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

#339 - Weighing The Advantages & Disadvantages Of Moving Your Manufacturing To Mexico with Alfonso Gorena Speaker 1: Welcome to episode 339 of the AM PM podcast. This week, my guest is Alfonso Gorena from Mexico. Alfonso is a seller for the past four years. He started off sourcing his products in Asia, but he has switched about 95% of his sourcing to his home country of Mexico and selling virtually everything in the United States. He's going to be talking about how he does it, the pros and cons, How to do it if you want to do it yourself and a whole lot more. Enjoy this episode. And don't forget, the Billion Dollar Seller Summit in Puerto Rico is just a couple months away. That's right, from June 11th to June 15th, about 100 to 120 of the top sellers from around the world will be gathering in Puerto Rico, in San Juan, Puerto Rico, to be specific, for the eighth Billion Dollar Seller Summit. These are seven, eight, nine-figure sellers. We had 11 folks doing over $100 million a year. At the last live in person event, the median, not the average, but the median in the room was 10 and a half million. So this is a very high level group, got a high level group of presenters, as well as a ton of networking and fun activities. It's going to be a great time for everybody that's there. If you want information on that, be sure to head to BillionDollarSellerSummit.com. BillionDollarSellerSummit.com. Unknown Speaker: Welcome to the AM-PM Podcast. Welcome to the AM-PM Podcast, where we explore opportunities in e-commerce. We dream big and we discover what's working right now. Plus, this is the podcast where money never sleeps. Working around the clock in the AM and the PM. Are you ready for today's episode? I said, are you ready? Let's do this. Here's your host, Kevin King. Speaker 1: Alfonso Gorena, welcome to the AM-PM Podcast. I'm happy to have you here as the guest this week. Speaker 2: Hey Kevin, thank you very much for having me here. It's a pleasure. Speaker 1: We just saw each other just about a month ago or so at the Prosper Show in Las Vegas and I think you said that was like your first time to actually go to one of these big Amazon shows, so how was it for you? Speaker 2: It was great, Kevin. It was a great experience. The networking was awesome and the floor, the expo on the floor was really, really good. So we had a great time up there. Speaker 1: So you said that was your first event really to go to, right? Speaker 2: Yes, actually, we started back in 2019 and then just right after that COVID hit. So for a couple of years, there was nothing really, nothing really going on. And last year, we couldn't go just because of the timing. So this was our first year there. So it was just something that we needed to do. Speaker 1: And now you're a lot of people don't know you, but you live in Mexico, you're Mexican and live in Mexico, correct? Speaker 2: Yes, actually, I'm from Mexico. I'm from Montreal, Mexico. I was raised and born here and I did live in the U.S. for almost 10 years before doing this Amazon business. So the business that we have is currently set in the U.S., but our operation is also part in Montreal, Mexico. Speaker 1: So for people that don't know much about Mexico, they've heard of Cancun and they've heard of Acapulco, but they don't know where Monterrey is. Tell them, where is Monterrey actually in Mexico? Speaker 2: So Monterrey is located in the northern side of Mexico, so very close to Texas, to Laredo, San Antonio, McAllen, to the Valley area. So it's within a couple hour drive from the U.S. actually. Speaker 1: And it's a big industrial kind of area, like manufacturing area, right? Speaker 2: Very big city. We're probably talking about four to five million people living here in very industrialized city. A lot of manufacturing operations and multinationals have their operation down here. So it's a pretty big city. Speaker 1: Now you said that, so before you got into the Amazon business in 2019, we'll talk about that in just a little bit, but before that you're living in the States for 10 years. What were you doing in the States during those 10 years? Speaker 2: So I was actually working for a multinational company for General Electric. So I was traveling all over the place and just moving from one city to another one. So I live in Milwaukee. I live in Ohio. In Cleveland and just went back and forth between Milwaukee and Mexico for a few times there and also in a different part of Mexico City. So I spent like 10 years just going back and forth between those cities. Speaker 1: Is that doing like a engineering work or is that more management's type of work or what type of work was that? Speaker 2: So actually my background is I'm an industrial engineer and graduated like 20 years ago. I live with over 20 years, 24 years now. And I spent 20 years in manufacturing and operations pretty much all over the place in between those roles. So working in sourcing, in manufacturing, in lean manufacturing. And most recently, like my last roles before I jumped into this Amazon venture were running manufacturing plants. So I was running a manufacturing plant here in Monterey for MRIs and x-ray equipment for GE Healthcare. And after that, they went and run a ceramic industry. Different industry in Saltillo, which is very close to Monterey also. So I spent four years there running their operation as well. So pretty much in that background, very different from e-commerce, nothing to do with e-commerce. I didn't even know that you could sell in e-commerce when I was working with this company. Speaker 1: How did you find out about this opportunity to sell on Amazon? You said you started in 2019, but how did you stumble across it? Speaker 2: Yeah, so actually it was my wife who stumbled into this. She was looking into doing something for herself and she started doing some research and she found out that there were people selling on Amazon and buying stuff from China and just sending it over to the US and making some product brands around it. So, she got interested into this and I was in the middle of a job transition and it was just like the right timing. So, I started getting