How to Take Your Product from Concept to Market ⎜ Gembah ⎜ EP 71
Ryan Cramer: What's up, everyone? Welcome to my corner of the internet. I'm your host, Ryan Cramer, and this is Crossover Commerce presented by PingPong Payments, the leading global payments' provider helping sellers keep more of their hard- earned money. What's up, everyone? Happy Monday. I'm your host, Ryan Cramer, for another episode of Crossover Commerce presented by PingPong Payments. Episode 71 is here and ready to go. About PingPong Payments, we provide marketplace sellers and entrepreneurs global solutions for controlling their domestic and international funds. An account with us enables companies to significantly reduce or help their costs when receiving or making international payments all in one platform that helps increase operational efficiencies, saves time and allows sellers to manage their business profits from one single source. For more information, go ahead and check out that link below where it says save 25% at least on your international fees. Go ahead and sign up for a free account with PingPong today. But about our show today, thank you, again, for everyone who is joining Crossover Commerce episode 71 live on Amazon... or excuse me, on Facebook, YouTube, LinkedIn or Twitter, or if you're catching this at a later time throughout your day. We know you're busy, so if you catch this later tonight, either downloading this on Amazon music, Spotify, Apple or Google podcast, anywhere where you can download a podcast, we will be. But if you want to watch this again, you can go always and check this link out on YouTube for a replay later on. Go ahead and do me a favor. Go ahead and share, like and comment your thoughts about this episode today with your social media following. We see all the comments real time, so we want to make sure we engage with our audience with any specific questions we have about our guests or a topic that we're discussing today. Also, if you're here, if you listen to this or watch this later on, go ahead and tag us in that post as well, and we'll make sure that you get your answers or your questions answered, I should say. Also, Crossover Commerce goes live about four to five times per week, so I'm always looking for guests to bring on the best and tell everyone about the best tips and tricks in the Amazon and ecommerce space. My goal is to bring you as much content as I humanly possibly can, so go ahead and subscribe to our social media channels, or go ahead and follow our Facebook group. Just search Crossover Commerce with Ryan Cramer, and subscribe to that, and you'll be notified of the week's worth of people. We have again four episodes this week, Monday, Tuesday, Wednesday and Friday. Go ahead and subscribe to those channels today. About our guest today on episode 71 of this show, again, he is the founder and COO of Gembah, where he has helped ecommerce brands and Amazon sellers and promotional products companies create new products that was sold for seven figures in revenue. His company, Gembah, is the world's first product innovation platform, connecting businesses and entrepreneurs to product development and manufacturing experts to guide them through the product development process. He has been on the ground of a unicorn company, Instacart, a tiny company, maybe you've heard of them, helping them build up the Texas markets from$ 0 to seven figures in weekly GMV, and building a national supply forecast system and fostering partnerships with Whole Foods, Costco and H- E- B, big time companies. Definitely tune in and take notes today. Welcome to our show, Zack Leonard of Gembah. Zack, welcome to Crossover Commerce.
Zack Leonard: Thanks, Ryan. Great to be here, excited to talk shop about product development.
Ryan Cramer: Those are big time companies that you worked with, man, like a unicorn company that you just... I'm curious about that. Tell me, walk me through that background of working with Instacart and then building out Gembah.
Zack Leonard: Sure. Started my career in consulting and then moved into the startup space. I lucked out, and the first one I went to was Instacart.
Ryan Cramer: Wow, so lucked out. You know what they were going to do. Most people-
Zack Leonard: I believed in it, and I thought it was an awesome experience that they built. I came there. I was employee number 30, so pretty early on. They only had a few markets up and running when I was there. I was tasked with starting and scaling the Texas market. Austin was the first place, then moving into Houston, Dallas, San Antonio after that, and working with Whole Foods to set up their partnership. Ultimately, that got bought out by Amazon, and now, they're competitors, and working with H-E-B and Costco, and helping create the model for forecasting supply and demand across all these different cities that they operate in, so really fun time, really exciting, explosive growth that I was able to see focusing on grocery delivery, and ultimately-
Ryan Cramer: That's awesome.
