Product inspections with Movley - Amazon Business Tips with Sajag Agarwal- Part 1

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Session Videos:
A. Part 1 with Sajag Agarwal

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Transcription in this episode:
[00:00:01] spk_0: Welcome to the seller roundtable e commerce coaching and business strategies with [00:00:06] spk_1: and er not and amy Wiis mm Hey what's up everybody? This is seller roundtable with and er not AmY we's Andy is skipping school today. He's not your with us today but that's ok. I'm covering for him and I'm here with my friend. So jog our wall from Mosley and you know he is, he's the man when it comes to inspections so we're going to get his story today and uh anyway, without further ado so jog it's great to have you. [00:00:43] spk_0: Yeah, Amy thanks so much for having me on and super excited to talk and uh provide as much value as I can [00:00:50] spk_1: awesome. So why don't we start we always start the show by just getting to know a little bit more about you, your background, where you grew up, where you live now, you know, whatever you want to tell us. Mhm [00:01:03] spk_0: Yeah, definitely. So I actually grew up in a small town, it's a suburb of Chicago in indiana, so it's called Chesterton. Uh So hopefully I don't get stock now, no one's looking at my address and stuff, but uh so I grew up in Chesterton indiana, it's actually home of the dunes and yeah, it's been actually a pretty crazy journey. So I started E commerce Like 10 years ago and just super random. I was actually visiting my mom and she was shopping in the outlet ball. And so I was bored out of my mind, I had nothing to do and I just kind of ended up by hanging out and went on Ebay and started sorting from high to low. Uh and I started, I was looking at the time for a cell phone cable and I noticed you could buy 100 cell phone cables for like $200 and they were selling for like $5 each. And I was like, Damn, this is really interesting. And that's actually how I got into e commerce was just that incident. So I started buying books on Ebay, reselling it on Ebay itself. So like retail arbitrage that I ended up going wholesale manufacturing in china, re selling it on Ebay again. And then shortly after moving into more of, um, I was like, okay, hey, you know, I'm buying book, but I need to have like my own brand. So I re invested all that money, put it into amazon. Com. And uh, that's when I started my, my first real E commerce brand per se and scale that to about two million a year um, in about 2.5 years. And um, while we were building, it really, really struggled with supply chain quality control. It was a huge, huge problem for us. Uh, we had a lot of problems when it comes to quality. [00:02:46] spk_1: Wait, you said you started actually on Ebay and you were working with these electric cables and like phone cables and you realize that you could buy them in bulk. You realize that you could get even better margin if you kind of started your own brand and put your own name on it and continue to sell them. But what you didn't tell us is what made you decide to move from Ebay to amazon. How did you have the amazon epiphany? [00:03:16] spk_0: Yeah, so Ebay, we, my, my listening for on Ebay was one of the top sellers for a lot of our key words like you would type in the keywords, We would be in the top 2, 3 in the rankings and excuse me, my voice a little sore today, But at the peak we were selling only maybe about 50 200 units a day. And um, it was also low price product because we were buying arbitrage. Ebay is a low quality site in general and my kind of thinking was that, you know, on an e commerce standpoint, if we wanted to sell our own products, uh, if we're selling 100 units a day on a lower quality product, which is more volume driven, uh, moving into like a more expensive product, building out my brand, um, that's not something that would be possible on event. So that's when I switched over to amazon and I started researching and I realized that amazon had way more volumes than Ebay can even imagine. And that's when I decided, okay, I'm going to build this brand, but it's going to be built on amazon and that was super early. That was when amazon was just coming out. So everybody was kind of talking about, you know what is like the common products, It's like the makeup brush and all that kind of stuff. Like the basic stuff. [00:04:26] spk_1: What year was that when you got started on amazon? [00:04:29] spk_0: It was like 2014, [00:04:32] spk_1: Okay, so kind of like the initial, when private label first started to become popular just before then really like, I think 2015 was when there was a big mad rush to private label, but 2014 people were still kind of figuring it out and just like early dabbling in the platform. So I remember I took a break from, I started in 2007 and it was just like merchant fulfilled. It was kind of like ebay right where you're just figuring stuff out. And then I noticed when I came back to it in um In 2017 and started private label, that it was a totally different platform and uh, yeah, so, but lots more traffic and I can definitely see the difference, especially if you're selling something