#463 - Margins, Moats, & Purple Cows: How to Actually Profit on Amazon with Steven Selikoff

Welcome to episode 463 of the AMP podcast. Got a great one for you this week uh with Stephen Celikov. Stephen was one of the original people in the original FBA program when it first started about 20 years ago. He was in those first 100 people to actually start sending products in FBA. Had several successful brands. does still involved heavily in uh the wholesale side of things as well as spending a lot of time in China visiting factories and and leading uh trips over there and uh teaching people how to really up their margins when it comes to selling on Amazon. I think you're going to really enjoy this episode and get some uh nice little pointers out of it as well. So uh here is Mr. Steven Celikoff. Welcome to the AM 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, plus this is the podcast for money never sleeps. Working around the clock in the A.M. and the PM. Are you ready for today's episode? I said, are you you ready? Ready. Let's do this. Let's do this. Here's your host, Kevin King. Kevin King. Finally, after all these years, I get Mr. Steven Celikov on the podcast. How you doing, man? I am doing good. I'm doing very, very good. How are you doing? I'm I'm alive and kicking. Uh and uh you know, every every day above ground's a good day, right? Absol Oh, absolutely. Well, we had to stop and think about that one. Like, well, maybe. Uh, but you know what? I I'm always always seeing your post on uh on social media. You're either sitting in some fancy club the top of a building in Seattle or you're on the road somewhere in China going all all over, or you're telling uh you're chastising stupid sellers that are doing things the wrong way and making mistakes, and you're like trying to set them straight. Like, look guys, this is how it works. this is what you need to do. So, I always love it when I when I see your stuff uh your stuff online. Yeah, I can be a bit contrary, but you know, I'm old enough that I don't care. I'll just call it. That's right. I got that freedom now. So, you you what's your what's your story? You started off uh working at Microsoft for a while. Were you doing sourcing and stuff for them or tell me this tell me the story how you got into this whole thing. So I I started off as as an entrepreneur selling things. Um and uh I I'll I'll share a sentimental story. I I tell everyone I tell them the first time I started selling things was 1973 before most people a lot of people were born and I was at the very first Star Trek invention. My brother Richard had kind of guided me and he just passed. So I love sharing the story and how much he really encouraged me. But I will share you a story. Share a story with you that no one has heard. The very first time I actually started selling things. Also had to do with Star Trek. 1968 they had an episode where um Kirk was on this this planet with a lizard guy. Um, and they had a fight and everyone's watching him from the from the ship and he comes up with uh he finds sulfur and uh uh magnesium sulfate, you know, salt peter and carbon and a big diamond, a bamboo tube and he makes a rudimentary cannon. Well, the diamond was bullet and the rest of the stuff made gunpowder. Well, here I was, eight years old, watching this, thinking I got the same stuff in my room in my Gilbert chemistry set. So, so I put it all together, lit a match, and boom, it really worked. I loved it. I uh I started um uh making small basically firecrackers, but basically they were just miniature dynamite and putting an SDS rocket fuse on them. And as I said, my brother Richard had just passed, so this is honors him. Um he helped me sell these little miniature dynamites to his friends and that's the first time I became an entrepreneur, selling these things to his friends. I um eventually I got bigger and made them bigger and bigger. I made one out of a toilet paper tube packed with gunpowder, black powder, put on a fuse. My brother and I, our backyard was terrace and it had these terracotta drainage pipes going into it. So, we went down to one of the lower levels and and put this this dynamite uh lit the fuse, used the the the pole from a rake and shoved it up as far as we could. We were hoping it would go boom and send sparks out and everything else and and it went boom. There were no sparks, but there was a loud crack. I had cracked the entire backyard foundation of our home. Oh my god. I thought I was going to be killed. I did not tell my mother. Well, I told my mother. I did tell my mother. I was 53 years old when I told my mother and I was still afraid of getting in trouble. And in honor of Richard, my brother, I never snitched on him. So, you know, brothers are like that. I continued real spirit. What's that? Yes, absolutely. As a young a young man, I am. And I will tell you there is a another well-known person in the Amazon space who basically is as bad as I was, also my age. I'll tell you the name off air. All right. Um but uh yeah, so I've I've had the entrepreneurial spirit for a long long time. Um you know, I went into fashion photography, had long hair. I had hair and it was long and curly and beautiful and basically running my own business. Again, the same philosophy, the same head space that you need as an entrepreneur. Um and your own studio. You had your own studio and across from FIT in New York City. So you're doing a high high fashion or like high fashion. High fashion advertising. Okay. Yeah. In New York I was doing um fashion and advertising. I got to work with Jerry Deleamina, Donnie Deutsch. I mean these were like headliners of of advertising. Um eventually I picked myself up. I went to Italy and continued photography as a starving artist in Italy. Came back. I went to Brazil for a while. eventually got into cataloges which is the bread and butter of of the business. Mhm. Um my eyes couldn't focus and I got into using the same graphic skills I had learned into e-learning and I did well enough there that I got recruited by Microsoft. I started at Microsoft in 2000 and by 2001 I could not keep that entrepreneurial bug down. It was it's part of me. Mhm. So, um, I started creating I I'm up in Seattle at this point, and Seattle loves glass blowing. I started learning how to blow glass, and I would sell my my glass pieces to gift shops. There's a large area outside of Seattle called Squim, which is the home of a bunch of lavender farms. So, I would make lavender colored glass balls and hummingbird feeders and stuff like that. I had a girlfriend who was a buyer for Hudson's which is the chain of stores you see at all the airports and she taught me all about retail keying and everything else I needed to know and I started selling to retailers. So now I was really really hooked. In 2005, I had a um a small product called Easy Diet Labels and u got some nice writeups in some magazines and stuff and I got onto Amazon. And then friends of mine at this point, I'm still working at Microsoft, but this is my side gig. And friends of mine who were at Amazon were telling me that they're going to offer a new service because I had always complained about my warehouse. And that new service they offered in the summer of 2006 was fulfillment by Amazon. Mhm. FBA. And uh if you can go back and and find the original ID numbers, my unique identifier was probably within the first 100 people ever to sign up for Fulfillment by Amazon. Um because I had the inside track of course and that changed everything. One of the fascinating things back then was that if you took a chance on them and signed up for FBA, they they rewarded you by giving you your own website and they only had a number of colors. Had stores all the first ones was all like we're set up little mini menure stores and we're going to fulfill it for you. Right. It was something. Yeah, I remember actually. Yeah. Yeah. Yeah. Everything was flat files. Remember that? Yeah. It's uh it was uh it feels so strange saying that now because today