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#339 – Weighing The Advantages & Disadvantages Of Moving Your Manufacturing To Mexico with Alfonso Gorena

In episode 339 of the AM/PM Podcast, Kevin and Alfonso discuss:

  • 01:35 – First Time On A Big Amazon Conference
  • 02:15 – Alfonso Gorena’s Backstory
  • 04:20 – Running Manufacturing Plants In Mexico
  • 05:00 – How Did Alfonso Learn About Amazon?
  • 06:45 – What Categories Did They Sell In First
  • 08:20 – How Much Did They Invest Originally
  • 10:05 – Why Did He Focus On Selling In The US?
  • 12:10 – Shifting His Manufacturing From China To Mexico
  • 16:45 – Using Spanish Keywords In Their Amazon US Listings
  • 21:00 – Listing Images and Units Of Measurements For Spanish Listings
  • 21:40 – Alfonso’s Manufacturing And Shipping To Amazon US Setup
  • 26:20 – Pros And Cons Of Switching Your Manufacturing In Mexico
  • 31:10 – Mexican Factories Willing To Do Short Runs?
  • 33:50 – How Can I Find Manufacturers In Mexico?
  • 38:10 – Where Does Alfonso See This Going?
  • 39:50 – Factoring In The Prices And Costs For Mexico Manufacturing
  • 43:25 – Cashflow Advantage Of Manufacturing In Mexico
  • 44:05 – Estimated To Make $3.5 Million In Gross Sales This Year
  • 45:25 – What’s The Next Move For Alfonso?
  • 46:50 – How To Reach Alfonso Gorena 
  • 47:40 – Golden Nugget Tip From Kevin King

Transcript

Kevin King:

Welcome to episode 339 of the AM/PM Podcast This week, my guest is Alfonso Gorena from Mexico. Alfonso is a seller For the past four years, he started off sourcing his products in Asia, but he has switched about 95% of his sourcing to his home country of Mexico and selling virtually everything in the United States. He’s gonna be talking about how he does it, the pros and cons, how to do it. If you wanna do it yourself and a whole lot more, enjoy this episode. And don’t forget, the Billion Dollar Seller Summit in Puerto Rico is just a couple of months away. That’s right. From June 11th to June 15th, about 100 to 120 of the top sellers from around the world will be gathering in Puerto Rico and San Juan, Puerto Rico. To be specific, for the eighth Billion Dollar Seller Summit, these are 7, 8, 9 figure sellers. We had 11 folks doing over a hundred million dollars a year at the last live in-person event. The median, not the average, but the median in the room was 10 and a half million. So this is a very high level group. Got a high level group of presenters, as well as a ton of networking and fun activities. It’s gonna be a great time for everybody that’s there. If you want information on that, be sure to head to billiondollarsellersummit.com. Alfonzo Gorena, welcome to the AM/PM Podcast. I’m happy to have you here as a guest this week.

Alfonso:

Hey, Kevin, thank you very much for coming me here. It’s a pleasure.

Kevin King:

We just saw each other just about a month ago or so at the Prosper Show in Las Vegas, and I think you said that was like your first time to actually go to one of these big Amazon shows. So how, how was it for you?

Alfonso:

It was great, Kevin. It was a great experience. The networking was awesome, and the expo on the floor was really, really good. So we have a great time up there.

Kevin King:

So you said that was your first event really to go to, right?

Alfonso:

Yes, actually we started back in 2019, and then just right after that, covid hit. So for a couple of years there was nothing really going on, and last year we couldn’t go just because of the timing. So this was our first year there. So it was just something that we needed to do.

Kevin King:

Now, you’re, a lot of people don’t know, but you live in Mexico, you’re Mexican and live in Mexico, correct?

Alfonso:

Yes, actually, I’m from Mexico. I’m from Monterey, Mexico. I, I was raised and born here, and I did live in the US for almost 10 years before doing this Amazon business. So the business that we have is currently set in the us but our operation is is also part in Monterey, Mexico.

Kevin King:

So for people that don’t know much about Mexico, they know they’ve heard of Cancun and they’ve heard of Acapulco, but they don’t know where Monterey is. Tell ’em wh where is Monterey actually in Mexico.

Alfonso:

So, Monterey is located in the northern side of Mexico, so very close to Texas, to Laredo, San Antonio, Macallan to the Valley area. So it is within a couple of hour drive from the US actually.

Kevin King:

And it’s a big industrial kind of area, like manufacturing area. Right.

Alfonso:

Very big city. We probably talking about four to 5 million people living here in a very industrialized city. A lot of manufacturing operations and multinationals have their operation down here, so it’s a pretty big city.

Kevin King:

Now you said that, so before you got, you got into the Amazon business in 2019. We’ll talk about that in just a little bit. But before that, you were living in the States for 10 years. What were you doing in the States during those 10 years?

Alfonso:

So I was actually working for a multinational company for General Electric. So I was traveling all over the place and just moving from one city to another one. So I w I live in Milwaukee, I live in Ohio, in Cleveland, and just went back and forth between Milwaukee and Mexico for a few times there, and also in a different part of Mexico City. So I spent like 10 years just going back and forth between those cities.

