Managing Shipping Delays Out of Asia
March 23, 2021
Sanjay Chandiram is the CEO and Co-founder of Kaliber Global, a premier brand collective and one of the top 50 private label sellers on Amazon. He is also the CEO of ProMark, an e-commerce brand management firm. Sanjay holds an MBA in Operations, Finance, and Systems from the Indian Institute of Management Bangalore. His specialties include brand management, e-commerce strategy consulting, importing, and more.
Chuck Gregorich is the Co-founder of Net Health Shops LLC and Net Pet Shops LLC, multi-channel home decor and pet product e-commerce companies that import from several countries and sell on over 20 marketplaces in the US, Canada, and Mexico. Before this, Chuck was the CEO of Lorman Education Services, a national leader of continuing education seminars in North America. He holds a degree in Accounting from the University of Wisconsin-Eau Claire.
Jerry Kavesh is the CEO of Western Outlets and an Amazon seller of both branded and private label apparel and footwear. He is also the Founder and CEO of 3P Marketplace Solutions, a third-party marketplace retail company that helps apparel and footwear manufacturers achieve marketplace exposure and sales. Jerry has a BA in Finance & Marketing from the University of Washington’s Michael G. Foster School of Business.
Here’s a glimpse of what you’ll learn:
- Sanjay, Chuck, and Jerry discuss what has caused the shipping delays and high costs of getting finished products out of Asia
- How can sellers successfully source products from overseas?
- The recent challenges caused by delays in customs clearance
- Sanjay, Chuck, and Jerry’s strategies for maintaining control over their manufacturing capacities
- How to address changes in consumer preferences when delays occur
- What will shipping look like after the pandemic, and how will it affect private label sellers on Amazon?
- How to strengthen your business and effectively compete on Amazon in light of current shipping issues
- Sanjay, Chuck, and Jerry share their tips for staying up to date with changes in shipping in 2021
In this episode…
Over the last year, many e-commerce businesses in the US have experienced delays in products being shipped from Asia. This, in addition to an exponential increase in importation costs, has had a negative impact on their businesses, revenue, and brand reputation. So, what is causing these delays and high costs, and what can you do about it?
According to Amazon experts Sanjay Chandiram, Chuck Gregorich, and Jerry Kavesh, the delays at the ports can be traced back to an increase in demand for products, a shortage of containers, and delayed customs clearance. As they say, the effects of these shipping issues have been felt not just by sellers but also by retail stores, buyers, and customers. Luckily, they have some tried-and-true strategies for working around these disruptions and making the most out of the current shipping situation.
In this week’s episode of the Buy Box Experts podcast, James Thomson is joined by Amazon experts Sanjay Chandiram, Chuck Gregorich, and Jerry Kavesh to talk about the shipping delays and high importation costs of products coming out of Asia. They discuss what has caused these disruptions, how they have affected business operations on Amazon, and the strategies sellers can take to ensure that their products get shipped on time. Stay tuned.
Resources Mentioned in this episode
- Buy Box Experts
- Controlling Your Brand in The Age of Amazon: The Brand Executive’s Playbook For Winning Online by James Thomson and Whitney Gibson
- James Thomson on LinkedIn
- Sanjay Chandiram on LinkedIn
- Kaliber Global
- Chuck Gregorich on LinkedIn
- Jerry Kavesh on LinkedIn
- 3P Marketplace Solutions
- Western Outlets
- Disruptive Advertising
Sponsor for this episode…
Buy Box Experts applies decades of e-commerce experience to successfully manage their clients’ marketplace accounts. The Buy Box account managers specialize in combining an understanding of their clients’ business fundamentals and their in-depth expertise in the Amazon Marketplace.
The team works with marketplace technicians using a system of processes, proprietary software, and extensive channel experience to ensure your Amazon presence captures the opportunity in the marketplace–not only producing greater revenue and profits but also reducing or eliminating your business’ workload.
Buy Box Experts prides itself on being one of the few agencies with an SMB (small to medium-sized business) division and an Enterprise division. Buy Box does not commingle clients among divisions as each has unique needs and requirements for proper account management.
Learn more about Buy Box Experts at BuyBoxExperts.com.
