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Why Having An On-The-Ground Presence Matters [Podcast ep.28]

GlobalTQM Podcast Ep28 Why Having an On the Ground Presence Matters? Sourcing in China

I was interviewed on another great podcast called ECommerce Excellence. The host, Joris Byron, asked me some really great questions and drew out some great insights, issues to avoid, how to overcome obstacles and general wisdom in Sourcing Products from China. 

As usual, we also drilled down on some specifics, such as: 

  • The two critical barriers with Chinese manufacturers or suppliers
  • Some unspoken rules to follow...
  • Keys to success!
  • The pros and cons of moving your manufacturing to China
  • How clear and concise communication can save you a lot of heartaches

 


I hope you enjoy the episode. 

Would love to hear from you if these episodes are helpful.!

Honored to be featured in CNBC Made It  alongside titans like Shark Tank's Barbara Corcoran and Serial Entrepreneur Gary Vaynerchuk. Dreams do come true! Click here to read!

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Podcast Transcript  

INTRO - 0:01

Welcome to the globaltqm.com podcast, where we teach eCommerce business owners how to source the best products from China, negotiate with Chinese manufacturers, navigate Chinese business culture, and grow your business to seven figures and beyond. David Hoffman is the founder and CEO of globaltqm.com, your team on the ground in China. With over 25 years of experience doing business in China, David and his team at globaltqm.com have the know-how and experience to overcome any challenge you'll face sourcing and manufacturing in China.

JORIS - 00:35

Hey, this is your host of the Ecommerce Excellence Podcast, and today I'm really excited to talk to David Hoffman. David is a serial entrepreneur and has built multi-million dollar companies. He has led the international trade powerhouse Global Regency as the CEO for over 15 years now. And he is considered an expert in China sourcing, supply chain, private label, and brand licensing. Global Regency services, or licenses famous brands, and retailers like JVC, Cuisinart, Kmart, Walmart, Aldi, and many others. In 2016, David launched globaltqm.com under the Global Regency umbrella, because he saw an incredible opportunity to assist SMEs, startups, and entrepreneurs with quality management issues and sourcing from China. And they offer a range of educational and mentoring programs and actually done for your service. So I'm sure this is going to be really interesting. David, welcome to the Ecommerce Excellence Podcast, super happy to have you here.

David - 01:34

Hey Joris, thanks very much. And thanks for having me.

JORIS - 01:39

Yeah, just to get started, I'd love for you to tell a bit more about your background. How did you get started? How did you, well evolve to this point in your career, because it's been a long career already.

DAVID - 01:52

Thank you Joris, I'll try and keep it short. I wish I could say it was all planned, but it wasn't. A lot of it was a series of events that led me on the journey. So, I think any entrepreneur takes opportunities when they're presented with them, and your personal circumstances guide your choices. And hopefully the path becomes a good positive one along the way. I started in retail in South Africa, where I come from, where we worked for a company that had a lot of retail stores, selling consumer electronics. And that was really the platform where I learned about retail industry, selling and consumer electronics. And I grew through the ranks in that company until about 16 years ago when I got the opportunity to come live in Hong Kong, in China, and doing the sourcing and quality control. And that's really when I started branching out into my own entrepreneurial journey from there, which led to a number of different opportunities.

JORIS - 02:54

Okay, so when did you know you wanted to be an entrepreneur? Because you started out working for someone else, and you even move to Hong Kong for them? At what point did you know like, "Okay, this is what I want "to do, I want to be an entrepreneur."

DAVID - 03:07

Joris, I always knew that I didn't want to work for someone. That was kind of something I always knew about myself. And working was a means to earn money and get experience. So it was always my desire, I didn't know it would work out that way, but it's certainly what I wanted. So a lot of the decisions I made, were always focused around the level of independence, those opportunities brought me, and the opportunity to be financially independent.

JORIS - 03:42

Mm-hmm. Okay, so from those early years in South Africa that working experience, what have you learned that you could use later when you started on your own?

DAVID - 03:53

The grass is not greener on the other side.

JORIS - 03:59

Okay.

JORIS - 04:00

That's a good one.

DAVID - 04:02

You work A lot harder when you work on your own.

DAVID - 04:05

I mean, I have a business partner. And you know, I mean, I don't think you ever are completely on your own, you always got surrounded by people in your life and in your business, that you work with. But you work a lot harder, and the stakes are always a lot higher. And there's no fallback where you can say, "Oh well, regardless of my performance, "there's still a company that I work for that does well, and can pay my salary, or my bonuses." You kind of realize, "Oh, if this doesn't work I'm dead. "What do I do next?" So it kind of lights a fire in you that really makes you go all out and work 10 times harder than if you're working for someone. So you know, people sometimes say, "Oh, I'd love to work "for myself and have that independence. "I'm so tired of working for someone." And I go, "Well, the grass isn't greener on the other side. It's going to be a lot harder. "but it is ultimately worth it."