electronic on from customers from, from Ebay to amazon. So now we know how you started your own brand and you guys grew really quickly and you had a supplier. Did you just have one supplier in china? Or did you have multiple suppliers? How was your, Talk to us about your relationship with your supplier? Because all of us private label sellers, and we first get started, like we have these pen pal relationships with our suppliers and because we kind of don't understand what's going on. So talk to us about your supplier and your relationship with your supplier. [00:05:55] spk_0: Yeah, it's a really good question. And just to kind of backtrack real quick, Um, you know, as far as like when we started, uh, we really got lucky because private label is just becoming popular. So it wasn't very saturated. We went into one of the most saturated categories and number two. Everybody now is just getting into product customization and building out their own kind of version of the product. We were doing that from day one. So that was one of the reasons we grew really quickly. Uh, so, and when it came down to our supplier to answer your question. So at the time when we started the business, we only had one supplier and so kind of what you said, we met them on Alibaba had a little bit of this pen pal relationship and they seemed really good. We got a first order from them. First order came out really well. We did inspections, we did everything then we did our second order with them. And when we went to do our second order, they said, hey, you know, we're really struggling with production manufacturing and the quality started to kind of deteriorate a little bit, but again, I gotta passed inspection. Everything went well. And, and then after that, what ended up happening is we placed a couple more orders from that supplier and what we didn't know was what was happening in the background is that supplier was actually shutting down. So the employee council reducing pretty dramatically. We weren't able to track it because we have no visibility into the factory. So like a couple of orders in, we were like, hey, we need another order of this. And they were saying, hey, you know, we just like scale down our production, we can't do any of your orders anymore. And we were like, oh wow, like out of nowhere out of the blue but we don't have a supplier anymore and we have a product that scaling. So at that point we started looking at other suppliers and we started finding more suppliers were like hey we can't have this happen again, maybe you should find one or two other suppliers and started looking at other suppliers and that's when quality really started becoming a problem because previously was erratic, it was going up and down with that supplier but it was like somewhat manageable and it was not something like, you know the quality was going down a little bit every order but still within manageable means. But with the next order in the next suppliers we worked with, we better them out, we did factory audits, we check the engineering R. D. Capacity, things like that and order quality was extremely inconsistent on a order to order basis. So we really got lucky with that first supplier. But moving into our future suppliers just didn't work out as well. [00:08:06] spk_1: Got it. So that first supplier was actually kind of ramping down and was kind of shutting down and closing shop before your eyes. And you actually had to move to you have to find new suppliers which I think so many of us go through, we have to find new suppliers or we don't know what's actually happening at our factories. And that can be really really scary because especially after chinese new year a lot of people don't realize that this is not the time to skip inspections because after chinese new year a lot of the workforce doesn't come back And the factory does not necessarily have the same capabilities they had before. So anyway you are back to your story, you're getting to this point, you're having to find new suppliers because you're selling like crazy, I mean, $2 million dollars a year, like that's that's not nothing, especially not with basically one electronic products. So you really need to keep this thing in stock and so you start finding new suppliers and your quality becomes a problem. How do you know that quality is becoming a problem? What's happening in your business? [00:09:16] spk_0: Yeah, so I mean originally we didn't know quality was becoming a problem, we started figuring out quality was a problem about 1-2 months after the production order came and was selling And that's what made it. So um a little bit detrimental and dangerous as well is because our lead time for our products were 90 days for some of our excuse. And um you know, you have a 90 day lead time, you have a 30 day shipping time for sea freight and then you have maybe a 30-45 day turn time for the inventory. So at any given point, you know, we have like four or 5, 5.5 months of inventory and stock. So we have this entire train of five months of inventory coming, slowly moving, slowly moving and all of a sudden two months after, you know, one of our orders, you know, we, we always have like customer service metrics and we have tracking and things