Podcast Episode Transcripts:
Disclaimer: Transcripts were generated automatically and may contain inaccuracies and errors.
Welcome to the Buy Box Experts podcast. We bring to light the unique opportunities brands face in today’s e-commerce world.
James Thomson 0:18
I am James Thomson, one of the hosts of the Buy Box Experts podcast. I’m a partner with Buy Box Experts and the former business head of the selling on Amazon team at Amazon, as well as the first account manager for the Fulfillment by Amazon program. I’m the co author of a couple of books on Amazon including the recent book Controlling Your Brand in the Age of Amazon. Today’s episode is brought to you by Buy Box Experts. Buy Box Experts takes ambitious brands and makes them unbeatable. When you hire Buy Box Experts you receive the strategy optimization and marketing performance to succeed on Amazon. Go to buyboxexperts.com to learn more.
Before I introduce our guest today, I want to send a big shout out to the team at Disruptive Advertising. For off Amazon advertising, Disruptive Advertising offers the highest level of service in the digital marketing industry, focusing on driving traffic, converting traffic and enterprise analytics. Disruptive helps their clients increase their bottom line month after month. Check out disruptiveadvertising.com to learn more. Today, we have a very unusual podcast for you. We are joined today by three very large private label sellers, all of whom import products directly from Asia. All three are seeing firsthand the challenges of the shipping delays that are currently in place with a major shortage on raw materials and shipping containers slowing down everyone’s ability to get their products out of Asia. Before we go too far into these issues, let me introduce each of our three guests. Sanjay Chandiram is CEO and co-founder of Kaliber Global, a premier brand collective and top 50 private label amazon seller. Chuck Gregorich is co-founder of Net Health Shops LLC and Net Pet Shops LLC, a multi channel home decor and pet product e-commerce company that imports from several countries and sells on over 20 marketplace isn’t in the US, Canada and Mexico. We’re also joined by Jerry Kavesh, CEO of Western Outlets, an Amazon seller of both branded and private label apparel and footwear. Sanjay, Chuck and Jerry, welcome. And thank you all for joining me today on the Buy Box Experts podcast. Gentlemen, let me start by asking you, I brought you together today because companies of all sizes are experiencing significant shipping delays and higher costs to get their finished products out of Asia. Please give me some details on what the problems look like today, when they got started and what you believe some of the root causes are of these challenges.
Chuck Gregorich 2:47
James, I think this you know, this whole thing started last May and June when we started doing these blank sailings, the demand was down and so on. As we were trying to get stuff out of Asia, things were getting pushed from one week to another. And then when all the volume started coming back, and the third and fourth quarter is just, we just couldn’t find room on those freight liners. And then we started paying a little bit extra. And then of course, here after Christmas that just just blew up the cost for containers. I know we were paying, you know, 5000 extra for some containers above and beyond what we normally would not all of them. And we probably in January only got about half of our containers out of Asia that we wanted. Luckily for us, we somehow guess back in July, this was going to happen. And so we started shipping stuff back in October. That would normally ship in January. So we’re not beat up as bad as we could have been.
James Thomson 3:51
But um, but your train costs are a little bit higher, because you’ve got extra inventory sitting here now. Yes. Okay. Sanjay, what do you. I’m sorry, Jerry,
Jerry Kavesh 4:02
I would say we had a very similar experience, we’ve had a very similar experience. Our factories also started highlighting to us they were having issues getting containers out. And so they recommended that we put in our orders earlier. And we did, which meant that we were we were in a better position going into fourth quarter than some of our competition and being worried somewhat unique in that we sell both branded and unmanned private label products. So we were able to see both sides of the equation, those brands that had anticipated and broaden product early where they were in business and they saw a very strong fourth quarter. Those who did not, were out of or out of product and that and not be able to get product into the country has has really cascaded into the first quarter and cascading further in the second quarter. And so we are actually in the situation where we’re saying even though we had additional product in stock, we have out sold out of Many of that product just because like Chuck said, we had it. And now we’re in the position of trying to get containers into the country, which has been very challenging.
James Thomson 5:09
Sanjay, what what are you seeing with your business today?