Zack Leonard: Then from there went to another delivery company, ran strategy for a company in Austin called Dropoff. They're focused on all same day delivery, some more courier- based services. I think that's where I started to get interested into the product development and manufacturing space. I've seen the last vile of the equation, which is the delivery. It's a very crowded space, but the problems that that delivery solved weren't that interesting to me. It was more about how does the whole thing work before that? How do you get products out in the market, and how do you empower people to create the world's greatest new products? That's really what led me to start this company is noticing that there was a true gap in the market for SMBs, particularly those who are just starting out or who have maybe a couple of hero products that they want to continue to grow. Seeing that time and resource constraints are real deal for SMBs as an entrepreneur myself, and understanding that hands on, and seeing where you need to devote your time and where you should start hiring people who are experts. We've created this platform that solves that gap, that if you're good at marketing, you're good at selling the product, but you may not have the expertise to develop the product or manufacture the product. It's something you should probably think about either outsourcing or hiring someone who is an expert internally. That can be expensive and time consuming, and so what we do at Gembah is created the platform to bridge that gap and give people who do not have that access to those people who do have the expertise at the click of a button.
Ryan Cramer: That's awesome. Obviously, 2020 was a big year for grocery, and your background comes in that in terms of that model. Gembah has been around for how many years? What, three, four, two?
Zack Leonard: Three, three years.
Ryan Cramer: What specifically are you working on? Are you working on more the market that you were actually experts in? Obviously, not the grocery, but obviously, just the supply chain fulfillment, more like product conception to crosstalk fulfillment centers. What was that switchover from one pretty specific area to more of, I would say, a wider base, if you will?
Zack Leonard: I think from our perspective, why we started and continued to do what we do is because, again, it is such a wide market. There's trillions of dollars in imports and exports every year. If you get a percentage of that, that's a huge potential business that you can crosstalk.
Ryan Cramer: We're talking with the T, not a B. We're talking about trillion with the T.
Zack Leonard: Right. That's the macro factors, and then if you go into the small midsize business segment of that, it's still in the hundreds of billions of dollars on a regular basis. Again, those companies are the ones that don't have it all figured out necessarily, and don't have the expertise or don't have the resources to do what we do. I think we're trying to help as many businesses as we can get products out in the market that actually sell. There's a real process in the filament that we do to help guide our customers on that journey of, " What does it take from I have an idea in my head to getting it down on paper to developing it for real with engineers and designers, then going into talking to manufacturers, and finally getting it to your warehouse?" That's really what we do.
Ryan Cramer: All this seems like a very time sucking entity, right? Ideas can take forever. They can take a few days. They can take weeks, years even to come up with a concept or idea for where you wanted to go to market, then finding a great manufacturer or distributor. No one really knows like, " Oh yeah, just walk down the street and find a good supplier or manufacturer." How did you guys build out a system that condenses it all from multiple weeks or years even, months or years to something that's very much time saving as what you guys do?
Zack Leonard: I think the first is the process, developing that. I'm happy to walk through more in detail on that from how that works perspective. That's the first step is building out the actual process, and then the second step was building out the network of experts and manufacturers. I think we've been doing those in tandems, now where we have over 1, 500 factories in eight or nine different countries that we have personally vetted. The philosophy for us has always been that you need to... When you go into the manufacturing side, you need to have someone who's physically there on the ground that can go to your factory at any given point in time to check in and make sure that everything is going smoothly, and your production is moving along towards both the spec and the time schedule that you've agreed to with the factory. That's really how we've developed it. Then really, it's about in the product development side of it, again, hiring and working with experts who have done it before, so our design and engineering network is hundreds of people large now and has awesome, talented engineers and designers that have worked at places like Under Armour and Weber Grills, and have worked on chips for Boeing and on the Tickle Me Elmo, so a bunch of cool stuff that they've done in the past that have actually made products and mass manufacturing before. That's a big deal. I think the part that a lot of people don't understand is how much expertise and knowledge actually has to go into this process. Why go at it alone if you've never done it before when you can have someone, whether it's with Gembah or not, but have some expertise on the ride to help guide you through the process and give you a better chance of winning, right?