like that. So we started noticing, hey, you know, our ticket volume is going up considerably, the more we sell, the more our tickets are going up and it's not going up, proportion is going up exponentially. And we were like, hey, this is a little bit weird and we started looking into it and we started noticing a lot of customers started leaving negative reviews, start having a lot of returns. We start having negative reviews come left, right and center. And we had customers Contacting us 30, 60, 90, even 1, 80 days outside of the purchase period, asking us for warranty replacement or for warranty claim. And that's very common in any product category, especially with electronic, give a warranty. Hey, you know, we're going to give you a one year, manufacturer's defect warranty or whatever like that. And if the product looks completely fine and it's completely broken, just for no reason. Uh, we kind of owe them a replacement. And so we started having warranty claims, We started having all of these different things, just a couple of months out after getting a couple of bad orders and then we were like, okay, hey, maybe just one bad order. And the next order came 45 days later and we had more problems. Then the next order came and we were like, okay, now this is like a, a big issue. So that's when the alarm bells started ringing because we were like, hey, we have like six months of inventory sitting around, like this is like a year of our cash flow, right? And you know, our margins are like 20% 30%. So we're talking like a huge amount of money at stake and these products are defective. And uh and this was despite doing inspections, we were doing inspections every single order, A lot of our orders were doing good production inspections were doing everything by the book factory audits on all of our suppliers once a year. Like we're talking everything by the books passed inspections, no problems. And the orders are coming to our customers and they're completely effective. And that's when we started changing providers. So we started looking and we're like, okay, maybe we got a bad QC provided. Let's go do another QC provides, let's go do another QC provider. And we went through like 234 different providers past, past, past past and still having these defective problems and that's what [00:11:54] spk_1: elections are passing. You're heading it off, you're doing the right thing. You're not just ordering from your suppliers, your inspections are passing and you're still having these problems and you're going okay, what's going on? All right. Well maybe the inspectors are missing something. Let's just switch providers before this next order. Let's use a different inspection company. And so you switch inspection companies and you're getting passes again and you're like, okay, well, I guess you have to kind of take them at their word because you don't live in china yet, so you have to take them for their word and you're still having issues. And here you are with inventory, you can't trust your nervous that especially if you're switching uh if you're working with a company and you don't have the right contracts in place or an inspection is passed, well then you can't get your money back because the suppliers hands are clean, right, the splendors of while you pass the inspection. So there was no quality issues before it left the factory. It's your problem, right? And so you're stuck in this situation that a lot of sellers get stuck in now where they have a passed inspection, they are dealing with inferior products, they're having bad returns, stuff like that are bad reviews and they've got all this inventory that they cannot trust. Especially today when um when you're sending all of your inventory to amazon, you know and you don't know that's why in our first days of launching our program we always always always have a friend or someone we know by the product and look at it and tell us to, you know, message us, give us a call, send us videos because we want to make sure that in between it leaving the factory and passing inspection and getting to that customer that there is there are no issues. So we usually do that with two or three friends, have them by it, have them have amazon ship it to them, have look at it and tell us is there anything is the packaging smash? Is there anything that would prevent someone else from leaving a five star review? And that's kind of how we head off quality control issues outside of being able to inspect it ourselves and trusting our inspection provider. So at what point at what point does I really want to get into inspections and talking about inspections, but I think this is so important because this is how you learned what was going on, why you were passing all these inspections. So you ended up moving to china, Talk to us about that. [00:14:37] spk_0: Yeah. And just to give a quick quick note about that, like this was not something like you know we we weren't working to process or anything like that. This is something that you know we were doing, we thought we were doing right and this is a supplier that we worked with. Um and a lot of our suppliers like you know in those first few orders they were fine and then afterwards they started having