Sanjay Chandiram 5:11
Very similar, James. So we noticed this early in the second quarter last year. And this was coming out of Chinese New Year when factories in China were closed. So we were well positioned in that we had a lot of inventory. So that put us in a position of advantage in April May, when the competition right out. And what we did was given our businesses pretty heavy, q4 centric, we finalized our q4 orders by middle to end of June, at least a month earlier than we normally do. And the idea was to have product start shipping early, mid August and receive everything by in September. Unfortunately, that didn’t quite work out the way we expected due to delays and not not non availability of containers. So during that time, the shipping costs tripled from what they were in the first quarter. Wow. And of course, there were issues down the line when it came to getting released at the ports and then receiving at Amazon and their restriction. So had a cascading effect. But you know, overall, it’s been a challenging time.
James Thomson 6:30
So let me let me confirm I understand this problem, just the right way. Sanjay, when you talk about you’re having problems finding containers, my understanding is there’s enough boats, but there’s physically not enough of these shipping containers available. Am I understanding this problem correctly? And if so, where did these containers go that they’re no longer available?
Sanjay Chandiram 6:54
I’m not sure about the details of where these containers right, I just think that there is more demand for products, and it has gone up. And there’s more products being shipped. So there is a finite amount of shipping, freight, sorry, freight liners as well as containers. So it’s a demand supply situation.
Jerry Kavesh 7:24
But James, something that I’ve read in and how accurate This is, is only as good as the article that I’ve read that it’s not as much as shortage of containers, although there is a shortage of containers, but it’s also where they’re located. They’re not in the right place. And and that that is compounding some of the issues out there. So for example, there are a lot of containers that are empty sitting in the United States, and they’re not where they need to be, which is in China. So that that is compounded part of the issue,
James Thomson 7:50
I’m going to assume that with the trade imbalance that’s currently in place between China and the US, there are a lot of boats going back to China completely empty, full of empty containers. We’re not offering much in return.
Chuck Gregorich 8:04
You know, James, I think there’s too many boats sitting outside of Long Beach right now that can’t get in there and get unloaded. So there’s a lot of full containers sitting there that they can’t get. And then those empty containers getting back, I know the folks that delivered the containers to our warehouse here, they usually send some foreign products back to China. And these steamship lines aren’t even let them load those containers. With that product, they’re having problems getting empty containers and shipped back because these steamship lines are just calling these containers back as quickly as they can. It’s better for the steamship line to get an empty container, run it back, make another trip back to United States, they can turn it more times that container more times in a several month period. And with the premium they’re getting off of that, you know, they come out ahead. So
James Thomson 8:58
talk to me about how did you see these surfaces start? Are these issues start to surface back back last last year. So when you say you started to see things happening, what was actually happening, you were putting in for getting a container and the delays delay started kicking in, or were there other more subtle measures in place.
Jerry Kavesh 9:17
But for us, it was pretty, pretty obvious we would order a container didn’t arrive and our forwarder would scramble to find a container. And so it took longer to get that container once it was loaded. And then delivered to the port, we started seeing ourselves get bumped either the ship wasn’t there because of the reduction in shipping capacity. Yep. And then once once the shipping capacity was coming back and demand was increasing, we were getting bumped for larger shippers. So we were getting we were getting kind of both sides of that equation. So it was very common for us to see a container bombed three and four times before we could get it onto a ship. That was our experience. Chuck. Sanjay,
James Thomson 9:54
did you have other early indicators that there was this problem happening?
Chuck Gregorich 9:59
I think we were The same was the blank sailings, or they just went sale that week, because the demand wasn’t there. And then when the demand did pick up, they didn’t print those steamship lines back in production or the way, I think they wanted to keep those prices high. And then, though, as everybody was going out of stock, including those big box stores, when everybody started placing big orders, they just didn’t have enough bolts or containers to handle all that volume. And so I think this problem is gonna last for a while, yeah,
James Thomson 10:31
I’ve heard that it takes upwards of 20 years to build a new port in the United States. And I also heard that we may need as many as three or four more big ports, the size of Long Beach, to 20 years of starting today to build a port. But right now, as far as I can tell, there are no plans to build additional large ports on the West Coast or east coast, I see this problem only getting bigger if demand for Asian based products coming into the US that continues to grow. This is going to be part of the reality of getting products brought in from another country. I’m curious around, as you see, I mean, all three of you in some way, we’re able to anticipate the problem. How do you solve this problem at a local seller level? I’m not talking, you know, the federal government deciding to step in and do something. But for each of you the scrambling around and being more nimble? How do you see yourself continuing to stay ahead of everybody else, in order to be able to continue to source product from overseas?
