#357 – Profits are Maximized in Sourcing, Not Selling with Sebastian Herz
In episode 357 of the AM/PM Podcast, Kevin and Sebastian discuss:
- 02:39 – Sebastian Herz’s Backstory
- 03:11 – What Is Industrial Automation?
- 07:40 – How Zignify Global Product Sourcing Got Started
- 11:02 – Talking About The German Amazon Marketplace
- 15:17 – Is Sebastian Still Selling On Amazon?
- 17:44 – Working Remotely And Traveling The World
- 20:34 – Having A Team That Speaks 23 Languages
- 26:31 – What Does It Take To Be A Good Product Sourcer?
- 29:34 – Is It Time To Get Out Of China Manufacturing?
- 33:19 – Concerns With The Taiwan Situation
- 38:02 – Biggest Headaches For Sourcing Outside China?
- 41:40 – Persistence And Patience Go A Long Way In Product Sourcing
- 43:36 – Why Should I Consider A Company Or Sourcing Agent?
- 50:01 – How Much Is Zignify’s Rates?
- 53:49 – Product Development Services By Zignify
- 55:27 – “A Lot Of Money In This Business Is Made In The Sourcing, Not In The Selling.”
- 56:40 – Join One Of Sebastian’s Events
- 58:59 – Free Consultation Call For AM/PM Podcast Listeners
- 59:15 – How To Get In Touch With Sebastian Herz
- 01:00:32 – This Week’s Words Of Wisdom From Kevin
Transcript
Kevin King:
Welcome to episode 357 of the AM/PM Podcast. My guest this week is Sebastian Herz. Sebastian and his wife run a very successful sourcing company that started a few years ago. They’ve sourced for everything from Fortune 500 companies down to small Amazon sellers, and know a thing or two about sourcing in China as well as all over the world. We’re gonna be talking about that today in this episode. Lots of great little nuggets and information. I hope you get some good value from it. And enjoy this episode. Sebastian. Welcome to the AM/PM Podcast. It’s great to have you here all the way from Germany.
Sebastian:
That does not make it very difficult, Kevin, to go through the internet.
Kevin King:
That’s true.
Sebastian:
But look at us. We just met a coupleof weeks ago by now, in London. Not even halfway, but now we’re back online here. And that goes even quicker.
Kevin King:
I know, it’s amazing Now what technology. I remember in the old days when my grandmother, you know would make a, she lived in a little old country town in Texas, and to make a long distance call was, you know, calling someone two hours away. And it was costing, you know, 20 cents a minute or some crazy amount like that. And it was a big, big deal. And now look at, look at us now. We’re sitting here on the internet two continents of parts. And just talking like we’re next door to each other. It’s amazing where it’s all come. But you’re not just always just sitting in the sitting there in the office like you are right now. I mean, you’ve been, you, you’re getting out and about. I’ve seen you in what Vegas? I’ve seen you in London. I’ve seen you probably some other places too that I can’t remember. I can’t even remember right now. But you’re, you guys over signify, which is your company that you you co-founded with your wife, right?
Sebastian:
That’s correct. Absolutely.
Kevin King:
How long have you been an entrepreneur? We will talk about signify and what you guys doing and product sourcing and everything, but before, before this existed, were you running other, other businesses or were you working for the man, what’s your backstory
Sebastian:
Legally or illegally?
Kevin King:
Illegally first. That’s the most interesting one.
Sebastian:
No, I mean, I’ve always been trying to you know, do something on the side. For the background, I’m an electrical engineer by university, and I stayed 12 years with a Fortune 500 company, world market leader in industrial automation. Not many people know ABBSA Brown Boveri, but everybody knows Siemens, Honeywell, Hitachi Emerson, and, you know, they’re in the industrial automation business market leader. And I stayed with them yeah, for 12 years. But I’ve always–
Kevin King:
What does industrial automation mean? What’s industrial automation mean? What, what is that?
Sebastian:
Indus Industrial Automation. The customer segment I was in mostly was oil and gas, chemicals, pharmaceuticals, food and beverage, automotive, et cetera, et cetera. And that means those are the factories where they produce what would be one Shell BP or Dow Chemicals. You know, they have those huge, massive plants, of course, in the US and the way, it just works in the end, is that the operators, they’re sitting in a plant like here right now, here on a desktop. You have a mouse, you have a keyboard, you have a monitor, or actually you have several monitors and you control the whole production plant out there. And the production plant might be what is that? Like an acre where several acres large. And people control this by you know, mouse and keyboard then, and it’s you catch the signals from the input signals from, from the fields, from the production and then, you know, the actuators, you have the sensors and all of those things.
Sebastian:
So I’ve studied that stuff and been with them for 12 years. And yeah, that was automation as well. But in terms of industrial automation, production facilities that are being controlled from an operator center or operator room remotely by masks and keyboard or those offshore plans, when you imagine the wells, the platform, the oil and gas platforms that people sit on shore and control all of the several plants that are out there opening, whatever, having the blow off valves, having whatever the pumps, the pipes going up and down, getting into the storage units and so on and so on.
Kevin King:
So you’re like emission control?
Sebastian:
Is one part of it for sure. But in general, it was fully about controlling the production, the process.
Kevin King:
So you’ve been in this process and engineering space for a while, so it’s only a natural fit that you actually actually start a company that actually helps people basically do similar things.
Sebastian:
Yeah. Probably just like in an e-commerce sense. That’s correct. Even though, I have to say right now, all of our work at the moment still is all it’s manual because those are things that you can’t do through software automation because it’s human. Not yet. You will be able, for sure. But it’s human interaction. But since you’ve asked, like, when have I started businesses? It is from the beginning on, I always was trying to build something on the side. Even back then, during university, after university that was like, university was 2004 to 2007, I believe. Somewhere around there. Yeah. I was lucky enough to live in the US during high school for one year. So I went to Michigan, Kalamazoo for the ones who may know it, K-town. And when I came back, I was lucky enough back then to have a host family, or the best friends with ’em was more like a host family than to me.
