Probably the most intimidating thing about sourcing products for private label sales from an overseas supplier is the issue of shipping. There are all kinds of issues that you have to be aware of including export licenses, taxes, when ownership of the products transfers to you (thus in indicating your liability), customs fees, and more. You can walk that path yourself or you can have someone help you. Scott definitely advises the later. Find out how it works on this great episode where Scott is chatting with Ryan Peterson, of Flexport.
How Ryan started thinking about creating a freight forwarding company.
It’s often the pain we experience ourselves that prompts us, entrepreneurs, to build something to solve that problem. That’s how it was for today’s guest, Ryan Peterson. Ryan had experienced some issues with his supplier and the sea shipping options that not only cost him a lot of money through fees and delays but also didn’t allow him to keep his products in stock as easily as he expected. He’d already worked in the overseas markets and figured he might be the guy to figure out some better systems to make things happen smoothly for others. Flexport is his solution. Find out more about Ryan and the Flexport story on this episode of The Amazing Seller.
Product shipping issues can trip up your sales pipeline in a number of ways.
One of the many problems Ryan Peterson ran into that caused him to build the Flexport solution for purchasers of overseas products was regarding timing. What he discovered was that everything had to legally be done in a certain sequence. If it wasn’t, and his product was shipped before a certain requirement was met, the shipping company would charge him daily fees for having his products “stored” at their facility. It’s just one example of the kinds of headaches it can be to ship by sea. But there are answers and Ryan has built the solution, which you can hear about on this episode of The Amazing Seller.
When it comes to dealing with overseas shipping, make sure you understand the terms.
There are all kinds of acronyms and terms used in the sea shipping and freight forwarding that can get you confused. And if you choose the wrong options, thinking they are the right option (which is not entirely unheard of) you can wind up paying lots of money in the form of customs fees and taxes that you really didn’t have to pay. So how do you navigate a field of landmines like that? You need someone to guide you – and on this episode of the podcast, Scott has just the guy – Ryan Peterson of Flexport.
How are you going to deal with your freight issues for private label products?
If you’re sourcing your products from overseas – China in particular – you are going to have to decide how you are going to handle your shipping issues. You can do it yourself. It’s possible, but you have to know what you’re doing. Or you can hire a company to be the go-between and the one to ensure all steps are being followed properly. To help you make that decision Scott’s brought on an expert from the freight forwarding industry to help you understand the pros and cons of each option – and hopefully to make a good decision for your situation.
OUTLINE OF THIS EPISODE OF THE AMAZING SELLER
- [0:03] Scott’s introduction to this episode of the podcast and his gust, Ryan Peterson!
- [3:50] Ryan’s story and how he build a freight forwarding company.
- [6:26] Why issues are always changing in the private label and ecommerce world.
- [8:20] Why Ryan wanted to create his own system and company for freight forwarding.
- [13:38] The main things to watch out for when it comes to sea shipping.
- [17:30] The logistical differences between freight forwarders and parcel post shippers.
- [21:58] The freight forwarder’s job to bring all companies and processes together.
- [24:54] One of the main things that hangs up sellers who order from China.
- [29:55] The Flexport solution to these complicated issues.
- [39:43] Ryan’s final advice: Keep at it – learning and growing as you go.
TRANSCRIPT TAS 308
TAS 308 : What You NEED to Know about Sea Shipping and Freight Forwarding
[00:00:03] Scott: Well hey, hey what’s up everyone! Welcome back to another episode of The Amazing Seller Podcast. This is episode number 308 and today we’re going to be talking about a topic that a lot of us are nervous about and well there’s good reason for it. There’s a lot of moving pieces and a lot of people touching your products. What I’m talking about is freight forwarding or shipping by sea…
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…by ocean, by boat, however you want to call it.
But really it lowers the cost of your shipping. Yes it takes longer but there’s also a lot of moving pieces and there’s a lot of things to know about this. I wanted to bring on an expert, someone who’s actually doing this but also has created a company that helps do this now because when he first started… we’re going back before even eBay and then he started on eBay and then he went to Amazon. After going through that as far as private labelling products even back then, he found a need for this or he wanted something better and easier.
He felt like he was getting ripped off at times and he didn’t know who to trust and just a lot of different moving pieces. This is what really scared me about this process and I’ve been totally honest about this. I have done very little in this arena and I say very little. I haven’t done it personally. My partner, Dom Sugar now has done that and he’s still doing it and he’s worked it out through the years but if you don’t have any idea of how this stuff works it can be very, very daunting and very scary.
That’s why I wanted to have on Ryan Petersen who is an expert in this. He’s actually created something for himself and then turned that into a service but I’m going to share with you his story of how he even got started private labeling. We’re going all the back before eBay and before Amazon. Then once he started doing it he started to see that this was really a pain-point for a lot of people and he’s created a company called Flexport. You guys may or may not have heard of them, I have mentioned them on the podcast before.
[00:02:00] Scott: I don’t get compensated in any way for recommending Flexport, at least as of right now but I just want to be able to connect you with the right people if you want to use this service. Here’s the deal, what it allows you to do is see the entire process but more importantly you need to understand the process. That’s what Ryan also goes through here on this podcast. I wanted him to break it down for us as if we were going to do it ourselves without even using a service and then what his service does to make it easier for us to feel at ease.
