How To Boost Your Margins By Fixing The Way You Source From Asia — Omer Sasson | What Good Sourcing Does For Profit, Why You Need Backup Suppliers, Why Supplier Checks Ensure Quality, Why You Need Factories Audits, How Culture Affects Communication (#415)

In this episode, Claus Lauter and sourcing expert Omer Sasson discuss the critical aspects of sourcing from Asia, including the importance of having backup suppliers, the process of finding and verifying suppliers, navigating tariffs, and understanding cultural differences in communication. 

Omer shares his insights on how to improve sourcing strategies to boost margins and profits, emphasizing the need for thorough research and the value of working with experienced professionals in the field.

Topics discussed in this episode:  

• Why having only one supplier is the biggest sourcing mistake. 
• Why contacting hundreds of suppliers ensures competitive pricing. 
• What the four-phase sourcing process entails for success. 
• Why backup suppliers must be developed before emergencies. 
• How factory direct isn't always better than trading companies. 
• What countries like Vietnam and India offer as China alternatives. 
• Why cultural differences vary drastically across Asian regions. 
• How moving to premium countries can increase product value. 
• What landed cost reveals about true profitability. 
• Why assuming miscommunication prevents costly supplier mistakes. 

Links & Resources 

Website: https://thesassoncompany.com/
LinkedIn: https://www.linkedin.com/in/omer-sasson-sourcing-qc-trade/

Get access to more free resources by visiting the show notes at
https://tinyurl.com/9raat2n5

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Transcript

Omer Sasson (00:00)
So we said like we're contacting a lot of suppliers, we're taking a lot of mud out. Now we need to filter it out. We need to find the pieces of

the biggest mistake

Claus Lauter (00:45)
Hi, Omar, how are you today?

Omer Sasson (00:47)
Hey, thank you for having me.

Claus Lauter (00:48)
sourcing a difficult topic, we didn't have that for a long time on the show and I think it's very, very important. From your perspective, and you just came back from Asia, what's the biggest mistake online sellers do when they're picking suppliers in Asia?

Omer Sasson (01:02)
Wow, biggest mistake, I guess the biggest mistake

is not having a backup supplier. So you can see,

providing service to ⁓ clients that make annually at least $1 million, but this is really at least. So usually it will be 10, 20 million a year and even more. And I serve the company even like Coca-Cola, so like across all the range, okay?

If your product is just a giveaway product, it's not a big deal. But if your product actually makes profit for you, and you have only ⁓ one supplier, and then tomorrow something has happened, and things happen all the time, right?

up, COVID, and then you don't have shipping, or even suddenly your supplier is going through bankruptcy. It's happened. And if you don't have a backup supplier, then... ⁓

it's going to be really bad for

And

I've got a very good lesson during COVID

in COVID I didn't have backup suppliers. Okay, so I had like one supplier per product and then COVID hit and China got locked down for like about two months.

And then I learned from this. And after this for every major client I'm working with for a long time, we started to prepare a backup supplier.

And then about one year ago, even before the election in the US, ⁓ they started talking about 100 % tariff in China. And since then I've started to create backup suppliers for whatever product I could. So if there was a supplier in China, a backup supplier outside of China. And then when the tariffs went up, there was no any big issue or big deal. We just transformed production to another country.

and now potentially we might bring it back to China. But it's very smooth. The problem is most of the businesses and brands, they don't have backup supplier until the moment they really need one.

And in the moment you really need one, then you're gonna have to rush, but you cannot because product development or you need to find another supplier. This kind of thing takes time if you want to do it right. So I think this is the number one mistake.

not having a backup supplier.

Claus Lauter (03:23)
think it's a very important point that you made there and I never thought about it and you're absolutely correct. mean, that's very, very important. If your supplier falls away, your business breaks and you stand there without a business, without products. Now, I want to take one step back and finding your suppliers. The first supplier, the second supplier, how many ever you need. ⁓ Obviously, trust is a big thing there. And if you're based in the US or anywhere else and you're sourcing from Asia, that might be a big problem to find the right supplier.