Sebastian:
They were the inventors, or the grandfather was the inventor of a blueberry harvesting machine. And for the ones, I mean, oh wow. Of course you guys living in the us you know, Michigan is the, is the blueberry capital of the world. And I brought the blueberry harvesting machines, sorting machines packing machinery and so on to Germany. They were around a specific area in the northwest of Germany are a few blueberry fields. And we actually sold some machines, built up a service rep center and all of that. And that’s what I’ve done in you know, aside the business on the weekends, in the evenings and so on. And that I think was somewhere around like 2007 ish, eight ish, or, yeah, it must be somewhere around there that I started building the first side hustles.
Kevin King:
The first side hustle. You weren’t, you weren’t selling newspapers or selling lemonade. You were selling big industrial blueberry picking machines.
Sebastian:
Well, for some sight income during high school, I was sell, well, you, I gotta say first in Germany, you’re allowed to drink at the age of 16. So as soon as I hit 16 or 18, whatever it was, I started selling, you know, in the city festivals, I went around and sold to, to all the people. Those, those little liquor bottles, you know, like hardly, it’s like a shot in there and you just, I sold them off, not for myself, but I was running around for one of the the bars in town and just sold them off. And I think this on the other hand helped a lot, you know, being able to go to people, to speak to people, to just sell them stuff in the street and alcohol during a city festival, I mean, sells itself quite easily.
Kevin King:
That’s awesome. So how did Zignify come to be then? I mean, somewhere along this way you met your wife and was she already in the sourcing business or, or was she in the e-comm business? How did that come, what’s the story behind the formation of Zignify?
Sebastian:
Yeah. the industrial automation business also took me after seven years in Germany, took me over to China. So we actually, I went to China to live there for three years, then another two, two and a half years in Singapore. So in total, I was like six years in Asia. And in the time in during my China time, I got to know my wife Julia, and she was staying in China as well. She was in total of 12 years in China or in Asia. And she is Russian and comes from the Russian Chinese border. So I think the first time she started learning Chinese was in the age of five, she said, and going over, I mean, it was literally just crossing a river. And she’s Haikou, which is the Chinese town, and it’s pretty much one circle town of Blagoveshchensk, the Russian city and Haikou.
Sebastian:
So it is a, you know, if, if whatever the distance you may go shopping to Walmart would be for her. She’s already in China shopping. So very, very close, very, very close. Now, later on we met, actually, back then, still in the old school way, no Tinder, no nothing. We went to the Shanghai Brewery in Shanghai. We met there, we started hooking up. And she has been in the sourcing business talking from now on like about 18 years. So yes, she started in the age of four. So I get some bonus points to make her younger this year.
Sebastian:
No, but she’s been doing sources for 18 years, and she’s always been, and somehow disconnected. Then later before leaving China, I did so much overtime for ABB that I, I actually calculated. I was back then still dumb enough to calculate my hours. And in, within two and a half years of working in China, I collected well to myself. Nobody gave a, sorry, I don’t know if we’re allowed to swear. Nobody cared about it. And in two and a half years, I collected about overtime worth seven man hours. Sorry, seven man months. So full seven months of overtime within two and a half years I was obviously working like crazy. And then I negotiated with the company when, well, I got six weeks off instead of seven months. And those six weeks, I didn’t know what to do.
Sebastian:
I was just, you know, starting to learn Chinese more, went to classes and I was like, Julia, I can’t, I can’t sit around and do nothing. So she got me into say, Hey, Sebastian, I found this podcast. And that was Scott Bulker, the Amazon seller. I got into FBA, understood this whole thing, blah, blah, started the business. And a couple years later I got into German networks like the Titans in Germany, it’s just called the AMZ Hackers. And all of a sudden people started saying, it’s like, Hey, your wife does sourcing right? So can you do sourcing for others? And I was like, well, I guess, of course. And then roughly, I think it’s gonna be in August this year, we’ll be about two years old. Julia said, she begged me for like a year to say, Sebastian, come join. Let’s do dignify together. And August, I think August, 2021, we started signify officially together. And since then we grew. And since then we’ve been on the road. So we started immediately with some trade shows and yeah, I don’t know how collected how many miles.
Kevin King:
So you were doing standard FBA from China. Were you selling in the US or selling in Germany? Germany or Germany? Where you selling Germany only?
Sebastian:
That’s still Germany only mistake, I believe now that I talk to all the people, look at the US market, and it’s like 10x, you have higher prices, you have no sales tax included. It seems all to be easier. People are not as much complaining as the Germans, you know with I mean, people by now, say if you have a four star review in Germany, you’ll probably get a six star review in the US.
Kevin King:
That’s true. I hear the Germans are they, they, one, they don’t like to leave a lot of reviews. And if they do, they’re gonna tell it like it is. They usually only leave reviews to complain, not to really appraise. Correct.
Sebastian:
That is, we do have a saying actually. Not having complained should be praised enough. I’m serious.
Kevin King:
Not having complaints, should be appraises
Sebastian:
Very commonly used. Very commonly used.
Kevin King:
Yeah, I know in Germany too, it’s a very, I mean, they’re so particular. I mean, the quality has to be like AA plus, like nothing will get by them. I mean, one tiny little hairline scratch or something is gonna just cause havoc. They, they just love their, the like, pristine, high quality stuff. And I think that’s a challenge for a lot of sellers that go into Germany where they’re just kind of getting by with an average quality in another marketplace. And a lot of times that doesn’t fly over there.
Sebastian:
I would say me as a German, I would definitely be allowed to complain about my country the most, because see, like I said, I’m complaining, right? And we actually also say to ourselves that we are like world champions in complaining. Now, the issue that I see, to be honest with the reviews that we have in Germany is it’s not necessarily only about having good, great stuff and everything. I think people are spoiled. And Amazon itself said, I think somewhere officially that, that Germany is the, the review laziest country in the world. Now, at the same time, what I see more and more, and I mean we’ve been traveling the world, we’ve been, we’ve been living in so many countries and traveled so many countries that I am more and more a little bit shocked about our country and our nation, how much we’re complaining and finger pointing at others.
Sebastian:
Now, if you take Japan on the other hand for an example, you know, and they give reviews the Japanese, very often they have the the Kaizen culture or in general the culture to say, you know, you can do a mistake but can only make it once, once you’ve made a mistake, please find out what is the problem and never repeat it again back then, I mean they were world market leaders in industrial automation. And we’ve been, okay, I’m for compliance issues, of course, not going into details now, but for the control systems, which were world market leader, the Japanese said, alright, okay, we need to look into some things which is has never done before into development of the software, of the hardware and all those things. And they said, look, we have the whole project here right now, something around Tokyo.