Kevin King:

Is that doing like engineering work or is that more management or what type of work was that?

Alfonso:

Yeah, so it’s actually, my background is seven industrial engineers who graduated like 20 years ago, a little bit over 20 years, 24 years now. And I spent 20 years in manufacturing and operations pretty much all over the place in between those roles. So working in sourcing, in manufacturing, in lean manufacturing. And most recently, like my last roles before I jumped into this MSM venture were running manufacturing plans. So I was running a manufacturing plant here in Monterey for MRIs and X-ray equipment for GE Healthcare. And after that they went and run ceramic industry, different industry in Saltillo, which is very close to Monterey also. So I spent four years there running their operation as well. So pretty much in that background, very different from e-commerce, nothing to do with eCommerce. I didn’t even know that you could sell an e-commerce when I was working with this company.

Kevin King:

So how did you find out about this opportunity to sell on Amazon? You said you started in 2019, but how, how did you stumble across it?

Alfonso:

Yeah, so actually it was my wife who stumbled into this is she was looking into doing something for herself. And she start doing some research and she find out that there were people selling on Amazon and buying stuff from China and just sending it over to the US and making some product plans around it. So she got interested into this, and I was in the middle of a job transition, and it was just like the right timing. So I start getting involved with her into this, and when she came and say, Hey, we need to open an LLC and we need to get some CPAs, and we need to figure this out. It’s like, okay, let me do a little bit digging with you into this and we’ll, we’ll figure it out. So I start looking into the numbers and I start looking into some of the training that she had bought, and that’s where I saw like the opportunities, like, wow, like I didn’t even know that people were doing this.

Alfonso:

So I started looking into the potential of, okay, what if we bring this product here? What’s margins? Start looking into some of those numbers. And what really helps is with the all the background that I had between my first 20 years of, in the, in the manufacturing industry was like, I understand the numbers really well. I understand how products were sourced, so I understand everything from a business perspective, and it was easy for me just to really look at this, and so the potential to escalate this into levels, like it was crazy. Like I couldn’t even imagine those numbers.

Kevin King:

What kind of products was your wife looking at originally? What category was she looking at?

Alfonso:

So when we started this, there was we were looking pretty much at anything that could give us a good margin. So one of the first products that we were looking into was some like bamboo, charcoal kind of products that were used for the air purifying systems. So we’re looking into that. We’re looking into some other like some test trips and, and things like that from China. So those were some of the first products that we came up with. And we actually, so it was very interesting because we started this business it was June of 2019, and end of June, by the first week of August, we already had three products pretty much on order and ready to ship it into Amazon. So we’re talking about a month.

Alfonso:

We fully understood the business of what needed to be done got some, we jump in with both fits. So we purchased three different products from three different suppliers, three different categories, and we launched those products, created their own brand and everything. So all of this is within four weeks, right? So I was working 24/7 on this and just making sure it was gonna be a success. So by week six, we already have our first product hitting Amazon, and we start making sales from day one. So it was just very exciting to see that all that investment that we put into in time and money coming in fruition.

Kevin King:

How much did you invest originally to do these three products?

Alfonso:

We start with $10,000, pretty much. So we said, here’s thousand dollars, we’re gonna start with this, and we got money in the back to make more orders if we need to, but we’re gonna divide this into true products. So we, we say, this is gonna cover not only the products, but gonna cover the LLC formation, everything that we needed to do around training. So pretty much everything. And we had the backup in the bank to, to say, if we need more, we’ll just put more money into this. So we weren’t worried about about that. We just worry about how to minimize the time that it took for a successful launch. So this is the thing, if you launch a product and you do one product, and you do the normal timing, because this normal takes four, four months to do a lunch from china.

Alfonso:

It doesn’t take four weeks, it takes four months. And we say if we’re gonna take four months to see if this is gonna be successful, it’s not gonna work out. It’s like we are gonna waste four months and then we are gonna do it. Oh, you know what? It kind of work. Let’s do another product. Let’s wait another four months. So we’re talking almost eight months to a year before you can see if you’re successful or not. So we say we’re gonna cut this in half or even in three and just take a portion of the time and, and put that into three products. And hopefully one of those three products, which we obviously do all the research is gonna pay off and we are gonna just take it from there and just keep growing the business.

Kevin King:

But are you still selling any of those three products today?

Alfonso:

Actually, I’m selling one of those three products, and that became one of our product lines. So we do have success in one of those three products. The other two, we didn’t lose any money. We did sold out, but we didn’t replenish those two products.

Kevin King:

So why did you focus on the us? I mean, you’re Mexican, you speak Spanish, you’re in Mexico, why not start with your home country? Why go to the US where it’s much more competitive?

Alfonso:

Well, actually it is not, it’s like selling in Mexico is not as attractive as selling in the US is like, if you’re selling in the US you got all this market and everybody has access to a credit card, and it’s very easy for people to, to go and do some shopping online. It’s actually part of the way of living in Mexico at that time. And even now, it is, it is kind of just trending into it, but it’s not, it’s not as demanding as in the US right? So the success that you could have in the US is much, much exponential than what you can get in Mexico.