JORIS - 04:56

Yeah, I think a lot of entrepreneurs can relate to that. I mean, usually, when people start on the entrepreneurial journey, it's either to get more freedom, or to get more money, and preferably a combination of both, of course. And then it turns out it's a lot of work. And I mean, most of us probably have read "The 4-Hour Workweek." Personally, I don't know anyone who managed to have a four-hour workweek. It's like, it's a lot of work, right?

DAVID - 05:26

Yes, absolutely. Exactly. Exactly.

JORIS - 05:30

Yeah.

DAVID - 05:31

And anybody who has read "The 4-Hour Workweek," there are great ways to delegate things, But then then line of business you're in, If you're in a business space where automation can run a lot of business, it helps, but certainly at the early stages, it requires time and energy.

JORIS - 05:46

Yeah, absolutely. And I think "The 4-Hour Workweek," is more of a book on productivity and efficiency, than on really reducing your number of hours to four. But anyway, that's a totally different discussion. So you're active in China, a lot of eCommerce owners they import from China, or want to import from China. What are some hidden risks of importing from China?

DAVID - 06:11

Joris, when you're importing from China, there's lots of hidden risks in terms of product quality, and product pricing, and knowing what you're getting. Not that those characteristics aren't inherent anywhere else. But I think when you're dealing with China, there's so many different levels and standards of manufacturing. And, depending on which manufacturer you're dealing with, knowing the level of what they can produce and the materials they use, and the shortcuts they may or may not take, are all factors that you don't have to necessarily think about doing manufacturing in other countries. So you've got to tread with a lot of caution. There are unfortunately a lot of scammers out there, where they'll take your money, take your deposits, don't deliver goods on time, or deliver an inferior quality product. So, you've got to do a lot more work behind the scenes to validate and qualify what you're going to get, and who you're dealing with. And I think that people underestimate that.

JORIS - 07:11

Mm-hmm. And how do you find a good supplier, a good manufacturer? Because there's always a language barrier.

DAVID - 07:20

Yeah.

JORIS - 07:21

And then on top of that, you're sometimes you're thousands of miles away from China, and you have to trust somehow whether it's going to be a good supplier or not. And that's really hard to do, I can imagine?

DAVID - 07:31

Yeah. And language and distance are two critical barriers. So there isn't a short answer to it. How do you find any good relationship? I think you start a relationship with good intentions, and you nurture that relationship over time. And I think just by you know, you judge a relationship on how well they communicate with you, how well you communicate with them. Their responsiveness, their performance. You do a lot of sampling, and you slowly build a relationship. And if there's a pattern of communication issues, or quality issues, or commitments not being met, you start realizing it's not a good relationship. But if there's a pattern of some positives, and a willingness to do things right, you go deeper into that relationship. So there isn't really a short answer here, but I do say, a lot of sampling, a lot of checking, a lot of cooperation. Don't leave things to the manufacturer to do on their own. You got to check things every step of the way and if you own that responsibility, it makes for a better relationship.

JORIS - 08:44

Yeah, right. Yeah, that makes sense. And then what would be a good starting point for someone who's considering importing from China?

DAVID - 08:53

I always recommend visiting China is a good starting point and attending a trade show.

DAVID - 09:00

Because I think it opens up your eyes to the reality and scale of what's going on out here. It gives you an opportunity to meet a ton of suppliers under one roof, without having to travel massive distances between them. So from a productivity perspective, it's great. And from an exposure perspective, it's great. And then if you've got time, you start visiting the factories and understanding how they work and operate. But I just think a trade show is a great starting point to really take a big jump into the world of possibilities.

JORIS - 09:38

Mm-hmm. Any trade shows in particular? I can imagine it really depends on the products you want to source from China.

DAVID - 09:44

It depends on the product category. There are a couple of big ones in China, like the Canton Fair, which they hold twice a year in April and in October. Which is in Guangzhou in China. And the Canton Fair is actually spread over a three week period. Because each phase, phase one, two and three, is held for one week. And they cover a huge range of product categories, or industries actually, to be more specific. And I think any product category you're interested in, you'll probably find it one of the phases of the Canton Fair. So to me, that's a great one to get started at, you almost...

JORIS - 10:24

Okay.

DAVID - 10:25

If you had to choose one, that would be the one I would recommend to everyone.

JORIS - 10:29

Okay, cool. So let's say we walk around the trade show, you start talking to some suppliers, what are some good questions to ask a supplier, to see if it's going to be a good one?