Sebastian:
Okay, let’s leave it with this. And they said, right, you need to figure this out right now. This problem has appeared. And obviously it’s not like a user problem. It is something that can be avoided by the software. So before we continue anything, that mistake needs to be developed out of it. So it will never happen again. I think the Japanese put hardcore focus there on reviews as well, but with the intention, of course, also of improving things. And they very much appreciate good quality and talk about it while the Germans at the same time, you know, it is tough. It is really, really tough to get good, good reviews, but at the same time, I of course don’t want to what, what is the English word? Is it discourage others to come to Germany? It is possible to get good reviews. You just probably need to now think of all the things that are becoming more and more important. Means, like brand building after sales, customer service, over deliver on value just, you know, go the extra mile and you will get your five star. So don’t be afraid. It is still possible. It may though be it forces you to grow into the next, in the new steps, which will come in the next whatever, six months, 12 months, two, three years, we’ll all be forced as Amazon sellers to, to get better and better.
Kevin King:
Are you still selling today? Still running that FBA company today?
Sebastian:
Yes, I do have two FBA companies, two brands.
Kevin King:
Awesome. And so when you met your wife, you said she was in China for like 12 years and you met her over there and she was already doing sourcing. Was she running a company or she was doing it for some other people back then? She was, she was just,
Sebastian:
Yep, she was actually, I think the first one was, I think she was employed for, was it a Russian or an Italian company in order to build up the Russian market when it comes to hardware stores and deliver or hardware stores in general. Were were big ones of the customer. And of course, I mean, the Russians wanted to get all the, the tools to hardware that you can sell on those, what do you call them? Like the, the DIY stores to hardware stores in Yeah,
Kevin King:
Like in the US we have like Home Depot or Lowe’s.
Sebastian:
Yeah, there you go. Exactly. and they were getting all the stuff from China and she’s been employed there in the company later. She’s been doing, I mean, the favorite examples I I usually give are that she’s been doing the original through subcontractors then the original shoes for Nike, Adidas, Chanel, and Converse. And later she got into also business development of light in the Box, which is kind of an international competitor where they’re trying to sell stuff from China directed to the world like an, like a B two C company, again, from with Chinese goods to all over the world. And yeah, she’s then been doing, sourcing all her life long. We went after six years in Asia, her 12 years, we decided, you know, let’s, let’s quit the job. Let’s go back home. My parents, that was I think one of my main reasons.
Sebastian:
Or my father’s also father’s also quite a bit older than me. So I said, you know what, I’m in six years Asia, that’s maybe enough. Go back home, be with the family. They’re also not getting younger. And we built a dream and well, we went on a motorcycle trip for 242 days. We sold everything we owned in Singapore. We donated all the rest that we had to the Salvation Army, I think that is the English word And took one motorcycle, loaded the side backs, put a tent on the back, and started traveling and building businesses really, or building the first business on a 242 day motorcycle trip while Julia was still fully employed for one of those companies. So yes, you can work remotely, travel the world, full-time travel, full-time work until one day all of a sudden the company said like, boom we’re, we’re shutting down departments, we don’t need you.
Sebastian:
And this actually then turned out, I think back then we were in Georgia, the country in Europe. And this then turned out, it’s like, what am I gonna do? And she started more and more, you know, sourcing over Upwork, doing projects for others, and all of a sudden she built her own business and that were the origins then with having all the background, having all the knowledge and sourcing to start doing this for others. And later, a couple years later developed an, well, I guess quite strongly, quite heavily into the Amazon universe.
Kevin King:
Well, that’s awesome. That’s really, I think that gives you guys a major competitive advantage because you were a seller first. You have the engineering background, which is another advantage. Then she had 12 years of experience working for someone else and a variety of things from shoes to tools to whatever, and to actually be able to come together. A lot of people that end up in sourcing, they just end up in sourcing. They never actually been selling, they never actually done some of the product development side of things, or never or they, they came up in one little specific niche. But you guys, I think have a, a real well-rounded experience set there that can make you guys really stand out from some of the other sourcing people and you know, or someone that’s just a, an agency. You know, in the past, I’ve used companies.
Kevin King:
I’ve had, there was, at one point there was a, a guy in the Amazon spaces maybe before your time that was actually, you would go to him and he would, he would go and find three people for you in China and that met your needs. And then you would interview them and choose one of them to hire, you know, and he would charge a fee for that. It was kind of a mess. Or then there was companies that, that sprouted up that said, we’ll do the sourcing for you. But a lot of those, it was hit or miss on what you can do. But from what you guys are doing, I think there’s a true, a true need. And I think you guys have a major competitive advantage as, as the leaders of the company that you really understand and have empathy for what these people are going through and what they really need. What is that fair to say
Sebastian:
That I’m, I’m, I’m kind of blushing, I guess. That’s very nice to hear, Kevin. Thank you so much for it. And I do hope that this is what we do. Yeah, I mean, for sure. I mean, being a seller, especially for a long time helps a lot as well. Being an electrical engineer myself helps a lot. And while developing products and you, I mean, 18 years of experience.
Kevin King:
Also, you also speak for the biggest languages in this space. And that’s, you know, Russian, ’cause There’s a lot of, which is similar to Ukrainian. ’cause There’s a lot of people in Eastern you know, some of the old Russian satellite countries that are in this space. So there’s enough similarity in Russian and Ukrainian you speak German, which is the second biggest market for Amazon. Both of you speak English. I’m assuming she speaks Mandarin or Cantonese or some, or maybe both. I don’t know if Mandarin, you probably speak a little bit of it. So that’s a major, major advantage right there.
Sebastian:
I think the, I mean by now that we have built quite such a large team, and we actually do speak, now I start bragging and, I don’t know if that feels good, but yeah, we speak I think like 23 or 24 languages, which helps massively, of course for the European sellers. When we do sourcing in Europe, I mean, Europe is a conglomerate of tons of little countries and, you know, tons of different languages. And we pretty much speak them all. Now at the same time, this helps of course for US sellers, when we do sourcing in Mexico, when we do sourcing in south America. I mean Spanish and Portuguese is definitely something. I mean, when you speak the language or when you do the sourcing also on your own, I mean, try to use the local language. This gets you, this helps you so much for the simple reason, you know, they also accept you as one of theirs of, as one of the peers. And they will say, Hey, yeah, I’m, I’m happy to sell to a countryman and let’s do a business together.