you need a college education to understand Amazon, but back then we were just doing it by the seat of our pants. It was it was basic and simple back then too. I I started selling in 2001. I didn't do the uh fulfillment by Amazon um the FBA until 2015 really. But I was since 2001 I was in their uh their media. It's on it's like a consign called call it I think it's called advantage program and it was basically a consignment program for books media and uh DVD books media and and print um cuz we had calendars so we would they would send us an order for like 250 units for the entire fall season. I'd send them in and they would only pay us once they sold. Uh so it's a pure consignment type of thing. Oh wow. did did that for a long time and then in 2015 I launched several several other brands and under the FBA mod I'd seen the amazing.com class and they're selling a $5,000 course like I don't need to pay $5,000. I've been doing this for other things for a long time. I I know I I got this. So I I went into it and launched five different brands and uh still kept the the advantage stuff with these calendars going for another three or four years and I was like this is stupid and by now they're ordering you know a thousand a year or 1,200 a year or whatever. Then so then I switched it to FBA to have more control cuz I had no control over the listing or anything really. And that's when it blew up and now I was selling tens of thousands of them you know a month uh during during the fall season. Plus Amazon's just grown so much. But yeah, I was I think I took my first sale like you. I took my first sale in online in 1995, I think, by email. Um, and had a little storefront like in 96, I think. So, yeah, I remember when it's super basic and like you said now, I mean, it's interesting you say you need a college degree now to sell on Amazon. It has become a lot more complicated. Um, and you got to wear you got to understand a lot of things now. uh versus 20 even 2015 you could just it was just whip find something on Alibaba whip your logo on it and just throw it up there and do some basic little things and you'd be fine. But now with logistics and inventory management and and uh the actual marketing and the AI and everything that's all rolled and the PPC has evolved dramatist back then but it's evolved dramatically. It's it's a whole another animals. Are you still selling right now on Amazon? So, I've got I take the easy way out. I sell wholesale the products wholesale to other people that are doing the selling. I couldn't do it myself. It's It is. So, you do one P with Amazon then? Oh, you're selling? I did for a while. Okay. No, I did I did one P for a while. In fact, when I started uh Amazon vendor, there was again flatfile and there was a little at the very top you can do a check mark and they would take $400 out a month and that would go to advertising and I don't know how it was used what they did with it. You know, that's that's all it was. Yeah. Some co-op advertising. Uh no, now I sell wholesale to retailers and sell wholesale to people who sell on Amazon. And when I say I, I'm actually in partnership with a couple of people who are in my program. So I should say we, but it kind of sounds like the king or something. So say I. So you're doing you're sourcing or sourcing or creating new products or new brands and then turn around and then wholes say, "Hey, I got something that'll work." You take it and you run with it on Amazon. You take and run with it in in the retail store. So you're basically sourcing. Yeah. I'm a vendor. I'm a wholesale vendor to people who want to sell my products. Is that in a certain category or are you category agnostic? Well, the two I'm category agnostic. The two categories that I'm personally involved with is toys and gardening. Okay. And um but people in my class and my program run the range from um I've got a couple in the toy section um to plumbing to um uh um decor to Christmas ornaments to I've got one fellow that sells about 8 million a month with an entire broad range of portfolio of of products. But basically, everyone that goes through my program follows the same philosophy I take, which is um be different. Be the purple cow, which Seth Goden calls the purple cow. Um standing out in the field of brown cows, you don't notice any of them, but the purple cow is the one that gets your attention. Be the purple cow, and have products that make profit. That's key for me. That's key for me. that you know we were just saying I'm happy to outsource all of the marketing and these days particularly it's pay for play on on Amazon. Um but if the pro the marketing is just going to create more and more sales mathematically if you go viral then you've got really successful marketing and it's successful because you're not paying for it anymore. The most market can do is increase sales and if it's really effective lower its own cost. So your cost of marketing is low. Products if they're done successfully that's where the profit comes from. You can do a product, design a product, sell a product that has a large margin, then you're making money on every single sale. You do that handinand with effective marketing. You get lots and lots of sales of products that are making lots and lots of money on every sale. That's powerful. That's what gets me excited. It always baffled me on the freedom ticket in the early days. I launched the freedom ticket with Helium 10 in 2017. In the early days, I was doing some they could pay uh now it's part of Helium 10, but back then they could pay like an extra VIP or something. They get, you know, calls with me. Uh sometimes a person a couple personal calls and then some group calls. I was always amazed at how many people I'm like, "So, they're like, "We're just having some trouble here getting this going." And I was like, "Well, what are you selling?" and they tell me what's the selling the SRP like it's $16.99 on on Amazon. So, so what's your your landing cost? They need to know or they would say the factory cost, you know, not including everything. But a lot of times they would say $10 or $11. Uh and I'm like, you're never going to make money on this. You you have no margins, you have no nothing. Yeah, but last month we did $50,000 in sales. Uh here's our screenshot. It's like it doesn't matter. And I think people Exactly what you just said. A lot of sellers, especially people that don't come from a business background, uh a true business background, are always they just think it's about top line. We just had someone uh at one of my events in Iceland, seller from Germany doing $10 million a year uh selling travel pillows. Uh nice little business. Got a bunch of employees. Um, we head him up on a what's I call market masters which is a it's it's a panel of seven or eight experts that I curate based on their needs. There's and then they basically ask spend an hour asking a lot of questions and another hour giving a lot of advice specifically tailored to that person. It's very powerful and the the collective of those minds coming together. Um they don't always agree. Uh but when they started looking into it like one guy ran some quick numbers messaged his team said while we're sitting there on the panel run these numbers and they came back he's like dude you're not making any money. What are you doing? Uh uh you should not be trying to go to another market. You should not be trying to do this. You're not making money where you're at. Uh and he didn't realize that. And a lot of people they don't know the numbers. And there's a lot of people I see that are making GMV of 2 million a year that are much more profitable than someone making 10 or 20. Everybody thinks it's about growing and scaling and getting bigger and they got cash flow uh coming in maybe and deposits from Amazon, but it's just uh Robin Peter to pay Paul. Uh it's just it's it's like a pyramid scheme. I see the same thing. And I don't understand why do you think it's happening? I think people get caught up in