involved with her into this and when she came and said, hey, we need to open an LLC and we need to get some CPAs and we need to figure this out, I was like, okay, let me Do a little bit digging with you into this and we'll figure it out. So I start looking into the numbers and I start looking into some of the training that she had bought and that's where I saw it like the opportunities like wow, it's like I didn't even know that people were doing this. So I started looking into the potential of, okay, what if we bring this product here? What's the margin? Started looking into some of those numbers. And what really helps is with all the background that I had between my first 20 years in the In the manufacturing industry was like I understand the numbers really well, I understand how products were sourced, so I understand everything from a business perspective and it was easy for me just to really look at this and saw the potential to escalate this into levels like it was crazy, like I couldn't even imagine those numbers. Speaker 1: What kind of products was your wife looking at originally? What category was she looking at? Speaker 2: So when we started this, we were looking pretty much at anything that could give us a good margin. So one of the first products that we were looking into was some like bamboo activated charcoal kind of products that We're used for the air purifying systems, so we're looking into that, we're looking into some other like some test strips and things like that from China. Those were some of the first products that we came up with and we launched actually. So it was very interesting because we started this business, it was June of 2019 and end of June. By the first week of August, we already have three products pretty much on order and ready to ship it into Amazon. So we're talking about a month just when we fully understood the business of what needed to be done. We jump in with both feet so we purchased three different products from three different suppliers, three different categories and we launched those products, created their own brand and everything. So, all of this within four weeks, right? So, I was working 24-7 on this and just making sure it was going to be a success. So, by week six, we already have our first product hitting Amazon and we start making sales from day one. So, it was just very exciting to see that all that investment that we put into in time and money coming in fruition. Speaker 1: How much did you invest originally to do these three products? Speaker 2: We started with $10,000 pretty much. So we said, here's $10,000. We're going to start with this. And we got money in the back to make more orders if we need to. But we're going to divide this into two products. So we say this $10,000 is going to cover not only the products, but it's going to cover the LLC formation, everything that we needed to do around training. So pretty much everything. And we had the backup in the bank to say, if we need more, we'll just put more money into this. We weren't worried about that, we just worried about how to minimize the time that it took for a successful launch. So this is the thing, if you launch a product, and you do one product, and you do the normal timing, because this normal takes four months to do a launch from China, it doesn't take four weeks, it takes four months. And we say, if we're going to take four months to see if this is going to be successful, it's not going to work out. It's like we're going to waste four months and then we're going to do it. Oh, you know what? It kind of worked. Let's do another product. Let's wait another four months. So we're talking almost 8 months to a year before you can see if you're successful or not. So we say we're going to cut this in half or even in three and just take a portion of the time and put that into three products and hopefully one of those three products, which we obviously did all the research, is going to pay off and we're going to just take it from there and just keep growing the business. Speaker 1: Are you still selling those three products, any of those three products today? Speaker 2: Actually, I'm selling one of those three products and that became one of our product lines. So we do have success in one of those three products. The other two, we didn't lose any money, we did sell, sold out, but we didn't replenish those two products. Speaker 1: So why did you focus on the U.S.? I mean, you're Mexican, you speak Spanish, you're in Mexico. Why not start with your home country? Why go to the U.S. where it's much more competitive? Speaker 2: Well, actually it's not. It's like if Mexico, like selling in Mexico is not as attractive as selling in the U.S. It's like if you're selling in the U.S., you got all this market and everybody has access to a credit card and it's very easy for people to go and do some shopping online. It's actually part of the way of living. In Mexico at that time and even now, it is kind of just trending into it, but it's not as demanding as in the U.S., right? So the success that you could have in the U.S. is much, much exponentially than what you can get in Mexico. Speaker 1: The Mexican market though is 120 some odd million people. But what you're saying is a lot of them still don't have credit cards. I mean, I know in Mexico City, there's a lot of very wealthy people and some of the other cities too. But you're saying there's just not enough of them really to make it worth the effort that are sophisticated enough and comfortable enough to actually do a lot of business online. Speaker 2: Yeah, that's true, Kevin. And pretty much that with the pandemic, it just changed around. A lot of people are more into it and they're more used to it. But it wasn't like that before. And now it's been growing and people are getting more familiar with that. And Amazon has been getting some market share with that. But Mercado Libre is very big here in Mexico and Latin America. So people are using those things more and more. But just the ease of commerce in the U.S. and how you open a business in the U.S. and how do you pay your taxes is so much simpler and so much easier that it's just a no-brainer just to go there