Kevin King:

The Mexican market though is 120 some odd million people. But what you’re saying is a lot of ’em still don’t have credit cards. I mean, I know in Mexico City there’s a lot of very wealthy people in some of the other cities too, but you’re saying there’s just not enough of ’em really to make it worth the effort that are sophisticated enough and uncomfortable enough to actually to do a lot of business online.

Alfonso:

Yeah, that’s true, Kevin. Pretty much that with the pandemic, it just changed around. A lot of people are more into it and they’re more used to it, but it wasn’t like that before and now it is been growing and, and people are getting more, more familiar with that. And Amazon has been getting some market share with that, but Mercado Libre is very big here in Mexico and Latin America. So people are using those things more, more and more. But just the ease of commerce in the US and how you open a business in the US and how do you pay your taxes is so much simpler and so much easier that it’s just a no-brainer just to go there and, and have that potential of selling your products in the us.

Kevin King:

Now you’ve, since you launched these, these products, the charcoal type of products and some other products, in the beginning, you’ve added a quite a bit to your line, correct? A lot of different, you’ve kind of pivoted a little bit, and I think a lot of your sourcing is now being done actually for many of your products in Mexico. Yes. Can you talk about that shift where you’re like, okay, we were getting our initial products from China, and then what made you decide to shift to actually China source more things locally?

Alfonso:

Perfect. So, here we are, like month one into the operation and started selling all these Chinese products. And I’m very optimistic about the growth that we could get. And I got a call from a friend of mine, long time friend of mine that he knew that I was selling an Amazon, and he gave me a call and say, Hey, I just learned that you’re selling an Amazon US and I’ve been trying to sell there for quite some time now, and I haven’t been able to figure out how to make the export work for us to ship product from Mexico into the states and, and put it there in Amazon. So we got together, we talk about it, and we saw the opportunity there. So we partner up and we started this partnership, and we start launching some products directly manufactured from his side in Mexico.

Kevin King:

So he’s a manufacturer?

Alfonso:

He was a manufacturer. He was in the party, in the party business, party supply business. Okay. So a lot of the products were tailored to the Mexican market. So we had to–

Kevin King:

Like pinatas and things like that, or,

Alfonso:

Well, not pinatas, but some other like wrapping stuff and for candies and things like that. So basically we had to reimagine the products that we wanted to sell on Amazon, and we start working with the dimensions and the weights and just designing these products that could be more generic and sell in the US better than what we had. So that’s how we started. So basically we designed like five, six products and within another month, so we’re talking now month two, we already have five products going into Amazon, being manufactured here in Monterey. So we start with those, and we launched those five products out of those five, two were successful, but I would call that very successful. We start like seeing huge spikes in demand. So now we’re talking that we’re getting into the October, November timeframe, and we start seeing these products just grow tremendously.

Alfonso:

We just couldn’t keep up with the demand. We start just manufacturing like crazy those products out and shipping those like every other week. We were shipping those products into Amazon and trying to figure out how to keep it up in stock. So since then, we, we never run out of inventory. So that’s something, something really, really good. And I’ll talk a little bit more about that probably in the future, about some of the benefits that you have from manufacturing here. But going back into the story, so we started with those products that were manufactured here in his factory, but then as Covid hit, obviously that industry just tanked. So the, pretty much the company that was manufacturing this went under and luckily, our business in Amazon was growing so much that we just transfer pretty much all the people that were working there into our, we created like a 3PL we can talk a little bit more into that, and we absorbed those people into our 3PL and we just start putting more and more products into the process.

Alfonso:

But now we’re talking about different products, not only products that we manufacture here, but more products that we’ve, that we find within the Mexican companies. And we start launching those. So now we’re selling products where we buying products that are semi-finished, good products. We bring it over here, we do some final integration, we do some quality control, we do some labeling and packaging, and we get those products ready to ship. There’s some products that we outsource completely the manufacturing operation. We do the design and we go and work with multiple companies that say two or three different companies that add value into this product. We bring it over, we just do the packaging and inspection and we ship those. So there’s all kinds of different products that we’re now sourcing within Mexico and selling in the US.

Kevin King:

Are these products that are aimed at more of the Latin market in the US or are they for everybody?

Alfonso:

We look into everything, everything that has potential to sell in the US. There’s some adaptations that are, are required. There’s some products that are tailored to the Mexican people living in the US. So there’s pretty much whatever that can have a good margin. We’ll just gonna go and check that out and make sure that it can sell and we’ll do some testing and we’ll put the products in the market and just go from there.

Kevin King:

Since some of your products are actually aimed at like Spanish speaking people in the US or Latinos in the US, are you doing like Spanish keywords and stuff? Because you know a lot of people Oh yeah. They don’t realize that, you know, Mexico is the largest Spanish speaking country in the world with 120 plus million people, but the US has close to 60 million people that speak Spanish at home as well. And it’s the second largest country in the world, second largest Spanish speaking country in the world.