the sexiness. they see, you know, you don't see this as I don't at least I don't see it as much anymore, but for years you had the Lambo guys on Facebook and uh Instagram and everybody like, "Look, you can uh source something for uh you can for a $150 in China. I'll just find it on Alibaba. You can sell it for 20 bucks and you got $18.50 profit. Here's my screenshot. You know, I did $100,000 last last month or last week." And but they don't say that. That was all Search Find by giveaways or something. you know, it's all I don't see that as much anymore, but I think a lot of people just get into it. They don't understand. Uh I always say the money is made in the sourcing, not in the selling. Uh and if you can s source better, uh and that doesn't al necessarily mean always a lower price. It could be mean a better quality. Uh it could mean a little bit higher price, but you can get it a month faster. Uh it changes your cash flow cycle or whatever it may be. Um that's where the money's at. Uh, and I think that's not the sexy part for a lot of people. The sexy part is uh is the PPC and the launching and showing their family, look, look, this actually works. Uh, I just did $10,000 in a week. Um, you know, but what did you put in your pocket? Nothing. There's there's every November there's lots of different Facebook groups where people have the courage at least to say, "I'm having Thanksgiving dinner with my wife's family or my girlfriend's family or whatever. What do I say when they ask me what I do?" It's like, "Dude, you're selling products." You know, you should be proud of it. Stand up and do it. But I think sometimes they if they're not doing it well, if they realize they're not making money, deep inside of them, they realize that it's all flash and no, you know, what we used to call down at Texas, you know, all sizzle and no steak. Yeah. Um Well, I think a lot of people they get caught up in in that. Exactly. They they want quick wins. I mean, it's part of this has been sell, but part of it a lot of people that think they get into selling that don't come from a a selling background. Maybe they've been working a corporate job or something. They get into it wanting that freedom, which a lot of us want and and they they want it quickly. They don't want to keep working for Microsoft for four years and have a side hustle like you did on the side. They want to actually get and they see people having, you know, the random person that actually has some viral success or something that appears to be success and that they want quick wins and that's why they're always looking for hacks or they're always looking for, you know, how can I launch faster and get more reviews or uh those types of things versus look, this that worked maybe 10 years ago, but not now. This is a long-term play. Uh, and it's a long-term thing. And you got to build something. And now you got to have some money and you got to have some talent. Uh, or someone partners that have talent or companies that agencies you're working with that have talent that can actually do this. And I think that's where a lot of people get caught up is there. It's almost like a frustration cuz I see it all the time. People that this this doesn't work or they're just chasing the next shiny object thinking that's going to cure everything uh in their business. and and and they'll they'll they'll pay they'll spend the money buying some course or some some thing and they shouldn't be. Yeah. I've heard you talk about, you know, the funding and setting yourself up and understanding the money at the very beginning. I always tell people like how much money do I need to sell on Amazon to start? And I'm like, well, it depends, you know, what's your goal here? You trying to make a living? What's your what's your how much do you need to make? You know, Profit First has a calculator. I give it out to my newsletter subscribers when they sign up if they choose to download it that actually you plug that in. Hey, I need 70 grand a year, 100 grand a year, 200 grand a year, whatever your number is to pay my bills and support my family. It will then tell you uh with like answer three questions. They'll say, "Well, you need this many products at this margin selling this much." So, you can back it up from there and you go, "Holy cow, to make 100 grand a year, I need to do that. No way. Maybe this isn't for me." Or or now you have something to shoot for. Um, and I always tell people, you know, it depends on where you're at. If you're in Pakistan where the average wage is $500, $600 a month. Um, you could start this with five grand and bu do a product that might throw off over time some very niche down super thing that doesn't take take a lot of advertising. Some might throw off $750, $1,000 a month, you know, once you get it up and rolling. And that's could be life-changing for you. But for me and you, uh, you know, that's that's not going to pay for a dinner, uh, with a a business dinner. No. So, the, um, you're going to need a lot more than that. Uh, and I always say you need I used to say two and a half times. Um, the product that you source should be divide how much money you have by two and a half. So, if you have 10 grand, you're taking your life savings of 10 grand and you're going to invest that in Amazon, you should not be doing your first product should not cost you more than $4,000 landed. Um, and cuz you take 10,000 divide by 2 and 1/2. I that number actually needs to to probably change to three, three and a half now because of uh all the Amazon fees and just what's going on with tariffs and all that stuff. Uh maybe even to four. Uh but you need a 5 to 7x at a minimum on on the cost. Anything that's a low price under 100 bucks uh retail, you you need a a super high margin. Most people are not doing that. Um, you know, my calendars I mentioned, they were a $160. We print in South Korea. They're 12 by 12 printed, uh, you know, 13-month calendars. Um, they're they were $160. This year, my guys messaged me said, "Hey, got bad news, Kevin. Um, you know, the tariffs and everything else. Uh, this is fully DDP landed cost. They're going to be $22 a piece." I'm like, they're like, "I'm so sorry, man. that's like a 25% jump in cost. I'm like, "Yeah, but I'm raising the price from 1995 to $24.95 per calendar this year. Um, I'll be totally fine." And but that margin is is 12x. Yeah. And and and I can work with that. And it's a unique product just like you said earlier. It's a purple cow amongst all the other uh other uh calendars that are out there. Um we don't even do any PPC on it. So there's no PPC. It's almost it's after Amazon fees. It's $102 pure profit uh per calendar. Um and that's where you got to be and that's not easy. But uh to find all those products, but that's where you need to be looking uh if especially when you're new. Uh you have a little bit more leeway once you're up and running. But that that's where I think a lot of people they they fail. Um and they they don't realize the downstream of like if I'm successful, oh shoot, I got to order more. or I got to pay my factory before I've even been paid by Amazon for the first round and and they don't have the money and they're going to a rich uncle or getting high loan credit cards loans or or high interest credit card loans or whatever. Yeah, it's you have to have that margin. That's when people come with us to China, that's what we teach them. And we we in the past has taught everyone how to do a 7x. Then we moved it up to a 9x. this last April, we have people doing 9x, 10x, 12x consistently. Um, the first step in it, frankly, the hardest step to get large multipliers like that is to believe that you can. Yeah. So many people are afraid to ask for it, afraid to aim for it, and then afraid to walk away if they don't get it. But this is your business. You want to make money. People start this um because they're not happy with the way their life is at that moment. They've got a new baby coming or they lost a job or they just want