Cut Costs and Keep Ethical When Sourcing Products | John Kyle Beaton

JK Beaton - Episode on 2024-04-25 at 15.13.10

Matt Edmundson: [00:00:00] Well, hello and welcome to the eCommerce Podcast. Yes, you're here again. Great to have you. Great that you're with us. If you don't know me, my name is Matt Edmundson. I'm going to be your host for the next little while as we chat about all things eCommerce. All designed to help you deliver eCommerce wow.

Yes, they are. If you're new to the show, very warm welcome to you. It's great to have you. Great that you're here. Hopefully, you'll get some good stuff out of it. I'm excited for today's show. We are going to be chatting with John Kyle Beaton. We're going to be talking about China. Keep watching. Can you still run a business that sources products from China?

All kinds of questions like that. Uh, we're going to get into, we're going to talk about TikTok, the changes. Oh yeah, it's going to be fun. So make sure you grab your notebook, grab your pen. You're not going to want to miss any of it. But of course, if [00:01:00] you're driving, Walking the dog or doing something where you actually haven't got a pen and paper.

The good news is we've got you covered. The show notes are going to be available on the website eCommercePodcast. net. You just head over to eCommercePodcast. net, find this episode, they'll all be there. But of course, Of course, if you are signed up to the newsletter, guess what? It's all gonna be in your inbox.

Oh, yes. So just go find the email and if you're not signed up to the newsletter, I, I just, I dunno what's wrong with you. I genuinely don't go sign up. Uh, instead of e-commerce podcast.net. It's been slightly FLIs, uh, but yeah, great to have you. Great that you are here. Now there are a few changes coming to the e-Commerce podcast, uh, which I will briefly tell you about now, historically.

Like today, the way we've done the podcast is we have in, we have interviewed, influenced, no it's the wrong word, we've interviewed, uh, experts in eCommerce, right, and we're going to keep doing that, and that is not changing, but we're going to [00:02:00] start adding a few things to the show. Uh, and one of the things we're going to add is interviews with people that run their own eCom companies or who are involved in eCom themselves from the trenches with the founders and all that sort of stuff.

So if you're listening to the show and you are an eCommerce entrepreneur, you are or an eCommerce er as we like to call you, um, and you run your own business, you're in the trenches, you're on the other side of the fence and you'd like to come onto the show, we would love to hear from you. So just head over to eCommercePodcast.

net, fill out the little application form and we will be in touch, because we're really keen to start doing some founder stories on here as well. So, um, yeah, if that's you, or you know anybody that meets that, Uh, goes on to say, know anyone that meets that criteria? It's not a job application, uh, but if you know anybody, uh, that is involved in eCommerce you think can make a great guest, do put them in touch.

We would love, love, love to talk to them. Now, speaking of great guests, John Kyle, the dynamic co founder of a product [00:03:00] sourcing agency who, alongside with his wife, has been cracking the code of China's business maze since 2010. He is fluent in Chinese, which I am just in awe of, uh, just absolutely in awe of.

Tried to learn a little bit once, just, yeah, no. Uh, his expertise spans from launching a single 7 Figure Home Goods Brand to Teaching Brands, How to Dodge Sourcing Pitfalls and Slash Their Cost of Goods, Orsois Keeping Their Goods Ransom Free at the Ports, which sounds like a good thing, uh, really, we've all heard the horror stories, uh, J.

K. is pumped to share his treasure trove of insights to help your business save some serious cash and headaches, uh, yes he is, so J. K. welcome to the show man, it's great to have you, how are you doing today? Thanks

J K Beaton: Great, Matt. That was a terrific intro. It's got me excited. Hi to everyone in the audience who's listening as well.

Matt Edmundson: Yeah, well, it's great to have you man, it's good that you are here, all the way from sunny [00:04:00] Canada, not China I might hasten to add, you're hailing from Canada right now.

J K Beaton: That's right, I'm currently in Canada.

Matt Edmundson: Is Canada still part of the empire?

J K Beaton: In spirit? Yeah,

Matt Edmundson: well it's definitely not in actual reality, you know, it's one of those, isn't it? I don't know. It's funny, isn't it, Canada? Do you have the, still have the Queen's head on the money and things like that?

J K Beaton: Well, we've tried, yes. So on most money, we've transitioned to having the King now. Right.

So there's money that's slowly coming into circulation that's just been printed. But yeah, still have the Queen or the King. And there's not, I mean, I think there's a certain Kind of like silent head handshake we get with other friends of the Commonwealth. I used to have friends when I lived in China from the UK, for example, from Australia.

And there's certainly some commonalities. [00:05:00] Yeah, I

Matt Edmundson: think it's a bit like, um, Oh, what's that? Uh, uh, that secret society that has the funny handshakes. Oh, come on. They're not really secret either. Uh, but then you talk about them a lot in business and it's a bit like that, isn't it? With the Commonwealth. We kind of, we, we, we're still quite friendly with each other and, and, um, and, and we, we do do things.

So my, my cousin found it fairly straightforward to emigrate to Canada, for example.