and have that potential of selling your products in the U.S. Speaker 1: Now, since you launched these products, the charcoal type of products and some other products in the beginning, you've added quite a bit to your line, correct? A lot of different, you've kind of pivoted a little bit and I think a lot of your sourcing is now being done actually for many of your products in Mexico. Speaker 2: Yes. Speaker 1: Can you talk about that shift where you're like, okay, we were getting our initial products from China and then what made you decide to shift to actually trying to source more things locally? Speaker 2: Perfect. So here we are like month one into the operation and started selling all these Chinese products and I'm very optimistic about the growth that we could get. And I got a call from a friend of mine, long time friend of mine, that he knew that I was selling on Amazon and he gave me a call and said, hey, I just learned that you're selling on Amazon US and I've been trying to sell there for quite some time now and I haven't been able to figure out how to make the export work. For us to ship product from Mexico into the States and put it there in Amazon. So, we got together, we talked about it and we saw the opportunity there. So, we partnered up and we started this partnership and we started launching some products directly manufactured from his side. Speaker 1: So, he's a manufacturer? Speaker 2: He was a manufacturer. He was in the party business, party supply business. Speaker 1: Okay. Speaker 2: So, a lot of the products were tailored to the Mexican market. So, we had to... Speaker 1: Like piñatas and things like that? Speaker 2: Well, not piñatas, but some other like wrapping stuff and for candies and things like that. So, basically we had to re-imagine the products that we wanted to sell in Amazon and we started working with the dimensions and the weights and just designing these products that could be more generic and sell in the US. Better than what we had. So that's how we started. So basically we designed like five, six products and within another month, so we're talking now month two, we already have five products going into Amazon being manufactured here in Monterrey. So we start with those and we launched those five products. Out of those five, two were successful, but I would call that very successful. We started like seeing huge spikes in demand. So now we're talking that we're getting into the October, November timeframe. And we started seeing these products just grow tremendously. We just couldn't keep up with the demand. We started just manufacturing like crazy those products out and shipping those like every other week we were shipping those products into Amazon and trying to figure out how to keep it up in stock. So since then we never run out of inventory and so that's something really good. And I'll talk a little bit more about that probably in the future about some of the benefits that you have from For manufacturing here but going back into the into the story so we started with those products that were manufactured here in his factory but then as covid hit obviously that industry just tanked. So pretty much the company that was manufacturing this went under and luckily our business in Amazon was growing so much that we just transferred pretty much all the people that were working there into our, we created like a 3PL, we can talk a little bit more into that. And we absorb those people into our 3PL and we just start putting more and more products into the process. But now we're talking about different products, not only products that we manufacture here, but more products that we find within the Mexican companies. And we started launching those. So now we're selling products where we're buying products that are semi-finished good products. We bring it over here, we do some final integration, we do some quality control, we do some labeling and packaging, and we get those products ready to ship. There are some products that we outsource completely, the manufacturing operation. We do the design and we go and work with multiple companies, let's say two or three different companies that Add value into this product, we bring it over, we just do the packaging and inspection and we ship those. So there's all kinds of different products that we're now sourcing within Mexico and selling in the U.S. Speaker 1: Are these products that are aimed at more of the Latin market in the U.S. or are they for everybody? Speaker 2: We look into everything, everything that has potential to sell in the U.S. There's some adaptations that are required, there's some products that are tailored to the Mexican people living in the U.S. So there's pretty much whatever that can have a good margin, we're just gonna go and check that out and make sure that it can sell and we'll do some testing and we'll put the products in the market and just go from there. Speaker 1: So are you using, since some of your products are actually aimed at like Spanish speaking people in the U.S., Latinos in the U.S., are you doing like Spanish keywords and stuff? Because you know, a lot of people, they don't realize that, you know, Mexico is the largest Spanish speaking country in the world with 120 plus million people, but the U.S. has close to 60 million people that speak Spanish at home as well. And it's the second largest country in the world, second largest Spanish speaking country in the world. Speaker 2: And they have a credit card. Speaker 1: Yes, that's right. They have a credit card. They don't have to go stand in line at the grocery store to pay the bill. So how does that affect the way you build your listings and the way you do some of your marketing? Unknown Speaker: It is just awesome. Speaker 2: We just pretty much do our listings in English and in Spanish and we do the A-plus content in English and Spanish. Speaker 1: It's a dual, so you have a bullet point that says the first couple sentences are in English, the next couple are in Spanish, or how do you do that? Speaker 2: No, for product description, we use A-plus content, and in A-plus content, you do have the option for Spanish and English. So pretty much, if your browser is