to do better. They want to treat their wife or their husband better. They want to make a change. So, they've got the courage to make the change cuz we all know people who just complain and they never do anything. They they have that courage. We got to respect that courage. But in order for that change to happen, you have to make money. You just can't get on the the bandwagon. You can't see a video from 12 years ago and convince yourself. It hasn't changed. You know, you got to learn. You got to open up your mind. You got to be free enough to say, "Hey, I can't do this. Let's hire an agency." And you got to have a product that makes money. I mean, I just had a meeting a couple weeks ago in Tampa with someone, if I said the name, you would recognize him right away, that was very big in the Amazon space, especially in the SAS side. ended up selling his company for a lot of money and dabbled around at Amazon for a little while and then now he's got a partnership with somebody else where they're doing wholesale probably a similar model to you. They've got a deal with a um some uh health related products that the government buys and they are allowed to actually on those big production runs for the government stuff they the company the the contract doesn't care if they add on to the end of it uh private label their own stuff. So they, you know, if they run in, I don't know, 10,000 of these medical thing. I don't want to say the product name, but 10,000 of these medical things, they can add 2,000 to the production run, get the cost of scale of, uh, 12,000 units and just throw change the label to their brand name and then wholesale that out to other people. And that that's what they're doing. But now they want to get back onto Amazon. And this is an exp someone that was considered widely considered an expert. And he hasn't been on since 2019. And when I'm talking to him, he's like, I it's changed too much. Uh, I can't I don't know what I'm doing now. It's It's a whole another game. And I think a lot of people, like you just said, that watching a 12-year-old video or learning from someone who hasn't sold that sold in 2017, hasn't sold since is not the wisest thing to do. Uh, but back on your your margins uh issue, I think a lot of times people are afraid to be that purple cow because a lot of times they're like, "Well, I can't do 12x because everybody else is selling it. if I'm buying it for $2, I gotta sell for $9.99 because everybody else is selling it for $9.99. So, that's a 5x markup and I got to beat them in price. It's like, no, you don't have to beat them in price. Um, if you differentiate and you properly market it, you can actually do it right. And maybe you spend instead of $2 a unit, you spend $3 a unit. And you put this little kitchen knife in a fancy little box. Uh, you know, it's got a string on it. and you open it, it looks like it's some samurai chef, you know, sushi chef, uh, Michelin star sushi chef, and you charge $49.95 for the same damn thing. And you spend an extra buck or two in the presentation or or in the in the packaging. And they're like, I don't know if people will do that. It's like, no, it works. You're not going to sell as many. That's the usually the answer is, well, I'm not going to sell as much. Yeah, but you're going to actually make a damn profit. I I had an example I give a lot in some of my talks. cuz I used to sell bully sticks. Bully sticks. Uh do you know what bully sticks are for dogs? Oh yeah. Yeah. Yeah. Yeah. So it's it's uh the private parts of a cow basically that they use and they they convert that into a little chewable thing for for a dog. Um and I got I one of these tools back in like 2016 said, "Oh, this is a great opportunity back early days of tools." And so I was like, "Ah, cool. Um I'm going to get into it." I started looking. Everybody's selling the same thing in plastic bags with a label on it. 30 sticks uh with a label in a plastic bag for I don't know 29 35 buck call a dollar stick. I'm like how am I going to compete with this just coming out with my own with a prettier logo or prettier name or I can do some uh crazy you know black hat stuff that people were doing back then. It's like no I'm going to differentiate. So I went and I found a a chef and in uh New England that's classically trained French chef that does these. I looked at all the reviews and saw what this is before the tools and the eye stuff scraped them. I scraped like 3,000 red all and people were bitching about smell, bitching about where's the cow coming from? Is this some foreignbased meat? And and they're bitching about uh um stains on their couch when the the dog eats it. A little bit of liquid can come out and stuff. And so I fixed those three problems with this guy and I I market it as done by organically 15step process. uh this American chef, American beef, and instead of selling 30 sticks for $30 and making a couple bucks a unit, just f uh and fighting everybody uh you know, for the first page or for the keywords, I came out with three sticks. I put them in a cigar type of box to make them look different with a nice little textured label on top. Sold three sticks for $54.95 instead of 30 for 30. And and people were like, "This is never going to fly." I'm like, "No, it will." People treat their some people treat their dog their pets just like the their kids. They want the best for them. They want their healthy. They want their dog to be healthy or whatever. So they they they parlay that into or they they transfer that into their pets. The thing started selling. Now, was I the best seller on Bully Sticks? No. I'm not even close. But on Bully Sticks, no older bully sticks made in the USA. Bully um premium bully sticks, I was able to be on page one. And they sold extremely well. And I'm looking at going, okay, I'm selling whatever, I forget the numbers, $500, $1,000 a day back, probably about $1,000 a day back then. But I'm actually making $300, $400 profit with no competition, no people knocking me down. Everybody else is fighting and making they might have been selling uh 500 units a day with a $2 margin at the end of the day in a constant fight. I didn't have any of that. So that's an example I'd like to give. Um, it is the Amazon is not just about price. It's about it's all in the product. You put out a good product and you market it well and you have decent margins. You don't have to be the best seller. You can be middle of the pack or bestseller in a couple niche keywords. Uh, and that's where I think a big mistake a lot of people make. Do you see that in in what um in your students as well? Yeah. No, absolutely. First of all, I have to say it's it's not difficult to imagine that you have a few cigar boxes around that you could use. That's true. That's true. Yeah. What happens is and and these days it's it's it's more difficult because you are able to take the time and the effort and and scrape them yourself. These days there's tools that do that. There's AI that do that. And I've seen some demonstrations in China of AI that not only scrapes what everybody is complaining about, but then projects out what the product should be, what it looks like. Here's a a mockup ad. It's so much easier now and everybody has access to that. There's not as big a moat around that. Yeah. Which also means everybody's differentiating the same way. Here's the key. Yeah. Yeah. Can I tell you a way to differentiate? Absolutely. Really gonna work. Okay. So, there's two parts of this. first is I'm a big believer in what's called WTP, willingness to pay. You want a product that has WTP that's rather high. Customers are willing to pay a high price. So, how do you get that? Um, I'm looking around my my desk here. So, I have a little um a little sweeper for your your keyboard. Now, not a great one, not a terrible one, whatever. Um, if you went on on on Amazon and you read all the reviews, you might find that people think it should be longer or stiffer, uh, different color bristles, whatever. I don't know. Everyone