Alfonso:

And they have a credit card

Kevin King:

Yes that’s right. They have a credit card. They don’t have to go stand in line at the grocery store to pay the bill. So how does that affect the way you build your listings and the way you do some of your marketing?

Alfonso:

We just pretty much do our listings in English and in Spanish, and we do the A+ content in English and Spanish.

Kevin King:

So it’s dual like so you have a bullet point, it said the first couple sentences are in English, the next couple are in Spanish, or how do you do that?

Alfonso:

No, for product description we use a plus content. And in A+ content you do have the option for Spanish and English. So pretty much if your browser is set up for Spanish, you’ll get the A+ content that is set up in Spanish.

Kevin King:

That’s not translation by Amazon, that’s you actually inputting the proper Spanish?

Alfonso:

Yes, correct. Because the translation from Amazon is a little bit on and off here and there, so you gotta go back and, and you gotta do it yourself and do some of the keywords also that people are familiar with. And there’s some, a lot of words that are very different that you don’t translate directly. Yeah. So you gotta make sure that you put those words into it as well and just make it.

Kevin King:

So a lot of people probably don’t actually realize that whether you’re selling that. That’s probably a good little trick there for a lot of sellers that are listing, whether you’re selling stuff that’s aimed at a Latino market or not, there’s still a lot of people that have their browser set to actually search in Spanish in from the US side. And if you’re just letting Amazon translate that, because you’re listing and your backend, your A+ content is only uploaded in English, Amazon’s gonna just translate that. And it may be a very loose or very poor translation or kind of even broken Spanish in a way. But if you actually, Alfonso is saying you can actually go in and actually put a true properly written Spanish version of your A+ content, then if they have that setting set to espanol, it’s gonna show it properly and index it properly. And that could be a major advantage for people. I bet there’s not a lot of people doing that.

Alfonso:

Yes. Yes. That is very on point. So it is something that is really needed. It’s like that will really bust your sales up tremendously. And the other thing is, what we do is in the title, for example, we mostly do like all English keywords, but we’ll put one or two words in Spanish, which are the main keywords in Spanish, depending on the product that we’re selling. Obviously, these are products that are tailored to the Spanish talking people in the US or Mexicans in the US. And we will put one or two keywords in the title that are in Spanish. But then the key bullet points are pretty much in English just because of regular TOS from Amazon and, and how they require you to do the listing. But then we’ll go into the backend and we’ll put some of the keywords in Spanish there as well. So we do a combination is between English and Spanish and just just play with that around and, and make sure that you can see it in your browser in Spanish, or you consider it in your browser in English and everything is organized correctly.

Kevin King:

What about the images? Do you do bilingual in the images as well?

Alfonso:

No, we just do the US version of the images.

Kevin King:

I would think that I would put maybe in one or two images or something, because a lot of times people don’t read the copy, but they’ll read, they’ll, they’ll skim the images and they’re Spanish speaking and they see that even if they’re very versed in English, just the fact that there’s a few things in Spanish that almost gives them that like, sense of belonging. It’s like, Hey, this is, this is for my people, this is for me. And I would think that would have some sort of subtle psychological benefit to actually just putting just even just a little bit in there.

Alfonso:

Yeah, there’s some key bullet points or takeaways that we do put some Spanish words there just to bring it home. And also the other thing, Kevin, is people are looking for a different unit of measurement. It’s like a lot of people from Mexico are not familiar with the English system. So you gotta make sure that you put centimeters and you put kilograms and you make them, you give them some information that is good for them to make a decision because they will really try to convert it in their head, but they might not be able to do it correctly. And then you have some returns or, so you minimize some of that potential errors just by giving them that information that they’re looking for as well.

Kevin King:

So did I understand you correctly that now you’re doing most of you’re sourcing from Mexico and some of that stuff is just made at the factory and it’s ready to go. It’s packaged up in cased and you ship it to the US but some of the stuff you’re bring, you’re still bringing in some things from like China and then you’re adding something to it or repackaged them or modifying it a little bit

Alfonso:

From China. It goes directly to the US. We are, we’re not bringing anything from China into Mexico so that we can cross the border. So everything that we source from China, which is probably like five to 7% of what we sell in in Amazon right now, is coming from China directly into the US. Everything else is coming from Mexico. And we’re consolidating here in our warehouse before we ship it into the US. Now some of them–

Kevin King:

Okay, so if you’re sourcing something from Oaxaca or from Mexico City area, you’re bringing everything in to Monterey, and then to what this, this what’s now in essence a 3PL that you set up? Cuz you hired all the people from the closed factory basically, and consolidating everything there, and then shipping into the US. That’s what you meant.

Alfonso:

Exactly. Exactly. That’s what we’re doing and that’s how we minimize also the potential for quality issues because instead of outsourcing the quality inspections to somebody that doesn’t understand the product, we do our quality inspections, we do our packaging here, and we, we pretty much consolidate the shipments and with this, we save a lot of money on the transportation because now we got a truck going into the states every other week, and we can adjust the frequencies and the size of the truck every time that we need to. So whenever there’s some inventory restrictions in Amazon or there’s some high demand going on, we can just easily adjust the timing and the size of our shipments into Amazon. So it’s just like being like right next to an Amazon center when we just ship from here into Loredo, it takes a couple of hours to be there. And then we scale a 3PL company, or not 3PL an LTL shipment from Amazon to pick up the these skids and get send it over to Dallas, which is closest.