Jerry Kavesh 11:38
We’re increasing our safety stock. And that that takes capital. And there’s costs associated with that also, but the costs of being out of stock are larger than having safety stocks. So that’s that’s the approach we’re taking. But we have not been able to get caught up from this last holiday season to build those safety stocks. And so that’s that’s where we’re, that’s what we’re focusing on is keeping more inventory in the country and booking orders earlier and larger.
James Thomson 12:07
Sanjay, what do you what are you thinking about doing at this point?
Sanjay Chandiram 12:10
There’s a couple of things. One is looking at different categories of products that are us manufacturer, that do away with some of these shipping challenges. The initial feedback, there hasn’t been all that great. But we’re still going to pursue that. And then the other is looking at more products that it’s cost effective to ship even by air. So it’s hard to make the shift in the short term. But in the long term, I think that would serve as well. I think,
Chuck Gregorich 12:52
yes, are our strategy. You know, we we early on, we thought we thought we this was going to happen. So we started ordering early. And then we have three PL warehouses across the country that we deal with also. And so we’re doing things like not sending stuff to the West Coast ports, we’re moving inventory all the way over to the East Coast ports. So we’re not getting long jammed over in Long Beach or LA ports. In some cases, we’re bringing the container all the way to the east coast. And then one of our like our Midwest, warehouse, we’re shipping stuff by semi trailer out to California, it’s a little bit more costlier. But we’re able to get a few more containers out of China or out of Asia by sending it to the east coast as opposed to the west coast. So using multiple parts and multiple warehouses has been good for us. And then we try to position inventory with with Amazon using their ATL service. And some of these other places use on their freight services. So we got, you know, four or five different people working working for us trying to position inventory and move into different warehouses. I think if if somebody is strictly an Amazon seller, and they’re used to sending it right into Amazon, I don’t know if there’s a trick where you can, instead of sending it to a West Coast, fulfillment center, can you send it to an East Coast Performance Center, you might get a better chance of getting that on a steamship line.
James Thomson 14:27
Then have you heard about Amazon’s ability to work through all the shipping delays? I mean, are they in a position that they’re big enough player that they can offset and make sure they remain at the front of the line with shipping capacity?
Chuck Gregorich 14:41
They’re not. We use a GL and they’re just like everybody else. They got the same issues.
James Thomson 14:49
Chuck Gregorich 14:50
So I don’t I don’t think that’s but but by having multiple alternatives at least helps us a little bit. But um, yeah, I think there are I think everybody’s struggling with it. I know just last week, one of the major retailers, you know, said their stock stocks are gonna be hurt this first second quarter, the Red Sox stuff that’s going to affect their sales. And, and I think if you’re lucky enough to have inventory, you might have a really good, you know, March, April, May, again.
James Thomson 15:19
Chuck, Chuck and Sunday are sorry, Jerry and Sunday have either view played with moving products into East Coast ports.
Sanjay Chandiram 15:28
We have not Long Beach port has been convenient for a number of reasons for us. So we have not explored shipping product to the east coast, but we have us up to six different freight forwarders this past year, up from one to two at the most. And that has helped us to an extent and, you know, keeps them honest, when they know that they’re not the only game in town, right. But it’s a question of availability and who’s able to get your containers on a ship with ghost and less chance of it getting wrong.
Jerry Kavesh 16:08
We shipped our first container to Oakland in January, because Oakland had space and we’re able to get it onto a ship quicker than if we waited for Long Beach, we have not experimented with the East Coast. I do understand that the Seattle Tacoma where where I’m located just because we’re local, they they have capacity. And they’re they’re publishing that they have the capacity now, I have not explored yet. What the What if any additional costs will exist with sending it to Seattle and then trying to get it from there to two or three peels.