Kevin King:
Yeah, it creates an instant bond. It creates an instrument, almost an instant trust in a lot of ways and helps open a lot of doors. So when y’all started Zignify it was just the two of you, but then you quickly, you’ve scaled, like you said, up to quite a few employees. Now, how many are you up to now?
Sebastian:
Well, first of all, I have to say, me as the engineer, this is not my earnings of building up the team. If it would have been me, we probably still would be two of us, you know, engineers, like, I can do everything on my own superhero syndrome. Nobody can do it better. But Julia has much the MBA understanding and she understood us like, Hey, we need to focus on the most important things to grow the company. And by now, I think we’re 53 or 54 employees or so somewhere around.
Kevin King:
And you’re the only guy, right?
Sebastian:
Yes, I’m the only guy. It’s simple. They’re the better shoppers. They do enjoy shopping. They’re better at negotiating, they are more patient. Women can work under women. They’re more detailed, they’re more friendly. It’s easier for them also to get into, you know, contact, I guess with suppliers and convince them to, Hey, do me a favor, give us prices. We mean that seriously.
Kevin King:
That’s by choice. It’s by choice that it’s all women or it’s just the way it’s works?
Sebastian:
Exactly. I mean, you know, the more and more we grow sometimes for example, one of the ones we, we start also getting for some parts, the external experts in there. If there’s some topics which we can’t cover yet on our own. And then sometimes there’s a, there’s a man in there, for example, I mean, by now when, when the, the show comes out or this podcast comes out, and since Tomer Rabinovich talks publicly about it, I guess I’m allowed to say it, that when you’ve seen what Tomer’s product now is for all of the Amazon sellers and entrepreneurs, I mean, there was a heavy electrical engineering in there as well, and that’s where we had an external man in there, but he’s not yet fully employed when we still grow at the same time.
Sebastian:
And we do more and more and more of those things, and they become full-time employees. And I might not be the only man in the company anymore. And we also had men before, but I think the record was a guy who had seven years experience, seven years source of experience. And I can’t believe it myself. I hope if you hear this podcast right now, I hope you’re not offended. But I mean, after three hours, he said, this is too much stress for me. I’m quitting after three hours. And I was like, come on, that what,
Kevin King:
Wow.
Sebastian:
Women among one another for sure. They’re also, you know, you, you see this, the bigger you get clusters, of course building. But I think one of the major things is also if the leader is female and the the management levels are also female, that is not always easy for guys to handle it.
Kevin King:
Yeah, this is a male dominated space on the seller side as well. So that’s awesome. That the company is that. So do you have satellite offices all over or is everybody just working remotely or do you have like an office in Germany and one in China, or ow are you guys set up?
Sebastian:
Germany and Singapore, and the rest is literally Germany.
Kevin King:
Germany and Singapore
Sebastian:
Sits we have a 100% distributed team, remote team because our ladies they sit there where the sourcing happens because we do the quality control. So we go into the factories to do the local quality control. And that means also, you know, the more distributed you sit, the easier it is also to travel. The faster you get to the factory, the shorter the travel is and the, the cheaper it will be also for our customers.
Kevin King:
But you’re sending people from Singapore into China, or you don’t, you don’t have someone in sitting in Shanghai or Shenzhen or something, or Guangzho or something like that. They’re all going from Singapore?
Sebastian:
No, no, no, no, no. I mean, Singapore is, is just a head offices where the company is registered. Okay. Okay. Our team is, I mean, the biggest, one of the biggest teams is in China. We have right now probably 15, 16 ladies in China Eastern Europe spread all over, or Europe in general, about 15 to 20, roughly around there. And the rest spread over US, Middle America, south America, Africa and they’re all sitting there remotely. The two of us, Julia and myself we’re in, in Germany.
Kevin King:
What does it take to be a good sourcer? So when you’re hiring one of these ladies to actually come on and, and, and help you guys with the sourcing side of things, what are some of the characteristics of someone that’s good at sourcing?
Sebastian:
I get to this point more and more often actually. And I mean, you know, I guess you know, me by now, I’m not shying away from giving out secrets, but I think as a sourcer, as a buyer, you at the same time need to be a good salesperson because, and everyone out there for you who do the sourcing on your own, when you try to reach out to the people to the producers, to the suppliers, put yourself into their shoes, you are the one who at this moment are selling them an idea, the idea of working together. So you actually need to convince them in the beginning, because they’re the production lines, they’re the facilities. They don’t necessarily need you all the time because many of them are pretty well booked out because they have the referrals, they know other people. So for once, you need to have the understanding that they don’t owe you anything.
Sebastian:
If you sell them an idea why you should work together, why it would be good to work together, and why they should give you a proposal or a quote. I think that is one of the key things that you should know as a, as a source as well. The second thing for sure, you should understand the product. You should understand the production process, how it goes at the same time in order to give suggestions, to figure out where are spots in order to save something on there. What alternatives may you have in the sourcing process? Or sorry, not in sourcing in the production process, in order to figure out, it’s like, hey, you know, a simple example, you know, when you want to go for wood and you want to go for birch wood right now, between the, the Russian and the Ukrainian war, I mean, it’s a very, very simple example, but birch on the other hand, could be quite expensive for sure, because it’s rare.
Sebastian:
So why not thinking of what could you change in the process to make your wooden product cheaper, but look, for example, for a different wood, which is not necessarily being affected by a Russian Ukrainian war. So on top of that, I would suggest as well, to be very patient, because you do need to ask the people in China, we all know you, you contact them, you, you get an answer within a few hours, and you get the prices immediately as well. When we start sourcing in other countries as well, that’s not the same. Be patient, be friendly, trigger them again, go again and go several times. Don’t be shy of calling, don’t be shy of emailing. You need to stick on there. It’s, it’s kind of like selling, you wanna sell ’em big box retail stores. You wanna sell to other customers directly. You won’t land your hit with a, with a first hit. Many of the salespeople of course know, usually it takes like 80% of the sales are being done between the fifth and 12th contact of getting your or in contact with a potential buyer.
