Most Sellers Won’t Survive This...

Most Sellers Won’t Survive This... Speaker 1: Sellers believe that they can succeed on Amazon by simply DMing over Alibaba and WeChat moving forward. Those are the sellers that are going to get chewed up and spat out and left behind in this game. Speaker 2: Trump's new tariffs are confusing even the advanced sellers and they're hitting harder than ever. Margins are being wiped out, supply chains are getting crushed and Panic is setting in for a lot of sellers, but here's the thing. The smartest sellers aren't panicking. They're pivoting. In this episode, we'll break down the chaos, the cash flow, and the inventory strategies that you need to know to stay ahead in 2025. Our guest today is the co-founder of Titan Network. He's an industry-leading Amazon entrepreneur with a team that delivers eight figures in Amazon's annual sales. Having used his ambitious and entrepreneurial mindset to build countless brands, he has become a sought-after speaker, inspiring crowds with his leadership and depth of knowledge on stages across the world. And in fact, I just heard him speak in Iceland with Kevin King. Please welcome. Pretty soon, Dan Ashburn. But before we do that, let's have a quick word from our sponsor. Tired of negative reviews dragging down your star rating in sales? TraceFuse has your back. Traceview specializes in removing non-compliant Amazon reviews the right way. I'm talking 100% compliant with Amazon Terms of Service. And with over 11,000 reviews removed for 400 plus brands, they know what it takes to protect your reputation and boost conversions. And here's the best part. You only pay for performance. That means you only pay for reviews they successfully remove. No contracts, no monthly fees, just results. Plus, as a Lunch With Norm listener, you get two reviews removed for free. Ready to clean up your reviews? Visit TraceFuse.ai. That's TraceFuse, T-R-A-C-E-F-U-S-E dot A-I. So, sit back, relax, grab a cup of coffee and welcome Dan. Speaker 1: Hey, Norm. Hey, Kelsey. Good to see you guys again. Speaker 2: You've never been on the podcast. Speaker 1: Do you know what? It's crazy, Norm. You and I have known each other how many years now in this space? Speaker 2: Forever. Speaker 1: Forever, and I think this is the first time, but to be fair, I don't do a lot of this stuff anymore, so I'm super pumped to be on here. Speaker 2: Yeah, Athena was on, so Athena... This is Dan's partner in Titan. So she came on and she was one of the most downloaded episodes we had. Yeah. People loved the story that she told. So yeah, it was very good. So I've got to get her back on and talk about that. So let's get right into it. While we were away, it all hit the fan and we were rushing around everybody at that conference was trying to find out what was going on. Now, we talked and you hit me up one day and you said, okay, you know, what do you guys think? You know, how's this going to affect the tariff terminator? And we had conflicting, conflicting results. Speaker 1: Yeah. Speaker 2: I think the next day, you know, we kind of evened out and the next day, where are we today? Can you just give, well, first of all, for those of us, and I know this is a basic, basic question, but what's a tariff and why are they important? Speaker 1: Yeah, sure. And look, this, as you said, Norm, this is changing daily in terms of the specifics of the rates and how they apply. But what I'm really keen to get into is the underlying strategic response remains the same, right? Regardless. So tariffs are effectively a way of a country, in this case the US, applying a tax to imported goods and there's different levels of taxation for different types of goods and depending on the country of origin, the source, that allows them to effectively balance the scales in their opinion between the trade between countries. So these tariffs that have come out in the US, there's various stated reasons and we could get into the details of all the different stated reasons for all the different types of tariffs that the US and President Trump is putting out, but effectively they're coming through as a way of the US stated balancing the scales with other countries to create a more fair economic trading system, whether you believe that or not, and then also leverage over certain activities like immigration and drugs and all that sort of stuff coming into the country that it's forcing the counterpart country to help the U.S. kind of get into control. Speaker 2: So one of the comments I heard a lot was how am I going to compete if China's going to check what we're going to get charged 145% or I don't know even know what it is today. Speaker 1: But as high as 245 depending on the product type. I'll go through that in a second. Speaker 2: Depending on the day. Speaker 1: That's the update today. Yeah. Speaker 2: All right. So we got to get into that. But what do you say to these sellers that are just Absolutely panicking. Stay ahead of the competition and learn the strategies to grow your brand on TikTok Shop. Watch our newest episode right here with Michelle Barnum Smith and don't forget to subscribe. And remember, we publish new episodes every Monday. Speaker 1: My response to that is we need to analyze, observe and respond and not react. The worst thing we can do right now as sellers is react and blow up our supply chain, make hasty decisions. Right now, the correct thing to do is to observe and analyze and then strategically plan a response depending on how long this is enforced for. So, in an ideal world, these tariffs come and go. Yes, there will be a baseline of tariffs. We dealt with the tariff We started this announcement a few years ago and we worked through that. We dealt with all the shipping issues during COVID and all that sort of stuff. And each time everyone starts freaking out and as an eCommerce business owner, you start kind of thinking, crap, what's going to happen? What am I going to do? But in reality, most sellers will be okay for a minimum of around 90 days, depending on how many times you're turning your inventory per year. This isn't, unless you've got an inbound shipment and sure you might lose the margin on that one shipment. You have to understand that this is a very fluid situation. The correct response is to observe and analyze and understand what options are available to you should these tariffs sustain and we need to take longer-term action. So I think to answer it very directly, the correct answer is just to observe, analyze, and respond. Speaker 2: That's perfect. Yeah, keep those three things. As a matter of fact, we might do just a quick little short on those three items. So I'm interested in what you just said. Now tariffs, because tariffs fluctuate. And whether you're a country, I think there was 15 countries right now negotiating with Trump today, I think I heard, but all of these are fluctuating. Vietnam was one that I wasn't expecting. I think it was at 46%. I'm not sure what it's at now. I think they've negotiated something today or earlier in the week. But how do you get to this 245% tariff? Speaker 1: Sure. So there's been a series of escalations and retaliations in this whole debacle. So previously, we've had the standard HTF kind of tariff code, the HTF sorry tariff code, which is material and product specific and generally single digits. For China specifically, there is then a total of 20%. They're known as Section 301, import tariffs from China into the US. This is to do with the fentanyl issue and some other things going on there. And effectively, it's a combination of two 10% that make 20%, and that's the Section 301. We then have the reciprocal tariffs, which are the ones that