Be able to also monitor and see where the packages are, who’s touching the packages? Whether it’s custom stuff, whether it’s getting delivered off of the port to whatever next location is in line because there are a lot of different moving pieces. I think we were counting as we were doing this interview there’s over 10 different touch-points which is crazy. When you’re going by air which I always recommend in the beginning is really just letting your supplier know or your manufacturer know where you want it shipped and they’re going to ship it, that’s it. It’s going to go there and that’s where FedEx or DHL or UPS, they handle all of that stuff.
Really excited for you to hear this interview. Ryan is a really great guy and he’s someone that’s been in the trenches, so I love that about him. I did want to say that our audio was just okay on his end; you can still hear him and everything but it was a little muffled at times. I just wanted to kind of throw that out there. The content’s still really, really good but again just wanted to let you know. I’m super excited for you to hear this. If you guys want to download the show notes and the transcripts to this episode head over to the amazingseller.com/308. You’re probably going to want to do that because there’s going to be a lot of great content that he’s going to share with us whether you use the service or not. It’s going to help you understand the process. Guys, enjoy this interview with Ryan Petersen.
[00:03:49] Scott: Hey Ryan thank you so much for hanging out with us today here on the podcast, what’s up man, how are you doing?
[00:03:55] Ryan: I am awesome, thank you for having me.
[00:03:57] Scott: I’m excited to have you. It’s funny, we’re going to dig into freight forwarding and all of that stuff. I’ve heard a lot about your company. That’s really what got me to know who you are but then I started hearing more about your story and stuff and I really wanted to dig into that because you’re not just someone that started a company for people that want to do freight forwarding but you’ve actually done the business.
I like that because you’ve actually walked the walk a little bit and you kind of fallen into some of those pitfalls and stuff. If you can just give us a little bit of a background as far who you are and where you came from and how you got to where you are today.
[00:04:38] Ryan: I’m Ryan Petersen. I’m the founder and CEO of Flexport which is a freight forwarder. We have companies that a lot of them are under one fellowship products around the world. A lot of them just imported from China but we shipped cargo this year from 83 different countries, so helping businesses move freight and get if forwarded to go, that’s what we do. Our mission is really to fix the user experience in global trade which we think it’s way too hard to get freight shipped across the ocean. That’s what we are.
My personal background, you mentioned, I started out on the other side. I was a customer of freight forwarder store and I used to run a business selling all kinds of things on the internet. My favorite one was a website called backrubhub.com that I started to sell electronic massage chairs. We had a couple of dozen websites and brands and we sold on eBay. We were rarely selling on Amazon when they first opened the marketplace back, I want to say like early 2000s.
I’ve been in the game a long time and started Flexport out of frustration for like it was just too hard to ship freight. I felt like my business is already hard enough to find good products and figure out to get people to buy them. When I would feel like I was getting ripped off by my service providers and just struggling to get flexibility and control and get honest transparent pricing. The business really came out of that. I didn’t know much about freight forwarding when I started it.
[00:05:57] Scott: I want to mention something here real quick and I kind of want to pick your brain a little bit is like you started a long time ago in this ecommerce, using different channels game, if you will. You’ve seen a lot of changes I’m sure like in the marketplace. Whether it’s eBay, Amazon, Etsy, whatever they are, the different platforms, Google. There’s all different updates. I’m just curious, when you were going through this whole process, am I wrong in thinking that there’s just always been these changes and we’ve always had to adapt and pivot in our business or am I just thinking wrong about that?
[00:06:38] Ryan: 100% no, we were always changing. Your business has to almost reinvent itself every six months or so. I mean we try to reinvent ourselves. When I was on the marketing side, Google every time they did the update. I remember Panda update or whatever it was back that is when I crashed out. We were doing really well and we had to start all over almost.
On the product side you had someone else would come in and have a product that’s very similar to yours and selling it for less you had to keep going out and finding this stuff and reinventing yourself and making sure that you got an edge on the product side. That’s why we had so many different brands. It was tough.
[00:07:17] Scott: It really is and I always try to ask people that have been in the game for a while, even before Amazon there’s just been always these changes. I always bring up the time that I was selling digital products on eBay when they allowed digital products and then they made that change where you no longer could sell digital products and then I had to adapt. You had to ship a physical item then I would just ship my digital items on a CD and I got around that and a lot of people didn’t want to do that. There’s just always been those changes. I just like to always ask people, is it me or is that normal?
[00:07:54] Ryan: No, it’s pretty normal and you gotta stay creative. One of the things I did was… I remember back eBay was a bigger platform for me back. I don’t know when lines crossed where Amazon just became so much more important than eBay, but I think late 90s or early 2000s I feel like eBay was a bigger platform in the marketplace and when we startedl getting traction. eBay is so review centric, so you can just keep destroyed so easily. Amazon is too but it’s funny ways to get people to say nice things about you.
[00:08:22] Scott: Without a doubt. You’ve been in this game a while. Your main focus is helping people that are in this game to be able to use or to use yourself as a freight forwarder but to also make that process simpler and easier. I know just from hearing from other people before I even got started in this game that it was a huge challenge. Who do you trust? Some people were freight forwarders and they really were but they weren’t and then your money would be tied up and they wouldn’t really ship the product. Just tons of horror stories. What made you want to create your own system for this? Was it because you got burnt? What was the reasoning in creating this thing?
[00:09:12] Ryan: It was a long lingering sort of festering mood of dealing with freight forwarders. I felt like I was getting ripped off almost every time, especially when you’re really small you just don’t have a leverage and you don’t have the knowledge and the resources of a big company where you got professionals and seasoned people who know how to call BS. The freight forwarding industry is one… If you look at it and then the fundamental dynamics and what freight forwarding is, it’s worth saying that, it’s really about this coordination function of helping freight move around the world. We don’t own the trucks and the planes and the ships and it turns out nobody owns planes, trucks and ships, they tend to own one or the other right?