Kevin King:
Well, China’s been the world’s biggest market, and that’s where, like you said, you have a, a big team over there and, but you’re also in Singapore, which is, you know, you’re close to other up and coming places like India and Vietnam, for example. And then you mentioned Mexico earlier, and then there’s, you know, there’s Turkey and there’s some stuff in in Europe is what are you seeing? A lot of people right now, the more of the hot topics is get outta China get, you know, there’s 25% tariff if you’re coming into the us extra, you know what they call it, the Trump tariff. There’s, you know, issues you know, with, with different things. And so a lot of people are trying to diversify out China, but China’s basically the world’s factory, and it’s not that easy to actually switch to, you know, a lot of Chinese factories are opening divisions in, in in Vietnam, for example, or even in Italy.
Kevin King:
You know, there lot of people don’t realize this, but if, when Covid first started, if you remember, there’s one little area in Italy where Covid just took off. Huge. It’s like in the northeast of Italy. And it’s a manufacturing town where there’s a lot of Chinese, the Chinese factories have come in and built built out a lot of local factories in Italy that are making these made in Italy products that are actually made by Chinese factories. Yes. And a lot of those people had come from Wuhan and, you know, covid spread throughout Italy. So there’s a lot of this kind of stuff going on. What do you think is, what are we looking at here in the next five years? Is it still gonna be 99% China and a few of these others, or is it worth actually trying to, to branch out into some of these other countries? What’s your thoughts on that?
Sebastian:
I mean, when I look at the past, what happened originally we had about pre-covid, roughly about 10% of our projects for sourcing outside of China. China sourcing still massively grew. I mean, our team massively grew as well, but the rest of the world sourcing just overtook. So, and by now we have about 40-45% of the sourcing projects are inside China. The rest of them is all over the world now with China for, especially for the US sellers. And we don’t have those issues really with China in Europe, but even, I mean, we don’t, we don’t have the anti-dumping tariffs. Like yeah, the Trump tariffs 2018 implemented, the first ones with a 25% import tariffs, I think on a worth, like a market worth $250 billion or so. I’ve seen it. There’s a very, very nice documentary by Wendover Productions.
Sebastian:
Wendover Productions is a YouTube channel. I love that channel. He explains the world statistically, but also in very short like, you know, 15, 18, 20 minute videos. And there’s one, why is Mexico becoming the new China now? The 25% is for a massive huge market where, well, the economic war started, but there are many other products that have eaten even higher tariff. I think the record we had was like 47 or 48% of import tariffs. That’s insane. But now, again, for the European sellers, we don’t have those anti-dumping tariffs, for sure. There’s some tariffs on Chinese goods, but the main thing that people need to know is that it’s not about the product. It is about the product because it’s from China. So the same product from Vietnam may have 0% import tariffs into the us.
Sebastian:
Now, I mean, to be honest, to predict the future or I wasn’t really good at that. And Nostradamus would probably tell me a, a lot more than I could, than I could. But, you know, US-China, that’s not the friendliest relationship. And yes, I am worried at the moment about Taiwan. Now Taiwan is being the world factory, the main next to China for electronic chips. And you have electronic chips everywhere. You have them in your smart watches. You have them, of course, in your computers, you have them pretty much anywhere by now in smart mirrors that you have in your bathroom saying in anywhere you’ll find chips. And imagine Taiwan is being fully taken over by China. We have a massive issue about chips, and that hopefully does not turn.
Kevin King:
Chips are the new oil, basically. I mean, these, these advanced computer chips, especially with AI and everything, the quantum, they, they’ve become the new oil. You know, in the past, the United States would step in and try to defend places in the Middle East, you know, over over oil and energy. And now I think you’re gonna see similar things happening like you said with with chips wine. That’s the new the new currency not currency, but the new dominant resource, I guess of the world. And you got a lot of countries scrambling to start manufacturing and bringing stuff home.
Sebastian:
We do have–
Kevin King:
Is there an advantage, is there an advantage for an Amazon seller to looking beyond China? Or is it just create more hassle because China’s so well, the, the machine is so well greased. I mean, it’s super easy. You know, you get all the shipping lines, you got all the processes, all the trucks, all bringing from the factory, all the little parts, all the individual components that resources are you get little areas that are specializing in certain things. It’s just set up to be like very efficient you know, as an engineer. But when you go to Mexico or you go to some of these other places, there’s little pockets maybe that specialize in something, but the systems, and it’s a little bit more of a hassle a lot of times ’cause they’re not as familiar with exporting. So what are you seeing along those lines and that sellers should be aware of?
Sebastian:
Yeah, I mean, let me pull on the chips a little bit more because I mean, besides Amazon sellers, again, me, electrical engineer, I do have some context to some of the industrial world market leaders in, well, who use a lot of electronics or they build a lot of electronics and use chips. So besides the Amazon business not the majority, of course is Amazon sellers or e-com brand owners. But we also do sourcing for electronic chips by now for a year and a half or so. And we do this for the big companies. And what you see there is already that the, the chips market is literally taken apart. I mean, it’s complete seller market. And chips are selling for 10, 20, 50, a hundred times the price, a hundred percent advance in advance payment, no invoice. That is, I mean, of course, unheard of, but it is very, very scary. And that’s going on. And you see the company’s
Kevin King:
No invoice.
Sebastian:
No invoice, a hundred percent cash upfront payment. I mean, all we find–
Kevin King:
Oh, no billing. Okay,
Sebastian:
Sorry, no billing. Yeah, billing. Yeah. so no tax proof, no nothing. The money is just being sent. The majority, of course of the big businesses is still all working on invoices. But we have been ordered or by the companies to start searching or search for chips in general. And we do find them, of course, not by at the normal distributors anymore, but for example, we find them at textile trading companies. Why? Because they knew something’s happening. They bought the market empty, and they’re stocking and stuffing any types of electronic chips under their pillows for the simple reasons, like they knew they’re gonna sell it. They knew they’re gonna sell it for a lot higher price because chips, yes, they’re in demand. I mean, here, look, the simple thing of a mouse or a keyboard or anything that you have in today’s world, hardly anything is coming without chips.