Oh,

Matt Edmundson: okay. Um, and so, yeah, it fascinates me. Whereabouts in Canada are you?

J K Beaton: Uh, I'm based in Montreal.

Matt Edmundson: Okay. So do you speak French as well as Chinese?

J K Beaton: Yeah, my Chinese is better than my French. Um, I, it's my, my French is passable.

I use French in some situations here, like at my kid's school, they go to school in French. So I speak with the teachers and the staff. But we live, we have a funny dynamic at home, Matt. We live in a bit of a Chinese bubble. So we speak Chinese at home with my wife and the kids. And then [00:06:00] with my team online, depending, Uh, who we're talking with, it's either Chinese or English, so French is used, but probably the least of the three languages.

Matt Edmundson: That's fascinating. That's, hats off to you. Um, I guess my first question then to kick it off, I don't know if you've ever dealt with France, but what's easier to deal with as a country, France or China?

J K Beaton: Oh boy. I'll tell you what. Um, I haven't sourced products from France, that's for sure, but a quick story, I used to work for a large university here in Canada, and I would give talks to sleep.

an audience of French parents. And every single time I would get up to give a talk, I would look across the audience and with all those eyes burning into me, and I thought everyone hated me based on, on the expressions on their face. [00:07:00] But wait, I get to the end of the presentation and I have the parents coming up and they're telling me, I think that's one of the best presentations we've seen all year.

Really, I couldn't tell. So, all to say, I mean, I love the French, um, but, uh, there's a certain, I think, sternness in business, uh, that I've noticed in, in the, in the few interactions I've had. And China is a completely different beast and I'll be happy to unpeel some layers of that onion.

Matt Edmundson: Yeah, absolutely. I like the analogy, we'll unpeel the layers of the onion, but not the French onion.

I'm

J K Beaton: going to leave that one for now, yeah.

Matt Edmundson: I don't blame you, let's not go there. So I was saying before we hit the record button and we'll get into this whole thing JK now, you went to China. As a student, and this is where you, um, learn to speak Chinese, I'm [00:08:00] guessing. When I was 18, I applied to do a gap year before going to university.

And I, I applied to go to China to teach English as a foreign language, um, because I was really into Kung Fu at the time. And so I wanted to go to China and learn Chinese and learn Kung Fu from, from, from some very capable people. Gentlemen, and it all sort of fell through at the last minute for whatever reason, uh, China didn't want, I can't blame China for not wanting me to go to be fair, but they just, it just didn't work out.

This was back in the, when would this have been? This would have been 90, 1991 maybe, somewhere around there, so a while ago, showing my age a little bit. Um, so I ended up going to North Carolina to work in a children's home in North Carolina, which changed my life in ways that were completely the opposite to how I expected China to change my life.

Do you know what I mean? It was really fascinating. So the fact that you got in, you did it and you learned Chinese, I, I, hats off to you, man. That's, that's, that's quite an impressive skill. [00:09:00]

J K Beaton: Well, I mean, in a different reality, you could have had an entirely different life right now, Matt, like based on what you just told me, if you had gone to China.

Yeah, yeah.

J K Beaton: And I think the same about my life as well. If I hadn't have gone to China, like, I am so deeply rooted with China and, and, you know, In an incredible amount of ways, I can't imagine, I'd be doing something else for sure, but what would it be?

Matt Edmundson: Yeah, I would just send you off, Dan, lots of rabbit trails in your head, and you'd say, I have no idea.

Yeah, exactly. But it's fascinating. No, it's interesting how you've come sort of, how you've done that. So what was it about China that intrigued you, that drew you in?

J K Beaton: Well, you know, I wish I had a great answer for that, but I think the simple answer is, I grew up in eastern Canada. In Canada's smallest province, Prince Edward Island, small town, like 3000 people.

And I desperately, desperately wanted out. I wanted to go see the world. And I had just gotten back from doing [00:10:00] a volunteer program in Ukraine, which was incredible. And it gave me the Travel bug and the want to see the world. And, uh, my roommate at the time, um, his friend's girlfriend was from China and she would come over to two different house parties and such.

And she just planted the seed one day that, Hey, you should go to China. You could easily teach English in China. You could go next month if you want to. And I'm like, Oh no, you're crazy. And for the longest time, I didn't really entertain the idea, but. As I again had just returned back from this really influential trip for me from Ukraine, I, I was looking for, for somewhere to go.

I wanted to go somewhere that would, that was completely different. I didn't have the intent at the time to learn Chinese that came once I was there. Um, but that was essentially it. I was [00:11:00] looking for adventure. I was looking to have some fun and, and I thought it was just going to be for a year. It was meant to be a gap year and then I would go back to Canada and continue working on my degree and then, uh, you know, kind of do whatever was next in line for me.

But I take it it

Matt Edmundson: was more than a year.

J K Beaton: Yes, it was. So it was definitely more than a year. So I went through a few phases. I had the initial shock phase of turning up in China. I didn't know what soul I flip on the TV. I still remember my first night, turn on the TV, the news is on, I can't understand a single word.