Ryan Cramer: What is that like? Are you guys trying to specialize in a specific country? Is that where you start that process at of, " Hey, we can line you up with Chinese manufacturers and distributors," or do you try to even take it further into different countries like India, Mexico, even the United States? I don't feel like a lot of people look in the United States, but even sourcing and manufacturing from your own country if you're in the United States, that could be a huge benefit and win in terms of turnaround if it's cost effective. Where do you start that focus? Where are those low- hanging fruit, I should say?
Zack Leonard: I think it's all going to depend on the actual product itself. Where's the best place to get that manufacturer? That's, again, further down the journey when you're going into full scale product development. It's something to note and consider if you are not wanting... If it's a bulkier item, maybe that's something you don't want to put on a boat, because it's so expensive to manufacture, so developing it somewhere... If you're selling the product in United States, maybe something like Mexico makes more sense, right? All those things you have to consider through the development process, and really where it starts is with research. I think if we're going to go detailed into the actual process itself, the first thing is you need to actually research your product. You research your idea. What's out there from a competitive landscape? What are you trying to... What problem are you trying to solve that hasn't been solved by your product, and how much is that going to cost you to do? I think that's a lot of what a lot of the development phase should be spent in at least to start, because it's cheaper. It's research. It's your time, which... It's valuable, but at the end of the day, if you're going to try to launch a product, you have a great idea, you need to validate that it has legs.
Ryan Cramer: How would you guys suggest that people do that, though? Do you that through data? Do you do that through testing? What are the ways that you guys suggest?
Zack Leonard: All the above. Definitely through data first. I think there's some quantitative data. It depends on where you're selling it to. If you're selling it on Amazon, there's obviously a ton of tools and stuff out there that you can use like Helium10, Jungle Scout, whatever. We've developed some tools on some proprietary stuff that we've created as well to help look at Amazon data. But ultimately, there's a combination of that. If you're looking for how much it's going to cost, I mean, you can get a baseline understanding from Alibaba. Alibaba is great at what's already been invented for the stuff that's custom that's never been invented before. It's hard to really gauge pricing based on what's already out there in the market. It can give you a baseline, but it's not going to be completely accurate, so doing a bunch of that, and then looking at trends. What are the smaller companies or smaller batch manufacturers or smaller entities that are selling things on Etsy or things on Pinterest? What are the trends that are out there that might give you inspiration of things that you want to incorporate into your product? Again, you can use data on the actual concepts themselves. There's a company out there called PickFu, where you can do AB testing, and get feedback on your product. Go ask your friends like, " Is this product... Would you buy it?" That's who you're selling it to. You're selling it not just to your friends, but people that are out there in the market and marketplace and ecommerce. Go get feedback. Protect your assets with some patent if you can, or deal with people you trust to start, but at the end of the day, do the research first. Make sure you have conviction, and make sure that the problem you're solving can actually be achieved within a budget that makes sense for your margins for your business. That's how you start. Then once you've gotten past that point, then it becomes a lot easier. Then you can start finding the team and building the team around the product that you need. Again, this is where it gets really specific into the type of product that you have. If it's a cut and sew product like apparel or a bag, you really only need an industrial designer, or someone who's worked on that type of product before. You're going to want to find a designer that has done those types of products before. I'm not talking to sketching. I'm talking a true tech pack, so something that will actually tell the factory the blueprint of your product. If you're going into something that's more complicated like injection molds like plastics, metals, and glass and all that kind of stuff, you're going to need a mechanical engineer on the product so that... Again, that's two. Now, you have an industrial designer and a mechanical engineer on the team. The next step after that is if you add electronics into the mix. Then you're going to need an electrical engineer. You have to really understand what kind of product you're starting with or building or creating or iterating on. That'll help guide you on the team you need to build to actually physically build that product.
Ryan Cramer: What do you tell people if it's... Do they have to be passionate about that product or that area of focus when they're selling online? Do you think that's a component that they have to be a part of?
Zack Leonard: I think that's a very good question, and I think it's timely in the sense that, I think, for the small business or mom and pops, or you're just starting out, probably, it's something you should probably want to believe in. But if you're on the other side of the spectrum like the inaudible or the aggregators of the world, are they going to be emotionally attached to their product that they're launching? Probably not, or the products that they're buying. Probably not. It's all about dollars and cents to them. Again, there's really two ways to look at it. I think it needs to be a combination of both. It needs to be a combination of... Again, if you're trying to go at it yourself, do you believe in the product? Do you have an emotional attachment to it? Then second is does it make sense financially for you to make the investment of time, energy, money, and everything that's going to go into actually developing the product?