You're doing this for a very long time. What's your approach on finding the right company to helping you with sourcing or with the right product, put it that way.

Omer Sasson (04:02)
think finding the right supplier,

do it in few phases. Phase number one,

you need to contact a lot of suppliers.

it sounds like, of course you need to contact a lot of suppliers. But when I say it, usually people think, okay, yeah, we also contacted like 20, 30 suppliers. When we are looking for a new supplier, we will contact a few hundred suppliers. For some product, we contact thousands of suppliers. Now, of course, eventually not all of them are relevant. But I just want you to think about it this way, okay? Statistically, if you contact 20 suppliers,

there is a big chance that none of them is very good or their prices is not very good. But if you contact 1000 suppliers, probably at least some of them are really good. So it's like

you go to an area where there is a gold in the ground and you're gonna dig and take out a lot of mud. And then when it's outside, you start to picking out the gold. So this is how we work. We contact a lot of suppliers.

This is number one, to make sure we put inside our funnel. We call this a funnel, kind of marketing funnel, just sourcing funnel, as many suppliers as possible. This is number one. Now, if you don't do this right, everything after is not going to be worth much. ⁓ By the way, the second reason we do it is when we walk this way, when we contact hundreds of suppliers, hundreds, we can really know if the price we got is the best price in the market.

And even if it's not, we know it's not the best price in the market, but we choose it. Just for example, I contact a few hundred of suppliers and I know this supplier have the best supplier A, just for example, have the best price in the market. And I choose supplier

because of different reasons, trust or other reasons, but I do know what's available in the market.

Okay, so this is number one.

Number two is about verification and filtering out.

So we said like we're contacting a lot of suppliers, we're taking a lot of mud out. Now we need to filter it out. We need to find the pieces of

Now, you're in the e-commerce for many years and you know suppliers in Asia, especially in China, also in India by the way, you're gonna ask them, can you do this product? They will say yes, yes, yes. But how many of them can actually do it? Most of them cannot, right?

So you really need to do a verification process and it's something that's gonna take time. You cannot verify the supply ability in two sentences because you're gonna need to ask the same question a few times in different ways to see can actually do it. So this is phase number two, verification. Phase number three is going to be the actual product development and sampling, creating samples.

I think the experienced one does, but the not experienced one coming with the wrong expectation. Like the first sample is not good enough, so okay, this supplier sucks. No, product development, it's something that takes

You need to make one sample, you need to give feedback and reject it, and improving the sample. So this is phase number three.

And phase number four, which I always do it. I always do it, but...

many other people don't do it, is factory audit,

which means we're sending a QC inspector to the factory to check the facility and to understand the ability and the advantages and the disadvantages. You know, there are many cases, it happened to us all the time. Let's say you look for supplier on Alibaba or YarlioBaba 1688 or other platforms and you see the factory look like, I don't know, like wicks.

head office, okay, or Microsoft head office, like huge factory and looks very nice. And then we do the factory audit and it's like a tiny room, dirty. There is like two small sewing machine. So factory audit, because for me it's really important not just to know the supplier can make the product in a good price. I want to make sure for the long term, it can make a consistent quality for example. And this is a good example.

Claus Lauter (08:06)
Hmm.

Omer Sasson (08:25)
if you want to manufacture a a case or bags, and I make a lot of bags. So if the factory is using just two or three sewing machines and it makes everything kind of manually or semi-manually, there isn't going to be a consistent quality. Each employee is going to make the sewing a little bit

So there are many kinds of details you can see when you do factory audit. So I think this is phase number four.

And I guess phase number

be, and this is coming back to what I said before, backup suppliers.

when you work in this way, you connect a lot of suppliers, you do the sampling with more than one supplier, during the process you are getting more than one supplier. Now, ideally, you want to proceed to the finish line just before an order with at least two or three suppliers.