problems and more problems and more problems and things like that, we weren't able to track that. So it's not something like we've had clients that reach out to us that have perfect orders on the extreme of, you know the first bad order is the first order. And then on the other extreme we've had clients who worked with the same supply for seven years and then all of a sudden ended up with the years worth of effective inventory and how to shut down. So it really happens any time. We just got fortunate that it was a little bit earlier on and then later when we were operating really big, but when it came down to moving to china, so when those alarm bells started ringing and I was like okay, hey you know what's going on with these products, why can't we find the problems on the ground? Like we were seeing some issues where like some of our products, you know their electronic products so you plug them in, they don't work. And we were seeing like a 345% defect rate where you just plug it in and they don't work and it's like okay this is the most basic tests. Like we're not even talking about wear and tear, we're not talking about customers using and abusing the product over two months. We're talking like the boast basic inspection and we did this several times uh you know ourselves and we were like okay why is this happening? So that's when I went ahead and said okay, I can't trust the inspection companies, I need to go to china myself and ended up moving to Shenzhen China, lived there for six months, did all of my own inspections basically for a couple of months, monitored my inspector inspection providers initially. And what I essentially found out was that in general, the inspection process is completely flawed. So first of all, most inspection companies only do a visual inspection. So they go to your factory, they'll go to a visual inspection of your product, they'll say, hey, the products look good. And the thing is that even the most simple products, like a wooden shelf have tests you want to do on the product. Like, hey, you know, do they support the right amount of weight? Are they built properly? Things like that? And inspection companies are basically just looking at this wooden shelf. They're like, hey, it looks good. Like just give you an example, like we did an inspection um uh for a strainer, it's like one of those pasta strainers and you know, to anybody looking at it, they're like, hey, it's just a pasta strainer. If it looks good, it's fine. You know, it's probably not gonna be any issues. There's 14 different tests we did on that pasta strainer, including like, hey, does the handles bend off if you put too much pressure? You know, things like that, is there enough water flow? Is there? You know, it's the surfacing, you know, done right? There's a lot of things to look into. More so than just a visual inspection and a lot of those things have to be done by product tests. The second thing I noticed is that those inspection companies that do product test, they literally only do them on like two units, one unit, three units. Uh in fact, you can go to some websites, I can't name them because they're gonna come after me. But uh, if you go to like some, some companies, uh, their inspections and take a look at their website, they literally tell on the website, hey we only check three units for function or we check one unit for function. And the companies that say, hey we check a lot of units for function and we check a lot of things for function. They don't actually calculate the right amount of time for the inspections. So they'll tell the inspector, hey, you know, you have eight hours to do this inspection and we need you to go look at 400 units and uh the inspector will get to the factory, they'll say, hey, I only have time to look at maybe 200 for these tests. So I look at 400 visually, I'll open them but I'm only gonna do function tests and maybe 50 and that's what ends up happening and there's no accountability, there's no visibility into the process, what happens and uh inspection companies and the management behind them are inherently flawed. And number two, the inspections themselves are flawed because the management is not being done properly and inspectors are used used to all these kind of problems when the inspection process happens. So it's a very common practice. So that's what we noticed. And then, so I started doing my own inspections and we started noticing, hey, we had problems, we have defects, we have these issues. And I was like, okay, hey, you know, maybe we have this under control, that's instead of using a third party inspection, let's bring our own in house team. And that's when I hired my own team in Shenzhen and we built out in office, we had about six full time employees at our peak uh in Shenzhen and what we noticed is a lot of our employees started getting all buddy buddy with the factories. Uh, so they started going doing a lot of inspections with the factories. Um, at 1.1 of them received a christmas bonus from the factory, which is like, hey, you know, why are you getting a christmas bonus of like several $1000 from the factory? And I started noticing a lot of weird, erratic behaviors and all of a sudden our inspections went