DAVID - 10:39

I think ultimately, you want to understand a little bit about their background, who they manufacture for? And what they like to manage, what brands they manufacture for, what countries they export to. Because and, you know every country's got its own regulatory requirements or compliance requirements. It's easier to work with a manufacturer who has some experience with what your requirements are going to be. And then ultimately, you do want to talk to them about their product, understanding the minimum order quantities they're willing to accept. Getting an idea for the products they're producing, the materials, the finishes they can do. And of course, getting pricing and container loadings because you want to be able to calculate if a product is feasible or not. So, you do need to get into the discussion of pricing, so you can work out what it's going to cost you to land the product, and if you're going to be able to sell it for a profit or a margin. Otherwise, you don't want to spend too much time there.

JORIS - 11:41

Yeah, sure. Of course. Yeah. That makes sense. Of course, it's also like the cultural aspect. Are there any rules that people should know when they do business in China?

DAVID - 11:43

Yes doesn't mean yes, it can mean no.

JORIS - 11:55

Okay.

DAVID - 12:02

Yes is a polite way of just agreeing with your question.

JORIS - 12:03

Uh-huh.

DAVID - 12:05

But yes,... Culturally the Chinese don't like to say no.

JORIS - 12:08:

Okay.

DAVID - 12:09

So they'll say yes, then they'll try their best and it doesn't necessarily mean they can do it. And I think the language barrier really is important to understand the difference because I hear people go to suppliers and talk in very complicated English, or sometimes they explain things in a way that the supplier just doesn't really understand. So just to slow it down, have the suppliers repeat things back to you, confirming it all in writing later is important. But the language barrier and cultural barrier is important to understand. It's not an aggressive climate, it's a relationship, you know. They have to like you, you have to like them, and then there's a willingness to help you and support you. So you know, building that relationship is very important to get cooperation.

JORIS - 12:59

Okay. To me that sounds really confusing. A yes, is not always a yes. Do you by now, I mean,

DAVID - 13:04

Yeah.

JORIS - 13:05

You've been there a long time, have you found a way to detect when they're saying yes, but actually meaning no?

DAVID - 13:11

Yes, we put it in writing, and we ask them to sign it off in our purchase orders. And then when they don't want to sign it back, we know they didn't really mean it.

JORIS - 13:23

Okay, that's a good one.

DAVID - 13:26

Honestly

JORIS - 13:27

But if...

DAVID - 13:28

It is that simple

JORIS - 13:29

Okay, yeah. But there's no easy way to detect when they're saying to your face, like, "Yes." And you spot it?

DAVID - 13:30

Mm-mm.

JORIS - 13:31

Okay, that's not a yes yes?

DAVID - 13:33

No, you can't tell. You've just got to work with them, get lots of samples, see if they can really do what they say they can do.

JORIS - 13:42

Okay, I can imagine that that's difficult for a first-timer who wants to navigate his way around suppliers.

DAVID - 13:49

It is and that's why the more you understand about the factory and can see the products they're already producing, and get samples. Hopefully, you go where it feels like it's going to be easiest for you to communicate, and the products are really close to what you want. Your goal is not to educate manufacturers on how to produce the product, you want to just try to find people who already have a certain competence. But that's why it's hard work. You've got to kiss a lot of frogs until you find your princes or princesses.

JORIS - 14:21

Yeah. That's not an easy task.

DAVID - 14:26

Mm-hmm

JORIS - 14:27

Do you have any horror stories of businesses that you know that tried sourcing from China and it went horribly wrong?

DAVID - 14:33

How much time do you have?

JORIS - 14:36

We still have some time, so go ahead.

DAVID - 14:39

Joris, the whole reason I came to Hong Kong 16 years ago with the intention to stay for one year. And the reason I ended up staying here 16 years was I just realized, if we were going to be successful in the product business and importing from China, we have to have a physical presence on the ground here. Just because of so many issues, whether it's quality problems, wrong plugs, wrong colors, containers shipping half empty. There are just so many things that can go wrong, the packaging is incorrect, the artwork is incorrect. You know, products don't meet a certain standard. A lot can go wrong. So being on the ground here has really been one of our recipes to success.

JORIS - 15:22

Mm-hmm, yeah. I can imagine that. That's a huge difference. If you have to rely on a manufacturer you've never really worked with before, and you're really far away, you don't know they said yes, but they actually meant no, then a lot can go wrong.

DAVID - 15:37

A lot can go wrong. And sometimes to be honest, the mistakes come from your side. You think you've explained something clearly, and it could be quite subjective. You know, if you said, "Produce this in green," and you show them a color sample of green by email, green can look very different on different monitors, and it's very subjective, right?

DAVID - 15:59

So if you don't know, "I should've specified the Pantone Color," you can't really blame them, but you do blame them.

JORIS - 16:06

Sure. Yeah.

JORIS - 16:07

But they do not mind readers, So it all starts with you. If you...

DAVID - 16:12

Exactly.