And this is what I call a backup supplier. A backup supplier is not just, ⁓ I talked to another supplier on Alibaba like two years ago and he gave me a price. No, I actually saw the supplier, how he makes sample, I check the communication, I check the different criteria that important to me, like production time, blah, blah. And then in the moment of truth, when something happen, I can really switch

very quickly.

Claus Lauter (09:43)
perfect sense and reminds me on my own story. I also had bags on my store and I went exactly through the process, finding suppliers, talking to factories, very painful and very time consuming process. Specifically, if you're not in a country that I think that's why it's so important what you said that you have to

boots on the ground. need to have somebody checking on what they're actually telling

I want to dive a little bit more into

profit margins. ⁓ You mentioned Alibaba. There's a lot of resellers that they pretend to be the factory, but they're probably not.

your approach with factories directly? Where do you see the biggest

price advantage of working directly with the factory?

Omer Sasson (10:19)
Okay, I might surprise some people with my answers. Okay, so I don't think working with factory directly is always a good thing. Sometimes it is, okay? And I will give you some examples that all of them I saw, again, on the ground in China. Okay, it's not like guessing. So

say you want to make, let's take a product, I

a lot of it, I make a lot of art and craft products, okay? And let's say I'm,

buying from a certain factory in $1 million annually. And now I want to resell the product. I probably gonna have a very good price from the factory. I can buy it very cheap and resell it with profit and still sell you in a very good price. But now let's say, going to the same factory, you're going as a beginner with a budget of $10,000 for the first order. How the factory is going to look at you?

Okay, this is one example. Another example, let's take the opposite example. A factory can make a finished product. It doesn't need any help from trading company. You know how to speak English. You know how to make the packaging. It makes the entire finished product by himself. You have his own QC team, which is very rare in China, but can happen. In this kind of scenario, trading company or agent bring no value. Okay, they just kill your margins.

I think it's little bit take me back to the point I say again and again and again also on my LinkedIn or wherever follow that you have to contact many suppliers. Like I don't like to guess and say these kind of assumptions. You have to work with factory or you have to speak Chinese in order to get a good price or many kind of assumptions. No, contact enough suppliers, you will know, you will have the right answer. so and then you will see the difference how in some products,

Claus Lauter (12:11)
Mm-hmm.

Omer Sasson (12:15)
A trading company can bring a lot of value. In some products, working directly brings a lot of value. I think what's important is whether you work with a trading company or a factory, or work with professionals, somebody who know what they do. Because there are some very unprofessional factories, there are some very unprofessional trading companies, and the opposite.

Claus Lauter (12:38)
That's very interesting. I want to dive a little bit in the dynamic situation right now with the tariffs. If a seller wants to move away from China or as a backup,

which countries are the best alternatives?

Omer Sasson (12:50)
the hard part here is that unlike China, which is like a production hub for almost everything, you don't have a single country that contain all the different factories like you have in China. So the first thing you have to do is to understand which countries potentially can make your product. So just for example, India can make many wooden product, some stainless steel product.

In Thailand you can make jewelry, in Vietnam you can make plastics. We make now, we help a big toys brand to move from ⁓ China to Vietnam. This is what makes it more complicated and why many people don't do it. It doesn't mean you shouldn't do it because it's complicated, it's just harder. So you have to understand which country potentially can make your product and then you need to dive into the research. Taiwan also provide

a lot of alternatives to China. The thing is Taiwan can be very pricey compared to China, which is another point. If you move your production from China to a country that is a little bit more pricey, for example, like Taiwan, Japan, Korea, try to look not just how you move your production from China to outside of China, how through this transition I upgrade the product and give more value.

So I can also sell it with a higher price. I will give you example. I have a customer that makes cosmetic products in China. They sell very well, it's a cosmetic brand, they do very good work. And through the terrorist period, they asked me to try to find a factory in Korea. And we found a factory in Korea. It was like, I don't remember, 10 cents or 15 cents higher compared to China. That's all. But because it's made in Korea,

which everyone knows is very good in cosmetics and it's good for branding, they could sell it in about $8 higher. So they increase the cost in 10 to 15 cents and increase the profit in much more. ⁓ Which is, I think here's the good point if you want to move from China to outside of China, don't look on product price, look at your landed cost.

because sometimes your product price might be a little bit higher, but the landed cost will not be much higher and your profit can be much higher. So try to look how you provide more value through the transition. Okay, it's not just about, I think sourcing is not just about saving 10 cents. It's about increasing profits.