And I'm thinking to myself, what have I done? What have I gotten myself into? And, you know, as the months went on, you know, as you do, I got to know. China better every day was an adventure. People are incredibly warm, hospitable, uh, started to pick up the language a little bit [00:12:00] and then long story short, I met other expats in China who studying Chinese at university.

And, uh, I decided to follow in their footsteps and give that a try. It was initially for a demo for another year and I tried it, loved it. As I got to know the language, I. My experience and the depth of relationships I was able to build in China, uh, grew and, uh, I spent five years total. I met my wife in China.

We came back to Canada together. Uh, I've always been involved with China, um, ever since. So I've been traveling back and forth and it, I consider it. Like a second home to me when I go back to China, I feel super comfortable. Uh, so yeah, that's a story in a nutshell.

Matt Edmundson: Fantastic. Our, um, our operations director, her son, similar story, he went, he got, he trained as a teacher and he went over to, um, [00:13:00] China, and I don't know how long he's been there now, probably a good seven or eight years, I'm thinking.

Fluent in Chinese, you know, he's living the life in China, just absolutely living it and has no reason to come back to the UK. You know, he's got a very different lifestyle out there and you kind of go, well, fair play to you. Really, and um, so let's talk about China then, obviously we're talking to people running eCommerce businesses, there's, there has been this thing, hasn't there, for years that you, you buy products from China on the cheap, you flog them to the, the West for a higher profit.

There was a phase we went through where Every other website I saw was a Shopify site and the guy had gone to Aliexpress found some products put them on his website and Connected the two and so there was some kind of drop shipping and so, you know It would take six to eight weeks to order that's kind of gone out of fashion a little bit now we see the rise of things like Banggood and you know, these sorts of sites [00:14:00] taking off and you know, On top of that, obviously, a lot of the products we source from Amazon, they're going to be China sourced, so, um, I don't know if that's an accurate sort of state of the nation, uh, where eCommerce in China, China is, maybe you've got some more insights or some probably, probably an awful lot better insights than me, actually, on the whole thing.

Where, where are things at currently with China and eCommerce in the West?

J K Beaton: Well, I think COVID definitely made and what happened, especially in China during COVID made a lot of eCommerce brands and much larger brands as well out there. Think about sourcing elsewhere. You have Apple who started moving production.

I think that's a big news story. A lot of you listening would have heard. Um, so there's a lot of curiosity. People started looking at Mexico as an alternative, Vietnam. other countries in Southeast Asia. And for good reason, China was virtually shut down for the better part of a year, a year and a half during [00:15:00] COVID.

There were a ton of delays, container costs were high. So with good reason, folks started looking elsewhere. But what we've seen, a trend we've seen with a lot of People that reach out to us and clients is ultimately, they find it difficult to source outside of China for a number of reasons. One is that the availability of raw materials in China is just unmatched.

China is the raw material king. So, if you have a product made, for instance, in Vietnam, um, your raw material cost will be higher because it's coming from China. Your lead times will generally be longer because, again, materials are coming from China. And the availability may be spotty at times. Um, so China's largely rebounded after that challenging blip with COVID.

And [00:16:00] to your earlier point, yeah, there's a whole. Mishmash of what you can find in China. So you can go to IU Market, which is this huge wholesale market, the largest in the world I believe, and you can buy dollar trinkets, um, or you could go to these extremely high tech. Um, almost fully automated factories.

And then you can get some really high tech items as well and everything in between. So you have drop shippers. I wouldn't say that that model's fully died out. If, if anything, I think the model where you buy something cheap and you rely purely on, on marketing, um, is, is a difficult one to sustain. It's not one I've personally tried.

Um, but certainly for eCommerce brands. Out there, you can find anything in China. Uh, you do need to like, like, uh, sourcing from other countries too. You do need to be aware of, of certain things and what to look out [00:17:00] for and what to avoid. And we can break that down a little bit if, uh, if there's interest as well.

Matt Edmundson: Well, yeah, let's go there. What, I mean, how, what are some of the things that we, we should look at then when, when dealing with China? Because I mean, yeah, we mentioned in your bio, and I, it's one of the things on your website, you talk about, you know, the, the bribes, the things getting caught up in ports, you've got to pay.

I, I hear a lot of rumors, JK, um, and you know, separating fact from fiction, you know, the false news from the real news is always the tricky bit, isn't it? And so I'm kind of curious, what is happening? What is real and how do we, how do we avoid them if it is happening?

J K Beaton: Yeah, absolutely. So I, I would say, let's take the instance if you're looking for a new factory.

So I think how most brands, if they're doing it themselves would go about it, would they, they would go on Alibaba. Yeah. So jump on Alibaba. Um, just a word of caution. I think Alibaba is great. You can, you can [00:18:00] definitely find a good factory partner on there. Um, but you can also find a lot of other types of businesses that, that want your money as well.

Yeah. So you, uh, I think a few tips I would share. One, if you're going on Alibaba, make sure you pay close attention to the business type of the supplier. So whether it's a trade company, or a factory in particular. So trade company being a middleman that usually has an office set up in a major city in China.