Sebastian:
There is a big scarcity. Now to your question about what about the other markets we are doing sourcing since this is going out a lot and far, but to, let’s say a very, very well known international marketplace that is selling in a lot of countries and having their own brands as well. We do the sourcing for them as well, and we see where we do the sourcing for them. And that’s we do a lot of Vietnam sourcing, India sourcing Turkey sourcing, Europe sourcing, Mexico sourcing, and this, every one of us knows them. And you know, I mean, if you see how the development from this giant goes where this goes, you see as well where all the other sellers go. It is more difficult still at the moment for sure. But when you look at Mexico.
Kevin King:
What are some of the headaches and actually go on, like going to Mexico, for example, for a US seller going to Turkey for a European seller, what are some of the headaches that you might experience there that you don’t experience necessarily in China?
Sebastian:
I mean, toughest one for sure that you would see. You already mentioned Turkey as well, but I would say Mexico, India, and then probably followed by Turkey is also the culture, the cultural behavior, the thinking, the cheating you or not cheating you. Some cartel, some mafia involved in anything quality for sure. But the first thing that you will encounter when going abroad from China, the Chinese really understood how sales happens or how sales works by giving fantastic service by answering day and night answering all the time, no matter the quality of the answer or saying is that, oh, I’ll get back to you. But they answer to you literally all the time. They wanna show that, Hey, I’m there. I wanna bring you the, the, the, the, the quote with the others. It’s with the other countries, especially when you look into Europe or especially Germany, you may need to contact them five times, six times, sometimes seven times, bring more patients and sell them the idea that you wanna work together because they’re very, very spoiled of having, you know, the big customers coming all the time and they’re being used to it.
Sebastian:
So why should they talk to you? Kevin King never heard of that guy. What are you selling? It’s like, ah, why should I deal with your small business? You know, this kind of attitude. But also they are changing because some of their big customers are breaking away. Now, when you come to Mexico and you come to India, it is that you definitely need to look even deeper into the quality. But when you do solid quality control, when you check out the production, when you check out the factories, when you do some background checks, and for sure not only check the samples, but in between mass production, of course after mass production, you gotta be prepared. It will take longer and it will take deeper quality control. And probably also some patients that they may not immediately follow everything up and stick to their time plan, but you’ll train them as well the longer you work with ’em together.
Kevin King:
I think one of the problems too, that western installers, especially here, like in us, I’m assuming it’s probably similar in some parts of Europe, but if I say I wanna have something made in the USA because made in the USA to a lot of Americans, we’ll give you a leg up if you can say, this is made in the u s a, there’s a lot of patriotic Americans that will buy that even at a higher price over anything that comes out out of China. But to get something made in the USA is difficult, unless you’re doing big volume, like you said, they’re not gonna give you the time of day. If I call up the average, you know, I could do print on demand or something in small quantities in the US but if I call up some guy and say, Hey, I wanna do a thousand units of this dog bowl this custom dog bowl that I’m developing can you make that for me?
Kevin King:
They’re, in most cases, they don’t even return my call or they don’t even return my email. But in China, they will, they will do that. They’re like a thousand pieces, for sure we can help you out. So there’s a lot of problems along the economics of actually small production run, which a lot of sellers in the e-comm space do initially. They’re not ready to buy 10,000 or 50,000 or a hundred thousand or something. They wanna kind of test the waters out or start small, or it could be because they wanna test it, or it could be because they don’t have the money to go bigger. What would you recommend to people in that that circumstance that wanna do these small production runs and they’re trying to get it outta China? Are there ways to do that? Or is it better to start in China, prove it, and then then try to move it to somewhere else?
Sebastian:
Persistence and patience. So just like you said, you contact them, they don’t return your call or your email. That’s like what I said before, you need to contact them five times, six times, seven times, and you may need to contact more of the suppliers. I’ll give you the example. When we do sourcing in China like you said earlier, I know people come with two or three proposals or contact two or three factories. That’s my opinion, not how you do sourcing. We contact usually about 30, so three zero potential producers in order to get as many quotes as possible. Why? Because this gives you the leverage. First of all, you get to know the real market price, you know, what is the average that every one of them is offering. And then you have the power of negotiation because you have a lot more proposals.
Sebastian:
Now, when you go outside of China, we go for 60 potential producers, because many of them may have a webpage. It may be an old crappy webpage. And by the way, that’s a small hint and a hack. If a company has an old webpage that looks like from the 1990s, but they’re still in business and they are, maybe they started from 1990, continue with them. They don’t need a great selling web webpage in order to sell because they work by referrals and everything. You, many of them may not have updated the webpage. That means you also will find some of them, you contact them, it’s like, oh, sorry, Nope, we’re not producing this product anymore, or We have completely changed our line. Or yes, we’re producing that product plus tons more. Oh yeah, but we’re not updating our webpage and we’re not answering emails or my colleagues on vacation, or we have Corona and whatever, can’t have it. So you need to contact them and be more persistent, give more patience and contact them more times. It is tedious work, but it needs to be done. And when you contact them four times, five times, six times, seven times, you will get answers, not from all of them, but this is a very, very, very common thing outside China.
Kevin King:
Why should I consider using a company or a professional sourcing agent over just doing it myself? Just going to Alibaba. I can play all the games, or I say, I’m not the boss, even though I may own the company, I can act like I’m just some salesperson saying, lemme pass this by the boss and all the little negotiating techniques and why should I actually consider using someone like you guys who are gonna, I’m gonna have to pay a fee or give them, give you a cut or however, however, your building system works. Why should I do that over just, just handling this myself?
Sebastian:
I’m not the boss hack, that was the one that Sean Hart just brought on from the 23 hacks, right? Nice. I mean, of course anybody to be honest, can do sourcing on their own. You need to be a bit patient. You for sure should learn your negotiation strategies. And again, we’re teaching and we’re telling everybody how you can do the sourcing. The question is just, you know, of course we started in the beginning. It, for me, with my own business, I was stupid enough that it took me one and a half years to understand that, you know, the other side of the bed can actually do my sourcing and I could focus on sales and marketing, focus on improving my images and finally learn how to really run my PPC campaign solidly. So the question is just, I mean, for sure when you do it in the beginning, I’d, I’d engage and I’d encourage anybody to say, go through it, do it, learn it, see what time and effort it takes.