were applied to all countries. The baseline of that or the global baseline is 10%, meaning there is a baseline 10% applied to all countries. And then the reciprocal above that replaces it country specific. So for China specifically, that was 34%. And then once that came out, that puts us in most categories at about 54%. And then if you were under steel or aluminum, there's something called a section. Speaker 2: That's aluminum in Canadian. Speaker 1: Aluminum. There you go. Speaker 2: Sorry. Speaker 1: So if you're in steel or aluminum, that's section 232 and that was an additional 25. So you could find yourself anywhere from 54 to about 79%. And that was the initial wave of this where everyone started kind of freaking out and saying, what's going to happen? Then China and the US got into kind of the back and forth last week, and where that escalated to was about 124, 125% by the end of last week. And then as of today, or in the last sort of 12 hours or so, Some specific categories, and it's generally non-eCom stuff. It's like needles and syringes and that sort of stuff that are stated to be kind of national security to the US. They've had additional tariffs put on and that's gone all the way up to a potential 245%. Now that doesn't affect most sellers because the categories are very specific and that's under the 232 rule. So it's still at kind of that 125. But I think, Norm, the key point with all of this is We can't adopt the mindset that this is going to be the tariffs moving forward. Yes, we have to prepare for that future, but it's moving that quickly right now that, again, the correct thing to do is to kind of collect all the information, devise a strategic response plan, and I can go into some of the kind of specific actions that can be taken. And then determine as time goes on, which actions need to be implemented to kind of mitigate the costs and make the business more resilient. Speaker 2: Yeah, I'd like to get into that response plan in a second. But one of the things people don't realize, and when they start talking about these tariffs, I was surprised that a lot of sellers were talking about that. I mean, they, they were thinking it was on the gross sale. And we're talking just cost of goods, which is a lot different. So if you're only looking at that, then it's a different mindset. You can breathe a little, not 245%, but you can breathe a little. And one of the things that I like talking about is how do you compete? Well, for me, it's always been perception and brand. If you can be that person that can be double, and this comes down with whatever category you're in, if you've got a higher perceived value, you could have that 100% or 105 or whatever it is, but you could still compete in the marketplace. And we talked about this too. People have inventory. So while these negotiations are going on, you've got, Who knows? Three months, four months worth of inventory that you can play with. So that's a bit of a buffer. Do you want to get notified every time we publish a new video? All you have to do is subscribe and leave a comment saying, I subscribed and I'll personally reply to your comment. Speaker 1: Yeah, for sure. And I think it's a really, it's a really important point. In the short term, this is an inventory game and those that I have inventory onshore. Those that are able to pull back on growth initiatives like promotions and deals and best deals, et cetera. Those that are able to slow sales without affecting velocity whilst maintaining profit are going to be the ones that ultimately in an annualized view over the course of the next 12 months, when they're looking at their kind of 2025 P&L and financial performance, those are the sellers that are going to win. The sellers that If you don't kind of understand the kind of demand planning and forecasting and maybe holding shipments back in China and only releasing what you absolutely need to meet minimum demand and running a much leaner supply chain for the next 90, 180 days while this works itself through to whatever position, those are the those that are going to suffer the most because they're kind of pushing ahead at full steam, not managing the risk. So absolutely right now is an inventory game and those who can hold out the longest set to, they're really posed to win because there's going to be a reshuffle in the categories, right? As sellers start to stock out or they have to push pricing up, those that can hold their pricing the longest. It really is an inventory game in the short term. Speaker 2: You know, one of the things that I've talked about a thousand times on this podcast is a three-tier strategy on Amazon. And there's a reason why I'm saying this. So the first tier, very low, it's basic product cannibalization. The example I use is Dead Sea Mud. There's 16 ounce Dead Sea Mud for $7 and it goes up to about 14, 15 bucks. Second category with a few price fluctuations. The second category is 24 to 44. The third category is 75 to, I think it was 95, 77 to 95. The bottom tier, they're fighting over eight ounce and 16 ounce, no profit. The higher tier is 3.5 ounce at $95. And that's, you can look it up right now. That's what it is. And here's what I'm thinking, is that as we bring our prices up, and if you have that brand or perceived value of brand, Well, everybody else goes down. That second and third tier have to go down. When things start to pull back, your price can remain the same. So you're going to gain a lot more. As long as your brand is solid. I think that this is going to be a real positive in the short term where you can stay at the price while everybody else has to pull back. Speaker 1: And anyone in that current position who has the inventory cover, this is an opportunity right now for if you've got any ability to claim anything to do with being an American brand, American positioning, kind of emphasizing American company status, American design, American quality control, customer service, You can't create made in the USA if it's not made in the USA, but you can talk about it's designed in the USA and you'll see big brands like Apple doing this all the time, right? Designed in California, manufactured in China. I think any kind of as a quick pivot and a way of supporting that value proposition, especially with the kind of political climate that's in place right now in the U.S. for local sales, that's an opportunity to be supporting that price that should you need to slowly incrementally increase price. Maybe you run out of inventory and you're having to kind of run a lean supply chain into the U.S. and you want to make sure you're at least breaking even while these tariffs work themselves through. Then there are some quick wins like that that you can put in place to enforce the price increase, but you really do at this point need to be monitoring competitors, using monitoring tools. I don't know what you recommend, Norm, like MZAlerts and others that are available, and keeping an eye on your direct competitors and really understanding who those competitors are. If you use the market basket report inside of brand analytics, you can see the other brands that your customers are shopping and comparing you to and monitoring their price points. And doing everything you can really to, one, support price increases, two, anchor and position yourselves, but hedging yourself against your competitors and not being the first to move is the real key. Speaker 2: Yeah, and there are people that will be looking how to gain the system. And one of the things I can highly recommend you not do is do restickering. So shipping from China, going to another country and then restickering and bring it over. First of all, if you're caught, you're