The role of the forwarder is you need to door to door freight, you just don’t need to go from port to port but you need to get it from the factory to your warehouse. It’s the forwarder’s job to kind of coordinate all of that. Today and every other forwarder in the world that works with the eyes on the phone just calling, call the trucker in China then call the ocean carrier, then call the trucker in the U.S. and call the customs broker and just coordinate all this and so much complexity.
I felt like obviously there’s a role for software here to organize things. Which documents do I need when, kind of turbo text style and make it a little simpler for people. The pain was that these things mattered, the dollar amounts are really high and all the forwarders, there’s not a lot of differentiation. You’re talking about a real commodity like generic, talk about a commodity it’s like moving a box from here to there. As long as the box gets delivered everybody is the same in the tradition way of doing business.
In that world what you get is competition tends to discover the price and there’s always someone willing to undercut you on price to land that customer and then hopefully extract profit from them on the next shipment or the one after that or the one after that.
[00:11:10] Ryan: What ends up happening is the forwarders because they’re just making money out of the peer middlemen and they kind of like to obfuscate things and hide the reality, I won’t say lie but they make it really confusing. Your invoices are hard to understand, they’re giving you prices where you then have to go do your own calculations later to figure out what they actual plan to charge to you. There’s always hidden fees at the end.
The one that really got me and there was a moment that… I don’t know that this is the one. I didn’t start Flexport after this but this is the one that always burned me the most about forwarding. It’s this just the thing called dimerage and hopefully none of the people in the audience have dealt with but I know you have. That’s when you ship something, you import something through the ocean port especially you have one week to get it out of the port. That means you got to have all your documents planned out. You have to have paid everybody in the chain, everybody needs to sign off like the forwarder’s been paid, the factory’s been paid, you can now release these goods.
If you don’t do it within a week they start charging you $200 per day per pallet, at an insane rate. If you can’t pay it because you don’t have enough money you’re now in a debt spiral. You’re just like, “Oh my God I don’t have enough money so therefore I’m racking up more charges and going deeper in the hole.” I had sort of an incident like that where we thought we’d be able to pre-sell all this product and use the money from the pre-sales to pay the factory and get…
We were just like classic style on the internet and it didn’t work out and had to borrow money from my mom. I felt like I was getting hoaxed by the people like why are you charging me $200 a pallet day? I can store it for a month for 20 bucks.
[00:12:52] Scott: That’s a big one. I guess that’s what’s really always… For me personally but there’s a lot of people that I work with and that I help. The freight forwarding is just really, it’s a mystery to a lot of people and that’s why you want to try to find a freight forwarder that can kind of handle all this. If we’re talking the documentation, like you said, if one thing is out of line it screws everything up. It’s kind of like the general contractor, you can’t get the next job done until the one job gets done before it and it holds everybody up.
It’s like then like you’re saying, now you’re holding your inventory on this dock that you’re going to be paying these crazy amounts of money and you just feel like you’re held hostage there because how else are you going to get it out of there. How can people avoid that? What would you say like if you were talking to your younger self and said like, “Listen watch out for his and this is what you’re going to do to not let that happen?” What would you say? What would you advise?
[00:13:51] Ryan: I think education is probably the only answer; really understanding what the process is, what you’re getting into. One of the things we really try to do is just be more transparent than everybody in the industry. Where everyone else is making money off in transparency if you’re the one that’s trustworthy and has some integrity I think we can stand out a little bit there but from the customer standpoint really understanding what’s going to be needed, make sure that you’re really getting door to door or at least you’re able to figure out what the door to door cost is.
If you find freight, especially if you’re letting your factory do the freight, they’re going to show you this rate to go to Oakland and here’s the price to L.A, whatever port they’re going to. You get the price you’re like okay, cool, L.A is right down the street I’ll just drive over there in a Uhaul and pick this stuff up.
What you don’t realize is that they didn’t include a whole bunch of fees at destination. Customs clearance and the port terminal fees and if there’s a fee to get it out of the security fees and there’s already other fees that you’re going to have to pay, they’re inevitable. You want to make sure you know and the best thing to do is make sure you shop around like a dozen people and make sure as you do that that you’re really comparing apples to apples. You see that it’s one price and it seems really low but it’s only port to port and it doesn’t include all the other stuff that needs to happen to get the goods out.
That’s one of the best thing I can say. In general buying freight from your factory is not a good proposition in spite in the beginning when you’re small and freight can really be an inconvenient. And they might have more scale so it’s possible to get better prices than you would but you have a problem there. Your forwarder has a really nice role to play in the transactions where you’re buying from an overseas factory.
They can sort of be that bad cop in dealing with the factory and the factory’s going to be late a lot of times. They’re going to kind of charge you things that might not be fully true, sort of very artful presentation of the truth let’s say.
[00:15:51] Ryan: If the factory is arranging the freight they always can just blame the freight forwarder. “We have it done but the forwarder didn’t show up.” If the forwarder works for the factory you’re not even in touch with them, you can’t verify this.
The forwarder has a nice role to play in helping put a little pressure on your factory, be like the goods are not ready. I know they’re telling you that they’re ready but we just called them and offered to send the truck and they’re not ready. Having that sort of third party involved in the transaction that can come in and put a little… help to get your back and be an objective third party is very useful.