from fail, fail, fail to like semi pass, semi past, semi past, semi fail pass pass pass pass. And we were like, okay, I guess everything is improving. You know, we're getting better quality control. Uh but lo and behold we didn't have the visibility or the know how to know okay on the ground. Um, you know, these inspectors are not doing the process properly and there's no accountability for them because we were not in inspections company, we were Nikon Brand and we don't know how to do inspections. So that's what ended up happening. Um And that's actually what led me into finding wildly as a little bit of a nutshell. [00:19:37] spk_1: Got it. So I think it's so interesting that you know that you were able to see that factories were giving bonuses stuff like that. I think it's hard for any, I think it's hard for any company to um to maintain that because these inspectors are spending so much time with these factories and constantly they want to develop. There's a balance between developing a relationship with that factory and making sure that you're friendly with them, your professional, all of that and making sure that you're also remembering that you're working for that customer who is asking you to look at their products with an objective view and make sure that you're giving them a failed score if it deserves to be failed, that you're looking at all the products that you're not taking time. So tell me how you learned. So you started doing your own inspections and you started realizing, you've told me this story before, where you started realizing when you were doing your own inspections what was missing from the inspector because it was taking you how long to actually go through all of your products. Um Yeah, tell me about that because that I think is really key for people to understand. Um, if they were to go inspect their own products, what they might find. [00:21:03] spk_0: Yeah, that's a good question. So a lot of people have this like unreasonable expectation, like hey, you know, opening my units checking my products takes like 10 seconds. You know, like I just opened it up, you know, it looks good, you know, quick inspection through and through and then they put a lot of pressure on their inspection companies. We've had clients do this to us. We've also, you know, I used to do it, I was the big time, the biggest guilty there um when it comes down to that, but you know a lot of people put pressure on their inspection providers are like hey you know this inspector should be able to do 400 students in the day. And the thing is that when it comes down to the actual time of an inspection it takes a lot longer than you think. So when you're doing your own inspection, you first arrive at the factory right? You have to go find a working area and then you have to go take all the shipping cartons out, you have to put them aside and when you actually go do that inspection process, you have to open up all the shipping card and open up all the packaging, open up all the units, make sure you're not damaging the products. And an inspector, a good inspector. And you know when I was doing inspections as well, you really want to carefully analyze your product because you know little grooves, it'll you know pieces every now and then. Uh you know even small little infractions, those can lead up to bigger defects in the future. So you want to monitor for that and excuse me when you monitor for that, I apologize, getting calls left, right and center here. But when you monitor for that, what essentially happens is that you take the time You do the inspection and then you put the all the info into the report by the time you've done that you're spending almost 2-3 times longer than you expect on like a per product basis. And in addition to that, um, was also very important is the product tests. And those are really, really key when you're doing the inspection, a lot of people don't budget for that. So they say, hey, you know, doing an inspection for product, this is going to take 15, 20 seconds. We start doing product tests, like wear and tear test safety tests, function test. Like you're plugging in the product That can dramatically increase the inspection times. So, uh, when I did my inspection in China, I hired an inspector and they told me they were going to do about 315 units. They said they're going to do it in one day when I went into that inspection myself and I know my product. So you know when I'm doing an inspection, I know exactly what to look for, exactly how to test it exactly what tests I want done etcetera. And uh for that same inspection it took me almost two days to do completely. So it makes a big difference. So when the inspector actually came to the factory just to give you an idea this is I think this is the story of referencing to. So at one point I literally went and monitored one of my inspectors doing an inspection in china and the inspector was supposed to show up around nine or 10 a.m. In the morning. I showed up around eight or nine in the morning. I want to make sure everything was ready before the inspector came. Inspector showed up almost five hours later. Around one p.m. 1 to two. [00:23:45] spk_1: This inspector did not know that you were there. He