James Thomson 16:42
So challenge getting container space in China challenge getting the boat to arrive and actually be received into the US West Coast port. I’ve heard that there’s now this new challenge of products taking longer than usual, just to clear customs. Have any of you experienced that in the last three, four weeks?
Jerry Kavesh 17:05
And not only that, to add insult to injury, so to speak, we had we had a container pool for inspection. So that’s just added another week. But you know, that’s just that just happens, you know, that’s just a random, random pulling, but it is definitely is a every every step of the way is taking longer is taking longer to get the unloaded, is taking longer to get onto a train because we will train everything to Kansas City. And everything’s just taking longer. So it used to be, quote, the normal pre COVID. Once the container was unloaded, we were we were basically four days from our inventory. Now we’re at least two weeks and sometimes three. So
James Thomson 17:45
Chuck, anything to add to that. Yeah,
Chuck Gregorich 17:47
you know, we’ve always budgeted 30 days from the time it leaves the part to being in our warehouses. And, and really, it’s probably more like 45. Now, you know, like, like Jerry said, Every step of the ways been delayed, including the customs, you know, including the ports being slow, including the rails being slower. And so it’s everywhere. Yeah.
James Thomson 18:13
So let’s talk about some of these issues are beyond your control, what kinds of things can you be doing around for example, changing the countries where your products are manufactured? or changing your shipping quantities? How do those types of options potentially help you to alleviate some of these challenges? We talked about let’s let’s diversify out of China. Sounds easier than that. It actually is no talk to me about the kinds of things you’ve explored around how to have better control of your of your manufacturing capacities.
Jerry Kavesh 18:48
Which for us, we’re a smaller importer, and we have explored outside of outside of China, but what we found is we would have to send all of our components outside of China. And then the there weren’t as many sailings and it takes longer. And so we’re looking at stead of basically we used a similar metric of Chuck of about 30 days, I think we were at 35 days, we were looking between 65 and 75 days coming out of a couple of the other countries, and we just found it was not cost effective. So I go back to my earlier comment that being smaller, we’re basically building our we’re building a larger safety stock and we’re gonna have to carry that here in the United States. I’m looking for somebody who’s smarter than I am to to resolve that one.
James Thomson 19:41
So, some thoughts around you know, tackling different countries or different shipping quantities to be able to circumvent some of these issues.
Sanjay Chandiram 19:49
We have explored the Vietnam and India for our products not had success. India in terms of responsiveness and professionalism leaves a lot to be desired. Unfortunately, and Vietnam has very limited capacity. So most of which is already spoken for. That’s a challenge. I do know. There are some other brands that have moved manufacturing out of India over to the US for their products, that may be the way to go. And that’s where we are concentrating our efforts.
James Thomson 20:26
Chuck, anything else you want to add?
Chuck Gregorich 20:28
Yeah, you know, we saw some 10 different countries, and every country is having a problem right now. And we bring some stuff right out of Europe, and you think they would, they’re not Asia, but they got the same issues. You know, it’s an extra couple of weeks. And you know, whether it’s our freight forwarders, asking us to, to book the containers, four or six weeks in advance, they used to be we’d look at, you know, two or three weeks in advance. A freight forwarder is saying book earlier, and now we even got our factories that are asking us to book eight weeks in advance, because factories, they must have, you know, they deal with a bunch of freight forwarders, too, and they must have a feeling that if we can book earlier, there’s a better chance of getting something because these factories are in tough positions, because some of our factories got 20 by containers or products sitting in their warehouse, they can’t produce anymore, because they have no place to print the product. And so um, so I guess what we’re doing is we’re ordering early. We’re trying to book earlier. And like I mentioned, we’re trying to use those other ports and warehouses.
James Thomson 21:31
So what happens if consumer preferences change? They were extending this manufacturing process. And now if consumer preferences change, that sounds like there’s not really going to be an opportunity to change the selection that you offer.
Chuck Gregorich 21:47
Yeah, it’s, it’s painful. We had, um, we had a couple of containers that were going on Amazon that was scheduled to arrive at the end of October for the holiday shopping season. There’s stuff you buy in the fourth quarter. Sure, they both got checked in December 24. And that’s not a consumer error, but that’s just missing that whole season. Yeah. And thankfully, it was only two containers. I’m not 20. But I think that, um, you know, the, if you if you’re into the seasonal business, where it’s a short season, like, just Easter, or just July 4 stuff. That’s pretty risky right now, because you can’t afford to be four weeks late.