else, thousands of other people are doing the same thing. The answer to how do you how do you get something that cleans your keyboard and competes against this? That answer was given to us in World War II. In World War II, um the the planes would come back to the airfields and they'd be filled with bullet holes and the military they they started spending money trying to reinforce cuz the wings were filled with blet bullet holes, the tail, you know, it's like where can they reinforce this so it doesn't get bullet holes? And a statistician stopped them and said, "Whoa, whoa, whoa, whoa. We're looking at the planes that came back, which means they got these bullet holes, but they still returned. What about the ones that didn't return? Where were they shot? Well, they were being shot in the fuselage in the cockpit and stuff like that. That's where we need to reinforce the airplanes. Look at the ones that didn't come back. It's the same thing with the product. Sure, you can make that little brush a better keyboard sweeping brush by looking at that, but you're just fixing the problems. What you want to do is people who want a cleaner keyboard, they're not buying that. Why are they not buying that? What are they looking for? You're trying to figure out what is it that they wanted in the first place and this didn't resolve. And if you can figure out what they wanted in the first place, now you have something that really solves their problem. Now you have something with a high WTP. And because there are no competitors, you're not in a race to the bottom. You can set your price to what people really feel is fair, what they're willing to pay. And you can keep it there because nobody else is doing it. That really sets you apart. It differentiates you not as a different keyboard sweeper, but it differentiates you because you've got a different product that cleans the keyboard and keeps it clean, keeps it the dust out of it and everything. You do that, now you got a winner. So, how does someone do that? I mean, so the average person selling, they don't have uh design engineers, they don't have uh people that can envision the stuff uh or can do some of that kind of research. Uh there's companies like Gima and people like that that are out there that can help in some cases. But what do you recommend to your people? Is it go to the factory and and talk to them and say, "Hey, look, I got this idea. Can you do this?" What what understanding start off understanding what you think the solution is. Do a rough prototype um uh proof of concept. Does it work? Does it do what you wanted to do? Then you want to get it designed. You want to protect your design. So don't go to the factory and ask them to design it for you. You run a very large risk these days, particularly politically. Chinese courts do kind of favor now Chinese factories. If they say, "Well, we invented that, not the guy who paid us." So instead, go to a place like CADC crowd, CAD D. Hire a designer. Say, "Hey, this is what I want. This is what it looks like. Here's the proof of concept." and you get the designer not only to design it out and give you all the product specs, all the diagrams that the factory needs, all the information, um, but you own it and you can protect that right away from the very beginning before you even show it to the factory. Now you've got something that works really well. The factory will understand that, hey, this is different. The factories, they've seen people come in left and right with the same thing, with the same little brushes for keyboards. They don't care. They can give you as high a price as they want and they know if you say no, the guy behind you is going to say yes. But when you come in with something that looks like it's going to really work, a good business plan. Now they want to work with you. They want to make money with you. You both bring a mutual beneficial you both bring something to the table. That's Guanshi. Gui is not just a relationship. It's a mutually beneficial relationship. We were at um uh you and actually you and I were talking at um uh Prosper one year uh in Las Vegas and you could walk around there and you could see guys that look like they're 95 years old with women that look like they're 25 years old. Do you think that's love? No. That's one she those are two people bringing to a mutually beneficial relationship. one's one's got, you know, a great body, the other's got great life insurance. Um, that's that's what you want going with the factory. When that happens, then they're going to give you a lower price because it makes sense for them to be able to ride along with your success. They see good things and frankly, culturally, it's more difficult for them to come up with interesting ideas. So, coming back to your original question, figure out a solution that works. If you're not an expert in how to clean keyboards, maybe you're an expert on how to clean around your kitchen cuz you've been doing it for so many years. Or how to clean up after your dog if you're into pet products. You know, how to clean up after your baby if if you're a parent. But there's all sorts of things that you're familiar with from your own life where you're an expert and you see what's out there and you see what's selling and you're thinking, you know, they're missing the mark. Don't differentiate just to be different. You know, we all know what karate belts are. There's a a black belt in krade. There's a brown belt, a yellow belt, green belt, purple belt. I think there's some others. I don't know. White belt maybe. Yeah, there's a series of I don't know what the colors are, but yeah. Yeah. So, if you look at all of those and you say, "Wa, that's great. All of these are selling really well. I want to do one that's different and I want to do a polka dot one or a leopard print belt for karate. It's not going to sell cuz you don't know what people are really looking for and what they need. But if it's something that you're living every day, um if if you're big in surfboards, um I'm saying that cuz I was recently at a surfboard factory. I've been to so many factories, Kevin. So many factories. I've learned so much about engineering. Um, but again, the more you know, the better you're going to get good prices. But, um, uh, yeah, you you look at something you're already familiar with. Look at what people are buying. What problems are they trying to solve? And then take a step back. What were they trying to solve in the first place? You do that. Now, now you're you're you're you're beautiful. No, that's that that's a good point. But back on the protection thing, like you said, you can have it designed. It's you can file IP in the US, but if you partner with a factory, what's your experience? And you said the factories want to work with you and I' they usually do, but a lot of times if you're not doing the protections in uh in China, which are not always acknowledged anyway, um they're just knocking it off and selling it to Africa or selling it to the Chinese market or something behind your back. Or maybe it's not that factory, but it's their brother down the street um that's doing it. Yeah. Well, first of all, when you source your factory, never source with your product. Figure out something that's similar to your product, and that's what you look to source for. So, for example, let's say you're doing a a Bluetooth speaker that looks like an anti antique book. You say, "Ah, this is fantastic. No one else has an ant." Probably do. I'm just using this. So, this is an antique book. Looks like a Bluetooth speaker. Sits in the bookshelf. Don't go to the factory and say, "I want to do an antique bulk looking Bluetooth speaker. Is it leather bound? Is it about this big, this big?" Tell them you want to do a gift box looking speaker that's made of leather. Just tell them something else, not your actual product. If you tell the same decoy product to 10 products, 10 factories, 20 factories, 100 factories, you'll be able to compare them appletoapple