done. And also trying to game the system with those codes. If you don't realize this, you might be trying to save two or three or five points, but at the end of the day, if you get caught, It goes back the lifetime of your product company. And so you could get screwed over big time and you get a hefty, hefty, hefty penalty. So just kind of keep that in mind. Don't try to game the system. Just go along, get it. Everybody's in the same boat right now. Speaker 1: Yeah, and that's the key point here, right? The rising tide raises all ships, and everyone's in a similar position, but you have to understand this is a game of chess, not checkers. And the moves you make, the first move you make that affects the second move you make, that affects the third move you make, you really need to have that strategic plan. And I did a three-hour kind of training on this last week, and we can get that link to everyone, Norm, in terms of kind of all the different ways of solving this. But it's about having that strategic response plan in place. And knowing what to execute in what order, depending on your own inventory position, your own cash reserves in the business. Your own supply chain setup and sophistication and also what your category is doing and what your competitors are forcing you to do. And that is kind of a, it's like 4D chess, right? That we're playing with this for the next 90 days minimum. Speaker 2: Did you know inventory is your secret weapon right now? Check out Dan Ashburn as he shares how to play the short-term gain and buy time while others scramble and you profit. You were talking about some strategies, so adaptation strategies. What are some of the immediate steps sellers can do? Speaker 1: Yeah, sure. So jump in Norm at any point, because I mean, I could talk about this for, as you know, for a long time. But the immediate thing is, as the CEO of your business, you need to be taking stock and doing a complete review on where you're at. So what inventory do you have on onshore? What inventory is in transit? What inventory is in production in China? You then need to be reassessing your demand planning across your top performing products. So what do you expect to sell over the next 30, 60, 90 plus days in those target SKUs? And my recommendation is do that on a unit basis. So how many units per day apply seasonality? If you've got a summer seasonal brand, then you're obviously going to be selling more than what you do in the winter. If this It does continue into Q4, which we all hope it doesn't. We obviously need to be factoring that uplift and we need to be determining, okay, what do we believe the demand is? Then we're going to say, well, okay, what is my current purchasing plan? What purchase orders do I currently have planned? And do I need to pull back on those? Do I need to be speaking to my supplier and saying, hey, I'm still going to place this order, but I want you to hold 50% of it in your warehouse whilst we work through these tariffs? And I'm going to talk a lot about supplier relationship in a minute, and we've got a whole team going to China literally in two days to execute on this stuff. But yeah, you might be holding back inventory. If you've already got stuff on the water, and we'll talk about shipping in a second, but if you've already got stuff on the water, you may want to be looking into solutions like bonded warehousing. Now, Norm, we talked about this. They're very scarce in the US. Demand is high based on current climate, but there's options in Canada that are great options where you can put inventory over into bonded warehouses in Canada. And what bonded means is that they're government secure, they're government kind of registered, and it means you don't have to pay the tariff Until you release the goods from the warehouse. So in that instance, you can start drip feeding into Amazon FBA in smaller batches and you're only paying the tariff on that release. In addition to that, maybe you've worked with working capital lenders before. Maybe you haven't. One that comes to mind who's fantastic and gets my full recommendation in the industry is called CAPEC. C-A-P-E-C, sorry, C-A-P-E-C. Nadav runs it. Nadav is an eight-figure seller himself. He saw a gap in the market for financing this business because a lot of the financing models in the space Don't really fit this business model. And I had a conversation with Dove this morning and they're happy to fund any tariff overhead that was unexpected on top of the purchase order. And then you can pay it on top of your supplier payment terms over a six month term. So there are ways of kind of smoothing out cash flow so that it's not such a shock to the bank account for the business between stuff like bonded warehousing and then working with finance providers like Nadar from Capek, who we use. We cycle millions of dollars with Capek in our own catalog. And they get my full recommendation to kind of spread out that cost whilst minimizing the cost through managing your demand plan. So I'll stop there for a second, Norm, because there's a whole other list of stuff. And we'll talk about shipping in a second. But that's kind of like the supply chain component in the immediate short term. Speaker 2: I'm wondering, I'm not sure if this will ever happen. But will there be, what do you think? Will there be a time and a place for a tariff rebate if you're paying 105% and it drops back down to 35% over the year? I wonder if there'll be any grace. Speaker 1: Maybe. I mean, look, I'm not a lawyer and everyone should definitely kind of take this under advisement. This isn't advice. It's just what we're doing and it's information. But I could see in the instance that these tariffs were challenged, which I'm already seeing, like the Californian state today. And I really don't want to get into the politics of stuff. But yeah, you can see that California today challenged it. And if it was ever overturned, whether you believe that or not, like maybe. But I think if providing that it's just kind of enforced and then dropped through negotiation, I think the period of time typically you'll be due for. But then if you offset the risk through bonded warehousing where you're not paying until released, I can see a scenario where if the tariffs normalize before then and then you release it, you're not going to pay the tariff prior because it's paid on release. With the financing solutions, you're still going to be, obviously, you still have to pay that financing over the course of the next six months or so, but it is a great solution if cash is a constraint right now and all of a sudden you've had a 10 or 15% cash increase on POs, which is what it basically nets down to, then that's a great solution for managing it within the business over a period of time. On the confidence that, hey, this isn't sustainable forever, and we can get into the longer-term strategy conversation in a minute, but if you're confident and that's your belief and that's your thesis, then it's just about managing the risk and minimizing the cost. Speaker 2: So we're gonna get into that long-term strategy. Right now, it's the bottom of the hour, and at the bottom of the hour, if you're new to the podcast, we have something at the top of the hour called The Wheel of Kelsey, where we give away a prize, and today, Dan, You've got a really great prize for one lucky winner. Can you tell us what that is? Speaker 1: Yeah, sure. So my team and I own and operate over $100 million on Amazon annually. We fully own about half of that and then we're minority partners in the other half and we operate all of it. So we've been doing this over a decade now. So recently we've started opening up some of the