Ryan Cramer: There's a couple things that I can break down from there. One is obviously aggregators and brand owners. They want to find something they're going to be passionate about and work about solving a problem, idea or whatnot. With aggregators, do you think that's part of the equation that they haven't figured out yet? How does passion quantify to success, and when we buy this, what does that quantify to what we can do with it? You know what I mean? At the end of the day, it's a number in terms of scalability, whether it's make it better, make more product, or whatever that is. Is there an unforeseen one that they haven't figured out yet like a formula?
Zack Leonard: I don't know. It seems like inaudible has figured at least part of it out. They keep getting tons of funding, and it seems like they're scaling like crazy. I think for anyone who's doing those bulk buying of businesses, the part that really needs to be taken into consideration is the supply chain risk, where if you have that scale, a lot of the people they're buying from are the smaller six, seven, maybe eight- figure businesses that their products may not... It's probably not just one hero product, or maybe it is, but it has some diversification. Can they level up their manufacturing to the next tier? A lot of the courses out there, they're taught for beginners. They just go to Alibaba and find a factory, which is great for white label again. You can do that, and you can run a great business, and it works to a certain degree. There's just no comp... There's no barrier to entry for anyone to do that. What we believe is that creating that barrier through the product development process and creating something that's defensible is what's going to win in the long run. Again, from the aggregator standpoint, if you're able to find that home run product, and it was built at a factory that's maybe what we would call a tier three factory or something that's found on Alibaba or something that you found at Canton Fair, and they aren't doing tons of volume relatively to the tier two, tier one factories, but maybe they can level up to that scale by putting money into PPC and money into marketing, and getting more efficient on that frontier, then they should have that conversation with the bigger players in the manufacturing space, and start getting competitive bids from those factories and making sure that they are getting the best possible solution from a manufacturing partner as they can.
Ryan Cramer: A couple different things, do you guys work with any aggregators to help them find their way along? It's almost like... I was going to say do you guys contract? How does that work when aggregators are-
Zack Leonard: It's the same-
Ryan Cramer: Is everything getting and going? It's almost like if you're working with a really well- funded third party seller, right? They just have lots of capital to help them crosstalk.
Zack Leonard: For them, it's about cogs. It's about being able to drive the cost down without sacrificing the quality of what they bought. There's obviously inherent risk by switching providers or something like that. I mean, the other thing we do is help develop the product. A lot of the aggregators don't have product development expertise. They might have Amazon expertise, or they have supply chain expertise. Again, if you're spending a lot of money on going and buying companies, you could also spend money on launching new products that are complimentary to the brands that you're buying. That is something that we also help out with.
Ryan Cramer: Interesting. Then on the flip side, with product development, is it something that you're seeing innovation happen more now than ever, or is it something like it's almost like a copycat society? You guys probably see it more on a high level or maybe closer to the inaudible, where there's not as much innovation in terms of the product world. They're just iterations of the same product. Is that fair to say?
Zack Leonard: I think in the Amazon world, for sure, there's certain products that just do well on Amazon because of the convenience and ease of use and ease of purchasing. If your strategy is to go off of Amazon and do more of the Shopify, your own website type of endeavor, you can do a lot more, I think, from a creative standpoint. Then what we've seen in the data is if you actually create that brand recognition off of Amazon, your click share and conversion share is actually two or 3X what it would be if you started on Amazon. If I look at the OXO brand, for example, for kitchen goods, their conversion share by someone searching for OXO in the actual title or the keyword is at-
Ryan Cramer: Super high.
Zack Leonard: ... 85% to95% versus someone who just searches like, " I want a kitchen blowtorch." Then you're getting into more of the 30% to 50% conversion share for those products. If developing a brand off of Amazon is actually an interesting strategy for some if you want to go down the product creation side of it, and then once you've created that brand, and people know who you are, Amazon just becomes another outlet for you of how you can fulfill your goods.
Ryan Cramer: If you're coming up with a product... Let's go back to the innovation part. If you're creating a product, and it doesn't have a name or a brand or anything associated with it, how are you telling people, " Hey, this is a need, but how are people searching for it?" Does that come in the picture of you need... It could be the most innovative thing, but if no one's searching for this problem, you know what I mean? How does that work in that crosstalk?