basis because they're all bidding on the same thing. And then once you have the factory that communicates best with you, that you've done an audit or you've visited that, you know, gives you a really good price and you feel good about it, they turn around, they're responsive, they're telling you the lead times, you know, are good lead times, all of that works, then you get an NN with them. And here's the deal, get a Chinese attorney to do the NN because two things are going to happen. Number one, if they hear from a Chinese attorney, then they know you could be anywhere in the world, but you got a sitting there in China whose job it is to make sure they follow. The second thing is, and I have heard this from every Chinese attorney I've ever spoken to and a couple that are not in China, but do a lot of Chinese work, the factory is going to ask them, "Tell me about this client." and and a good Chinese attorney will tell them good things about you. So now it's the bicycle lock theory that the bicycle lock theory is you don't have to have the strongest bicycle lock. You just need to make sure that when the guy comes to steal bicycles, yours has a lock on it and he looks for the easier ones that don't have a lock. You know, you have an NN, a couple things going to happen. Number one, um they're going to think twice before trying to copy you. And particularly once you move beyond Amazon and you expand into selling to retailers, you're now bringing in revenue to that factory that they would never have before. Every single factory you go to in China these days has a photo booth set up, white paper, everything else because they are selling on Amazon whether they tell you are or not. And it's not just Amazon. Shien, Timu, and a couple of others that I'm not supposed to be talking about yet, but it's probably already hitting the US by the time this hits the air. Big ones. They're they're going to compete selling products. So, when you have a product of your own, you want to make sure they are not selling it themselves to the same consumers. But if they're selling it to Africa, to uh to Amyia nations, if they're selling it um South America, so what? Don't worry about it. Don't lose sleep. Focus on the biggest markets there are. You know, focus on America and Japan and Germany and Europe. Um, Germany and Europe, same thing. But focus where you're going to make money. Um, so you you you get that NN. Then you make sure that you're protected by registering your trademark in China as well as in the US. And I think I I I I know that you know the stories of people sitting on trademarks and trying to hold up your shipment when it leaves China and stuff like that. That's because they've recorded the trademark with Chinese Custom Border Protection. But here's the thing. You can do the same thing. You get the trademark in China, then you record your own trademark with Customs and you record it in the US Customs and Border Protection. It's $190 for 10 years. That's 90 19 bucks a year. That those pro products come in with your name in it, your trademark on it. If anyone else is sending stuff in trying to be you, trying to counterfeit, it's going to be seized. If they don't seize it leaving China, they will seize it when it comes into the US. That's how I say 190 bucks for for 10 years. Everyone should be doing that. Most inexpensive way protecting yourself as possible. And then lastly, get familiar with trade dress laws. That protects you from people selling a product that could be mistaken for your product. So you you're not going to be, you know, you're not going to make it impenetrable. Um I've got a couple of clients who won Time magazine best new invention of the year. And they've got people online who are saying, "Hey, you can buy this product for 49 bucks." And people are sending in 49 bucks and the product's $700. And then those customers are contacting my students saying, "Hey, I sent in 49 bucks." And they're saying, "Talk to your bank. Come on, that's not us. You didn't send it to us or anything else." You're always going to have someone trying to rip you off. But if you focus on making the most money you can in the biggest markets with the largest margin, then you're going to be going to sleep, you know, happy and whistling a happy song, you'll deal with the other things. And and frankly, as you expand more and more into retail, Amazon becomes like 10 15% of your income. Um, you're not going to lose that much sleep over it. Anyway, lastly, on the same point, when you build a product, build out a product development timeline. So, you're launching with version one, the simplest, the basic base level product. you know that 18 months later you've got version two, 12 months after that you've got version three. So when people do come along to copy, they're always aiming six feet behind you because you've moved ahead and you've got the unique product that no one else does. I just had someone just a couple weeks ago on on actually it's last week's episode of the podcast. She's pretty well known in China. She I uh got a little agency and she she speaks at some of the big events, you know, they got like 200 people at their big Sunday events and stuff over there. But she's like in in all of her stuff and really sharp girl. She's like, "Look, us Chinese sellers are having trouble right now." Uh from the factories to the sellers because we know how to do numbers. We know how to game the system. We're good at taking you guys' innovations uh and then figuring out a better way to engineer it or to make them cheaper to uh make these little changes or whatever, but we don't understand your culture. We don't understand your marketing and how to actually market and actually build a brand. She there's two big issues, the building of a brand and the marketing to the west. And I said, well, you got AI and chol. She's like, no, that helps on some, but we still can't the psychology. we can't get into their head. We don't understand. That doesn't really help us on that. It helps us make a a listing that's not ching English uh or something, but it it's no, we still have a problem. And then he's like, we don't understand retail. We don't understand US retail. Uh that that's She's like, "How many Chinese sellers do you see in retail in the US?" You know, that have these weird brand names of DK XR3 that you see on Amazon. I said, "Virts none." She's like, "No, we don't know how to do it." So, she's coming over to the US, going to NYU, getting a master's in uh I'm not sure exactly, but she's doing a lot of digital marketing, advertising classes and and stuff, trying to figure this out. Um, she just finished her first year and she's on to her second year. What do you see when you you you spend a lot, you just at time we're talking, you just got back from like 3 months in China, two or three months in China. What what are you seeing on the ground over there that we have a competitive advantage in the West over them? Uh, and where do we like quit trying to compete here because it's they're gonna beat us every time. Yeah. Well, first of all, gotta give a shout out to NYU. I took a semester there back in 2006. Jesus, 190. Yeah, around then. Wow. Now I'm feeling really old. Thanks, Kevin. You're welcome. Back in that passion photography days, right? Yeah, it it actually was before then. uh back and I had hair then too. Um but yeah, the number one thing that we know how to do that Chinese people do not is we know how to color outside the lines. We know how to break the rules. Um uh Emil Durkheim, the the father of of of sociological statistics said that deviency is the price that society pays for creativity. We're deviant. we go outside the norm. And for such an incredibly large population culturally, they are raised with an very strict understanding of what to do, what's expected of them, what their obligations are, what's right and wrong. In fact, um you won't hear little little children saying no in China. Um despite the fact that Chinese is not