Sebastian:
But I think when you get to the point where it says like, Hey, I don’t know if that’s worth my time. I should invest my time into sales and marketing in order to grow revenue. Anything that’s not a revenue generating activity, I’d love to outsource. So what do I wanna do with the business? I mean, I’m building a business in order to sell, in order to make a profit for whatever motivation I have behind there, over financial freedom, living, traveling, et cetera. So yes, please, anybody go through those processes, do this on your own, learn it. And when you say, I wanna focus on growing the business and selling more and getting better click-through rates, getting better conversion rates, well then don’t focus on those those mundane and tedious tasks. I would say when you go with somebody who specialized in that, and do I still love sourcing myself?
Sebastian:
No. Hell no, I don’t. But we have a big team who does exactly that, and that is their job, and this is why they focus on it. And yes, they actually do enjoy it if they fully focus on it. So if I would say I contact 30 potential producers or outside China 60 potential producers myself or give it to my team, I think my team works better on it than me myself, because I will not keep up the same motivation to contact 60 producers. And no, we’re not I think this is where we’re probably disrupting the market a little bit. We’re not taking a share of the order volume. We’re charging just simply by the hour. And that is fully transparent and fully honest, fully open, fully document, actually we’re charging by the minute. You’ll see all the minutes that we spend talking to the customer and the, the minutes that we spend with the suppliers,
Kevin King:
Some sourcing agents will work on a percentage of, of the order. So if I place an order for a thousand units and they’re $10 a piece that’s 10 grand, they will take a percentage of that of that 10 grand of HPO. And the logic there is that they’re saving you money. I mean, they’re doing the work, but they’re also, you would probably be paying 11 grand for that. Same thing if you didn’t use the sourcing agent who has speaks the language, has negotiating skills, other people do a flat fee, it’s 300 bucks or 500 bucks to find this factory or do this, but you guys don’t do that. You’re saying it’s because you’re reaching out to 30 to 60 depending on where it’s being made. You’re charging basically it’s by the minute spent doing corresponding with the factories and time and it’s just a flat fee and then it, once you hand it over and it’s done. Correct?
Sebastian:
I mean, again, I’m not a person who finger points at, at any you know, competitor or what do you call ’em, not even competitor or anybody who does sourcing. I think anybody has a reason for existence. The thing that, you know, as we’re sellers ourselves, I would not want to do that to spend somebody for $500. Why? Well, because I know that person’s probably gonna contact two factories, or let’s say three, and then when we have two prices or three or maybe four or, but I want to know the real market price. I prefer by now, of course to say, Hey, you know what, I spend a little bit more time, but if that is gonna be a well selling product and I’m selling 1000, 2000, 10,000, 20,000 units a year, and if I get that product for say, $2 cheaper I would have say $40,000 in a year.
Sebastian:
If it’s 20,000 units or more or less, I, whatever it is, you see it of course more and more higher price products coming. And there’s of course also the potential of saving more money on the unit. Now anybody of course, can do that for a fixed price or do that for a percentage. But my question then would be, alright, how many factories did we contact? How many prices and proposals did we actually get? Are we sure we really have the best prices? And then at the same time, the next question is of course, do I know who is the supplier? And that is one of the things that would have bothered me if I would have not done sourcing myself. If there’s a sourcing company who does not tell me who is the supplier, the sourcing company goes belly up, the relationship goes belly up or something, and I don’t know who the supplier is.
Sebastian:
I’m having a product that’s selling 50,000 units a year, or even if it’s just 5,000 or whatever, and all of a sudden my supplier disappears and I don’t know who it is. So that is why we’re not only doing the charging, the hours transparently, but we’re giving all of the contact details of every single one of the suppliers that we search for contacted. Because you know, me as a seller, I wanna know who that is. I don’t wanna be reliant on a sourcing company who says, well, you need to come back to me to do the sourcing so I can get a cut again. No, I will come to you, Kevin, if you do the sourcing for me. If you’ve done this nicely and I will come back to you to do the reorders for me. You show me the hours and then I know what I get, but I must have the opportunity to know who my supplier is.
Kevin King:
Yeah, that’s a really good point. So, so my cost then, if I come to you, if I’m listening to this and I’m like, Hey, I wanna give that Zignify a try, I know it’s complexity of the product is gonna have a factor there. What’s a reasonable range? Could I assume I’m gonna be spending between 300 and 1500 bucks or what, what’s a reasonable just ballpark range that if I come to you with my dog bowl and I say, Hey Sebastian, I want you, your company to source this dog bowl manufacturing this dog bowl for me? Just from the sourcing part of things. I mean I know you do, you do some other stuff as well, help on logistics and shipping and some other things, but what am I looking at? Probably just a rough idea.
Sebastian:
Tell us, since we’re talking about this, they, of course got a much lower rate than the, the pro producing businesses, industries or Fortune five hundreds. I be open and honest and they get a very different hourly rate. But when, when it’s about sourcing in China it’s roughly like, it’s, I think it’s somewhere now must be like $75 or so per hour. And we usually spend about 15 to 20 hours. It takes us so about like a $1000 or $500 in order to find about like 30 potential producers, find them, contact them, get the proposals, look through the proposals, compare all of them, put them over in a list, and then you know, list them all down, show all the names, show all the, the reasons and everything. And then come up with like two, three, maybe four, maybe even five of them, where we say, Kevin, let’s get ready.
Sebastian:
Let’s order samples from them. So it’s roughly, this process is about a thousand thousand $500. On a typical Amazon product, if you have the same urge talking as much as I do, well, we charge you for those minutes as well. But usually you are very down to the point and say, this is what we need. Then the more specific, of course it goes, the better we know outside China, it takes about double the amount of time we’re like, so it’s gonna be like 2000, $3,000. 30 to 40 hours is what we usually takes to find extra, like 60 potential producer, contact ’em, get the proposals, list them all over, put them in an overview, and then same thing to get about 2, 3, 4, maybe five of them where we can get samples. So this is roughly, but the massive advantage, of course there is, is we do know what is the market price, because we’re not only looking for two or three or four proposals or make a fixed rate.