capacity within our management team. So we've got 150 people full-time operating across our brand portfolio. And we started offering out brand audits. And I think this is a perfect time for this. So this isn't just like a tactical quick review of your listing. This is a full strategic business audit, kind of like think like Deloitte or McKinsey coming into your business and kind of going through it. And then we'll produce a strategic audit across your financials, your supply chain, the product performance, your catalog positioning, immediate tactical opportunities like pricing and ranking and keywords and images and all that sort of stuff. And then you'll get a one-on-one with a member of my ops team who will go through that report with you. In addition, you'll also get 14 days complimentary access to Titan Network so you can access all of our frameworks, all of our training, all of our support as part of this as well. So that's the Titan brand audit that Norm is available to one of your One of your amazing listeners. Speaker 2: All right, so that is a great offer. The audit by itself without the membership, that 14-day membership is $400 to $500. So again, this isn't just, oh, we'll take a quick look. It's really an in-depth report into your listing. Okay, so to get that it's hashtag WheelOfKelsey or tag two people and you'll get a second entry. So let's see. Kelsey, let's go to a commercial and we'll come right back. Unknown Speaker: Start, scale, exit, repeat. I'm Colin C. Campbell and I've started over a dozen multi-million dollar companies in the last 30 years. I spent the last 10 years writing the book Start, Scale, Exit, Repeat to figure out what it is that these serial entrepreneurs do over and over again. We interviewed over 200 people. We created 58 chapters over 30 illustrations 180 call outs and we quite frankly made this book. For the ADHD entrepreneur it's been number one on amazon in fifteen categories and has one twelve awards globally. Get your book today either on eBook, paperback, hardcover, or Audible on Amazon or your favorite bookstore. Speaker 2: All right, we are back and let's get into long-term strategies, Dan. Speaker 1: Well, yeah, I think there's a bridge between the two, right? Which, Norm, you've got a lot of experience with on the kind of shipping piece, right? So I think as an interviewer, if we talk about shipping and I think we're kind of assuming the knowledge on HS code optimization with Tariff Terminator and everything everyone's been doing for a couple of years, right? So we're going to assume that's in place. But on the shipping side of things, it's also worth right now reaching out to all of your shipping brokers and asking how they can help with the solution. Now, word of warning, again, this is not advice, but I think it's important to be up to speed with what's happening. There is a shipping option called DDP, which is where effectively you are not the importer of record and you're passing the legal responsibility of that import to either your factory or the shipping partner that you're working with, and they become the importer. Now, you will notice if you start asking for quotes on DDP shipments that they are significantly lower than traditional shipping routes where you are the importer of record and using more traditional setup. And the reason they're able to do this is they're co-mingling inventory. There's activity like invoice splitting happening in China right now where they're splitting labor from material costs and therefore reducing the overheads. And again, you have to take this under your own kind of understanding, speak to them, understand what they're doing. We have had members that have successfully got clauses in contracts. Saying, Hey, I'm going to tell you what the HS code is. That's the legal HS code for this, for this product. And if for any reason there is an issue at customs, you are responsible for any penalties on this. So it comes with a big word of warning and a risk label, and you need to really understand what the factory or shipping partner, generally Chinese-based, are doing on that import. But there is some optimization available there, especially in a short-term mitigation strategy. Norm, I don't know if there's anything you want to add to that, but I just want to make sure people are aware of what's going on there and how it's happening. Speaker 2: One of the things that Afalabi and I have talked about with going with that strategy too is there could be some problems with them sharing a lower HS or HTS code to get a better rate. So your shipment could get pulled. It's rare, but there are some, let's just say Yeah, just not so moral suppliers out there or shippers that will put everything together, give one type of code, and then you're blanketed under this code, which is not your code at all. So that's just something to keep in mind with this. Are you worried about getting crushed by tariffs? Your best partner isn't a tool. It's your supplier. Find out how Dan Ashburn's relationship building can save your business. I want to stay on China for a second and you've got something called China Magic. You bring people over. You've been doing this for years and you recommend, I think you recommend going, meeting your supplier, working out something. This is a whole other strategy. Can you get into that? Speaker 1: Yeah, sure. I mean, we probably should have opened with this point that your biggest and best partner to navigate this is your supplier. And this is where the sellers that have spent years investing in that relationship, going deep on their relationship with China, visiting China, as opposed to just relying on Alibaba or WeChat, like the thousands of others, US-based companies that are talking to that same factory. It's really paying off. And if we really step back to kind of what's happening right now, the tide is out and we're seeing everyone with their shorts down who don't have those relationships in place, the resilience of the pipeline. We'll talk about the kind of China plus one strategy in a second. So working with your supplier is immediately something you should do. And to be honest, it's something you should be doing anyway. And the way I talk about this, so in our own catalog, We operate currently at 20-21% contribution margin, which is gross margin after advertising, and let's say on around $50 million of revenue within kind of one of our cohorts. Last year alone, in the last 12 months, we've been able to increase that by 19% because we're out to China twice a year. We're applying first principle thinking to packaging, materials, size. We're looking at the way the manufacturing is done. We're looking at how many things are cut out of a piece of material. We're really getting down to cost efficiency and affecting every single cost in the business. We're optimizing inbound placement fees and shipping fees with Amazon. So all of this stuff is super important. A margin optimization should be the always-on activity and the immediate response to anything like this. And those that have maybe been a bit lazy or haven't invested in the relationships, they're really going to be feeling it right now. So yes, we take people over to China with China Magic. We actually have a team going next week. We've got a whole crew going next week over to the Canton Fair, phase two and phase three. In between the phases, we visit everyone's factories. And within China Magic, what we're doing is strategically helping our members Formulate a negotiating pack to go to their factories with. To negotiate on COGS, payment terms to solve cash flow. If I told you, Norm, that every single brand in our portfolio is a cash net positive brand, meaning