Um, they normally mark up product costs as you would expect for such a service, but it can be substantial. Uh, so it can be anywhere from 20 to 40 percent on top of the product cost. Um, but that's not the biggest reason I dislike trade companies. I think it's. It's more that it's certainly one of them, but it's also, um, the issue with consistent quality.

So I think in any brand that's been ordering [00:19:00] for a number of years can probably relate that to the story of having, let's say you put in a first order and, and the quality is impeccable.

Yeah.

J K Beaton: And then you go, the second order is great. And then suddenly the third order, you're left with just a product that is off spec.

Okay. It's missing a feature that you had that was clearly included on the other two and you're left scratching your head what happened. And a lot of the time, if you're working with a trade company, the way that they operate, you know, they're trying to make money as, as their, as their biggest, um, goal.

And therefore, When you put in a purchase order with a trade company, they usually put it out for an RFQ, a request for quotes to their network of factories, which means that you're not necessarily getting the same factory with each. Right. Right. You see, you see where I'm getting at? Yeah. Yeah. Yeah. Yeah.[00:20:00]

Matt Edmundson: It's interesting. I, I'm, I'm, I'm making lots of notes, JK, as we go along and I, I'm, I'd never even thought about the trade factory Deal. So if I'm on Alibaba, look for the different, cause it's, it makes a lot of sense, forge a good relationship with a factory, then it's going to be consistent and consistent quality.

Um, an interest talking to a lady, uh, two days ago, actually, they used to source clothing from China. They switched, they've now switched to Thailand, um, because they couldn't keep. The, the factory they were dealing with because it was, you know, trade was getting better and better. Their minimum order quantities were getting higher and higher.

Um, and these were a smaller company and they just couldn't meet the minimum order quantities really and sustain the business. So they've, they managed to find a supplier in Thailand. Um, is that becoming a, was that like, do you think that's a one off? Is that, is that something [00:21:00] to think about?

J K Beaton: I think, you know, uh, there's an element of it being a one off, but definitely something to think about.

If you're a mature brand. And you have, uh, volume year over year on the same products and a growing list of SKUs, then absolutely it makes sense in advance of getting that bad news, potentially it could be that, it could be anything else. Your factory might go bankrupt for some reason. Factory may be bought out by someone else and they change their, their scope of business.

Maybe they're not focusing on your product type anymore. So for any number of reasons, I think it makes sense to look for a second factory. If all, I mean, the other thing too is to be able to play pricing off one another. So it becomes a leverage in. In our negotiating as brands to be able to say, you know what, um, factor B, I'm getting this pricing.

I want to give you my order, but can you match it? Um, or what can you do? How close can we get to this pricing? Yeah. [00:22:00] So I think, um, yeah, it's definitely. Definitely something that we encourage our clients, especially some of the more mature ones to look at is to, to look for that plan B in case something happens.

I mean, if you look at any 10 year span in business, usually something's going to happen. Um, so it's good to be prepared. Yeah.

Matt Edmundson: To be fair, that's whether you're sourcing from China or Indiana, that's going to be the truth anywhere, isn't it really? I mean, I, I have this, uh, In the in the courses that we teach, I have this this one called the 38 million lesson, which is where one of our suppliers changed the terms of supply on us overnight, and they were a US, well, British US supplier.

And just didn't care, did not care. And it meant, um, uh, prices had to go up by 30 percent overnight. They instituted a more you buy, the more you pay policy. And we were their biggest client. And so, um, our prices went up by, well, one of their biggest clients, our prices went up by 30%. Our business dropped [00:23:00] by half, uh, within inside of a few weeks.

It was fascinating. So the biggest supplier issues I've had are actually with US suppliers, British US suppliers who are just arrogant to the high degree.

I'll get off my little soapbox now. So I think, you know, some of the things that we associate with China, actually you can associate to companies all over the world, and I sometimes feel like they've got a bit of a bad rap. I guess if I was thinking about, you know, Then, you know, I was going to come to you guys and say, guys, listen, this is, I want to make this product, you know, this, this little gadget.

And I'm thinking, do I get it made in China or what? Um, I guess there's going to be some common questions people have, right? Some common obstacles that people sort of face. Um, How do I maintain quality, I suppose, how do I, again, mainly because of rumours, how do I make sure kids aren't exploited in the factories, you know, those kind of things, how do I deal with communication barriers, [00:24:00] um, how do I deal with intellectual property, because again, all the rumours, you know, about China ripping off IP, um, yeah.

How do I avoid the scams and things like that? Are these common? Or is this just how my brain works, JK? Are these like common things that people

J K Beaton: face? Absolutely common questions. I think it's fears, uh, any brand has when they, when they come into sourcing for the first time or for the 300th time when they're putting in that PO, right?

I think these concerns, although I will say it's easy to get into a pattern. So if you've been sourcing for a while, you have a comfortable, Factory relationship or what you think is a comfortable relationship, it's easy to not kind of go in and and do checks that you need to 'cause we're, yeah, we're also busy.

Right. Focusing on other parts of the business. Yeah. Um, but in any product business, uh, it is the core, it's the heart. of any product business is manufacturing and supply chain. It's not nearly as sexy as marketing. Like marketing's great, if you, [00:25:00] you know, if you create an ad campaign, you can see almost instant results.