In general if the factory’s arranging the freight you might not find out there’s a problem because they’re just saying it’ll be in Los Angeles in five weeks or in eight and you don’t find about the problem until it’s eight weeks down the road and the goods haven’t shown up. Whereas, if you were coordinating with the forwarder you would find out four weeks earlier when the good are supposed to have left. There’s a few tactical reasons and advantages to being able to have more visibility control over all your products.
[00:17:03] Scott: I think it comes down to, and we’ve always talked about this, it’s like having a good relationship with your manufacturer but then also again having a good relationship with a freight forwarder if that’s what you’re going to do rather than doing all the legwork yourself. Maybe what you can do though is lead us down the path. What does it look like to get a box from or a pallet from, let’s say China over to Amazon? I know but I want you to kind of go through those steps logistically that will have to happen in order to make it go smoothly.
[00:17:42] Ryan: It’s worth stepping back and realizing that difference between a freight forwarder and like a parcel player such as FedEx. The biggest difference is that with parcels, which it’s really just a matter of the product being small, like a little box is that in the small parcel world the goods never leave FedEx or UPS’s control. It’s their employees picking it up, taking it to the… Their truck comes, goes to their warehouse, puts it on their plane, mirror image on the other side.
It’s in their network from door to door and therefore you get all that nice tracking, you get those sort of milestones, you log in and they have mobile apps these days. Pretty good. Their service it doesn’t work for importing in bulk from China but you see the beauty for instance it’s pretty good. In the freight forwarding world there’s no company that’s big enough that has the trucks on the ground in China, thousands of them, that has thousands of trucks in the U.S. plus owns planes and owns ships. There’s no company that big.
The forwarder’s job is to coordinate it across multiple companies’ networks, so you’re good. The reason that tracking is hard in forwarding is that there’s not one company that has one system that scans a barcodes and uploads it to one place. That process starts with getting the goods out of the factory. Figuring out when is the cargo going to be ready to be picked up? Making sure that you have export licenses. This is a common mistake for people exporting, buying from China is they see the price in China and they buy and they don’t realize that that factory doesn’t have an export license.
Now you gotta go find some third party to use their license to export under and that becomes a real problem if your product has batteries or any kind of hazmat stuff where the third party just don’t want to take it because whoever is the exporter is taking liability for that. Batteries can start fires as we’ve seen. So it becomes very hard also you bought this product, you’ve paid for it and you can’t get it out of China so that’s one potential pitfall.
But let’s say you’ve got export license planned out, you’ve got all the documentation you need, we’re going to arrange a truck from the factory to the port or the airport, get it loaded, cleared out export customs.
[00:19:48] Ryan: Again that’s part of that export license process. How many companies so far? One was the factory, then the trucking factory, maybe there’s an export license so that’s three, a customs broker that’s four.
We’re going to probably put it in the warehouse, if you’re just shipping a couple of pallets of goods, we call it Less than Container Load (LCL). Then we’re going to bring it to our warehouse and consolidate it with other customers who are shipping goods and get it all in the same container. That’s another company that’s going to be in the chain. Then put it on a ship, so we now have six companies, we haven’t even crossed the ocean yet.
Where the ships can arrive, if it’s entering the United States in Flexport’s case we’re a customs broker so we’ll clear it through customs ourselves but sometimes you have a forwarder and customs brokers that are separate. And the customs broker clears it so that’s like seven, eight companies. A warehouse again to deconsolidate it to then take the six different customers who are in that container and split their cargo. Then you need trucking from there to an FBA facility. Usually Amazon has the best rates for that.
You are at like nine, ten companies so you can see the complexity. You can see the role of the forwarder is like “wow that’s a lot of complexity to take on if you’re going to do that yourself and maintain relationships with truckers in China and warehouse.” It’s not reasonable. You’re going to need a freight forwarder if you factor in ranges that far, but they're still using a freight forwarder to coordinate all that.
A lot can go wrong. There’s a lot of handoffs. In the old world all these handoffs are done, it’s almost like a relay race with pieces of paper. Your turn dude, now you take the cargo through the next destination. The pieces of paper or just phone call. The way that Flexport is a little bit different is that we structure each of those as a little micro-market place where we have preferred providers on each leg of that shipment. We work very closely with them, we can track these goods from door to door in real time using satellites, much better transparent pricing etc. Our goal is like no surprises, we’re not always going to be the cheapest but we just don’t want there to be surprises.
[00:21:57] Scott: Really, just so I understand this but a freight forwarder in reality is supposed to be the one that can take care of all of those 8, 9, 10, 12 companies to try to bring it all together.
[00:22:12] Ryan: Gives you a single point to focus.
[00:22:15] Scott: Yeah. Pretty much.
[00:22:16] Ryan: Relationship.
[00:22:17] Scott: Right. You got someone…
[00:22:19] Ryan: It’s extremely valuable. I don’t think freight forwarders are just pure middlemen, that’s a lot of value they’re creating in coordinating all that complexity. It’s not like buy low sell high.
[00:22:29] Scott: Right. From your experience you’re still going to be… And I’m just asking you this too, but from your experience, depending on how much you’re ordering, what you’re ordering I guess would also come into it, you’re going to save money on the shipping. You are going to pay a little bit for the freight forwarder but in the same breath you’re probably still going to save a lot compared to if you did it by air.