in every single brand we've negotiated into a position where we're already selling the products before we pay the supplier, like that's the position we want to be working into. And what we found, and I was talking to Lydon about this, my partner earlier today, he was sending me some WeChat screenshots. Because we've been investing in those relationships and all our members who come to China Magic have, We're already getting messages from suppliers saying, hey, don't worry about the tariffs. We're going to help. We're going to work together to get through this together. And they're offering concessions that are cutting our exposure in half. And we haven't even been to China to see them yet. So, yeah, we've also had to increase the capacity of China Magic in the last couple of weeks because If sellers believe that they can succeed on Amazon and eCommerce in general, but Amazon specifically, by simply DMing over Alibaba and WeChat moving forward, those are the sellers that are going to get chewed up and spat out and left behind in this game because success I mean, Kevin King said this. Kevin said this. I heard him say it once, but it's more true now than ever. Success on Amazon is now in the buying, not in the selling. We've completed the selling. The selling is the easy bit, right? We've got data. We've got tools. We've got strategies. We've got all that stuff. But the success is now in the buying. He or she or those that can buy them for the cheapest and was Delivering the same quality and have the relationships of those that can compete more on the platform. So we've had a massive influx of sellers wanting to come out to China with us because the immediate response is I want to get in the factory with my supplier and I want to work with them as a partner to absorb some of this cost and solve this problem. Speaker 2: Yeah, especially nowadays. Everybody's willing to work together. So you can go you could sit down. I've seen it. So we have a knife company that we work with. And it used to be regular terms. You might pay 20, 30% and then before it leaves the factory, you're paying the rest. We've got it now where we call it the circle of life. So product comes in to Amazon. Half of it goes into Fulfillment Centre. Half of it goes over to Amazon. Once it gets down to a certain point, it triggers the 3PL to send a certain portion over. But we've negotiated with the factory to already have an order sitting there that we've paid a small percentage to have in place. And today we're going to talk about the new order at the warehouse. And then when they ship that over, another order goes into play. So it's just constantly, there's no rush. It's constantly turning. And what we were able to do is that new order that's in the warehouse, we're paying 20 points on it and we get 90 day terms. Speaker 1: Yeah, amazing. Amazing. And you can, once you really build this up, I mean, we're in position with brands, with factories now, 90 plus days and what this does for the cash of the business is absolutely huge, right? Because effectively your supplier is financing your growth and you're always in a cash positive position and it allows you just to accelerate growth so much better. And that's achieved in person. And what we do at China Magic is we have a lot of sellers that have maybe been out to China on their own before, maybe the visited factories. We had one actually in October last year on our last trip who had been to see their factory. They'd really pushed for these terms. They kept saying no. Lydon went into the factory with them and was able to get them 90-day terms in five minutes just because we're doing so much of it and we've taken, I think, 700 sellers to China or something now. It's a big number, right? And we've been to hundreds of factories and there's things that you pick up along the way and the cultural stuff on how to negotiate, how to present your demand forecast, your cash forecast, all this sort of stuff that allows you to achieve that. So the reason I say all that is not to beat my chest, but it's more to kind of Open everyone's eyes to what is possible when you actually treat this like a business and you treat your suppliers like partners. Speaker 2: So let's take a look at this. Let's give a couple of action steps or key points. What can people or what should sellers do, the most important things that they can do when they're negotiating with a supplier in China? Speaker 1: So the number one rule for negotiating China, one is you have to be in China. You need to be there in your factory, but it's all in the preparation. You have to present the case of a win-win and how if the supplier works with you on your need and your ask, They get more. So to break this down into a very, very quick step, and Norm, for your viewers, if anyone wants to DM or message or whatever, I can get actually some negotiation training out to them. There's a whole pre-recorded kind of framework. But what you need to do is one, create your demand plan. What is your ordering need? Then you're going to create your cash flow and understand, okay, to To pay for this demand plan, what cash do I need and where am I short? Then you're going to play with the payment terms and say, well, look, if I can push that out 90 days, what does that do to my cash? How does that affect my ability to cash flow this business? Then you're going to look at and go, well, actually with these new payment terms, I can afford to order more units and be more aggressive in my marketing and therefore accelerate growth, which means I need to place larger orders with a supplier, which is more commitment to them. So it's all about kind of planning these numbers out and then consolidating it down into a very simple presentation. And most factories now are English speaking or have English speaking representatives. We can provide translators if need. We can even have the presentation translated and being able to present that case of, hey, look, If all you do is rather than me paying you 30, 70 on shipping, if I can pay you 20 and then 80, 90 days after shipping, I can 2X my order with you. I can accelerate growth. This is what I believe we can do together for the next 12 months, 18 months, 24 months. And all it takes is you helping me on the payment terms to cash flow it. Once you've got the agreement on that point, and there's, I mean, if Lydon was talking now, he'd have a whole long list of very advanced negotiation strategies for you. But once you've got to that point, you can then turn around and go, and now that I'm ordering three times the amount, let's talk about the price. And you can actually get a COGS reduction at the same point. And I mean, we have countless cases at this point, not only in our own portfolio, but with members and clients as well, This approach is just very effective but it comes from a genuine point of a win-win and a partnership. Speaker 2: I've seen that in China where just going in person makes the world of difference. You were absolutely right. If you want to negotiate, you might get a little bit if you're long distance but going there, Taking the time to meet up with your factory, that's where everything happens. Speaker 1: It's a very culturally driven, it's relationship driven culture. Speaker 2: Right, right. Oh, I got to tell you a small story here, Dan. So my brother and I, our family had a factory in Taiwan. Just prior to owning the factory, we were doing some negotiations with this factory. And we had a translator who ended up being our general manager, but we went to this factory and usually back then, like 20, 25 years ago, you would only talk family the first day. Nothing, no business, it was family. So this guy was