Zack Leonard: That's an interesting question. I think, again, if you're looking at the data, there's only going to be so many places you can find what people are searching for. You can look at Google trend data, and that's challenging. It's a lot. You can look at Amazon data. Again, if it's something that may not be a good fit for Amazon right now, it doesn't mean that it may not be a good idea, or it might not be something you can make money off of. It just means that, " Hey, maybe you don't want to start by selling it on Amazon. You want to start by selling it on your own website, and do more of that crowdsource way, or you could do something like a Kickstarter, and go down the path of trying to collect the funding upfront to limit the amount of cost you have, and see if it has legs that way." If it does well on something like Kickstarter, and you get five, six, seven figures on Kickstarter, it may be worth the investment of time and money and energy into it.
Ryan Cramer: Is that where you tell people like, " What are the different ways that you can take an idea and either fund it?" Well, obviously, you can do it personally or privately, or you can do them on Kickstarter, which actually right before this, I posted friend's product. It's a coffee substitute. I don't know if you know Samer Brax or Mina Elias from the Egyptian prescription. He has a chemical engineer background, but he sells online, and he does supplements, which is a super common space. But then also, they both figured out this product. They're doing concepts too, or selling on Amazon, and then hopefully exiting eventually. But now, it's called Nuro or ShopNuro. He has a successful brand on Amazon, but they're trying to do all these different ways for people to get started with their product ideation like how to research product ideas, and then funding it even if you have$ 0 on Kickstarter. I literally just posted it on social media. If you check it out, and you're friends with me on Facebook, definitely go check it out on ShopNuro.
Zack Leonard: I would. Absolutely.
Ryan Cramer: But then... What are other ways? What else might I be missing to fund this great idea? I've conceptualized it. I have an idea in mind, but need capital in order to get that products manufactured.
Zack Leonard: I mean, the other thing is you could license it. If it's something that you just don't want to pay for the inventory and you want to collect a royalty, or you think it's that great of an idea, you can limit your risk, limit your upside obviously, limit your risk as well by saying, " Hey, go to a bigger company or someone who you feel that it may work, and show them design and see if it's interesting." If they like it, then maybe they'll pay you for it at some point. I mean, that's what a lot of... There are some design agencies that do that. That's their lead... Their sales channel is to create these designs that look cool for big brands and say, " Hey, this is interesting to you," and then maybe they'll fund the project. Those are the main ways that I see as pathway to capitalizing the product.
Ryan Cramer: Gotcha. When someone comes to you, what problem or missing... What hole do sellers or companies have that they're trying to fix when they come to Gembah or you? They're like, " I have this problem. I need it plugged quickly, so I can get up and running and start making more money on this inaudible."
Zack Leonard: I think majority of our customers want the design aspect of it, because they don't have that expertise themselves, or they don't have the teams that we can build. Then other customers come to us with wanting to take over managing supply chain and helping them either reduce costs or source in Vietnam or India or somewhere else outside of China.
Ryan Cramer: They're coming to you and saying, " This is my idea. I need to make it an actual tangible product," and you guys are helping them build it. Is that what it is?
Zack Leonard: Yep. Again, the platform links people together, so if they come to us with an idea, let's say... Again, I'll just use an example. I'll make that up on the spot. Let's say you have a cup that you want to have your ideas. I have a cup, and I want it to measure volume and control the temperature. That would have some electronic component into it. It would also be most likely injection molded because a cup is injection molded. It's either made out of plastic or some metal that insulates like a Yeti. You would need a designer and two engineers. You need a mechanical and electrical engineer so that you can develop the PCB, and have all the wiring works within the cup. Then you need an engineer to make sure that it can be housed correctly and safe for human consumption within that cup. Then you need the designer who's going to actually just come together and make it look cool, make it look like something I want to buy. What we do with our secret sauce is we have this wide net of designers and engineers in our network. As soon as someone comes in and says, " Hey, I want to build that cup," we can match them up with the team to go build that cup. We'll find the designer engineers that have actually worked on products that are similar to the idea that our customers and our leads come in and talk to us about, and then we match them with that team so they can go develop it.