set up for Spanish, you will get the A-plus content that is set up in Spanish. Speaker 1: That's not a translation by Amazon, that's you actually inputting the proper Spanish. Speaker 2: Yes, correct. Because the translation from Amazon is a little bit on and off here and there. So you've got to go back and you've got to do it yourself and use some of the keywords also that people are familiar with. Words that are very different that you don't translate directly. So you've got to make sure that you put those words into it as well and just make it. Speaker 1: A lot of people probably don't actually realize that whether you're selling That's probably a good little trick there for a lot of sellers that are listing, whether you're selling stuff that's aimed at Latino market or not, there's still a lot of people that have their browser set to actually search in Spanish from the US side. And if you're just letting Amazon translate that because you're listing and you're back and your A plus content is only uploaded in English, Amazon's going to just translate that and it may be a very loose or very poor translation or kind of even broken Spanish in a way. But if you actually, what Alfonso is saying is you can actually go in and actually put a true, properly written Spanish version of your A plus content. Then if they have that setting set to Espanol, it's going to show it properly and index it properly. And that could be a major advantage for people. I bet there's not a lot of people doing that. Speaker 2: Yes yes that is that is very on point so it is very. It's something that is really needed. It's like that will really bust your sales up tremendously. And the other thing is what we do is in the title, for example, we mostly do like all English keywords, but we'll put one or two words in Spanish, which are the main keywords in Spanish, depending on the product that we're selling. Obviously, these are products that are tailored to the Spanish Talking people in the U.S. or Mexicans in the U.S. and we will put one or two keywords in the title that are in Spanish. But then the key bullet points are pretty much in English just because of regular TOS from Amazon and how they require you to do the listing. But then we'll go into the back end and we'll put some of the keywords in Spanish there as well. So, we do a combination, it's between English and Spanish and just play with that around and make sure that you can see it in your browser in Spanish or you can see it in your browser in English and everything is organized correctly. Speaker 1: What about the images? Do you do bilingual in the images as well? Speaker 2: No, we just do the US version of the images. Speaker 1: I would think that I would put maybe in one or two images or something because a lot of times people don't read the copy but they'll skim the images. If they're Spanish speaking and they see that, even if they're very versed in English, just the fact that there's a few things in Spanish there almost gives them that sense of belonging. It's like, hey, this is for my people, this is for me. And I would think that would have some sort of subtle psychological benefit to actually just putting even just a little bit in there. Speaker 2: Yeah, there's some key bullet points or takeaways that we do put some Spanish words there just to bring it home. And also the other thing, Kevin, is people are looking for a different unit of measurement. It's like a lot of people from Mexico are not familiar with the English system. Speaker 1: Yeah. Speaker 2: So you got to make sure that you put centimeters and you put kilograms and you make them You give them some information that is good for them to make a decision because they will really try to convert it in their head but they might not be able to do it correctly and then you have some returns. So you minimize some of that potential errors just by giving them that information that they're looking for as well. Speaker 1: So to understand you correctly that now you're doing most of your sourcing from Mexico and some of that stuff is just made at the factory and it's ready to go, it's packaged up in case and you ship it to the U.S. but some of the stuff you're still bringing in some things from like China and then you're adding something to it or repackage them or modifying it a little bit? Speaker 2: From China, it goes directly to the U.S. We're not bringing anything from China into Mexico so that we can cross the border. So everything that we source from China, which is probably like 5 to 7% of what we sell in Amazon right now, is coming from China directly into the U.S. Everything else is coming from Mexico and we're consolidating here in our warehouse before we ship it into the U.S. Speaker 1: If you're sourcing something from Oaxaca or from Mexico City area, you're bringing everything in to Monterey and then to what's now in essence a 3PL that you set up because you hired all the people from the closed factory basically and consolidating everything there and then shipping into the US. Is that what you meant? Speaker 2: Exactly, that's what we do and that's how we minimize also the potential for quality issues because instead of outsourcing the quality inspections to somebody that doesn't understand the product, we do our quality inspections, we do our packaging here and we pretty much consolidate the shipments. And with this, we save a lot of money on the transportation because now we got a truck going into the States every other week and we can adjust the frequencies and the size of the truck every time that we need to. So, whenever there are some inventory restrictions in Amazon or there's some high demand going on, we can just easily adjust the timing and the size of our shipments into Amazon. So, it's just like being right next to an Amazon center. We just ship from here into Laredo. It takes a couple of hours to be there. And then we scale a 3PL company or not 3PL, an LTL shipment from Amazon to pick up the skids. Send it over to Dallas which is our... Speaker 1: Do you have your own truck or do you have a trucking line that actually takes it from Monterrey to Laredo, those couple hours drive? Speaker 2: We've got a truck