Claus Lauter (15:32)
That makes perfect sense. I think looking into the numbers is always a good thing. I want to touch on a different topic here because you've spent 10 years by now, more than 10 years in Southeast Asia, and you're very aware of cultural differences. What kind of mistakes do you see Western sellers approaching Asian suppliers and then in communication, a lot of things can go wrong. What are the biggest mistakes or misconceptions Western sellers have when dealing with Asian companies?

Omer Sasson (15:58)
It's a great question, ⁓ because I think it's probably one of the biggest mistakes Western people mostly do when working with Asia. So number one is, if we look at Asia in general, is Western

business with them as they were doing in their Western countries.

So just for example, in Europe, if you will send a supplier an email with all the details of the product,

and supplier in Europe, okay, a factor in Europe, and you will ask him, please confirm you can do all the listing above, and he will say, yes, it's kind of a contract, right? It's kind of a binding contract or agreement at least. In China, it's worth

so people trying to treat

Asian supplier as they will treat Western supplier. This is number one. And...

Number two, they look at Asia as a one country, which is like Europe is not one country, right? The culture in Germany and France are totally different. So Asia also, and I'm saying this as somebody that all the time in Asia, I'm living in Asia, the culture, the difference in the culture between China and Vietnam is huge, even though

They have a border. And between China to Japan, it's like totally different. Even more, will say, okay, because I've been living in China, in several parts of China. The culture in different provinces in China is totally different. In some places, they will cheat you a little bit more. In other places, they might be more honest. In other places, they might be a little bit more official, maybe even a little bit more Western. So if you go to...

Shenzhen, which have border with Hong Kong, sometimes they might be a little bit more Western, somehow we can say. In EU, in Zhejiang, it's totally like market approach,

give me the money, I will give you the

don't waste my time. So you really have to understand there is a cultural difference.

the biggest tip I can give, because I cannot teach you the entire culture in...

one hour, I myself cannot know the entire culture, even with 10 years of experience. Always assume you don't understand and the other side, your counterpart also doesn't understand. And if you come with this approach, like if I'm saying something and I assume you didn't understand, I will say it again in different way. I will ask you, did you understand what I just said? And when you said something,

Maybe my initial response might be to get offended by what you said, but I need to ask myself, wait, maybe he didn't want to offend me, maybe he said something that in culture it's okay to say. So if you assume you don't understand and

also don't

you will make less mistakes.

Claus Lauter (19:03)
I think it's very important. I think that's the most important thing if you do global business is to have an understanding or not an understanding, but be open to being lost in translation, Not knowing about the culture. It just does not work out. Now, the safe path is to work with someone like you who has the experience, who is on the ground, who has the contacts. Who's your perfect customer and how do you work with them?

Omer Sasson (19:13)
Hmm.

So my perfect customer will be probably a brand that make at least one million annually. And the reason is usually it's more serious customers and they

they understand the benefit of like getting results and not just about, we spend this and that money for a service. They care for the result, not just about how much they spent. And the way we work with brands, usually they pay us and we are doing, we find the suppliers for them.

and then they can work transparently with the suppliers. Some other brands also pay us to do the entire supply chain and say entire production and inspection and QC. But it's mostly e-commerce brands, Amazon

work very well with this type of customers.

Claus Lauter (20:14)
Are there specific, and you mentioned a few before, there specific verticals or industries you work more with than others? You mentioned cosmetic is one thing, bags is another one.