had no idea that you were there. [00:23:50] spk_0: Exactly. Yeah I didn't tell the factory that I was going to come that day. I just said I'm gonna send an inspector then on the day of the inspection until the factory hey I'm gonna be there um or the day before. Don't tell the inspector I'm gonna be there. You know he doesn't need to know I'm the client as far as I'm concerned I'm just another factory worker. So they were like okay sounds good. So I show up at the factory at eight am. I wait and wait wait. I was just about to leave the factory and then the inspector shows up around 12 PM. He's like hey What's up? And he starts talking to the factory staff and you know this is a an inspection. And for this inspection he was budgeted eight hours for this inspection myself. It took me about 12 hours to do I did it a couple of days before. And um this inspector showed up at the factory five hours late into an eight hour day and then literally just went in, just brushed up a couple of units, open them up really quickly. Just went through it pretty quickly. Didn't do any function tests on more than two or three units at a time and managed to do the whole inspection which took me 12 hours in a matter of 34 hours and left around 56 o'clock the same day. So that was kind of my story when it comes to inspection times I guess. [00:24:58] spk_1: Got it. Yeah that it's really crazy to think about. You know if we were to inspect our own products what would we inspect and how what happens sometimes when these inspectors are supposed to be there, what are they supposed to be doing and what's actually getting done? So I love that you were able to see this and you were able to discover the problems with inspections and that really most of us it would make us want to just quit everything altogether. But it made you want to start your own inspection company. So what, what made you decide to get into this instead of going, oh my gosh, I need to get away from this [00:25:39] spk_0: house. I mean if you told me five years ago that I would be in supply chain, I would tell you that you're crazy. Uh So supply chain is probably like the most unsexy industry that I never thought I'd be in. I thought I was going to be in like smart home. I thought I was going to electronics, e commerce, all this kind of stuff and I'm ending up, I ended up in supply chain. So what ended up happening essentially is that after having that experience with side that was my previous brand, um and having those issues on the product quality control standpoint, uh I started talking with a lot of different sellers, I went to conferences, I went to events and um meetups and I started talking with a lot of sellers and I basically found out that this was like a super common issue. So if you didn't have it already, you're going to have it in the future and if you had it early then great, you learned your lesson the hard way and you know, you're moving on from there. So, and when it came down to me personally, when I was building up my brand, um I really hated my life for like a year or two because I wasn't able to sleep at night. I was always worried. I always had this huge anxiety level like okay hey are my product's gonna come? Good, I have no idea what's going on. I hired my team help me sleep for two months and then 2 3 months later we started having more problems. It's actually more so six months. But yeah you know we start having more problems after that. So basically what I wanted to do is I didn't want anybody else to be kind of in that same position where you put your life savings, you know you put all your money and you put your whole life basically to build this one company or this one brand or you know to do whatever you're doing and then have it all basically you know thrown away because of a couple of bad eggs. So that's why I started Mobley and I have a technical background. So I used to program servers, I used to be able to uh I can code and uh I know how to play. Minecraft used to be a huge Minecraft guys so gaming background as well. And basically I saw a lot of improvement areas when it comes to the inspection process. Excuse me. Uh when it comes down to the inspection process so for example we can bring in body camera footage, we can use modern technology to actually track what the inspector does, how the inspection is done and then leverage that to actually determine okay which inspectors performing, which suppliers are performing etcetera. And um leverage all of that to build a better inspection process. So that's actually how I got into modeling originally is basically I was like okay hey you know there is a lot of room for improvement here and I feel like I can bring that improvement and there's no one else really doing it. So it might as well be me. Thanks for tuning in to Part One of this episode, join us every Tuesday at one PM pacific standard time [00:28:17] spk_1: for live Q and [00:28:17] spk_0: A. And bonus content after the [00:28:19] spk_1: recording at cellar round table [00:28:21] spk_0: dot com, sponsored by the ultimate software tool for amazon sales and growth seller S c o dot com and [00:28:28] spk_1: amazing at home dot com.

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