You have, um, so many different metrics you can look at, but then you have in the background, the products you're selling, if one thing goes off and, in your manufacturing process, it, it can destroy the business, right, or completely. Or create a huge headache that needs fixing. Um, so I think if I can circle back to the trade company question real quick, I want to share something with you and the audience is a quick check you can do.

So if you're reaching out to factories in China, uh, specifically, and you're wondering, are they a factory or are they a trade company? Because the other thing is many of them don't want you to know they're a trade company,

right?

J K Beaton: Um, so you can check their address. Jump on to, uh, usually Baidu Maps. It's a good way to do it.

Uh, or you can jump on Google Maps if you're outside of China. Um, and if they're in a [00:26:00] commercial hub, if they're in a business district, chances are high that they are a trade company.

If

J K Beaton: they're in And, and, uh, an industrial area, uh, outside of the city, then chances are greater that they're a factory. So it's an easy sniff test you can do.

Yeah. To gauge on, on who you might be working with or already are working with.

Matt Edmundson: Mm-Hmm. That's a really good idea. I, to be fair, I, I, I do this with companies I work at, wherever they are. One of the first things I do is go onto Google Maps and go look at their business. I dunno why. I dunno what it, I just, oh, yeah.

Actually it's real, it's there, you know.

J K Beaton: Right. Yeah, no, you want to make sure that they're legitimate. I mean, if you're going to be paying someone any amount of money, you want to make sure it's not just going to vanish.

Matt Edmundson: Yeah, absolutely. So let's talk of then, you know, I really want to get to the, I don't, you know, the sort of the question, is it still a reasonable proposition for eCommerce businesses to source products from China?

Yes or no. [00:27:00] I can sit and ask you that question and you're going to say yes, in certain, you know, in certain circumstances, maybe not, but yes, I mean, I'm, you know, end of episode, but I want, I want to drill down into this a little bit further and deal with some, maybe some of the fears that people are going to have then dealing with China.

So, and again, this is your experience, right? You've done this and, and we said in the bio, actually, when we read out your bio, it's worth noting that this is, you know, You don't just supply products for the people, you sort of take your own medicine, don't you? In essence, you are an eCom brand. How do we, how do we maintain, um, I guess intellectual property?

Because there is this fear of, of being ripped off slightly, I think. Um, and I, so I want to separate maybe some of the fears and reality if we can. Let's drill down a little bit.

J K Beaton: Okay, let's do it. So for IP, it's, it's, it's a tough one. I think it's a tough one, wherever you're sourcing from, but specific to China, um, if you enter [00:28:00] into an agreement, let's say with a factory, it can be difficult to enforce.

That, that's a reality, uh, unless you have a ton of money and you're willing to go through the Chinese court system. Um, that being said, there are definitely steps you can take and should take. Um, with factories, whether it's a new factory partner or an existing factory partner. So if we look at factories and we're approaching a new one, the new product in hand that we want to source, especially if it's a novel product, it's not on the market yet.

We want to make sure the first thing we'll do is we'll drip feed. The product to the factories, we won't in the first sweep of getting quotes, initial quotes, we will not give the full design to the factories. We will generally give a like product, um, whether it's a product that exists already in the market or a mock up.

Of one, and we'll ask for general quotes. Through this process, we can get a feel of, of [00:29:00] who we're working with. You get a feel for the pricing.

Mm-Hmm.

J K Beaton: the amount of time it'll take to manufacture. Um, you'll get a feel for the, the, the communication. Are they strong communicators? Are they willing to work on our quantities?

And then, and only then as you move forward and you shortlist. And then you get down to, let's say, a small handful of two to three factories. We would then have a video call with each. We would ask them if they're willing to sign an agreement, usually an NNN that we have drafted up, and, uh, essentially saying that they will respect our intellectual property.

They will not share our design with anyone else. They will not sell it in other marketplaces where we're not selling. Going looping back to my first point, is it easily enforceable? No, not really. But does it set a precedent? Absolutely. So you would be I'm still flabbergasted at the number of brands that don't do [00:30:00] anything.

They have a virtual handshake agreement via their purchase order. And that's it. So I think if you If you make yourself low hanging fruit by not even mentioning it, it's easier for the factory to go and say, you know what, they probably don't care as much about their IP, therefore they won't mind if I sell their custom product to this customer in Australia.

Yeah, right. So I think it's all about setting that precedent. Is it perfect? No, but it's much, much better than not doing anything at all. And you can have that drafted. You can have it drafted additionally in Chinese. So it becomes more enforceable in China. I think the other thing too, they don't know that you aren't the crazy customer that will come after them.

If they do something. So again, coming back to low hanging fruit. So I think it's important to, if I just summarize drip feed, drip feed your design to factories and then, [00:31:00] um, get on a call with them, make sure they know you are a client that cares about their IP and continue that conversation. Um, there's some, there's some business practices in China that, We would assume would never happen because I don't think we would, uh, well, just, just differences.