Omer Sasson (20:25)
interesting because at first when I just came to China, I started from textile, even textile raw material. And the more the time passed, I started to learn more more niches because you're

you learn something, becoming an expert and then you learn a new industry. So we do a lot of cosmetics, supplements, pet supplies. do a lot of pet supplies. Art and craft and DIY is probably a niche I do for many years.

we do a lot, home decoration, even furnitures we do. guess quite almost everything. I guess what we don't

is the very complex technological products because for this I have no

right now most of the products

can do. Also when you have the right sourcing system,

It's not just like learning the product, learning a new product, it's part of the system. So for me, this is what we do all the time. We get a new product, we need to learn it, we need to have a strategy how to find it because for some products, it's not just, ⁓ I need to find the factories that already make this product. Sometimes you need to come with a strategy, wait, maybe I need to make one piece in one factory and other piece in another factory and combine them because this is the way to reduce cost, for example.

So it's also about strategy. And another thing we do, which I really like to do, have to say, we help the little bit bigger brands to build their internal sourcing team and sourcing system. Because I think a brand at some point reach to a size is that you want to do things in-house. But, and many times they will use VA's from the Philippines, which can be great employees, by the way. ⁓

but they don't have the right experience. So we help them build the right sourcing system and sourcing team

and train them so they will be able to do it internally by themselves, which is something I really like to do because I really like training.

And I think it's part of the reason why I'm good in what I'm doing, not just because of my experience, because I know how to train my employees

to help me in the process.

Claus Lauter (22:42)
That makes perfect sense. Now, you've already mentioned and answered a couple of questions that I had with the different styles of how you work with clients. But from Emergent approaching you, what kind of homework do they need to do before they get in contact with you?

Omer Sasson (22:57)
Well, I guess it's to know what the product they want to do.

I don't like to work with clients when they come like, listen, we want to make a table kind of look something like this picture, but give us all the different table available and then we will choose. By the way, because the part of doing the right sourcing process, you need to take a specific product, learn it and then compare it because...

you cannot compare green apple to red apple. they need to come when they already know what specific products they want to do and

what qualities they want, what target price they probably want or arrange and then we can do the rest.

Claus Lauter (23:45)
How does your pricing structure work? How do you charge for your services?

Omer Sasson (23:50)
So it's dependent on the product. We charge to find supplier. If we find supplier and you work with them transparently from 3000 to $4,000. And as part of this, you don't just get the one supplier, you get the entire research we do. So like I said, we contact hundreds of suppliers. So you get the entire research, includes the backup suppliers, which is, I think is very important.

For a training and building a sourcing system and training a team, it's around $12,000 and we have also smaller price point

smaller companies, but this is about the price range.

We also have some clients that pay us regularly and

Claus Lauter (24:27)
Okay, no songs.

Omer Sasson (24:31)
outsource us to do their entire sourcing.

Claus Lauter (24:35)
I can only vouch for having somebody with the experience and being on ground to help you with that. Otherwise, it's a very, as I said, it's a very difficult process. ⁓ Not being there, not speaking the language, not understanding the culture. You're basically already losing when you start with that. And sourcing from Asia is important. ⁓ Sourcing from different Asian companies or countries, I think it's the way to go right now. So before our coffee break comes to an end today.

Is there anything you want to share with our listeners that we haven't covered yet?

Omer Sasson (25:07)
I guess just say like come to my LinkedIn. I try to post regularly, everyday

value. It's not like sales or marketing. You can just learn. ⁓ Go to my LinkedIn page. You can see the posts, learn. I think even if you already have your own sourcing team and you're confident and you feel I don't need any help.

Let them read the post, let them see the... I make a lot of cheat sheets and stuff. Let them read it, it's gonna help them.

So LinkedIn is a good place and you can always DM me and we can schedule a 15 minute call,

do some introduction and if we see we can also do some business together, gonna be great.

Claus Lauter (25:50)
Perfect. I will put the link in the show notes, then you're just one click away. I think that was a master class in sourcing. I hope a lot of people will reach out to you and see the benefits of working with somebody who has the experience. And I hope to talk to you soon and get some updates. Thanks so much for your time today.

Omer Sasson (26:06)
Thank you.