Ryan Cramer: Interesting. It's almost like a... Hold on. There's a product out there. It's almost like matching not a Fiverr or anything like that, but almost like a Fiverr for engineers, right, almost?
Zack Leonard: I mean, it's similar. Fiverr for manufacturing and design, similar to that.
Ryan Cramer: Interesting. Not that I'm saying that you guys are copying Fiverr, but that it's this different model of-
Zack Leonard: I mean, it's a marketplace at the end of the day. We are a marketplace that is two sided, and people can transact and work with people that are contractors that are not employees of Gembah, but have a fuel that will get them to develop the product that they're looking for.
Ryan Cramer: Interesting. That ideal customer would be, " Hey, I need to make this. I need to find somebody who can work with me to build this out to make it legitimate." They have the idea. Naturally, I'm assuming you want them to go through your network to find legitimate manufacturing and distributing partners that you've, I'm assuming, vetted in person. Is that the next ecological step?
Zack Leonard: That's the next step. Once you've done the matching with the designer and engineers, and you have your collateral, which is your CAD drawings, your tech packs, your build materials, all the stuff you need to go talk intelligently to a factory, it transitions over to the other side, which is the manufacturing side. That's where we have teams actually in the countries where we're doing manufacturing, so China, Vietnam, Mexico, Colombia, Turkey, India. We have eight or nine different countries that we're working in now. We have people actually on the ground there. Then what we do is once we have that collateral, so the tech packs and everything I just talked about, we're going to the countries that it makes sense to go manufacture, and then getting bids from the factories and taking it down from hopefully a stack of six down to two potential suitors, and then saying, " Hey, who do you want to move forward with," and eventually getting down to that one partner that you're going to move into. Yes, we vet the factories that we put our customers in front of.
Ryan Cramer: What's the number one country that people are probably working with right now?
Zack Leonard: China.
Ryan Cramer: China?
Zack Leonard: Yeah.
Ryan Cramer: Is that trend going to continue to stay strong? You guys are the experts in distribution and manufacturing. Is that going to continue to stay paced, or do you think other countries are catching up?
Zack Leonard: I think there has been a push to be diversified by all ecommerce sellers, whether you're big, small or whatever, or just starting out. I mean, I think the port systems are being developed in countries like Vietnam to facilitate more commerce flowing through there and more products flowing through those countries. I just think what the data would suggest is that you need to have a much better handle on your inventory, and much larger volumes to have conversations with places like Vietnam. The reason for that is they only have so much infrastructure. They also import a lot of their raw materials, so they don't have mass land like India or China has, where they can get their mills up and running really quickly for materials like cotton or silk or whatever you're making. But you are seeing a labor force that's cheaper, so, again, you have that trade, and you got to figure out what your actual landed cost once you get these competitive bids from the factories to really understand like, " Okay, what's my true lead time, because it's not just the factory lead time?" It's on the water. Once you start going... As you go further west of the United States, the longer it has to go on the water, so China is the direct west of the United States, so it's the least amount of time on the water. You start going to Vietnam and India, and keep going more down on the the ocean there. It's more time on the water. Those are all things you have to consider. The lead times for Vietnam might be longer because they're importing all the raw materials from places like China and India or maybe Korea. Then they have to do their factory work, and then they have to ship them out. Where China might be a 30- day lead time, Vietnam might be a 45- day lead time plus the extra 10- ish days or so on the water. Again, it's all a game. It's a puzzle, and what you're trying to do in the development process is fill in the pieces as much as you can, and ultimately complete the puzzle all with making a margin and having a great idea.
Ryan Cramer: We talked with Tyler Jeffcoat of Seller Accountant, who's a fantastic person in terms of... He painted this picture for us last week on Friday is the turn is the number one factor of... If you look at margins, and you look at your spend and how much you're actually in profit, how many turns of inventory are you actually doing, because that's what aggregators are looking at? They're like, " How often do I need to reorder my goods in order to hit certain level threshold in terms of revenue?" If I have a set of goods that's only turning once, they're like, " Well, I only have to order it once a year." That's not really good in terms of growth opportunity, but if you're turning it three, four or five times, and you can look at that, but your margins might not be great, you can look at it and say like, " Maybe we can go to a different manufacturer or distributor, and make more profit." Then obviously, that's where the win is happening for a lot of aggregators. When you guys are talking about like... Are you having those conversations with sellers, the pros and cons of sourcing from India or China or Vietnam, like you said? How do you break that down for them? Is it based on time, money? What other things am I missing right now that you have to break down for them?