being a bit of a jerk, very rude to us. Like wasn't being overly rude, but just wouldn't talk. And so the translator, Katie, went back to him later and said, what's going on? Like, why did you treat these people like this? And he said, my brother's named Steve. In the community, all these business guys are in one big community. There was a Steve from America that screwed one of the factories And he thought because my brother's name was Steve, he was the guy. Oh, wow. Speaker 1: That's not ideal, is it? Speaker 2: No, but we ended up being really, we had a great relationship over the years. Yeah, it was very good. But let's talk about mistakes now. What are the mistakes people are making either when they're negotiating or just moving forward? Speaker 1: Yeah, the biggest mistake sellers make in my experience is they go in unprepared and it effectively goes like this. Hi supplier, can I get a discount? The supplier says no, and then the seller says okay. And it's just a completely unstrategic approach to a negotiation with no foresight, thought, or any alignment. So that's what negotiation is, right? It's win-win alignment. If you go into the mindset of how I'm going to get one over on my supplier, that is not a sustainable business mindset. It's not a long-term business mindset, and it's going to fail. Even if you do that once or twice and win, which most suppliers are way more qualified than we are in negotiation, because they do it all day, every day, that's not going to win. So I think the biggest mistake sellers make is they go in unprepared. They go in with maybe a bit of an ignorant and arrogant mindset of, I'm the seller, I'm the customer, I can generate this demand. And they don't understand they're one of many that are contacting this factory and working with this factory, and that the culture of China is very relationship driven. And regardless of the numbers, they will prioritize relationship. So I think it's just kind of, I think the mistake is ignorance. An oversimplification and you've got to go in there strategic as a real business owner with a real plan. Speaker 2: Okay. Let's talk about tools and services that you're using. Is there anything out there that's helping you navigate this? Speaker 1: Sure. I mean, I'm very fortunate. We've got some very qualified staff on team who come from kind of corporate supply chain backgrounds, et cetera, but it's, it's all the same sort of details that everyone else is using to, to check the HTS codes. One thing that is very, very pertinent right now And what I've found is the news is changing at such a pace that it's quite difficult to get a source of truth in real time. And Norm, you and I faced this right last week when we were kind of trying to figure out what it was and there was all this confusion in the media and like counter reports. I found the best tool for keeping up to date with this stuff is perplexity. So, whilst other AI LLMs like ChatGPT and Grok and all these have these deep research features, none of them are as real-time or accurate as Perplexity Sona. So, perplexity.ai, you can use the free version if you become a power user. I think it's about $20 a month. That's been really useful in finding the single source of truth that's accurate and then being able to kind of unpick all the different classifications. For example, the new escalation tariffs and retaliation tariffs that have taken it all the way up to 125. Section 232, which is aluminum and steel, are exempt from those escalation tariffs. So actually, whereas last week, being in steel and aluminum was the horrible thing to be in because it was the highest, all of a sudden it's now lower because they're exempt from the escalations. Now, for most sellers, if you're in those categories, you know this stuff. If you're not, you don't need to worry about it. And like I say, keeping Keeping on top of what's happening is important, but letting it control your anxiety and your emotion is not a good place to be, and that's where the starting point of this conversation of we observe and analyze and respond, we don't react, and know that focus on the inventory game, focus on the platform, monitor your competitors, and understand, okay, I'm okay for 30 days. If I did nothing for 30 days right now, I'm probably okay. 60 days if it's still here and we're still at these rates and all of a sudden all my top SKUs are starting to stock out, that's where I've got to have this more like lean supply chain demand plan drip release type strategy in place. 90 days, if it's still here, and it's starting to get a bit more serious, this is where I better have gotten a plane to China, or I better have been seeing my factory. If you're a seven-figure business, then you've got no excuse. And I should be already absorbed at least half of it through my relation with my factory, or even just if I've got fancy packaging and the rest of the category doesn't, then let's drop the packaging cost and use that to absorb some of the margin cost. And that's where we need to start getting a bit more serious. And then I think that's a good transition, Norman, to some of the more longer-term stuff. I don't think we have time to go into every single long-term mitigation strategy, but I think it'd be good to kind of give people a general direction of what's available, right? Speaker 2: Don't nuke your supply chain. Dan Ashburn shares long-term strategies like bonded warehouses, the first sale doctrine, and China plus one sourcing to survive this tariff war. Well, let's get into it. So how many long-term strategies do you have? Speaker 1: I mean, there's about 20, but I'll go through kind of the main two or three that kind of we believe are the kind of ones where this is going to end up. So, first off, you have foreign trade zones, FTZs. This is a place like Mexico, Canada, et cetera, where you can, and you'll see this actually, if you look at the back of the brand, these Apple AirPods are brand new. And if you look at a new set of AirPods on the back, it says, designed by Apple in California, assembled in Vietnam. Now, these are manufactured in China, but they're assembled in Vietnam or I think some of them say assembled in India. India seems to be the new. Now, there is rules to this. You can't just import from China to Mexico and then put it into the US. It has to, effectively, the ruling is, it has to add a material amount of value in that country, which is the assembly piece. I think the official's around 25 or 35%. You'll need to look into deeper into how that's quantified and valued, but you can do what's known as nearshoring assembly as one strategy. The second strategy, which is a bit more in depth, is something called the First Sale Doctrinate. This is a bit more complex, but effectively this allows importers to declare the value of goods based on the manufacturer's original sale price rather than any markup added by middlemen. So all of a sudden you start working with distributors again. So manufacturers are selling to distributors at an agreed cost. Distributors are selling to you at an agreed cost, which is probably marked up more to like 100%, but the customs pricing is on the first sale price. There's a lot of arms length rules around this and yes, the distributor and the factory could be owned by the same person, but they're separate entities. Those sort of things come into play, but that allows us to kind of start really kind of minimizing the cost against the manufacturing cost and maybe not the distribution cost. A third one, which I'll get into is non-dutable items and services. So this is where costs and services that can be legally excluded from customs value when structured properly. And again, you have