line and there's some partners with us that we use them for, so they move our product. Speaker 1: And I think you said it's about $600 a trailer or something like that to take it from Monterrey to Laredo? Speaker 2: Yeah, that's about it. So it's like $550 to $600, depending on the size. And this is just like a half truck, right? It's not the full trailer, but it's a half truck. Or a half trailer. And besides that, you gotta pay like the import permits and stuff like that. But the good thing is, you got the free trade agreement going on. So a lot of the import fees are just pretty much zero. So you don't pay import fees and you just pay for the truck, you pay for the permit to bring the truck into the States. And you're talking that, let's say if you pay $1,000 and you put I don't know, 7,000 units into that truck or 8,000 units, you can get the price to be like 12 cents per unit or 13 cents per unit for something that you're shipping into Amazon, compared to bringing it from China where you're paying probably for that same amount of product, you're probably paying twice or three times as much. Or even more. Speaker 1: So how long does it take you to cross the border in Laredo? I mean, so is it just pretty much like a few hours or a day or just to clear customs and with NAFTA and everything and just pretty quick? Speaker 2: Within the day, you can get the truck just crossed from here into into Laredo and even in a few hours. So what we do is we just plan for a full day. So they'll pick up our our shipment pretty much, let's say they pick it up today. Tomorrow they will cross the border. And they will leave the skids or the shipment in a warehouse that is used by the import agent. So that's the address where the LTL company is going to come up and pick up the skids. So that usually takes another day or two just for the LTL to go there and pick up the skids. And then from there to Dallas, which is the closest fulfillment center that we're assigned to, it takes a couple of days, two or three days at the most. And then what it takes more time at times is for Amazon to schedule the delivery, right? So it could be within the same day. So if you're lucky, you can get a shipment just from our dock into Amazon's dock in six days, five days, or it could take probably a couple of weeks at the most, even in Christmas time. Speaker 1: Yeah, that's incredible. That's really awesome. So there's a lot of buzz right now out there. I know you attended the event that happened down in Monterey a few months ago about sourcing in Mexico. And there's a lot of buzz of people like, I got to get out of China. I got to quit paying these 25% Trump tariffs. And like you said, you know, it's taken weeks, even on the water, you have to pay expensive air freight. I can't get something in in six days like you can. And they're looking to switch their sourcing to places like Mexico. What are some pros and cons of that? I mean Mexico is probably great for certain products, other products maybe not so good. A lot of the raw materials I think are still in Mexico, in some cases are still having to come from China or other places. So what are, if someone's looking to switch and like man this sounds too good to be true, what should they be considering if they're actually going to start doing some of their manufacturing in Mexico? Speaker 2: Yes, that's a great question. So the first thing is you got to understand the manufacturing capabilities that you can find locally here in Mexico. So there's a lot of different manufacturing capabilities that you can rely on like glass, aluminum, carbon, plastic, artisanal products, food, pottery. So all of those categories, there are great companies out here that can manufacture this. But what you got to understand also is all of those companies, they're not familiar with selling into Amazon sellers, or they're not FBA ready. It's like, if you ask them to ship a product into Amazon US, it's like, What is that? You want me to apply a label? But no, I can ship you 500 of these. What do you want them? So you gotta work with them and educate them on how to make this work. And that's what we minimize by doing our own 3PL here where we are just taking that part away of them and we're doing that ourselves. And with that, we're also having better margins because we're controlling that portion of the equation of the supply chain. So, but with that said, you can work with them and you can educate them and you can tailor Your needs to what their manufacturing capabilities are and start manufacturing these products that you want them to ship to you. The other good thing about being here in Mexico is as we've been talking about transportation costs, free trade agreements, all of that is just saves you a lot of money and plays a lot into the factor of calculating your margins when you're comparing this into China products. The other thing is rapid prototyping or launching. So, we've been doing a lot of launches. Right now, we got, we haven't talked about this, but we got like 75 or 80 SKUs already selling on Amazon. Everything with good volumes that we're replenishing pretty much every other week. And what we've been doing is we've been doing rapid prototyping launches. So, in one time, we were able to launch a product from a concept to selling our first order in Amazon in less than seven days. 7 to 8 days we were already selling our product. Everything aligned of course, it's like we had the manufacturing guy already lined up, it was similar to a product we were already making, we have a truck that was going out the next day, so we called these guys like, hey can you manufacture this for us and do a set of 30 of those. Sure, I can give those tonight for you. So we go and pick them up, label those things, put it in the truck and seven days we were already selling this in Amazon. In that time we were working on the listing, on the photographs, everything during that transit time. And we were able to get this product to sell real quick. And it was a good product. So, but let's say, okay, seven to 10 days is if everything aligns, but two weeks to three weeks is something very common or is it something very possible. So, being able to test the