So one, one being that, um, I think I, I would certainly assume that, um, if I went into an agreement with a factory that they would not sell my product to other marketplaces. Yeah. But sometimes the assumption, On the ground can be, Hey, you know what? Their IP is important in the US where they're selling, or in the uk, but they probably won't mind if we go and we sell it to Korea.

Right? . Okay. They don't, they don't, they don't have any customers there. So it's important to continue the conversation, Matt, and continually ask them, you know, uh. about your designs, what's going on with the production and keep bringing it up so that you're the squeaky wheel that they don't want to mess around with when it comes to IP.[00:32:00]

Matt Edmundson: Is it, I, I, I'm intrigued by this because, um, is it then just, is it a cultural thing? Is it a different way of approaching? Um, still, I mean, again, I, no. I'm thinking through my dealings with, say, British companies who have done very similar things. So I appreciate this is not a Chinese phenomenon, um, but again, it's something I think we associate with dealing with Chinese and this is where I want to separate a little bit of fact from fiction.

But is there, is there, there are obviously these cultural differences, um, which would be worth understanding, but what would they be?

J K Beaton: Sure. So, yeah, I, I appreciate your earlier point. This can happen anywhere. So you can get. Um, your IP ripped off in any country in the world, including certainly here in Canada where I am.

Um, I think one cultural difference that's interesting to, to look at is, um, the Chinese love to say yes. [00:33:00] So, uh, generally speaking, again, this is a generalization, but from my experience it, it has shown to be mostly true in that if you have a request, let's say you go to your factory and say, hey, I. In order to make this product profitable, I need you to decrease the cost by 20%.

They will say, yes, sure. But on the backside of that, they'll make it happen. They don't want to create a conflict. Right. So they'll make it happen, but you may, it may result in your quality deteriorating if they're replacing a certain material for Yeah, a less expensive one. So knowing that, um, I, I, I always like to tippy toe around this, you know, anything cultural differences, but it, it has shown to be, um, true in my experience.

So knowing that it's really important to ask questions. So instead of saying, Hey, give me. 20 percent off. It's saying, [00:34:00] Hey, these are my pain points. Um, in order to continue selling this product, I would really like to get a discount of 20%. How can we achieve this? Like what are your challenges? What are some different ways with this product we could get to a lower price point?

And then you create this discussion. It's not a close. Close ended, yes or no question. You create this back and forth dialogue of them telling you, you know what, uh, you're packaging. You might want to go from a full color box down to a plain brown cardboard box, or what if we decrease the dimension slightly so there could be any number of things or.

We have, you're currently using, uh, steel. We could use on, on this component, we could use a less expensive variation of iron. Uh, would you consider that? So like just different questions start coming up. So I think it's like any business relationship. Uh, it's really, really important to ask questions. [00:35:00] Stay Involved in the process.

Uh, I see a lot of brands that only reach out to their factories when they're putting in a PO or when they have a problem. Mm-Hmm. . And I think it's important to be much more involved in that if we're, if we're product, uh, brands, our Chinese factories, if we're sourcing from China, our, our biggest business partners, um, usually one of the biggest, if not the biggest.

Matt Edmundson: Yeah, that's powerful, that's useful, very, very useful. Well, let's deal with the other, I guess, the big elephant in the room when it comes to dealing with China, certainly from what I hear, is the ethical side. How do we mitigate, I suppose, modern ethics around sustainability, eco conscious, modern day slavery policies, and all that sort of stuff, which is probably quite rightly high on the agenda for a lot of companies these days.

And I'm kind of curious, Um, again, separating fact from fiction, I'm aware that, you know, biases are obviously [00:36:00] fed. Quite a lot by fiction and and and and so I'm really curious to hear your thoughts.

J K Beaton: Sure. I think a lot of Concerns around this have stemmed from news stories and in the 90s Predominantly when China was opening up they were newly newly moving into becoming the manufacturing hub of the world and And there were such practices in place.

I'm not saying there, there's not any more, but I will say we look at dozens of factories, if not more, every single week. And I never come across, uh, instances of child labor, for example. Um, that being said, so, you know, you can look for certain ISO certifications, um, that factories would have done to show that they, um, treat their workers well, their, their workers are a certain [00:37:00] age, um, they're not being overworked, so on and so forth.

So there's, there's certain certifications you can look for, um, I always recommend if you're looking to work with a factory and you've gone Uh, into the shortlisting phase of getting into sampling, considering putting in a P. O. Have an audit done. They're not too expensive. You'll spend 300 to 500 on an audit on average.

I mean, it depends on your product complexity, but on average, and you can get someone to go into the factory. That's something our team does. You can go into the factory, they'll check everything. They'll take videos. They could have you even on a video call. You'd meet with the factory owners. You see the factory flower with your own eyes.

And certainly nothing beats going to China and seeing it for yourself. Yeah, so jump on a plane and go check

it out.

J K Beaton: Yeah, I mean, it's the best, the best way. And I'll circle back. If you want to have full transparency into your supply chain, [00:38:00] you need to avoid trade companies. You need to work direct with factories.