Kevin King:

Do you have your own truck or you have a trucking line that actually takes it from Monterey to Loredo? Those couple hours drive?

Alfonso:

We got a truck line and there’s some partners with us that we use them for. So move our product

Kevin King:

Into, and I think you said it’s about $600 a trailer or something like that to take it from Monterey to Laredo?

Alfonso:

Yeah, that’s about it. That’s about it. So it is like $550 to $600 depending on the, on the, on the size. And this is just like a half truck, right? It is not the full, full trailer, but it is a half truck or a half trailer. And besides that, you gotta pay like the import permits and stuff like that. But the good thing is you got the free trade agreement going on. So yeah, a lot of the import fees are just pretty much zero. So you don’t pay import fees and you just pay for the truck. You pay for the permit to bring the truck into the states. And you’re talking that, let’s say if you pay a thousand dollars and you put, I don’t know, seven, 7,000 units into that truck or 8,000 units, you can get the price to be like 12 cents per unit or 13 cents per unit for something that you’re shipping into Amazon compared to go bringing it from China where you’re paying probably for that same amount of product, you’re probably paying twice or three times as much or even more.

Kevin King:

So how long does it take you to cross the border on Laredo? I mean, so is it just pretty much like a few hours or a day or just to clear customs and with NAFTA and everything, it’s just pretty quick?

Alfonso:

Within the day you can get the truck just crossed from here into Laredo and even in a few hours. So what we do is we just plan for a full day. So they’ll pick up our shipment pretty much, let’s say they pick it up today, tomorrow, they will cross the border and they will leave the skids or the shipment in a warehouse that is used by the import agent. So that’s the address where the LTL company is gonna come up and pick up the skits. So that usually takes another day or two just for the LTL to go there and, pick up the skids. And then from there to Dallas, which is the closest fulfillment center that we’re assigned to, it takes a couple of days, two or three days at the most. And then what it takes more time at times is for Amazon to schedule the delivery, right? So it could be within the same day. So if you lucky you can get a shipment just from our dock into Amazon’s dock in six days, five days, or it could take probably a couple of weeks at the most, even in Christmas time.

Kevin King:

Yeah, that’s incredible. That’s really awesome. So there’s a lot of buzz right now out there. I know you, you attended a, the event that happened down in Monterey a few months ago about sourcing in Mexico, and there’s a lot of buzz of people like, I gotta get outta China, I gotta quit paying these 25% Trump tariffs. And like you said, you know, it’s taken weeks even on the water, you have to pay expensive air freight. I can’t get something in in six days like you can, and they’re looking to switch their sourcing to places like Mexico. What are some pros and cons of that? I mean, Mexico is probably great for certain products, other products maybe not so good. A lot of the raw materials I think are still in Mexico in some cases are still having to come from China or other places. So if someone’s looking to switch and like, man, this sounds too good to be true, what should they be considering if they’re actually gonna start doing some of their manufacturing in Mexico?

Alfonso:

Yes, that’s a, that’s a great, great question. So the first thing is you gotta understand the manufacturing capabilities that you can find locally here in Mexico. So there’s a lot of different manufacturing capabilities that you can rely on, like glass, aluminum carbon plastic, plastic, artisanal products, food pottery. So all of those categories, there are great companies on here that can manufacture this three. But what you gotta understand also is all of those companies, they’re not familiar with selling into Amazon sellers or they’re not FDA ready. It’s like if you ask them to ship a product into Amazon, US is like, what is that? It’s like you ask, you want me to apply a label and, but no, I I can ship you 500 of these. Where do you want them? It’s like, so it, it is, you gotta work with them and educate them on how to make this work.

Alfonso:

And that’s what we minimize by doing our own triple here, where we are just taking that part away of them. And we’re doing that ourselves and we’re with that. We also having better margins because we’re controlling that portion of the equation of the supply chain. So, but with that said, you can work with them and you can educate them and you can tailor your needs to what their manufacturing capabilities are and start manufacturing these products that you want them to ship to you. The other good thing about being here in Mexico is, as we’ve been talking about transportation costs, free trade agreements, all of that is just saves you a lot of money and place a lot into the factor of calculating your margins when you’re comparing this into China products. The other thing is rapid prototyping or launching.

Alfonso:

So we’ve been doing a lot of launches right now. We haven’t talked about this, but we got like 75 or 80 SKUs already selling on Amazon. Everything with good volumes that, that we’re replenishing all pretty much every other week. And what we’ve been doing is we’ve been doing rapid prototyping launches. So in one time we were able to launch a product from a concept to selling our first order in Amazon in less than seven days. It was seven to eight days. We were, we were already selling a product. Everything aligned of course is like, we had the manufacturing guy already line up. It was similar to a product that we were already making. We have a truck that was going out the next day. So we call this guy, he’s like, Hey, can you manufacture this for us? And do a set of 30 of those?