really no, it's it's an it's an affirmation of a negative. But still, they're not the same culture. From birth, we've been taught to do things differently, to be creative, to color outside the lines. That's our strength. We can do that. We can innovate. Don't be afraid to innovate. Um, you know, test it out. Put in front of I friends if you have to. Strangers even better. Get people feedback on your idea. Yeah, this really works or this is terrible. I mean, you and I both have seen people come to us with terrible ideas over the years. Um, and and sometimes it's really easy to fall in love with your idea, and you need someone to be honest with you and say, "Hey, that's a terrible idea." But more often than not, people are afraid to do that. They want to say stay specifically to what they they know and they see. A a perfect example in the FBA world is those people that are really successful. They understand how to find products that have the, you know, the best chance of success and they follow their own formula. Um and and lots of gurus have almost the same formula each one follows and so on. But the ones are really successful, they're breaking the rules. They're doing things differently. They're doing things differently in their business. They're doing things differently in their products. and they're building a strong business. I'm going to give a shout out to a mutual friend of ours, Athena. She did a great email. Oh gosh, probably two 3 months ago where when all the tariff brewhaha started back, well, I was all the way back in longer than that. But, uh, she sent off an email basically saying, "Folks, look at your own business. If it's not strong, make it strong enough." You know, I like telling people it's the three little pigs theory. The house of straw, the wolf came and blew it down. The house of sticks, the wolf blew it down. Build your business out of bricks and stone. Make your business strong. And in the case of selling products, that means differentiating, having the right price, having a product that people want. And as you said and and and and I said having large multiplier, go for a 10x a 12x multiplier. If you don't know how to do it, learn to do it. Um I have videos out there. People other people have videos out there. Get payment terms. If you're not going to ask for them upfront, when are you going to ask for them? Get that product part done right. And then you know the marketing. you're selling something that makes money on every single sale. Don't get caught up in selling something that's breaking even or losing money. And if you don't know, sit down with an accountant. You may hate it. You may not like to hear what they have to say. May be the most boring thing in the world you've ever done, but it's worth it. Sit down with an accountant who looks at your business and says, "Hey, dude, you're losing money here and you're missing an opportunity to make money there." What do you what do you see in all the the factory visits that you've been to? You you said earlier, I've been thousands of factories or whatever. Um, it what what have what do you what can you share of two or three things that sellers that are a little bit more uh less uh experienced under under their under their skin should be looking out for that you're seeing factories do. Maybe it's something uh that they're doing to cut corners and they need, hey, make sure you always check on this, this, and this. Or maybe it's something in a good way, like, oh, here's an opportunity. Uh you got all this extra fabric laying on the floor. If you go visit them, you can see that. Oh, let's make this into some other thing. You're just wasting it. Or you get my idea. And just on that same note, I'm always baffled at how many sellers don't do inspections or they do it on the first or second order. And like you were saying earlier, the trademark's 190 bucks. spend the damn money. Um they they won't spend the 150 to 400 bucks depending on the company they're using, the type of uh deal they're doing because yeah, the first three orders have been fine. Um never had a problem, so why should I waste that money uh and have any potential delays? So, can you talk to those those things about inspections and about opportunities that you see and things that you need to make sure you're aware of that you might not be aware of? Yeah. But first on the inspections, I'm going to give a shout out to an inspection company uh called VRust. And there's lots of good inspection companies, SGS, Intertech, um I was going to say Asian Inspection, now they're called KMA for the last few years. They're all good good inspection companies. I'm going to give a shout out to VRS for a different reason. When COVID started up here and it was already on the decline in uh in China, I was I was talking to the CEO of Vrust. Um, Ted, and I mentioned that my niece worked in a uh a hospital. She was a nurse in a pediatric ICU hospital in New York City and how they were already running out of out of masks and so on. And and he was just conversationally asking where she works and so on. Two weeks later, I get a a phone call, who is this? Do you know a guy named Ted from China? I said, yeah. On his own, he took it on himself to send and supply them with masks in this hospital for little babies. And that character speaks so much to me that that he just he's earned a shout out because of that. That's awesome. That's awesome. Um, so coming back to to what you look for in the factory, first of all, staying on inspections, Chinese culture, Chinese people love to gamble. If you're going to have if you have four orders and you only do inspections on the first three, they're all going to think, okay, they're not going to think, oh, we're going to get inspected the next time. they're going to think, "Hey, we have a one out of four shot that we're going to get away without an inspection." So, always do an inspection, no matter what. You're playing into their hands otherwise. And always have the product specs carefully defined. My first big big success were pillowcases. I didn't invent pillowcases. Pillowcases have been around for however hundreds hundreds of years. I had pillowcases that were different. Um um my ex was disabled. We had a little service dog that climbed into the bed the first night the dog was there. My my wife moved over. I moved over, the dog stretched out, and I got the look. Even though I was on the very edge of the bed, I couldn't complain. So, um, uh, my first big product were pillowcases that split the bed in half. One half said, "The dog sleeps here." The other half said, "The wife sleeps here, and jumbled up on the edge, it says the husband sleeps here." and we had a whole series of of pillowcases for people who let the dog sleep on the human bed. Now, it's it's funny. It's cute. It was a big success. I'm also a numbers guy. I can tell you right now at that point, 52% of American households with dogs let the dogs sleep on the human bed. 72% with small dogs. I knew the market. I knew at those numbers that more dogs were sleeping on the human bed than in in dog beds, dog crates, dog kennels, and dog beds combined. So, I had a great market and I differentiated pillowcases. So, now I could sell them as pillow cases for the home and also a pet product and pet stores. Opened up a whole another realm of of selling. So, I knew what what I was doing. Um, so, and I'm trying to remember where this question was. Oh, yeah. So, I did not specify what the GSM was on our polyester version. I'm going to take this one more step into the the old story. We had two versions. We had um 330 thread count pure cotton. These were sold in stores where people could touch it and feel it. And then we had polyester versions under a different brand name, different designs that ripped off the first designs. Nobody knew I was the same person. Two different companies, one ripping off the other. I was making money on both of them. Um, sorry to say. So, we didn't have the, uh, well, it's all about making