan. We don’t have any people that are doing the exact same things we’re doing before we do it to show us how not to do it. So we kind of have to do all this stuff before everybody else.
And we actually do know a couple of guys. We actually helped them train and start their Philippines office the year before ours. And they still have a Philippines office doing pretty well. It’s just in a different area than we have. And they do it okay. They’re doing it well. It’s not that easy. It’s really a nightmare to deal with all the logistics there.
Chris Guthrie: That’s a good point. And for the vast majority of people that are listening, they’re not probably anywhere close to that stage. But it’s something always to be thinking about when you’re trying to figure out where you’re going to be going next with your business and maybe some of the goals along the way. So knowing that hey, it’s kind of a pain to do this, well, maybe people will be like, “Okay, just use Upwork and hire people through that source instead. Or work with college students or something if you’re trying to keep salaries low when you’re first getting going.”
Isaac: That’s a great point. Paid interns are great. You don’t even have to call them interns. But when you hire for them, you can say, “I’m looking for a paid intern.” It’s great for them to learn how to do their job. We actually had a paid intern graphic designer in the U.S. I think she worked like $9 an hour, fantastic job. By the time she finished, I would put her as one of the top graphic designers I’ve worked with, to be honest with you.
Chris Guthrie: That’s great. And then of course they develop their skills and probably could go on and get more money.
Isaac: Make much more money.
Chris Guthrie: Yeah. We’ve gone a little bit over what we usually go. But I want to wrap things up with maybe just some final thoughts on where you see things heading in 2016. We’re at the start of 2016 when we’re recording this. What are the types of things that sellers should be aware of in terms of really anything, in terms of what you guys are doing and also just where you see things heading?
Isaac: I’ll give you maybe 3 quick tips of how you can “survive” in the Amazon jungle… The one thing you obviously want to do is no matter what your business is, you want to have your own audience. If it is a big Facebook page where you have 50,000 likes on Facebook, you just have to make sure you have an engaged audience there. Or if you have a 10,000-person email list, you want to make sure that you have your own audience. Now it doesn’t have to be that big; it just has to be your own. So you need to get your email. You need to get the likes. You need to get people that actually know about not just necessarily your products but just that you can engage with in your demographic. This is key to any marketing. So if you don’t have an audience, you can’t sell them anything. You can put any product you want up on Amazon. It doesn’t mean people are going to see it. And even when they do see it, it doesn’t mean they’re going to really buy it because they don’t know you from anybody else. So obviously, you have to find ways to stand out there. That’s a whole different thing. But if you’ve actually built some trust with people by once they buy your product, you can get them to give you their email, or if you’ve got an email because you wanted to send them a promotional discount code because they followed a Facebook contest or something like that, you can build these emails up over time. And if you can even get 200-300 emails a month, you’re looking pretty good by the end of the year. So build up those emails and maybe a Facebook audience or Pinterest following or however you can do it because you can monetize that. No matter what you sell, they will actually be a warm lead versus a completely cold lead.
So rule or tip #1 to survive the “Amazon jungle”: Get your own audience. You can go out of your way to pay money to all these people that give you review group likes and all this other stuff and write reviews for you. But in the end, that’s not your audience. So you have to pay again to go back to that well. So it’s not a replicable process. If you have your own audience, it’s completely replicable. So that’s tip #1. And basically, at that point, you can sell anything. Like I’m saying, if you have your own audience, warm leads, you could sell them anything – products, informational products, affiliate market for other people, however you want to do it. And that’s how you build an online presence.
Tip #2 is always be different. If you’re ever wondering why you’re not getting sales but other people in your same product niche are, it’s because they’re probably more established. Then you have some sort of reviews or sales history or recognition. So you can’t just do exactly what they’re doing to try to gain ground on them. You have to do something different because if you did the same thing, the customer is going to pick the more recognizable or more established one. You can’t just think, “Okay, because they’ve done it and become successful, I can just replicate that process and become successful too.” It doesn’t work like that. The more you can stand out, the more people will actually notice you.
So a couple of things you can do are make your images stand out and make your copywriting stand out. And I’m not saying you have to write professional copy. I’m saying write a unique story. Tell something different. Focus on the benefits of your product instead of features. This is one thing that I would tell anybody. If you’re just writing all the features – like it’s made of stainless steel, it’s got polished glass or whatever – nobody cares about that. Tell them why those things actually matter to them. So why would they buy that product? Because it has those features. So focus on the benefits.
Use some personality in your listing. I actually wrote a copy for one of my products where I said something like this product is guaranteed for life. If it ever breaks, I’ll pay for the shipping to have you return it. And I will slap the person who created that product or something like that. So they knew that I was serious about helping them. It’s about going over the top to put a little humor into the listing. I think I put something like this product was forged from the spirit of the Rocky Mountains or something like that, to just really say how durable it was. So use a little bit of creativity. You don’t have to be the funniest person in the world. But it’s those things that make you stand out.
A great example of this was the Dollar Shave Club, if you guys remember that. And if you haven’t ever seen the commercial of the Dollar Shave Club, basically, the guy who started the thing did a commercial. And I think it aired on Super Bowl, so he had a little bit of money to spend on the advertisement. But it was a simple advertisement. He just did an advertisement that was Dollar Shave Club. We have one-dollar razors. And people are like, “So is your product any good? Are your blades any good?” And instead of just saying, “Our blades are made of this and this and this,” right in the middle of the commercial, he says, “No, our blades aren’t any good.” And then he walks up to a sign that’s pinned on his wall and he says, “Our blades are f***ing great.” So it just transforms. As soon as you see that, you’re like, “Oh, man, this is awesome. This has some attitude in.” And then you see the rest of the commercial, and it blows your mind. And it’s just that story. He’s telling the story of his company and how it’s different than everybody else. If you can be different, you will survive. Get an audience, be different.