Alfonso:

He’s like, sure, I can give those tonight for you. So we go and pick them up, labeled those things, put it in the truck and seven days we were already selling this in. So in that time we were working on the listing, on the photographs, everything on during that transit time. And we were able to get this product to sell real, real quick. And it was a good product. So, but let’s say, okay, seven, seven to 10 days if everything aligns, but two weeks to three weeks is, is something very common or is something very possible? So doing it, being able to test the market with a small batch in two to three weeks, and then being able to replenish that batch in another two weeks with minimum orders, that’s huge. You cannot accomplish that by doing this from China.

Alfonso:

Even if you air freight these things, it’s like you can do it probably in a month from China, test the market and then you’ll replenish and, and send you some units by error, some units by ship. But here is like, you can react very quickly and you, you can have the supplier just line up to your needs and it’s like, Hey, we’re gonna launch this and if it’s successful, I’m gonna come back with you and I’m gonna order this much. Do you have material available? Are you ready to go? It’s like, sure. So you partner with them and then you can just test the water yet it works. Just send more and send more and just minimize any inventory issues that you might have and just keep the listing going and going and going and, and just keep selling these products out.

Kevin King:

So most Mexican manufacturers are willing to do short runs like that, in the US it’s very difficult to get short runs. But in China they’ll do it. But Mexican manufacturers will do short runs?

Alfonso:

Depends on the manufacturing and, and what pro what type of product you looking into. Like, there’s obviously places where you’ll be talking about injection molding, well, you gotta buy them mold and then you gotta do some runs. If you’re looking with cargo products, well, you gotta make sure that you have the cutting fixture and then the setup of the machine take some time. So they’re gonna ask you for a minimum. So it depends on what type of product you are talking about, but if you understand their capabilities and their processes and manufacturing setups and everything, you can work with them to minimize this and maximize the cost as well.

Kevin King:

So what kind of terms are Mexican manufacturers looking for? Are they, is it similar to China? Is it the 30-70? Are they more of a 50-50 or what, what are they typically looking for?

Alfonso:

It it all depends. So it all depends. If you look into, let’s say an artisan that is gonna sh send you some products that he work with, you probably pay up upfront or you pay 50% when you order. And then when he’s able, when he’s ready to ship, you’re gonna pay the other 50%. If you’re talking about somebody that is well established and has some cash flow and you have some relationship with them, they might be able to say, well, you pay me when I deliver, don’t need anything up upfront. So it all depends and it’s all about relationships and how you build these relationships with them and how you create this factor of trust. Now you gotta also understand that there’s many different type of companies down here. It’s like you find the mom-and-pop shops, which are the very small factories that can run new small batches or can run you some decent quantities, but you also have some medium size factories and you have some large and multinational companies, so it’s pretty much all over the place.

Alfonso:

So you gotta find something that works for you and you gotta build that relationship with them to make it work. Now there’s some difficulties about talking about how do you pay suppliers in Mexico. Some of those guys, if you look into artisanal products and things like that, they will ask you for cash. They will not have a bank account set up. There’s some guys that will ask you to pay in a local gas station. You go there and you pay and they’ll deposit into an account. So, so there’s all kinds of activity going on that you’ve gotta be able to pretty much work around and figure out how to make it work

Kevin King:

Well, how do I find these? I mean, that’s the next step is people are always like, how do I find these manufacturers? I would love to source something in, in Mexico, but I I’ve looked on Alibaba or there’s a couple other little websites and I’m just having trouble finding anybody. What are some ways that people can actually find manufacturers?

Alfonso:

Yeah, so basically what we do is you, we rely a lot in, like I say, LinkedIn, Facebook, in a lot of those, you will find all those mom and pop shops and you’ll find some of that very small suppliers. You can go into Google and do some research. But what really works also well is those, those trade shows and trips that, that are getting organized. And as you, as you mentioned a few minutes ago, we had the Mexico trip here in Mexico in Monterey a couple of months ago. And that was great. It’s like, it was a great way to put people from different countries, not only the US we had people coming from Australia and Europe coming down here in the Montreal and meeting with local manufacturers that were put into this expo show. And people had the opportunity to talk to them and make their relationship and figure out what type of products and capabilities they have and even look for very specific needs that they brought over from their current products as they sell and, and look for that here. So there’s all kinds of trade shorts going on, but they’re not as big as you will imagine, if you go to China, by no means there’s not even a tenth of what you can find in China and those type of expo shows. But you can go into some of those and you can and find some suppliers and then you start building the relationship from there.

Kevin King:

Are there sourcing agents or anything that like specialize in helping companies bind this? They’re on the ground in Mexico and they can go knocking on doors for you and so you don’t have to get on a plane and go down or has that industry popped up yet?

Alfonso:

There’s a lot of that. There’s a lot of that. So you can find very good sourcing agents down here that could help you pretty much with all your needs. You just tell them, I need this. And they’ll go and find it for you and they’ll figure out how to pack it, how to inspect it, how to ship it out. So there are companies popping up and newer companies and there’s a lot of established sourcing agencies already here.