money. We do this to make money, you know. So, um, uh, but I did not have the GSM specified on the the polyester ones. And because I did not have it specified when the inspections were done, they were looking for abrasion and you know me die fast and printing and quality and packaging and everything else, but they weren't measuring the GSM cuz I didn't have a specific GSM for them to test for. Always make sure you have all of your details, all of your product specs known very, very well. And now I'll give another shout out to someone we both know, Ken. Uh Kan's got a great trick, which is if you're doing a product and you don't know anything about it, find someone you don't want to work with. Ask them every question you can learn for them and then wave bye-bye because now you'll have all of the information you should know when you go to the factory you want to work with. Make sure all that information is carefully documented so when the inspection's done, it can be actually matched to what those requirements are supposed to be. And then the first part of the question, which is what do you look for when you go into a factory? There's four things you should always be looking for when you go into a factory, the showroom. Do they have a large showroom? I was in a factory that had a huge showroom and maybe a dozen different products. That was an immediate red flag. There was something going wrong here and and there was something wrong going on. Um, second is the production floor. You want to make sure that it's clean, that people are doing what they're doing, that that everyone who's working, that there's a lot of people working, it's not like a completely empty factory or so on. Um, that that's not difficult to see. Look for what the QA is. And if you don't see it, ask for it. Where's the quality control? What type of quality assurance policies do they have? Um, and then lastly, look at shipping. Look at the section where products are leaving and then are they neatly taped up? Are the sh carton are the carton marks the shipping marks stamped and printed on the outside or is it a piece of paper that's just taped on pressed down on the top of the box? Does it have a lot of leeway and give? That's because they tried to cut corners and buy pre-made boxes rather than having boxes made for you. You hit those four things, the showroom, QA, production floor, and shipping. Right away, you'll have a good sense if this is a factory you want to work with or not. Talk with them. Lots of times, real factories won't have someone who is as proficient in English as a trading company does, but depending on where you are, it's easy enough to to find someone who'll do a translation. Particularly if you're anywhere around the world of Woo. We had just mentioned EW earlier. Um you can for 50 bucks you get someone who will take you through EW for translations. You can if you're around that area you can also have them come to a factory with you and translate. Um it's not difficult to find people who will do translations for you on the ground there. I'm going to kind of put a bow on that by pointing out by you going to the factory, by you communicating, even if it's going online, but frankly, now that CO's over, everyone should get on a, you know, a a metal tube, fly there for 8, 10, 12 hours, get off and be in China. It's not a big deal. Um, you can negotiate better than anyone. You live this, sleep this, eat this. You put food on the table for your family because of this business. You can negotiate better than anyone. Sourcing agents are great at finding a factory for you, finding a supplier for you, but when it comes to negotiation, you can do better than anyone. You're willing to put the patience and the time. Stephen, we could keep talking on this for a while. This is uh too too much fun. Uh but we're already already past an hour. Uh the guys that he yell at me. Um, so tell tell me a little bit about uh uh this training that you have and these trips that you do and uh how would people find out about that? All right. Well, it's real simple. Product one used to be product development academy. The new name is product1.com because we're focus one or with a number one. Number one. Number one. Here's a secret. You can also do product. You know that URL instead of bot.com. product1.com is a lot easier. The digit one and um and if you look at the logo, it looks like the New York subway line, line one, which is where I used to take to get home when I was a kid when I lived southern part of of Manhattan called Soho number one line. That was my home for a long time. But product one, uh and product one, we do a few different things. Um we have the China trip which we go twice a year during the Canton Fair and we help you succeed. We not only help you source at the fair, we teach you how to do business the Chinese way, how to negotiate so you're getting that 9x, 10x, 12x multiplier. Um, we teach you about shipping and how to avoid scams and uh take you to the to the port. Um, last April when we went, we got a VIP tour of their AI driven part of the port. 25% of the port's done by AI and robotics, which is incredible. Um, we take you to a certification lab. We teach you what those certifications are and how to save money there, inspections, um packaging, all of that, factories and so on. Um as well as the Canton fair. Um at the end of two weeks, you have so much experience and more importantly confidence that not only do you leave with products and great ideas for products and connections, but you leave with that confidence and knowledge. That's big. So, it's all about the product whether it's on the sourcing side, the manufacturing side, the selling side, the development side. That's where we are. It's all the parts that you need beyond these wonderful things that you're learning about listing and selling on Amazon. Awesome. So, product one, uh, Stephen, no. Well, product one or product one.com, whichever is easier to remember. Yeah, either one. Um, awesome. Well, Stephen, I appreciate you coming on today and uh and sharing. This is uh this has been fun. We'll have to do it again sometime. Excellent. Can I make an offer? Um, sure. So, I' I've got a the book, big book that's sold on on Amazon. It's a textbook now. It's used at universities. Anyone who wants a free Well, I'm not gonna say anyone. Um, anyone who says that you've watched this video and wants a free book, we'll do that up to 200 free books. Just send an email to book at product1.com, say you want a copy of it, and once we hit 200, the offer is off the table, but this way you can get a free book as well. Awesome. Very generous of you. Thank you. Thank you, man. That's that's very kind. Um, cool. Well, hey, uh I'll see you I'm sure I'll see you in uh Seattle if if not sooner or for uh later this month for uh Accelerate. Um I'll be up there. Absolutely. Um but uh um looking forward to it, man. Thanks again. Absolutely. I I got to take you to lunch, let you see over the whole of the city and everything. That's right. I got I got to see this uh this fancy little place up there. You got it. We'll see you soon, man. Some great ideas and strategies there from uh Stephen. I think you probably got some good good things running around in your head now right now. Things that you need to do, need to change when it comes to the way you're choosing products and looking for margins or what you're doing in the sourcing or dealing with the factories. Awesome, awesome stuff. Be sure to check out his uh product one or product1.com as well. And also check out the billiondollar sellers club newsletter, billiondollarcellers.com. uh every Monday and Thursday. I got a brand new edition coming out in that as well. And then there's a billion-dollar sellers club that's uh recently started on top of that. So check that out as well. I'll be back again next week with another awesome episode. Until then, take care and we'll see you again next Thursday. [Music] [Applause] [Music] [Applause] [Music] [Applause] [Music]