James Thomson 22:29
Jerry or Sanjay? And what are you doing to address potentially changing consumer preferences when it’s taking longer and longer for you to get products in hand?
Jerry Kavesh 22:40
That is less from the nature of my business, I’m an apparel and footwear, and so that we live that daily, regardless, and it’s um, so so we are deeper in our evergreen products, and we have been lighter on our what I would call our fashion products. And the brands that we work with that are not our own brands, they’re they’re doing the same thing. So right now. Right now everybody’s trying to figure that out. And that’s, that’s the nature of retail. Sunday, you’re
James Thomson 23:11
in a very seasonal business. How do you tackle this issue, if consumer preferences change, and all of a sudden, you thought it was gonna be hot for q4. Maybe it is hot, but you can’t get more inventory. Or maybe it’s no longer going to be hot, but you’re stuck with lots of product.
Sanjay Chandiram 23:29
We ended up dealing with that pretty much every year. So there’s some products. Yeah, the fun part. One part is when you sell to when you projected, and run out, what we have done to offset that is introduce other products that are seasonal, but for other parts of the year. So we’ve got that starts off from Easter, summer. And then Halloween. So that definitely helps. But then the delay is down. So just ensure you’re getting your orders and way in advance. So one of our things, one product line, we ordered in October of last year, for the season, just knowing that it you know, we ran out like five times during the season. And it did way better than we expected. And that’s never the demand. And so we are ahead of that curve. But as far as innovation in that particular category, launching new products, we’ve accepted that we’re going to miss the season, we’ll just use the season as just sort of a test and do some initial launch. And then the real volume will be next year.
James Thomson 24:49
So what happens when COVID has mostly passed and we’re back to whatever the new normal looks like, now, where do all these changes and shipping demands? Where does this take us We’re not going to have the same PP product demand, I would expect filling up these containers, Turner’s containers on boats, but consumers will want to get back to buying things that they typically buy. Pre COVID I’d like to hear your thoughts in terms of what where do where do we go here with this new normal over the next five to 10 years post? COVID?
Chuck Gregorich 25:22
Yeah, you know, we’re struggling trying to figure out when at least consumers make that switch, you know, right now, everybody’s buying products to spend their money. And when this whole COVID thing clears up, and people go back to buying experiences, whether they’re going to concerts, or ballgames or cruises, yeah, your Wednesday money going to switch? And how’s that gonna affect us? You know, I don’t know that right answer. But you would like to think that whenever that happens, that would actually help the supply chain a little bit because somebody’s spending money, and I’m going to the concert or a cruise or not buying all these products for their own. Yeah. And so I think in the short term, that’ll help us long term for for our situation, you know, I feel like, you know, the consumer demand more people going online, you know, brick and mortars, maybe closing more that e-commerce role is probably a good place to be going in the next five or 10 years. And maybe the supply chain to help a little bit because you mentioned it, the PP, they spend a lot of a lot of containers with that. Yeah, that goes away, and they get back to normal, I think the future is good.
James Thomson 26:34
So we’ll see. Jerry, your thoughts.
Jerry Kavesh 26:38
I go back to a newsletter I was reading, called a global port tracker. And they were speaking about that e-commerce and the new normal is going at it, the consumer moving to e-commerce and that, that we pulled forward such demand and growth and we have such growth in e-commerce field, that they said that they believing that we’re going to see a continued increase of stance and flattening of the demand curve, meaning that seasonality is going to disappear somewhat. So when you look at the the seasonality of the products, we had, you know, there’s there’s some highs, and there’s lows and peaks throughout the year, and they’re seeing that flatten and so they’re they’re projecting that we’re going to see an ongoing increase in in demand of imported products, which is going to continue to put pressure on on the supply chain and or the not necessarily the supply chain, but the the infrastructure at the ports and the rails and the trucks. So I logically I agree with what Chuck what Chuck is saying. But then I read these newsletters, which there’s that they’re thinking that we’re going to continue to see this increase of people buying stuff because their habits have changed. I don’t I just don’t, I don’t know. So, Sanjay, what
James Thomson 27:59
what’s your take on where we’re going here with these new shipping issues going forward?