[00:22:56] Ryan: You’d still be freight forwarding in the air as well. Airing versus boat because again you need door to door like just getting it to the airport, flying out. It’s got to clear customs, it’s got to get delivered by a truck, etc. I always think you’re going to need a freight forwarder if the products heavy, like if it’s under a sample of that can go in FedEx network or in DHL or it’s in 100 kilograms or something then you ship with one of these guys and they’ll just do it for you door to door. But otherwise doing heavy stuff is going to get coordinated by a freight forwarder.
[00:23:29] Scott: Right. That’s what I’m saying, if you’re shipping it by FedEx or even DHL and like you’re saying, if it’s lighter and smaller then that’s different because they are handling everything. They’re initially your freight forwarder in a sense because they’re handling everything. Everything is going through their system. I’ve done that and I’ve had packages that arrive in three days; DHL. It can totally happen but it is going to cost you more without a doubt.
[00:23:58] Ryan: It costs a lot more and it always blows my mind. Air freight takes five, six days. It’s like wait a minute, why are they taking it so long? The plane only takes 15 hours? What is the other five days is the nonsense? I’m not saying we fixed that but that’s one thing we’re constantly working on. It’s like “hey how do we take down cycle times and make sure that paperwork gets processed, customs gets cleared faster.” The whole point of air freight is to get there the next day.
[00:24:21] Scott: Obviously if you’re paying more you want to get it there. I know a lot of people that have done it where just because they want to get it in a hurry they might do a part of their load by air and then the rest of it they’ll do by sea so this way here they can save the money on the back end but they want to get product to market as soon as possible. I want to go through Flexport and how you’ve streamlined this process and how now you can look at the process in a dashboard which I think is cool.
Before we jump into that, maybe let’s just… For anyone that is just getting started in freight forwarding, maybe not just getting started in selling online stuff but as far as their first order that they’re getting ready to do. What is one thing that you think that people they’re not aware of that gets them hang up? The one thing that they could prevent by you saying like, “Listen, make sure you do this or you could pay a huge penalty or get hang up.”
[00:25:22] Ryan: I think that the simplest one is understanding the terms of your transaction. The industry jargon it’s called Incoterms. This is where when you are buying something almost by definition have this change in title. At some point you own the goods instead of the factory and there’s this body of law… I think it’s original maritime law, but where that transaction takes place? This is where you see FOB versus X-works versus DDP. Let me go over those things are.
[00:25:58] Scott: That will be great.
[00:26:00] Ryan: X-works is when you’re buying and it means that the transaction takes place at the factory. From the factory in China, wherever in the world it’s your responsibility from there on as the buyer to get… The rest of the delivery is up to you. Then you have FOB which I think we’ve all heard this term; it’s free on board and that means that the goods, the transaction, the change in title takes place the moment the goods are loaded on the ship and cleared out of export customs.
There’s a few other terms but the key ones are going to be those two plus CIF, that’s cost of insurance in freight. What that is it means that the terms where the transaction takes place where the title is transferred from the factory to you is at delivery. CIF it includes the cost of the good plus insurance plus freight, so you’re paying for it all to the factory. Then the factory is responsible for the freight and it’s going to deliver it to you. It’s very important to understand when you’re buying something what is it actually bought.
If I’m buying the X-works then I definitely have to pay for all this freight in addition rather than by CIF, it’s included. It matters a lot especially with the FOB versus X-works distinction, this is a mistake that we see people make somewhat commonly. We highly recommend to everybody, I say we, I personally as someone who’s done importing a lot is to do FOB terms when you buy goods. The reason that is, is because now it’s up to the factory to clear export customs and if they can’t do it you don’t pay for anything.
Whereas if it’s X-works you’ve paid for it and this that point I was talking about earlier where all of a sudden it’s on you to figure out how to get these goods out of China. We can do that for you, we can help but sometimes maybe their goods haven’t been certified as… Like they haven’t passed some drop test for batteries to make sure that they’re not going to start a fire. There’re certain things and make that the sellers responsibility. You don’t want to have to take that on by buying at X-works from the factory.
[00:28:03] Scott: I like that, that’s a huge nugget actually for anyone listening. To me that’s like life or death as far as like, I’m being extreme but as far as like…
[00:28:14] Ryan: We’ve seen companies that have come close to death because of making this mistake where it’s like “oh my goodness, we’ve paid for all this stuff and we can’t get it out of China, what are we going to do?”
[00:28:22] Scott: That’s insane. That would be crazy and here you’re thinking to yourself like everything’s going to be fine and then all of a sudden you have to figure out how you’re going to get something tested the past so you can get it out of the country. If you’re doing FOB it’s basically their responsibility and you feel a little bit of protection there that at least my product has been passed and cleared so I can actually get it shipped.
[00:28:44] Ryan: Big time. That’s a very important thing to know. CIF has its own problems. CIF is when the factory is going to pay for freight to door. I went over that a little bit earlier where it’s like where you want to have more transparency. You want to know when there’s a problem in advance. CIF does not include, it’s just to the port in the U.S. It doesn’t include the customs clearance and then the trucking to your warehouse.
You got to make sure that you know what you’re paying for and don’t get hit with an extra 1,000 bucks at the end that you weren’t counting on. That would be my number one piece of advice, just make sure you understand these terms of when you’re buying something, what are the implications and how do they apply to freight, to the export in the customs process and all of that.
[00:29:25] Ryan: The big one though is if you can get FOB that would be the one?
[00:29:29] Ryan: I would get FOB, FOB at the port of origin. FOB Shanghai or whatever, FOB Sheng Chang, those are probably the most common one. Factories are happy to do that, just make sure you tell them it’s FOB.