Because again, trade companies create This, um, this mist, this fog between you and, and the factories ultimately, and they will never share with you which factories they work with, that, that's, they're bread and butter. Um, so try, try to go factory direct, build a relationship, visit in person, uh, ticket prices have gone down going to China, they're very high for a while there, um, if you haven't been to China, someone listening or watching this.

You'll have so much fun. The food's amazing. People are incredible. You'll be welcomed with open arms.

Matt Edmundson: I'm there, man. Any excuse, you know, jump on a plane and go see. And I'm guessing there's some very beautiful parts of the world that I've not yet seen inside the Chinese borders. Let's, if I can, uh, JK, just in the, in the, in the sort of closing part of the, the, the, the podcast, [00:39:00] let's reverse it slightly.

Um, this is me going and getting products out of China. Can I sell my products into China?

J K Beaton: Yeah. Yeah. It's, it's a little, yes. So that was actually one of my earliest projects. I worked for a clothing company in Montreal back in 2011 and I went into my boss's office at the time with his harebrained idea. I was like, I really hope he, he says yes, which was to bring, to bring the, uh, The brand's clothing products was for children's clothing and rainwear to China and I go there and find a distributor and thankfully he said yes and I was on a plane a month later and so yeah absolutely you can.

I think you need to have Some brand recognition. Um, if you're, if you've, if you don't [00:40:00] have like you're, so here's the thing in China, um, because of all of the local manufacturing, there are an incredible amount of cheap options for goods. So if it's just another private label, I don't know, a soap caddy, For a sink or something like that.

It's very, very easy to find it. But if it's branded, if it's a branded line of children's stationary products, um, that have a licensing deal for Paw Patrol, or there has to be something unique that would make the local buyer, uh, willing to part with their money. Over something that, um, can easily be found.

And I had, interestingly, we tried on my own brand, my home storage brand, uh, to go into Singapore and start selling in Singapore through, uh, Amazon. And we had a terrible time because, [00:41:00] uh, we didn't have that big brand name recognition. And. Uh, there's so many products easily available through different sites like AliExpress, um, that it was hard to compete and really, really hard to price, uh, the price points we needed to be profitable.

Yeah, it's possible, but you need to have a certain approach and your brand has to be positioned in a certain way.

Matt Edmundson: Very good. Let's deal with, uh, the politi and I, I try very hard to stay away from politics, uh, especially on this podcast, but I am very aware that at the time of recording, um, Biden has signed something which will in effect ban TikTok, as best as I understand, uh, from the U.

S. If Trump gets back in, the, the rhetoric around China is, is, well, I mean, it's like a, it's like Apollo Creed and Rocky Balboa, isn't it, [00:42:00] in a lot of ways to get it going toe to toe. Um, how does that impact everything?

J K Beaton: Well, it definitely has an impact. Um, I think especially in the last five years. Uh, Relations on the surface have eroded, certainly what we see in the news and I think what's happening in the Chinese news as well on reporting for the US.

On the ground, as it applies to factory relationships, we're not really seeing a change. I think the place to look out for is, you know, there's already that, the 25 percent additional tariff from. Many years ago now that came into effect in the U S but we, we've done a lot of studies and, um, within our agency to look at costing because we want to be able to transparently tell people that come to us, um, that it's still affordable to [00:43:00] source from China, even with additional tariffs.

And the answer for most products, not every product, but most products is, is yes.

Yeah.

J K Beaton: Um, And there's multiple fa factories for that. But it's an interesting time we're in and I think, uh, that's not gonna go away. China, you, you have two behemoths like your Mm-Hmm. your rocky analogy. I like a lot. I , I watched the whole series.

I rewatch them quite a bit too . Um, I, I think that fight will continue. Mm-Hmm. Um, and it'll be interesting to see, but the reliance the two countries have on one another is also, uh, very, very large. So, is that trade relationship going away? Definitely not. Will it change? Yes. And let's, I don't know, uh, yeah, let's, let's see what happens.

But TikTok, TikTok's a bit, I, I haven't delved into that too, too deeply, but, um, you know, it's a little bit tit for tat as well. Um, it, it definitely [00:44:00] makes for a great news story. Um, and it's a, it's a great political play as well, um, in, in some ways, uh, a lot of social media has been banned for years in China.

Facebook has been inaccessible five, 10 years now, for example. Um, so yeah, so I, well, we'll see what happens.

Matt Edmundson: Yeah. It intrigues me. It does intrigue me, you know, the whole, and especially, I guess with the, you've got the war in Ukraine. Yeah. Yeah. And you've got the split there between, you know, Russia and China and you just, I guess it just all feels a little bit unstable.

But then I, I'm kind of going, well, I'm not sure it ever I don't know if it feels more unstable than it ever has. Maybe I'm just interpreting world events slightly differently. I don't know. Um, but it's been, honestly, it's been absolutely fascinating chatting to you about China. Really, really enjoyed it.

And I think, um, to answer [00:45:00] my own question, can you still trade with China? I think you can. And I think actually you've dispelled some myths and some fears, which I think has been quite helpful. So thank you for doing that. Um, We have this new segment, uh, now, JK, I think I mentioned this to you earlier. We call it Ask Matt, where you get to ask me a question, but I don't answer it now, I answer it on my social media channels.