to have proper paperwork and structuring and you'll want to work with a legal professional on this to get this done. But this is where you identify all of the non-physical service components. Non-physical and service components, and then you create separate contracts and invoices for each. So if you're using designers, maybe your factory is currently helping you with design, you strip that out, you take that offshore, you take it somewhere else, and that comes off of the invoice. You've got branding and logos, packaging design. If currently you're paying a premium for packaging, take the packaging design out of the factory's purview in China, move it else, and bring that off the invoice. There's loads of stuff that goes into this. Tooling & Moulds, paying separately and documenting the ownership for Tooling & Moulds. The Tooling & Mould fee is not on the PO invoice. Freight insurance, post FOB, quality assurance and testing, do that outside of China. Again, if that's currently on invoice. So samples and prototypes that are not for resale, you can use section 323, sorry, 321. So this effectively, this non-dutable item is a way of really granularly breaking down what is applicable to a custom duty, what isn't, and then effectively stripping them out. And most factories and sellers, because that's never really been an issue historically, have been pretty lazy with that. So these are more of the long-term strategies. And then there's a whole list that I went through, which again, Norm, I can, if people go to the Titan Network website, there's actually a link at the top of the site. There's the tariff call replay. So, titannetwork.com and they can get the more detailed stuff. Speaker 2: So, Kelsey, if you could put that in the comments section, that would be great. Speaker 1: And I think, as I said, Norm, with all of this stuff, and I think the big one we should really wrap on is the China Plus One for the long term, right? Everyone's immediate reaction is, I need to move my sourcing out of China, or I need to stop selling in the US and sell in Europe. And both have levels of validity, but the devil's always in the detail, right? In our experience and in the position we're in helping thousands of sellers over the last decade, the challenge with the non-China sourcing environments What I've seen is they often come up against restrictions of scale, complexity of labor, or they can't produce all the components, so then you're still manufacturing parts in China to bring it in. And the biggest risk that I've seen is the consistent quality at scale. Very few countries in the world, including the US right now, can match China on their ability Physical products, goods, a consistent quality at scale. And the big risk with just moving your entire supply chain to a non-China based source, if you're currently there, is that all of a sudden you're risking the quality of the product. And we all know as Amazon sellers where that shows up, right? In the reviews, on the listing, customer service and all that. And that's, I mean, if it wasn't tariffs that were going to tank the business, that certainly will if you go from a five to a three star, we'll drop click-through rate, et cetera. So in the longer term, if these things stick around and it's not sustainable, then we do have to adopt a more sophisticated approach. And that approach is more of a China plus one. So we start looking at our hero SKUs, working with sourcing professionals. And again, Norm, you've got loads of people around you that are specialists in this. We help with, we help sellers with this as well, that are able to break those products down and go, well, actually this product lends itself really well to Vietnam or this product lends itself really well to India based on the material type. And you start exploring that kind of secondary supply chain and maybe then you start assembling in an FTZ or you get confident enough with the quality over time that you move it entirely to that country. But what I'm standing here and saying is don't react. Blur up your entire supply chain, lose all control of quality at scale and try and move it all to a brand new factory relationship in a different country that you've never navigated and the infrastructure is probably not there to support it. We need to be a lot more sophisticated in the approach. But I think the message, Norm, for everyone listening is these tariffs, things like tariffs and these headwinds come and go, right? We have the issue with shipping, we have the supply chain, we have the container costs, we have the first round of tariffs and everyone freaks out. But providing you take a breath, you understand the inventory game, the short-term mitigation strategies, and then there are options, yes, more sophisticated and potentially a bit more complex, but those that are able to navigate this with a level head are going to be the ones that really come out on top. And the other side of this, there's going to be a massive reshuffle. At least 25% of the market's probably going to drop out on smaller sellers because they won't have this information available to them. And that's a great opportunity for everyone that is serious about this business and is willing to show up We're here to help you partner with the factories and do this work, right? Speaker 2: Have you seen the container costs going up? Speaker 1: Yeah, starting to, yeah. I mean, they're actually at an all-time low, aren't they? Since COVID, they've been quite low, but yeah, definitely start seeing this type of happening. Speaker 2: Yeah. Okay. So, Kels, let's get into some questions. Unknown Speaker: All right. We have lots of questions. Here in some comments, so TripFit saying we received about a year's worth of our products inventory just prior to the tariff business. We feel pretty good in the short term. Hopefully these tariffs aren't at this level long term. Speaker 2: Subscribe and leave a comment saying I subscribed and I'll personally reply to your comment. Speaker 1: Yeah, and DripFit on that point, I mean, it sounds like you're in a pretty cash rich position to be able to hold a year's worth of inventory. A lot of sellers aren't in that position. If you need to release cash, there are other lenders in the space that will actually release cash against those goods you're already holding. But yeah, you're in a perfect position to play the inventory game. And if you can hold out on price rises and And actions like that, whilst your competitors are pushing, naturally you're going to pick up more clicks, more sales, more velocity, and you could actually see yourself leapfrogging in ranks and stuff as a result of that position you're in. Speaker 2: Okay. Okay. Unknown Speaker: Next from Simon, Chinese factories live and die with a FAPIO. This gives them a tax refund on exports from China. If they lower, lower invoice costs, don't they reduce this point of export from China? Speaker 1: Yeah, I'm not an expert on that specifically. Lydon did mention this to me, but understand the bigger challenge that Chinese manufacturers and factories and business owners are facing right now. Whether they're taking the long-term view of this will normalize or not, the U.S. is a consumer market. Unlike anywhere else in the world, it's a consumer-driven economy and a large part of China's export, especially the type of factories that we deal with. So, yes, there will be a reduction in those rates back to the factory. But again, in our experience, especially in China, the culture is that of a long-term mindset, and they would rather retain the lifetime value of that business than save a few points on a rebate on one or two orders. Okay. Unknown Speaker: From Tony, what's