[00:29:42] Scott: That’s a good one. We’re going to put all this stuff in the show notes, transcripts and all that stuff so you guys can definitely grab this off which I think you’re going to want to because this is pretty good stuff. Now let’s take people through Flexport. What did you create? Again, I know why you created it now but maybe you can lead us through the user experience of as far as if I was to go in brand new and wanted to get started in this. What’s that kind of look like?
[00:30:14] Ryan: I’m glad you said user experience. I think that was our original mission here. We didn’t know that much about… I knew the problems from having experienced them but I didn’t have the solution. I’ve never worked in freight forwarding business before but I did have… We just focused on the customer and focused on making it easier for people we could create a lot of value.
The original idea was something similar to Turbo Tax I think like let’s make some workflows, make this easier. These documents are needed, tell me what they are, where to get them, allow me to upload them, keep track of them. A lot of times we used the same document again but why start from scratch if they’re all stored in the same place. Save people a lot of time on workflow and make it simpler. We’ve really grown involved the idea a lot since then, we’ve learned so much.
I’m so proud of the team since so much we’ve learned about the industry from coming in I think with a healthy amount of naivety in the beginning and saying now we pretty much understand the fundamentals why all these problems would come about. Some of the things that I explained to you earlier around this complex coordination across multiple modes of transit. I didn’t know any of that stuff before. I was usually like I don’t like the service I get from these companies.
We started to build tools for all those legs of on the supply side to connect in with all these partners so we’ve got apps that all of our partners can log into, our truck brokerages that we work with come in and get loads and dispatch truckers for example. We do integrations with airlines and ocean carriers so they gives real fast real time tracking. As the customer you’re able to log in, see all your stuff on a map. That’s the one thing that people really like to get some peace of mind. We’ve been told by a couple of the companies that they now are able to do pre-sales where they never could before because they are able to see on the map like the ship’s right there. I see it right off the coast. It will be here, I’ve got this arrival date of when it’ll actually get here.
I can see it. If I could go out and create my website it will be like, “It ships in two weeks,” whereas before they would just be like out of stock and lose that sale.
[00:32:10] Scott: That’s huge.
[00:32:12] Ryan: One of the insights that led to Flexport was realizing that there’s always data in your supply chain. Every single commercial invoice, every packing list. There’s really interesting information for you as business owner. What have I shipped? What did it cost me? Where did it come from? Where did it go? What modes of transit and what are the factors that affect this and what’s the seasonality to it? Does the price go way up? As a customs broker you got to give all… You as an importer have to give all this data to U.S. customs and whatever country you’re shipping to.
Customs needs to see what is the price of the goods that you paid for? What are the attributes of those goods? We as the customs broker have to collect that data and structure it and give it to customs. Every other freight forwarder just keys in and every other customs broker just takes that data and keys it in U.S. customs system, gets the clearance and prints the file and puts it in the file cabinet. It’s looks pretty silly. We’re doing all this work to do the data entry, why don’t we put it into a database and give it back to the customer in useful ways?
Of course we’d never share that data, it’s super private, it’d be illegal for us to share it. It’s your data but we can give it back to you and say, “Here’s what you shipped.” For every product, every SKU that you ship what is my landed cost? The full cost from the factory, the price of the goods plus the freight plus the customs. We have all this data for you so we can show it to you and help you understand if I shipped it by air what’s my price, by ocean what’s the price?
If I ship it to the East Coast, how is that different than to the West Coast? You can learn all these things and help make better decisions. Ultimately, this is where I say like in a commodity business which Flexport is very much in a commodity business; we sell freight. I think some of you guys are probably commodity businesses. Other people sell similar products in some cases. You really have to focus on how do I differentiate, how do I sell on value that I create for my customer. If you just sell on price there’s always someone willing to go a little bit cheaper than you.
[00:34:11] Ryan: Selling on price is a very dangerous proposition. We say, how can we add value? We can create lots of value. One of them is data, one of them is peace of mind, it’s presale thing like giving you more visibility, control, helping you make better decisions. These are ways that we can sell on value and say we’re going to… Our goal is always to be the cheapest but we’re not always going to be.
But if we’re competitive in our user experience and the value that we create it’s greater than our competitors then it becomes at some point irrational not to use it. As long we’re just as good at delivering the goods on time and in full. Just generally I think it’s good modern software just can make these complex transactions simpler.
[00:34:57] Scott: Let’s just kind of go through that real quick though. I go ahead and I have an order that’s lined up and it’s ready to go, it’s FOB. I just go into Flexport in my account and then there’s a place to just start and then that leads me through to what I need to do next? I’m just trying to gather for the listener how that would be.
[00:35:22] Ryan: We create a work list to make it pretty simple and straightforward. One of the interesting things here is the first time you ship something, our process might actually take a little bit longer because we’re going to structure all the data. We’re going to upload all the product attributes. You don’t have to do more work, we do this for you. We’re going to upload all the product attributes, what’s the HS code of that product? What’s the weight, the dimension? All of these things.
In the very first setup process it takes a little bit longer but then the next time you ship your product it’s like click a button. I’m going to actually ship this many units, boom, move it. That’s where the automation really comes in. It’s like cool. After it, every time now you’ve got this product catalog. We’ve got all your products here, all the SKUs, if you ever had dock compliant information, if you ever need country of origin document for this product it’s cool, it’s all stored right there. The next time down the road when you’re try to clear it you’re not going to dig in through hundreds of emails to be like, “Hey what was that thing?” You can’t remember.