market with a small batch In two to three weeks, and then being able to replenish that batch in another two weeks with minimum orders, that's huge. You cannot accomplish that by doing this from China, even if you air freight these things. It's like, you can do it probably in a month from China, test the market, and then you'll replenish and send some units by air, some units by ship. But here is like, you can react very quickly and you can have the supplier just line up to your needs. And it's like, hey, we're going to launch this and if it's successful, I'm going to come back with you and I'm going to order this much. Do you have material available? Are you ready to go? It's like, sure. So you partner with them and then you can just test the water. Yeah, it works. Just send more and send more and just Minimize any inventory issues that you might have and just keep the listing going and going and going and just keep selling these products out. Speaker 1: So most Mexican manufacturers are willing to do short runs like that? Yes, yes. Because in the US it's very difficult to get short runs, but in China they'll do it, but Mexican manufacturers will do short runs? Speaker 2: It depends on the manufacturing and what type of product you're looking into. There's obviously places where you're talking about injection molding, well, you've got to buy the mold and then you've got to do some runs. If you're looking with cardboard products, well, you've got to make sure that you have the cutting fixture. The setup of the machine takes some time, so they're going to ask you for a minimum. So it depends on what type of product you're talking about. But if you understand their capabilities and their processes and manufacturing setups and everything, you can work with them to minimize this and maximize the cost as well. Speaker 1: So what kind of terms are Mexican manufacturers looking for? Is it similar to China? Is it a 30-70? Are they more of a 50-50? Or what are they typically looking for? Speaker 2: It all depends. So it all depends. If you look into, let's say, an artisan that is going to send you some products that he work with, you probably pay upfront or you pay 50% when you order. And then when he's ready to ship, you're going to pay the other 50%. If you're talking about somebody that is well-established and has some cash flow and you have some relationship with them, they might be able to say, well, you pay me when I deliver. Don't need anything up front. So it all depends and it's all about relationships and how you build these relationships with them and how you create this factor of trust. Now, you got to also understand that there's many different type of companies down here. It's like you find the mom and pop shops, which are very small factories that can run you small batches or can run you some decent quantities. But you also have some medium sized factories and you have some large and multinational companies. So it's pretty much all over the place. So you got to find something that works for you and you got to build that relationship with them to make it work. Now, there's some difficulties about talking about how do you pay suppliers in Mexico. Some of those guys, if you look into artisanal products and things like that, they will ask you for cash. They will not have a bank account set up. There are some guys that will ask you to pay in a local gas station. You go there and you pay and we'll deposit it into an account. So there's all kinds of activity going on that you've got to be able to pretty much work around and figure out how to make it work. Speaker 1: Well, how do I find these? I mean, that's the next step is people are always like, how do I find these manufacturers? I would love to source something in Mexico, but I've looked on Alibaba or there's a couple other little websites and I'm just having trouble finding anybody. What are some ways that people can actually find manufacturers? Speaker 2: Yeah, so basically what we do is we rely a lot in, like I said, LinkedIn, Facebook, in a lot of those, you will find all those mom and pop shops and you will find some of that very small suppliers. You can go into Google and do some research, but What really works also well is those trade shows and trips that are getting organized. As you mentioned a few minutes ago, we had the Mexico trip here in Monterey a couple of months ago and that was great. It was a great way to put people from different countries, not only the US, we had people coming from Australia and Europe. Coming down here into Monterey and meeting with local manufacturers that were put into this expo show and people had the opportunity to talk to them and make the relationship and figure out what type of products and capabilities they have and even look for very specific needs that they brought over from their current products that they sell. And look for that here. So there's all kinds of trade shows going on, but they're not as big as you will imagine if you go to China. By no means, there's not even a tent of what you can find in China and those type of expo shows. But you can go into some of those and you can find some suppliers and then you start building the relationship from there. Speaker 1: Are there sourcing agents or anything that like specialize in helping companies find this that they're on the ground in Mexico and they can go knocking on doors for you and so you don't have to get on a plane and go down or has that industry popped up yet? Speaker 2: There's a lot of that. There's a lot of that. So you can find very good sourcing agents down here that could help you pretty much with all your needs. You just tell them I need this and they'll go and find it for you and they'll figure out how to pack it, how to inspect it, how to ship it out. So there are companies popping up and newer companies and there's a lot of established sourcing agencies already here. Speaker 1: One of the other big advantages that I see in some of what we're doing with dealing with Mexican manufacturers is it's basically, you don't have these time zones. A lot of times with my Chinese manufacturer, I'm having to talk to them at nine o'clock at night or something