Kevin King:

I mean, one of the other big advantages that I see and some of what we’re doing with dealing with Mexican manufacturers it’s basically, you know, you don’t, you don’t have these time zones. Lot of times with my Chinese manufacturer, I’m having to talk to them at nine o’clock at night or, or something because it’s there nine o’clock in the morning. Yeah. Or it’s, you know, I gotta really plan a trip to go down there if I wanna do, go meet the factory, go have a, have beers with them or something versus Mexico, same time zone or maybe an hour or two difference depending on where you are in the US and in most cases it’s just a few hours flight from, from a lot of places it really easy to get to. So that’s another big advantage. What about language issues? I mean on these manufacturers, do most of ’em have someone that’s speaks pretty good English or do you need to hone up on your Spanish skills?

Alfonso:

So it depends on the size of the company. And if you looking let’s say medium to larger companies, all of them will speak English. Most of them will speak English, especially in the northern side of Mexico. Like all the north side of Mexico is more industrial and, and they’re very familiar with companies that are pretty much multinational. And, and is part of what we do is like we go to school and we go into an English school and we learn English as our second language, but it’s pretty much the main language that we learn in school, talking about private schools. And so there’s a lot of that. Now, if you go into more the central Mexico down to the south, unless you’re in a resort or something like that, you’ll have a little bit more people that don’t talk English or speak English and you’re gonna have to use your translation skills to, to communicate. But it’s, it’s not, it’s not difficult. I think you can maneuver around and figure ways to make it work.

Kevin King:

So where do you see this going. Do you think China is basically the world’s manufacturer. They’re the factory for the world. They just, the infrastructure, the, the logistics, everything is just set up so well right now. And they, it’s just fine tuned. Mexico has that, but it’s still kind of rough around the edges and you gotta kind of babysit it a little bit more than you do if you’re, if you’re sourcing from China. How do you see that evolving over the next few years? Do you think it’s gonna get more sophisticated and better and better, or do you think it’s gonna always be this kind of like little hidden secret, little stepchild kind of place to manufacture?

Alfonso:

No, I think it’s gonna take some time. Of course, they have the big advantage of what the size and what they already accomplished. But if you look into Mexico, it is something that is, is difficult to start, but once you, you start in the long run, you’re gonna be much better off than buying this from China. So it’s like investing, it’s like you’re gonna be investing in your product, you’re gonna do all the upfront work and then it’s gonna just explode from there. It’s just gonna grow and you’re gonna rip up the benefits from, from doing that. So talking about the country, I think there’s great opportunities coming up. It’s like Tesla just announced open up a gigafactory here in Monterey within, within nine months. So it is one of the biggest gigafactories in the world. And with that, you can imagine all the investment that is coming. And that’s not the only company that we have here. We got many companies that are multinational in that size or even bigger than that. So the industry is gonna keep demanding more people, it’s gonna keep demanding more resources and it’s gonna keep demanding that we grow into this and Mexico is getting more into the e-commerce and understanding how it works. So I think we’re gonna be there, but it’s gonna take some time.

Kevin King:

What about pricing? I mean, I’ve heard people that have actually looked into sourcing from Mexico and they say the price is just higher, even though the labor cost in a lot of cases in Mexico is probably lower than what it is in China’s because the raw materials are having to come in from other places or for whatever other reasons, the cost of the item can oftentimes be more expensive. And my argument to ’em is, are you just looking at the cost of the item or are you looking at the total landing cost? So a lot of people, they may say, yeah, this spatula is I can get it made in Mexico for a dollar 12, but the same spatula I can have made in China for 72 cents. Just because China’s and so they look at like, why would I go to Mexico?

Kevin King:

And I’m like, well, have you factored in all the other expenses, the 25% Trump tariff, the duties that you gotta pay that you don’t have to pay cuz of NAFTA with, with Mexico, the time on the cost for the container or for air freighting at the time on the time lost in sales, like what you just said. Or you can test something. You know, I usually tell people, don’t do that. That’s a strategy that some, some people teach is like, test the waters on a product. Don’t, don’t go buy a thousand of something, you know, do your homework and buy 50 or a hundred and try some PPC and try and see and test it. And I usually tell people, don’t do that unless it’s an artisanal thing. You know, it’s a handcrafted or some sort of special thing.

Kevin King:

Because usually by the time if you do that and you’re successful, then by the time you can get more in, it’s too long. You’re basically starting over again and you’ve also just given other people who are watching these tools an idea. And then they can jump ahead of you or, or come in on you. But like what you said earlier where you did some testing with the guy and he made it almost overnight for you and you put 30 units up and they were in within a week and you could see what it was doing and if you needed more, you’re back a week later. That’s a major advantage. What about those kinds of things and, and the pricing what would your argument be against that? You

Alfonso:

You’re gotta look at this as total cost, but you gotta also break down the cost.

Kevin King:

Total cost includes time too, not just, that’s go dollars coming outta your pocket. It includes what’s called op in business opportunity cost. So it’s not just, and a lot of people forget about that opportunity cost.