We’re not just a pure self-service software solution. It is really not only software and it can be self-serve, but it’s a managed service, so there’s a team backing it up. You can communicate with us. You call us any time, instant messaging inside the system. Email is just a nightmare. We got 50 people on the email thread and sometimes in these great conversations I’m like what is it? We’re getting too many emails, let’s bring it all into one place and then hold people accountable and make sure they do the things they said they were going to do.
[00:36:49] Scott: That’s great. I’ve heard a lot of people… Again, it’s funny, the reason that I’m actually talking to you is because someone on your team had either listened to the podcast or heard of the podcast and said we’d really love to get Ryan on and kind of talk about that because you’ve had some experience in the ecommerce world but also been hearing that I’ve been mention Flexport because I have. I’ve been hearing really good things from listeners, from my students and just obviously if it’s something I believe in then I’m going to go out there and share it. Now it’s just come full circle where I get to talk to the guy that’s actually the founder and creator. It’s cool how things happen that way.
[00:37:33] Ryan: This weekend I went skiing and I hang out with five people that we went to and two of them were listeners to the podcast so it’s pretty awesome also for me to get on here.
[00:37:41] Scott: That’s awesome and I just love it how… For me personally it’s about those connections and the networking and figuring out how to build out your own little support network. This is a huge part of a support network because if you’re able to get this part done, I’m talking about like freight forwarding and bringing your cost down and then your margins go up but then you have a trusted source. Here we are talking to the guy that created this thing. What better way to validate that there’s a good service out there is to really go to the source and it’s sometimes hard to do that.
I’m just so glad that you came on and shared your story with people and I’m sure you have a ton more war stories which we may have to have you back on for those. I want to say thank you for coming on and sharing some of these expertise. I think the FOB thing for people that was one nugget I think people should really write that one down because some people might not know that. I know that because I’ve just learned that through the whole process and I’ve done my research but some people will just skip over that. Then you get a phone call or you get an email that says, “Hey, you got to get this stuff approved or it isn’t going to leave China,” that’s a big deal.
[00:38:53] Ryan: The whole industry is set up with acronyms like that and just weird terms. One of my hypothesis here is that they do on purpose because then if you ask about it they’re like this person is a novice, let’s rip him off. Whereas just here you just call them out and they go this guy knows what he’s doing let’s give him a discount. I really think there’s a lot of that.
[00:39:13] Scott: There could be. They’re very well could be.
[00:39:14] Ryan: You got to do your homework and often asking your freight forwarder is not the best way to… Although they know the answer like you’re now signaling, you’re sending the wrong signal to the guy. You got take your education in your own hands.
[00:39:26] Scott: I agree with that 100%. Sometimes you don’t want to seem like you’re a newbie even though you may be. There’s tons of resources out there, the podcast is one of them but there’s many others out there just do a little bit of research and understand the language and terminology I think is a huge thing. Is there any last little bits of advice you’d like to discuss here or even just that you wanted to mention before we wrap this up?
[00:39:51] Ryan: I just think Amazon sellers and ecommerce merchants have just a really hard job on a number of different fronts. Dealing with China… I lived in China for two years, been to dozens of factories. Dealing with that especially if you don’t speak Chinese and you don’t have good cultural ties to that world it’s tough and really hard. Then you have this hard problem, how do I compete in a very crowded market place where the internet is open to everybody?
Everybody in the world can come out and compete now and it’s awesome but it’s competitive. You’ve got this two bookends of really hard problems to solve. I have now respect and I’ve worked hard in that business and I wouldn’t say I had like shining success. I did a little bit of good work as a buyer/seller, but it’s really hard. Then we just feel like in the middle part of getting the goods from that factory to that customer should be easy. That’s our goal and our mission we’re definitely not done. We’re working every day to get better but that’s how we come at it.
As far as advice I always point back to my own career like I did it for a long time, one year, it’s already 10 years ago but I worked my butt off doing importing from China and selling on the internet. I made $14,000 and I was working hard like I was trying my best to make money. That’s not a lot of income to take home and yet I stuck with it and I think part of it is, you don’t want to stick with things that aren’t working, you got to be honest with yourself. You also got to realize that success can really compound and build on itself like little successes because you have them sometimes enable the next success or maybe it’s because you’ve got enough revenue you track the employee that helps you take it to the next level.
Hopefully some of your guys can raise enough money someday from investors and because you get that investor money because you had enough success to invest your money now you have enough money to hire that person who makes it. It’s like you can really have these compound functions and success where success compounds on itself and so really look for that and be aware that sometimes it feels like you’re not being successful but you got to stay at it.
[00:42:01] Scott: I love that because we’re recording this around the time the 300th episode going live and this won’t be airing till after but I’m recording it at that time.
[00:42:12] Ryan: Congrats man, I saw that comment on iTunes.
[00:42:15] Scott: I appreciate that. That whole 300th episode was I had someone interview me and kind of going back through exactly what you just said. All of those things that led up to where I am now I wouldn’t be speaking to you right now if I hadn’t done those three things before I started the podcast.
[00:42:33] Ryan: I’d love to see a graph of number of listeners by episode within the first week or whatever and just see the growth of your audience.
[00:42:43] Scott: It’s funny because it started relatively quickly for a podcast because generally people start podcasts and then they might start, you get 100 listeners here and there and then it starts to grow 500. I think right out the gate we started with about 500 listeners but that’s because I was helping people also within Facebook groups and stuff. I was kind of starting to help before I was even thinking about a podcast. I already had people that were interested in what I had to say but it would be interesting to go back and see that.