because it's there nine o'clock in the morning or it's, you know, I got to really plan a trip to go down there if I want to do, go meet the factory, go have a, have beers with them or something versus Mexico, same time zone or maybe an hour or two difference depending on where you are in the U.S. And in most cases, it's just a few hours flight from a lot of places. It's really easy to get to. So that's another big advantage. What about language issues? I mean on these manufacturers, do most of them have someone that speaks pretty good English or do you need to hone up on your Spanish skills? Speaker 2: So it depends on the size of the company and if you're looking let's say medium to larger companies, all of them will speak English. Most of them will speak English, especially in the northern side of Mexico. The north side of Mexico is more industrial and they're very familiar with companies that are pretty much multinational and it's part of what we do. We go to school and we go into an English school and we learn English as our second language, but it's pretty much the main language that we learn in school. Talking about private schools and so there's a lot of that. Now if you go into more the central Mexico down to the south, unless you're in a resort or something like that, you will have a little bit more people that don't talk English or speak English and you're going to have to Use your translation skills to communicate. But it's not difficult. I think you can maneuver around and figure ways to make it work. Speaker 1: So where do you see this going? Do you think China is basically the world's manufacturer, the factory for the world. The infrastructure, the logistics, everything is just set up so well right now and it's just fine-tuned. Mexico has that, but it's still kind of rough around the edges and you got to kind of babysit it a little bit more than you do if you're sourcing from China. How do you see that evolving over the next few years? Do you think it's going to get more sophisticated and better and better? Or do you think it's going to always be this kind of like a little hidden secret, little stepchild kind of place to manufacture? Speaker 2: No, I think it's going to take some time. Of course, they have the big advantage of what the size and what they already accomplished. But if you look into Mexico, it is something that is difficult to start. But once you start in the long run, you're going to be much better off than buying this from China. So it's like investing. It's like you're going to be investing in your product. You're going to do the upfront work. And then it's going to just explode from there. It's just going to grow and you're going to rip up the benefits from doing that. So talking about the country, I think there's great opportunities coming up. It's like Tesla just announced opening up a gigafactory here in Monterey within nine months. So it's going to be one of the biggest gigafactories in the world. And with that, you can imagine all the investment that is coming. And that's not the only company that we have here. We've got many companies that are multinational in that size or even bigger than that. So the industry is going to keep demanding more people, it's going to keep demanding more resources, and it's going to keep demanding that we grow into this. And Mexico is getting more into the e-commerce and understanding how it works. So I think we're going to be there, but it's going to take some time. Speaker 1: What about pricing? I mean, I've heard people that have actually looked into sourcing from Mexico and they say the price is just higher. Even though the labor cost in a lot of cases in Mexico is probably lower than what it is in China, just because the raw materials are having to come in from other places or for whatever other reasons, the cost of the item can oftentimes be more expensive. And my argument to them is, are you just looking at the cost of the item or are you looking at the total landing cost? So a lot of people, they may say, yeah, this spatula is, I can get it made in Mexico for $1.12, but the same spatula I can have made in China for 72 cents. Just because China's got, and so they look at like, why would I go to Mexico? And I'm like, well, have you factored in all the other expenses, the 25% Trump tariff, the duties that you got to pay that you don't have to pay because of NAFTA with Mexico, the time on the cost for the container or for air freighting at the time on the time lost in sales, like what you just said, or you can test something. You know, I usually tell people don't do that. You know, that's a strategy that some people teach is like, Test the waters on a product. Don't go buy a thousand or something. Do your homework and buy 50 or 100 and try some PPC and try and see and test it. I usually tell people don't do that unless it's an artisanal thing. It's a handcrafted or some sort of special thing because usually by the time if you do that and you're successful, Then by the time you can get more in, it's too long. You're basically starting over again and you've also just given other people who are watching these tools an idea. Then they can jump ahead of you or come in on you. But like what you said earlier, where you did some testing with the guy, he made it almost overnight for you. You put 30 units up and they were in within a week and you could see what it was doing and if you needed more, you're back a week later. That's a major advantage. What about those kinds of things and the pricing? What would your argument be against that? Speaker 2: You've got it right there. It's total cost. You've got to look at this as total cost. But you've got to also break down the cost. Speaker 1: Total cost includes time too, not just fiscal dollars coming out of your pocket. It includes what's called in business opportunity cost. So it's not just... A lot of people forget about that opportunity cost. Speaker 2: Correct. And also, what you got to ask is what's the cost that the supplier is giving you and what does it include? Because sometimes a supplier will say, well, this is how much my product costs. But then you're asking the supplier to do the packaging for you and