Alfonso:

Correct. And also you, what you gotta ask is what’s the cost that the supplier is giving you and what’s, what, what does it include? Because sometimes the supplier will say, well, this is how much my product cost, but then you’re asking the supplier to do the packaging for you and the labeling for you, and you’re asking them to do all this type of things that they’re not used to doing, and they’re gonna go and they’re gonna probably go and source a box from you, which you can get even cheaper from somebody else within the same country within Mexico, or you can have the box already in the states. So you gotta understand the cost structure that the supplier is giving you because probably they’re not set up to do this whole thing. So you might be able to get a semi-finished good product very competitive cost, and then you can do the rest or you can negotiate with them some of these things that are within the cost structure of the product.

Alfonso:

So you gotta look at it, the whole thing, very holistic. You gotta look at the entire supply chain and understand where the cost is and what can you do to optimize the margins of your product. But then another thing that we haven’t talked about is cash flow. So cash flow is king here. If you can have six weeks of inventory in Amazon and two weeks of inventory at your warehouse and minimize any inventory shortages, that’s huge. With my China products, I got six months of inventory. With the products that we have from Mexico, we got in overall around eight to 10 weeks of inventory at the most. We have six weeks in Amazon, two weeks here, and two weeks in order. And we haven’t paid for the two weeks in orders. So the cash flow and how do you control the expenditure that you get from the disbursement that Amazon is, is providing you, it is a huge advantage. So you gotta factor that into this cost structure as well.

Kevin King:

Where are you at right now in like gross sales on Amazon with your Amazon business? Seven figures, eight figures. Where are you guys at?

Alfonso:

We’re kinda seven figures within the first full year of operation. And then from there we just pretty much triple, so we’re, we’re around 3.5 this year.

Kevin King:

That’s great. So now this little kind of like a 3PL that you set up to that consolidates everything and puts it on this little half truck to go up to Laredo. Do you do that just for your products or if someone else was out there, you know, sourcing stuff, you know, and they found a guy to make the spatula, but he doesn’t know how to get the box to put it in and I find another factory to put the get the box. Can I send those to a company like you? Or are there other companies like that where I can send it to actually have it finished goods prepared?

Alfonso:

Yeah, I’m not aware there’s any companies like that here. They might be, I’m not aware that there are, and we started this for ourselves, but we are also exploring the opportunity to open this up slowly, opening this up to people that are wanting to do the same thing. So people that came from the Mexico trip a couple of months ago show a lot of interest in our operation. They actually, they came here, they look at our warehouse and we’re exploring some opportunities with them as well. So this is something that could expand into a new business as well.

Kevin King:

What’s next for you? Just gonna keep focusing on the US market. Are you gonna expand up to Canada since that’s part of NAFTA as well? And you can get stuff up there from Mexico or you gonna come into the Mexican market at any point or you’re happy where you’re at right now?

Alfonso:

So Right, right now our focus is, is the US for sure. We are selling in, in Canada and we are selling in Mexico, ironically enough,

Kevin King:

Oh, so it’s coming back to. You ship to the US and then it comes back to Mexico.

Alfonso:

It comes back to Mexico. And we do have an Amazon fulfillment center like five miles from where we are but we don’t have any interest in sending products here to Mexico just because of how the taxes are regulated and how, how do you, how, how do you deal with all that? And there’s not enough demand for, for some of the products that we, that we sell. So we use NAR for Mexico and Canada and the US is just huge. It’s a huge market. There’s huge opportunities there. And we got some products in the funnel that we have lined up to expand our operation even further for this year and, and just keep, get the growth going and keep probably eight figures very, very shortly.

Kevin King:

It was awesome opportunities in this. And it sounds like you’re on the cutting edge here of actually manufacturing in Mexico and, and, and selling in the us. You’re kind of leading the way and paving the ground for everybody else. So if someone wanted to find out more about this or reach out to you to discuss maybe you know, partnership or if you open up your 3PL type of stuff, how would they reach you?

Alfonso:

Sure, they can reach out to me to my email account. So [email protected].

Kevin King:

Can you spell the last name for em?

Alfonso:

Gorena.

Kevin King:

Awesome. Well, Alfonso, I really appreciate you taking some time out today and stepping into the office, away from the warehouse there and sharing some really cool insights with us.

Alfonso:

No, it’s a pleasure talking to you, Kevin. Thank you very much for having me here.

Kevin King:

Awesome. And I’m sure I’ll see you at another event or in Mexico or somewhere soon.

Alfonso:

Looking forward to it.

Kevin King:

So as you can tell from our discussion, sourcing in Mexico could be a big competitive advantage for some of you. Depending on what you’re selling and what you need to source, it’s maybe something that’s definitely worth looking into to cut down the lead times, to cut down a lot of the other issues that you may be having with sourcing from overseas Alfonso’s on his way to eight figures doing just that. And it’s a pretty amazing story and he’s got some pretty cool ways that he’s doing things as you could see. I hope you enjoyed this episode. We’ll be back again next week with another awesome episode. But before we go, I’ve got some words of wisdom for you. You know, focus starts with elimination. It improves with concentration and it compounds with continuation. Focus starts with elimination, improves with concentration, and compounds with continuation. Have a great week and we’ll see you next time.


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