I just love to go back to my story of when, and your story, it’s like you got to where you are today to do Flexport because of the things you did in the past that help you get the skills or the connections to help you do Flexport. If you just looked at it everyone has that. Everybody has a skillset that they’ve built because of something else that they’ve done or lessons that they’ve learned. It’s just people think that they’re going to go out there and start a business and it’s going to be successful and the chances are it’s probably not going to be.
[00:43:46] Ryan: Chances are you’re going to learn more than anything else you can do and the interesting thing is you learn about parts of the world in running one of these business is that other people don’t see. Your friends are like I want to do app like but they don’t get exposure to the same… They get exposure to the same ideas as everybody else like food delivery. Plane tickets is too hard to book and so everyone builds the same thing. Actually as the buyer or as a seller participating in global trade, buying things overseas and selling, just see problems for those people don’t even see and learning about.
That was our story like, I just learned about this weird part of freight forwarding, like no tech entrepreneurs were thinking about that because they never tell you, they never got involved in it. I also really encourage people to be like I know you’re working on your business and working in it every day but look around like what are the problems that your business is facing and maybe one of those can be even better than your actual business.
It just keeps nagging you and no one’s fixing it. At some point in your life, maybe even though it sounds impossible and I don’t know what the solution is maybe if I go at this from the perspective of focus on my customer, how do I create value, how do I find people who are suffering the same problem and fix it for them you can make a really good business.
[00:44:55] Scott: That’s what happened to you basically. If you never did the importing and exporting and stuff you never would have had that problem that made you aware of Flexport.
[00:45:05] Ryan: Exactly, 100% and that’s my story. That’s what I’m trying to say.
[00:45:07] Scott: It’s crazy, it’s just crazy how things happen and I just want people to understand. I know that we’re talking about freight forwarding here with you but really I just like to always pull that back in because most people I’d say 95%, 98% of people they’re out there and they’ve gotten to where they are and people look at that as they got lucky. But it’s not, to me luck it’s that you created opportunity because of the things that you did beforehand that led up to where you are. It just the way it works.
Like you’re saying problems are a huge thing for a lot of businesses and that might be the thing that you’ll be able to build upon. You just never know where you’re going to go. Connections I think are also another big thing. Learning about other people but then also connecting and helping other people and then you just never know where those could turn into a partnership. This is awesome, I really appreciate you coming on Ryan.
I’d love to maybe get you back on and we can hear a little bit more of your story but also maybe some things that you’ve either discovered through working with all these other business stuff. Maybe we’d get you back on and do an update but I just want to say thanks.
[00:46:13] Ryan: I can come on any time and I will also be really down, I know you do a lot of Facebook, question and answering stuff so we can maybe do a session like that too.
[00:46:21] Scott: That would be great. Maybe we can do like a Facebook Live and get you on and we can field some questions, that would be great because I know it’s a big topic and we can definitely do that. That’d be awesome. I’m going to let you roll, I know you got a company to run. Why don’t you let people know just how they can get a hold of you and then we can go ahead and wrap this up?
[00:46:42] Ryan: Come on to Flexport.com. Our main email is email@example.com. You can find me on twitter too. My handle is @typesfast, don’t challenge me to change that. And I just challenge you guys, good luck out there.
[00:47:03] Scott: That’d be awesome. Guys what I’m going to do is I’m going to link everything up to the show notes, transcripts and links and all that stuff so I’ll put that there for you guys as well. Again Ryan I just want to say thank you so much and I’m sure we’ll be in touch bud.
[00:47:16] Ryan: Okay, awesome, thanks Scott, it was really cool.
[00:47:18] Scott: All right, there you have it, another great conversation. We learned about freight forwarding but the other cool thing that we learned is all about Ryan’s story. I’m just so interested in that and that’s why I decided to recorded episode 300 to be honest with you. I wanted you to see my journey, kind of all of these different points of different light bulb moments or where this happened and then that allowed that to happen. It’s just interesting and someone look at Flexport and go they’re a pretty big company right now. Who’s the guy that started it? Well, there’s the guy that started it and exactly how and why he started it and how he’s helping people now.
It’s just crazy on how all of that stuff works. I never intended on this interview to go down that path but I’m so glad I did because any time I get an opportunity to do that I do it and hopefully you guys are cool with that because I just love listening to people’s stories and seeing where they came from and how they got to where they are today. That’s it, that’s pretty much going to wrap up this episode. The show notes can be found at theamazingseller.com/308. The transcripts, the show notes, any links there, I’ll link up to Flexport for you as well. Like I said, no pressure, you don’t have to use them but definitely check them out.
The last time I was going to mention them they weren’t even accepting new clients yet. Definitely go check them out, see what they’re all about, ask Ryan some questions if you have any. Again, I don’t get compensated as of right now for this. I know they don’t even have an affiliate program in place but maybe in the future. Right now I’m doing it really because I want you guys to have a great resource and that’s what I really believe that Flexport is.
Just wanted to say thank you guys for being listeners, thank you for taking me on the run, in the plane, on the train. Wherever you are I just want to say I appreciate each and every one of you and hopefully you’re getting massive value from these episodes that I’m publishing. That’s it, that’s going to wrap it up.
Remember, as always, I’m here for you, I believe in you and I am rooting for you but you have to, you have to… Come on say it with me, say it loud, say it proud, if you don’t know what to say next you got to go back and listen to some more episodes. What do you have to do? You got to take action. Have an awesome, amazing day and I’ll see you right back here on the next episode.
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