Sebastian:
I mean, a simple example, you can’t make a product for a fixed rate. We have done some of them, we saved this guy on the first product. He had 27% import tax. He sourced it from China, and the product price was $6. We were super lucky. And it will never, never ever happen again. It took us three hours to find a new supplier with same or better quality in Vietnam, 0% import tax at $1 cheaper. Now, I gotta tell you, this guy is selling 500,000 units of that. He’s not selling on Amazon. He’s selling just over Shopify. So he had order volumes of $3 million, 27% of that import tax is $810,000, and we got it $1 cheaper, 500,000 units. So we saved them in the first year, $1.31 million by three hours of work. Those savings projects we have I mean, guess what we charged him? $210.
Kevin King:
Wow. I think he, I think he might owe you a nice dinner or a nice trip somewhere or something for you and the wife that’s awesome.
Sebastian:
He said he would’ve given us hundreds of thousands of dollars because he had immediate savings. So this is where we then understood. It’s like, you know what, no, we don’t. He would still have given to it to us. And we said, no, come on.
Kevin King:
Will you help people too if they come to you and they need to develop a product, they’re like, Hey, I have this idea. Do you do product development or is it just the sourcing side of things?
Sebastian:
We do. I mean, depends on, I mean, look at Tomer’s product right now. We fully developed that whole thing, of course, incorporation with Tomer. There were other, other parts, other people involved as well. But yes, we’ve done quite some electronics and some design 3D designs and, and, and all of those things as well. We can do that as well. One of the things that I still wanna say about the, the savings projects is we had our learning, of course, from that, that we save for the savings projects. We do, of course, now take the hourly rate and then we’ll negotiate as a percentage of the savings, but only of the savings, not of the order volume, so that you will save money from the first order onwards, the development. Yes, if you say, Hey, I mean, of course the typical thing, the, the standard thing is you have this Amazon product, you want these and those changes, this, and that should be changed on the product.
Sebastian:
That’s very basic, but when it goes to deeper developments, say you have an idea of a product, you need three D designs, you need CAD drawings and all of those things in order then to go to build a mold or to get whatever the CNC drilling out of it, or also have some electrical wiring, some, some logical PCB plans that will be needed also. That is possible packaging design, of course, product design and sourcing the packaging, sourcing the logistics companies. That’s quite standard. Of course, then in many, many projects,
Kevin King:
I always say that the money in this business is made in the sourcing, not in the selling. A lot of people don’t think of it in those terms, but when you can source better, that’s not just better quality, but it’s better pricing, it’s better logistics, better delivery better timing. That’s where the money’s made and where the competitive advantages are gotten over just the pricing. So it’s using someone like Zignify or is I think someone that’s been doing this for a long time is I think is important. And I think that’s something that everybody should consider. Whether it’s Zignify or you, maybe you have somebody else that you’ve been working with or, or someone else that you know. But I would definitely give them a, give them a shot. Just, just real quick before we, we wrap up you’re also involved in another project scale for retail which was a, like a traveling conference where you guys have done ’em around the US and Europe and a few other places in 2023. I know you have some events coming up this fall. You know, I know the dates are gonna be announced soon, but how’s that going for you with now you’re sourcing and producing events, not just not just products.
Sebastian:
Very true. Just remind me of one phrase, like, the circus is coming to town, a traveling, how do you call it? Traveling trade show. That’s a nice way to explain it as well. Yes, we’re doing the ones that we’ve done in the past where, you know, like a Europe tour, then a US tour, then a Europe tour again. So I think in the first one was London, Manchester, Paris, Milan. Then the US came with LA, New York, Miami, and then Europe began with Paris, Madrid, Berlin, and London and Target there is, you know, to be an open network in an unbiased network for Amazon sellers to find ideas, to find, to learn things. And I think it’s been going quite well. It’s been accepted very, very well. We spread the word massively fast, and companies that are involved are AVASK, GETIDA, Fortunate and us, Zignify and I could not complain, really.
Sebastian:
I mean, of course you need to, it’s, it’s massive amount of works to make this known, especially if it’s in the very, very first year. But I think we filled up the seeds quite nicely in most of the cities. Networks are growing. It’s nice. You know, target is also that we built local masterminds that anybody who is in the Amazon on the e-commerce sphere now has contacts, has some, some buddies, you know, brothers in arms to help one another out, to learn from one another and to just when we not been to Berlin, I think we had like eight presentations and six of them were including myself. We’re all sellers ourselves. There’s no pitching, there’s no nothing. It’s just delivering value. And I think that’s what the industry wants and needs as well.
Kevin King:
Awesome. Well, if people wanna get ahold of you for either to find out more about your events or about your sourcing with Zignify, what’s the best way for ’em to, to do that?
Sebastian:
Thanks for that. That’s an opportunity to pitch and just put out the address. Lovely. Well, it’s of course zignify.net that’s a Z in the beginning, a Y in the end. So zignify.net. There’s a button on top, just, you know, schedule a call. We’ll give a, usually, of course, like a 30 minute free of charge or a call just in general, get to know one another. But for you, Kevin and the AM/PM Podcast, anybody who comes there, just say that and we will be happy to give you a you know, a bit more of a consulting call to look into what is your current situation and what could one change. If you want me, myself, you find usually, I guess it’s still the name, there’s Sebastian “The Connector” Herz, with a few Chinese characters behind there, just behind there on LinkedIn, on Facebook. I think those are the main ways to find me, or I feel like everybody has my WhatsApp number by now. So it should be quite easy to find that one as well.
Kevin King:
Well, awesome, Sebastian, I really appreciate you coming on today and sharing look forward to seeing you somewhere around the world soon.
Sebastian:
Very much looking forward to that as well. Kevin, thank you so much for having me. What a pleasure.
Kevin King:
If you wanna stay on the latest information when it comes to Amazon, including sourcing, like Sebastian and I just talked about, be sure to check out my newsletter, billiondollarsellers.com, billiondollarsellers.com. It’s totally free. You can sign up and receive the newsletter several times per week, absolutely free, just loaded with tips and tricks and great information for e-comm and Amazon sellers. We’ll be back again next week with another episode that’s gonna show you how to multiply yourself and how to really do some really cool stuff with systemizing and multiplying yourself in your business. Until then, I’ve got some words of wisdom for you. You know, the way someone fits you into their schedule says a lot about what they think of you. The way someone fits you into their schedule says a lot about the way they think of you. That’s both in business and in personal relationships. Until next week, have a great week and we’ll see you then.
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