Tip #3, I guess, would be that your customer support should be as good as you can possibly make it. And this is one of those hard things. A lot of customers are trying to scam me. A lot of customers are just trying to take advantage of the systems. And they’re not always right. Well, as true as that may be, you’ll have probably a half a percent of your customers that actually try to scam you. That is true. But at the same time, it’s not going to hurt your business to the effect that you think it will. If you have one customer trying to get a refund for something, just give him the refund. Try to go out of your way to be super polite and nice. And that way, they can’t then go damage your business and damage your reputation by posting negative reviews and writing bad seller feedback, all that stuff, because in the end, one 1-star review could actually kill your product. So you don’t want that to happen. So you always want your customer service literally to be over-the-top impressive. I don’t care if it’s the worst customer you’ve ever worked with in the world. I don’t care if they’re blaming you for their dog dying. You have to find a way to make them happy. Or at least don’t make them angry by the time you get done with it.
I used to work retail for about 15 years. Let’s see, 16 to about 31, yes, so about 15 years. And I’ve had customers who have… Not because it’s my fault I’m doing anything wrong, but because I had to be a manager and walk up to them because somebody made them mad or because something they didn’t like about whatever the price was or something like that. So you have to go up, you have to be calm. You can’t really fire back and tell them that they’re stupid or anything like that. You can’t say they’re wrong because that’s not going to help you in any way. And meanwhile, this is in a retail environment where there are 50-60 people standing around watching this whole thing unfold. So you’ve really got to make it. You’ve got to be over-the-top nice.
And it’s even more important for online sellers because there is a paper trail of what you’re sending to and from your customers. If you send them an angry email, guess what, they can copy and paste that, send that to Amazon, put that on your product review, and then what? Then you look like a complete idiot. It’s happened time and time again where people get publicly shamed online and their businesses suffer greatly for it. So do not fall into that trap of being baited by bad customers or even competitors writing fake reviews. Be over-the-top nice, even to those competitors, even if you’re certain that it’s a competitor. Find a way to be nice, especially through email and those review comments. Since you have the ability to edit it before you hit Send, I highly suggest you edit it and reread it for content and for tone because you never want to send an angry email.
So that’s really the three tips right there. That’s how you build a sustainable business. Get your own audience. I forgot. What did I say the second thing was?
Chris Guthrie: You said get your own audience, and then you said be different, and then be nice to your customers, basically. And it’s very true. I found it across every business that I’ve worked on as well. It’s just so much easier to be nice because no one wants to deal with an angry person. And if you’re the angry person, well, you better be the customer, not the… [laughs]
Isaac: Yeah, exactly. And I have definitely got mad at some people in their businesses. But I always look at it… I’m never mad at that person, and I don’t ever treat them with any disrespect. But I will get mad and tell them that their company is bad. I’ll make sure that they know that their bosses have set them up for failure kind of thing. So there are definitely times when you get angry. But at the same time, you can’t be the person that gets angry back if you’re the seller.
So those are the three things that I would say that will help you create a sustainable business in the long run. You can keep those things always ahead of your competition kind of thing. You’re going to do really well.
Chris Guthrie: That’s great. I love it. When we first were setting this up I said, “Hey, let’s just see where this takes us because there are a lot of directions we can go.” And I think that I really enjoyed the conversation. I believe the people who are listening loved it too. And probably, we could do something else again down the line. So after we wrap this up, for those that are listening, I’ll share the show notes link. So if you have a question as well that you want to ask Isaac, post in there. And maybe I’ll convince you to come back and answer some of those there too.
Isaac: Yeah, I’ve got so many different things going on. But at the same time, I like helping people. It’s one of the things I actually do that makes my day. So if you guys have questions, feel free to ask them. And I would love to come back. And maybe we can do this again. If you guys have any questions, we can talk about that as well.
Chris Guthrie: Yeah, that’d be great. Well, thanks again, Isaac, so much for coming on and sharing with us. I had a lot of fun talking to you. And some of those stories there, I’ll go back to the story of losing the account doing $300,000 a month. Don’t break the TOS, that’s what I’ll leave for people.
Isaac: Yeah, definitely, Amazon has things that they will bend on and then things that they just won’t. And the review manipulation or trying to get reviews outside their TOS, that’s the one they won’t. They will just ban your account.
Chris Guthrie: Yeah, that’s great. Well, not great, but I think that’s a good element to close it on. So thanks again, Isaac. And again, thank you so much for coming.
Isaac: Not a problem. Thanks, Chris. And thanks everyone for listening.
Outro: All right, and that was the episode with Isaac. If you want to check out the show notes – there are multiple URLs that were mentioned during this episode – you can go to Sellercast.com/25. And that’ll take you to the list where you can see some of the different sources that he talked about for finding products besides Alibaba.com. Additionally, you can go there, post some questions, and I’ll point Isaac to those questions as well so he can chime in from time to time as they’re asked.
Thank you again so much for listening to this episode. And if you’ve been enjoying the show, again, please go to Sellercast.com/itunes and leave us a review. I really appreciate it. And if you’re listening on another platform, you can leave a review there as well. So thank you so much for tuning in. We will see you in the next episode.