Sanjay Chandiram 28:05
While COVID has definitely accelerated the growth of e-commerce, I don’t think there’s any turning back, there could be a temporary pullback, some short term loss of volume as other sectors open up and comers are spending more on experiences. But the demand is going to be strong, longer term. That’s what I feel there’s a new challenge right now, which I don’t think too many people are talking about. And that’s the rising cost of raw materials. And that’s going to impact prices, and how much of that can get passed on to our customer versus being absorbed by brands, that’s to be seen. increases pretty significant. We’re talking mid double digit, you know, anything from 15 to 60%, depending on the material. So
James Thomson 29:02
So you’ve already paid the China tariffs, you’re now dealing with higher shipping costs. Now you’re dealing with higher sourcing product costs. It certainly makes the long term appeal of getting products manufactured overseas. Every one of these reduces the opportunity for margin. How do you see all of this playing out with this the private label seller community on Amazon that has basically existed in part to be able to leverage sourcing from overseas. Did you see that slowing down very much.
Chuck Gregorich 29:40
You know, James, I think for the new person that’s gonna come in, it might be more scarier, because they’re looking at sourcing a product that the math just doesn’t make sense. You know, my cost is higher, my shipping cost is higher. And a lot of times, it just takes three or six months, wait for the market to adjust their prices, I might be sitting on a million dollars of inventory and all the costs that I can hold out a little bit longer. Yep. And so maybe a new buyer doesn’t understand that. And they’ll just say the economics don’t work out. But I’m sure people like us, you know, we get that. And we just keep plowing forward. And unfortunately, you got to, you got to raise your prices, and you got to hold some margins. And you got to hope the market moves up, comes up with your moves with you. I’ve seen that in our category over the last year, you know, some price adjustments, and I even got some factories over in Asia that compete directly with me. And I had a couple I was talking to in the last month that, you know, they’re saying they gotta raise their prices you can use, we’re gonna be at the price level you’re at now. And you know, they’ve always sold it cheaper because they could or they elected to, so they’re finally raising their prices. So it’s probably not a great thing for a consumer. But for a seller, it’s probably something that’s going to have to happen.
Sanjay Chandiram 31:09
There’s likely to be some churn, there’s the larger or the stronger brands will weather the storm, versus some of the less established wares that aren’t as strong financially.
James Thomson 31:34
Jerry, anything to add to that?
Jerry Kavesh 31:36
I don’t have anything to add. I think they’re both right on it. Yeah.
James Thomson 31:41
So let me ask you this, out of this situation, where is there opportunity for each of you to take advantage of these shipping issues? How can you make your business stronger today? How can you compete more effectively on Amazon as a result? Jerry, you want to start that one for us?
Jerry Kavesh 32:05
I’m sure I go back to my ability to increase my safety stock levels. And I’ve been and my relationships with the factories where we’ve been able to maintain some cost pricing, even though they’re seeing material and material price increases. So we’ve been able to maintain our pricing, partly because we’re also agreed to create some larger orders to help them Yep. And we’ve worked closer with them to create longer term projections for what we’re going to need. So they could be going backwards into their supply chain to try to take advantage of some of them and save them on their material costs. All those will, will help. And I think that’s where that’s where our strength is going to be because we continue to be in stock where we’re seeing other people that we’re working with that we’re competing against, they just don’t have the inventory, they don’t have the wherewithal to place to stay in stock and keep the safety stock. So once we get through the the challenges of getting the product here, I think we’ll be okay. And that’s been our pretty straightforward approach to this. Well,
James Thomson 33:16
How do you take advantage of all the shipping issues for a business like yours? That’s so seasonal?
Sanjay Chandiram 33:22
Yeah, it’s been more challenging because of the seasonality. But I mean, we do have enough historic data to know which products sell during which time of the year given that we were very well positioned last year, because of having more inventory than we had planned, coming into q1 and q2, that benefited us. But this year by design, we’re done that so we were just holding more stock. Again, it paid off because pre Chinese New Year, only about half the containers shipped of whatever we had planned. So stock outs yesterday is a higher holding costs, there’s more working capital, that’s locked up in inventory, but at least you’re not running into stock outs. And so earlier, you know, it was a 90 day plan that we had in terms of 90 day lead time is what we would account for from jump in order to let was delivered here. Now it’s looking more like 150 days, and it’s not great, but just making sure that you’re prepared for that and not going to run out. definitely helps.