So, we're going to record, we're going to, I'm going to say we're going to record, we're recording anyway, but we're going to record this question, we're going to play it back on social media, I'm going to give an answer. What is your question?

J K Beaton: Sure. So my question for you today, I recently heard that instead of reading five books, you should read one great book five times.

So for you, what, what is one recent book or not even recent? It could be a book that you've always found value from. What has that book been for you that you've been rereading five times or more?

Matt Edmundson: This is a Brilliant question, and I love it, and I'm going to answer it [00:46:00] on social media. So if you want to know my answer to that question, do check it out.

Come follow me on Instagram, uh, just find Matt Edmundson on Instagram, and we'll do it there. Listen, uh, JK loved, genuinely loved the, the, in fact, let me just flip, before we get into how people reach you, how would you answer that question? Because I can't answer it, I've got to do it on my social media channels.

I'm just curious to know what your answer is.

J K Beaton: Yeah, um, oh, geez, I should have expected that one coming, huh? That was a great

Matt Edmundson: question. I've got to think of an answer. I

J K Beaton: think one book I've been revisiting a lot in how I want to position and I think a big part of what we do as an agency is education. So we're sharing our philosophies, our thoughts on, on how to transparently source from China.

And, um, and I've come to realize that [00:47:00] it's, you can have the best message, but if you don't have it packaged in the right way, that it means something and it catches attention, it will, it'll be missed. Yeah. So I've been revisiting, uh, building a story brand.

Matt Edmundson: Oh, Don Miller.

J K Beaton: Yeah, that's right. Don Miller. Yeah, it's been great.

So I'm going through that and we're applying it to I love writing. I'm not a particularly good writer, but I've always enjoyed writing and copywriting, sales writing. So we've been looking at how to repackage that within our agency and across our brand. And we're actually just partnered on a new brand I'm working on.

So we're Thinking along the lines of understanding our, our new, um, market demographic through the lens of that book. So, it's, it's been impactful for, for me.

Matt Edmundson: Yeah, no doubt. I love Don Miller's stuff. I did his course as well, years ago, building the StoryBrand course, very, very good. Makes you, and we actually, some of the lessons that we've learned on that, I still [00:48:00] talk about today.

Um, and, uh, I, the, the, the reason it really hit home with me, because he uses Star Wars Analogies a lot. . It does true. And I was like, oh, thank you Jesus. 'cause this is my language, right? . Very, that's just brilliant jk. Listen man, uh, appreciate your time. Appreciate you being with us. How do people reach you if they want to do that?

What's the best way to connect?

J K Beaton: Yeah, sure. So what, one of two ways I'm active on LinkedIn under John Kyle Beaton. So give me a follow, connect, always happy to connect. Um, or you can email me direct at jk at China product pros. com.

Matt Edmundson: jk at China product pros. com or on LinkedIn. We will of course link to all of those things in the show notes as well.

But, uh, any final words from you, JK, I did really appreciate you being here, man.

J K Beaton: Yeah, no, it's been a pleasure. I think if I were to give one last piece of advice that's been impactful for [00:49:00] our, my brand and for clients, it is if you don't already have a refund policy in place for defective goods with your factory, start talking about one.

It will give you, uh, it'll help a lot on, uh, and reducing your, your cost of goods. So Briefly, the way that works for us, for any items that are returned by customers that we are deemed to be defective, we will have them replaced by the factories. It also creates a nice ongoing dialogue around quality. So that's, that's my final parting piece, uh, tip there.

Fantastic. Love that. We're staying to the end. Yes, exactly. For anyone that's listened to the end, that's right.

Matt Edmundson: You got the, you got to save the best till last, right? I love that. Yeah, no, I love that. J. K. Listen, thanks for coming on, man. Genuine pleasure, uh, to meet you and to connect and, um, uh, no doubt our paths will cross again soon.

J K Beaton: Yeah. Wonderful. Thank you so much for having me on, Matt.

Matt Edmundson: Fantastic. Well, there you go. Huge thanks to [00:50:00] J. K. for joining me today. Also, be sure to follow the eCommerce Podcast wherever you get your podcasts from because we have more great conversations lined up and I don't want you to miss any of them. And in case no one has told you yet.

Today, let me be the first, you are awesome, yes you are, created awesome, it's just a burden you have to bear, JK has to bear it, I've got to bear it, you've got to bear it as well. Now the eCommerce Podcast is produced by PodJunction, you can find our entire archive of episodes on your favourite podcast app.

The team that makes this show possible is the stunning Sadaf Beynon and equally stunning Tanya Hutzlek. Our theme song was written by Josh Edmundson and as I mentioned, if you'd like to read the transcript, the show notes, all of that good stuff, just head over to eCommercePodcast. net where incidentally, you can sign up to the newsletter and just make sure every week all this yummy goodness flows straight to your inbox.

Yes, you can. That's it from me. That's it from J. K. Thank you so much. I appreciate it. For joining [00:51:00] us. Have a fantastic week wherever you are in the world. I'll see you next time. Bye for now.