the labeling for you. And you're asking them to do all these type of things that they're not used to doing. And they're going to go and they're going to probably go on and source a box from you, which you can get even cheaper from somebody else within the same country, within Mexico, or you can have the box already in the States. So you got to understand the cost structure that the supplier is giving you, because probably they're not set up to do this whole thing. So you might be able to get a semi-finished good product, very competitive cost, and then you can do the rest. Or you can negotiate with them some of these things that are within the cost structure of the product. So you've got to look at the whole thing, very holistic. You've got to look at the entire supply chain and understand where the cost is and what can you do to optimize the margins of your product. But then another thing that we haven't talked about is cash flow. So, cash flow is king here. If you can have six weeks of inventory in Amazon and two weeks of inventory at your warehouse and minimize any inventory shortages, that's huge. With my China products, I got six months of inventory. With the products that we have from Mexico, we got in overall around eight to 10 weeks of inventory at the most. We have six weeks in Amazon, two weeks here and two weeks on order. And we haven't paid for the two weeks in orders. So the cash flow and how you control the expenditure that you get from the disbursement that Amazon is providing you, it is a huge advantage. So you get to factor that into this cost structure as well. Speaker 1: Where are you at right now in gross sales on Amazon with your Amazon business? Seven figures, eight figures? Where are you guys at? Speaker 2: We hit seven figures within the first full year of operation. And then from there, we just pretty much tripled. So we're around 3.5 this year. Speaker 1: That's great. So now this little kind of, you call it kind of, it's kind of like a three peel that you set up to, that consolidates everything and puts it on this little half truck to go up to Laredo. Do you do that just for your products or if someone else was out there, you know, sourcing stuff, you know, and they found a guy to make the spatula, but he's, he doesn't know how to get the box to put it in and I find another factory to put the, get the box. Can I send those to a company like you or are there other companies like that where I can send it to actually have it finished goods prepared? Speaker 2: Yeah, I'm not aware there's any companies like that here. They might be. I'm not aware that there are. And we started this for ourselves, but we're also exploring the opportunity to open this up. Slowly opening this up to people that are wanting to do the same thing. So people that came from the Mexico trip a couple of months ago show a lot of interest in our operation. They actually they came here, they look at our warehouse and we're exploring some opportunities with them as well. So this is something that could spawn into a new business as well. Speaker 1: What's next for you? Just going to keep focusing on the U.S. market? Are you going to expand up to Canada since that's part of NAFTA as well and you can get stuff up there from Mexico or you're going to come into the Mexican market at any point or just going to you're happy where you're at right now? Speaker 2: So right now our focus is the U.S. for sure. We are selling in Canada and we are selling in Mexico through NARF. Ironically enough, we're shipping products to the U.S. Speaker 1: You ship to the U.S. and then it comes back to Mexico. Speaker 2: It goes back to Mexico and we do have an Amazon Fulfillment Center like five miles from where we are. But we don't have any interest in sending products here to Mexico just because of how the taxes are regulated and how you deal with all that and there's not enough demand for For some of the products that we sell, so we use NAR for Mexico and Canada and the US is just huge. It's a huge market, there's huge opportunities there and we got some products in the funnel that we have lined up to expand our operation even further for this year and just keep the growth going and hit probably eight figures very, very shortly. Speaker 1: There's awesome opportunities in this and it sounds like you're on the cutting edge here of actually manufacturing in Mexico and selling in the US. You're kind of leading the way and paving the ground for everybody else. So if someone wanted to find out more about this or reach out to you to discuss maybe a partnership or if you open up your 3PL type of stuff, how would they reach you? Speaker 2: Sure, they can reach out to me through my email account, so it's alfonso underscore gorena at hotmail.com. Speaker 1: Can you spell the last name for them? Speaker 2: G-O-R-E-N-A, Gorena. Speaker 1: Awesome. Well, Alfonso, I really appreciate you taking some time out today and stepping into the office away from the warehouse there and sharing some really cool insights with us. Speaker 2: No, it's a pleasure talking to you, Kevin. Thank you very much for having me here. Speaker 1: Awesome. And I'm sure I'll see you at another event or in Mexico or somewhere soon. Speaker 2: Looking forward to it. Speaker 1: So as you can tell from our discussion, sourcing in Mexico could be a big competitive advantage for some of you, depending on what you're selling and what you need to source. It's maybe something that's definitely worth looking into to cut down the lead times, to cut down a lot of the other issues that you may be having with sourcing from overseas. Alfonso's on his way to eight figures doing just that. And it's a pretty amazing story and he's got some pretty cool ways that he's doing things as you could see. I hope you enjoyed this episode. We'll be back again next week with another awesome episode. But before we go, I've got some words of wisdom for you. You know, focus starts with elimination. It improves with concentration and it compounds with continuation. Focus starts with elimination, improves with concentration and compounds with continuation. Have a great week and we'll see you next time. Unknown Speaker: Thank you.