JORIS - 16:13

Have the right spec's, and are really clear about everything, then you can avoid some of the mistakes, I can imagine.

DAVID - 16:21

It's what I call attention to detail.

JORIS - 16:24

Mm-hmm, yeah. And that's not just in China. If you source from anywhere else, you have to be clear about that as well, I guess.

DAVID - 16:33

Exactly. And I think one of the communication barriers comes in that, some places would if you said, "I want it in green." They would say, "What color? Which green would you like?" They come back with the right question. Whereas here, if you don't specify they may not prompt you for the accuracy they are  looking for, they might say, "Okay, sure. Well, send me a picture. "and I'll do it." And they'll try and match it as closely as possible. Rather than saying, "Can you please provide me "a Pantone color?" So, it's just those little things. It's a two way street.

JORIS - 17:03

Right yeah. And is that a cultural thing? That maybe they don't want to bother you too much, with too many questions, and they just guess what you mean?

DAVID - 17:11

No, I think it's just circumstantial.

JORIS - 17:13

Mm-hmm.

DAVID - 17:14

You know, do they have the experience to ask, or do they not have this experience to ask it? You know, they are getting more and more mature now, the manufacturers, they are starting to ask these questions. But they also expect that if the buyer has a requirement, they'll make it clear.

JORIS - 17:29

Mm-hmm, yeah. Okay that makes sense of course.

DAVID - 17:32

Yeah.

JORIS - 17:33

Apart from the horror stories and everything that can go wrong, any success stories of businesses migrating to China manufacturing? Pros and cons of such a move?

DAVID - 17:42

Well, I think with all the potential risks involved, we're still fundamentally here doing it, and that's because we can source and develop products at a much lower cost. And when you do put the right attention into the details, you end up with a great selling opportunity, and you've got a product in the market that sells well, you make a good margin, and that's what the business is all about. It's the only reason you do it at the end of the day. So, by having a physical presence in China, we've managed to launch whole businesses off the backbone of being able to find, source, and develop products quickly. So, as hard as it may be and with all the risks involved, if it didn't make sense, we wouldn't be doing it. So you do have to do it.

JORIS - 18:28

Right. Yeah, of course. If you would start over again in your entire career, and that can be apart from your current business, but what would you do differently?

DAVID - 18:43

I think it would be two key things from the start and outset for me, that would make a big difference. I'd only do something that I'm absolutely passionate about. That when I wake up every day, I'm so passionate about it that it doesn't feel like work. And I would just choose the people I deal with and work with a lot more wisely. And just deal with only people that are top players in their space. It saves you a lot of time and effort and mistakes.

JORIS - 19:14

Yeah, I think a lot of people go through that, hiring the wrong people and just to realize that they should've invested a little bit more in someone better. That would have saved them a lot of money in the end, right?

DAVID - 19:28

Exactly. Exactly.

JORIS - 19:31

What's the biggest mistake you made? Is that also related to hiring people, or something else?

DAVID - 19:37

Yeah, I think sometimes just hanging on too long. You know, you've got to cut your losses quickly if something's not working. And try, you know you can't... Well, there's an expression, "You can't extract water out of rock sometimes." if you're too attached to something, or you've been working so hard on it that it's hard to let it go. So I think cutting losses quicker and moving on to the next thing quicker is probably a big lesson I've learned over the last couple of years.

JORIS - 20:06

Yeah, I think that's a great piece of advice. Well to wrap it up, this has been really great. And I'm sure we could go on for a lot more time. But, we're running out of time. And yeah, just want to make sure, Where can people find you if they want to connect with you? What's the best place to do that?

DAVID - 20:23

So if people want to talk to us, we normally start anything with a call. So our website is globaltqm.com. And if they go to our website, there's a “schedule a call” button. Or there's a form that can fill out to tell us what type of product they're looking for. But the easiest is to schedule a call, and then we talk about where they're at on their sourcing journey, or what kind of services they need on the ground in China. Because we love to help entrepreneurs starting up in the space giving access to our resources on the ground in China, and get them growing, sourcing, and developing products. That's the best way, schedule a call. What they can do if they hear this interview is, they can always, when they schedule the call, they can just put in the notes there, they can mention the podcast name. And they can mention that they want to speak to Dave. And I'll personally take those calls. Because I enjoy talking to entrepreneurs and identifying how we can help them.

JORIS - 21:22

Awesome. Awesome. Great, and we'll put that link in the show notes by the way. Thank you so much for being here, David.

JORIS - 21:25

Thank you.  It's been absolutely great. Thank you very much.

OUTRO - 21:30

Thank you for listening to the globaltqm.com podcast. So you don't miss a single episode, remember to subscribe to our show on iTunes. We'd also be very grateful if you'd leave us an honest rating and review. And don't forget to download your free gift, our ebook on China sourcing for startups. At globaltqm.com/gift.

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