your best strategy of getting a mold done offshore and manufacturing locally? Speaker 1: Hey, Tony. So, this is the same approach to what it is. Now, if you're getting a mold done, this typically means that you're into more bespoke product design, and that's where we live now. We live and play in what we call subjective products, which are more custom-designed products. We've got a whole design staff that design products. And it's just like it is anywhere else. You will find manufacturers that specialize in molds for that type of product. And you can have that mold produced outside of China, designed outside of China, and you own the rights to that. And then you can have that mold obviously worked, sent to factories for contract manufacturing. And this is kind of how a lot of the bigger, kind of bigger boys, bigger businesses do it. Even in China, you can still approach and get that mold done in China. Just make sure it's done as a separate project and a separate fee that you own the rights to, that you're then not being invoiced on every purchase order as an incremental cost or it's kind of been included in that. So it's the same process regardless of where you're doing it. Unknown Speaker: Okay. Let's see. Another one from Simon. Surely stuff will never be mass-produced in America unless it can be fully automated. Consumers are price whores. The labor costs dictate price, so Asia will always win this game, right? Speaker 1: I mean, Norm, that's a huge question and obviously comes with a lot of personal speculation and all of that stuff. One thing I think we can all agree on is that Over the last few decades, China have really positioned themselves for cost-effective manufacturing at scale. I was actually at dinner with a manufacturer last week in Iceland. He's a US-based. He produces steel and iron components, I think, for cars, wasn't it, Norm? He makes parts for cars. And he even he said, look, it's going to be at least a few years before America can can produce the volume. Yes, we can produce the quality and the detail right now. But to get to that scale, there'd have to be a lot of investment in infrastructure. So if you want to speculate, I think with investment, any country can get there. It's just the time and cost of doing so. And do you believe the political climate will change before that? One thing I would strongly advise, and I say this to my team, let's focus on what we can control and ignore what we can't control. And what we can control is supplier relationships, mitigation strategies, demand planning, looking at educating ourselves on stuff like nearshoring and all that sort of strategy that I just talked about. And let's see where it ends up. Unknown Speaker: Are there any top-end inventory management tools? Are there any reliable AI inventory forecasting tools? Speaker 1: So we do have an enterprise-level inventory forecasting tool, management tool. I will tell you there are not many in the space that are functional, accurate, or reliable. We have one that's private, so it'd be no point in me recommending it here. What I can recommend is learning how to do a basic unit-based demand forecast. I have a training, Norm, that we did in January, actually. It was a series called the Cash Flow for Sellers series. If you go to cashflowforsellers.com, there's eight parts to that training. One of the episodes, we actually taught demand forecasting and demand planning. Again, I'm more than happy to get that training out for your guys. Speaker 2: That's great. Speaker 1: And the second part of that is don't Don't abdicate the responsibility of your business to AI. Don't throw it at AI and say, figure out my demand plan. You've got to really take ownership. You can delegate it into a member of team, but don't abdicate it. And what I mean is don't kind of relinquish responsibility. Simply look back at the last 12 months of sales for a target SKU. By use units on a daily basis, or if you want to do weekly to consolidate it, that's fine as well. Look at the seasonality trends, apply that, and come up with a rough run rate based on your current trajectory. If you haven't been selling, or maybe this is a newer SKU, then go get a like for like competitor and use softwares like Helium 10 or Keeper to look back at their history and use their demand plan. You can also, inside of the product opportunity finder inside of Amazon, They will give you trendlines. They'll give you like an image of a trendline. I don't know if you've seen that, Norm, where you put a SKU in it, it gives you like a demand trendline. If you screenshot that trendline and drop it into ChatGPT and then say, ChatGPT, give me a numeric seasonal trendline for this image, it will give you a 12-month numeric forecast of 1, 0.8, 1.2, 1.4, Based on that trend line, and then you can overlay sales data from Keeper or Helium 10 or somewhere like that, and you can actually get a pretty accurate forecast out of competitors' data using that Amazon data as well. There are others available in the space, but I'm a big believer in bottom-up in a spreadsheet, depending on what level you're at. Speaker 2: All right. Dan, I think that's it. Speaker 1: Yeah, there's a lot there to unpack, right? Speaker 2: There is a ton. And guess what? Next week, same time, it's going to be completely different. Speaker 1: One thing I'd say to that, just to wrap up, is the strategic response to this is universal regardless of what the politicians are doing. The underlying strategic approach remains the same. Observe, analyze, respond, don't react, and then apply those kind of strategic actions. And then just, you're going to have to navigate it based on the timeline and your inventory position. Speaker 2: Very good. Hey, Dan. It's been like four or five years since we've had this podcast. I'm glad we got you on for the first time. Hopefully it doesn't take you that long to come back. Speaker 1: Amazing. Thank you for having me, Norm. I've really enjoyed it. All right. Unknown Speaker: So thanks everyone for entering today's Wheel of Calci. I'm going to spin these up. And let's see who the winner is. So if you are the winner, please email me kate at lunch with norm.com. Speaker 2: Business and finance. All right. All right. And yeah, business and finance is one before, so he knows what to do. Dan, if anybody wants to get or go to China Magic or check you out at Titan Network, how do they contact you? Speaker 1: Yeah, sure. So you've got titannetwork.com. Like I say, on there, you've got the links to the tariff call. You can access that. And if you click workshops, you can see the cash flow for sellers and the 2025 profit planning. The profit planning is all about margin optimization. Cash flow also has all the stuff to do with payment terms and demand planning and all that. And then Chinamagic is Chinamagictrip.com. We are heading out there. We've got members joining us in about 10 days. If you've already got a visa, we do have a couple of spaces available because we were able to open up with a hotel and then we'll be back out there later this year in October. Speaker 2: Fantastic. All right, Dan, thanks for coming on and we'll see you at some event somewhere around the world. Speaker 1: Thanks, Norm. Appreciate you guys. Speaker 2: All right, Dan. All right, Kels. Unknown Speaker: Hope you enjoy and make sure you subscribe to our newsletter. We've got a new referral program. Speaker 2: And how do they get to the newsletter, Kels? Unknown Speaker: It is LWN.news. So nice and easy. It's three letters, dot news, LWN.news, and you can subscribe. Speaker 2: Very good. All right, everybody. Thanks for watching. We will see you next Wednesday. Unknown Speaker: I'm Dan Ashburn.