James Thomson 34:41
How are you handling all of this and turning this into an opportunity for yourself?
Chuck Gregorich 34:45
Like those guys were seeing that we anticipated in July and started bringing inventory in early interesting selling here in January February at a much higher rate than we expected. Mainly because the competitors don’t have the product there. So we’ve been able to turn around and think that, you know, we are next containers that are arriving in March and April, would have lasted us several months, now we’re finding out, it’ll probably sell out pretty quick. So we’re actually doubling down and ordering some more containers, and hopefully, they’ll get out. So in the short term, it’s going to help us and I think if we go another month, with very few containers, we would be, we’d be in trouble. But we got quite a few containers on the water right now. And in a lot coming in April and May two, so it’s just taken advantage of the opportunity. And hopefully, you know, a lot of work a lot of my competitors are, are trying to companies and, you know, they’re they pinch a lot of pennies over there. So I’m hoping that they’re, you know, they’re just refuse to pay that extra freight costs. And, or they can, then, you know, we can take advantage of that.
Jerry Kavesh 35:59
Another advantage that comes to play here is, is as long as if we’re assuming we’re staying in stock, and our products are they perform well, that’s going to help our us with the algorithm also against their competition. So there’s a long term, there’s a long term play there, that that is attractive.
James Thomson 36:18
So let me let me wrap up our discussion, I want to ask each of you about software or companies that you’ve used during these these past 12 months, these companies being particularly useful in giving you visibility into the scope of the shipping problems that your products may have. What What kinds of tools are you using? Where are you getting your information? How are you staying up to date, so that you can better manage the situation.
Sanjay Chandiram 36:46
As I mentioned, we have expanded the number of service providers we use, and this is all along the supply chain. So getting information from those relationships that were formed, that’s definitely been helpful. The situation, so you just don’t except for one person tells you not innovations along the way, right? resources
James Thomson 37:14
Jerry, anything, you’re using at your end to help give you better visibility?
Jerry Kavesh 37:19
No, I don’t have any software tools, I’m real, I’m relying on my communication with the factory and my freight forwarders how you utilize to forwarders and what they’re, they’re very good at communicating, and we’re speaking all the time. And so they’re they’re keeping us informed of what’s going on with with them. And we’re telling what’s going on with ourselves. And so it’s very open two way conversation. And, and we’re very much in partnership, trying trying to figure out what will work best for both of us. It allows them to plan their production, and allows us to plan our delivery. So
James Thomson 37:54
Chuck, what are you doing a year end to stay up to date on all these developments?
Chuck Gregorich 37:58
Yeah, you know, I think I’m just like those guys, we we don’t have any special software tools that we use for that communication. And you know, we have a couple of freight forwarders and then we we use like I said a GL Amazon global logistics and we got some other major retailers we use their container shipments too, and so on. We’re getting a consistent message from everybody. And that was reassuring early on when when I found out everybody was having the same issues. I felt like it just that no one to everybody. And so just use use more you know, don’t rely on one freight forwarder or one way of doing it. You’re gonna have to use multiple because maybe, you know, maybe Amazon does have a way to get some stuff out that your freight forwarder doesn’t that week, and so we bump stuff around a little bit. Yep.
James Thomson 38:51
Sanjay, Chuck. Jerry, I want to thank you all for joining us today on the Buy Box Experts podcast. I want to wish you all good luck in getting your products into the US shortly. Thanks. And join us again shortly on the next Buy Box Experts podcast. And now to finish today’s podcast I’d like to share some final thoughts. For third party sellers to be successful on Amazon, a critical lever will be soliciting feedback from customers. We at Buy Box Experts are really big fans of the team at eComEngine, and it’s tools that help Amazon sellers to simplify the process of messaging customers of Amazon orders. To learn more go to ecomengine.com. And with that, I want to thank you for listening today and I look forward to joining you next time on the Buy Box Experts podcast.
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