Zack Leonard: Time, money, expertise, order quantities, those are the main things. You nailed it. I mean, that's most of the equation when you're talking about manufacturing partners. Especially if you're getting into specific products, if you have certain regulatory needs, if you're working with certain materials that are only going to be milled at certain factories, you narrow down, you can work with pretty quickly. If you have some product that's meant for children or babies, and you want them to have no chemicals and all these different requirements, again, you're only going to work with a certain amount of mills that actually can fulfill that requirement. Again, it's really going to be product specific on how you start narrowing down your search for the different factories that you're going to be at least accepting bids from. That's, again, why I think Alibaba is great for stuff that exists, but stuff that doesn't exist, these are all the things you have to be thinking about when you're launching a product and doing your research on is what compliance requirements are part of the equation, and how does that limit the amount of factories that can actually be good partners for you?
Ryan Cramer: I was going to say so in terms of the network that you guys are working with, is that in thousands? Is that tens of thousands? I don't even know how many factories actually exist that would work with third party sellers. I'm assuming it's in tens of thousands, right, that we're talking about?
Zack Leonard: I mean, you can go to Panjiva or some other data source for finding every factory that exists out there, that's done exporting to the United States in the last 30 years, I think. We've vetted close to a couple thousand through a couple years that we've been in business.
Ryan Cramer: How are you ranking them? Is that based on quality of product? Is that time efficiencies? Is that ease of use? What are those other ways?
Zack Leonard: It's communication, excitement for your product. You can tell a lot factory based on how they respond and all that, and then expertise as well. I mean, again, there's a lot to be said about what they put on paper and what their compliance documentation says versus going to the factory and showing up and actually seeing what's happening. I've seen factories that I've personally been to that they have Disney certification and Walmart certification, and they have product parameter-
Ryan Cramer: I don't even know what that means. What does that mean? Tell me what that means. Can you make those products?
Zack Leonard: I mean, they're just... They can make products for Walmart, or they can make products for Disney. It's a certification that Disney suppliers make you go through in order to be a partner of theirs. It's supposed to be something... It's another notch up as far as-
Ryan Cramer: crosstalk.
Zack Leonard: Exactly. I've gone to a factory that had all that, and then shown up, and they have dust all over their toys, and none of their machines are running, and nobody's in the factory. Again, it just goes to show that having someone there to physically do that for you and able to, again, vet who they are not just on paper, but who they are in person, it's important. Again, I can't stress enough the importance of your factory relationship as you continue to scale your business. I always say that your customers are obviously, your most important part of your business, and then the second most important part of your product company is your factory partner. They control so much of what you do. Treat them that way. They should be a partner, a real partner, not just a inventory management system, right? They're in the game with you. They want you to succeed just as much as you want to succeed, and just be smart about it. Put the parameters in the contract of what they can and can't do with your product. Protect it as much as you can, and then just have a working relationship where you have some representation in the factory that can go there on a regular basis, and build a relationship and help you get those cost savings downstream, and help them have someone who truly understand your product too. If you send someone who's a production engineer to the factory on a regular basis, they're going to be able to look at the operation of the factory, and probably help the factory and you on your product save on your cost, because they're going to find the inefficiencies. That's what engineers do. I think, again, that's part of what we offer as Gembah is to give that person that representation for you that can go to the factory, and be your advocate and help you reduce your cogs, not just negotiating price terms, actually finding inefficiencies in your product and in your production line to make it so that you can have a better conversation about your cogs. Not just like, " Hey, I want a lower price." Why?
Ryan Cramer: Just as a quick reset real quick, Zack. That's Zack Leonard from Gembah. He's the founder of Gembah. We're talking about product concepts beginning and then obviously to making it and bringing it to market. A lot of people are always curious and scared, especially when you see Amazon with the data that they have in terms of like, " Hey, I have this really great product idea." I come to Gembah, and I say like, " This is awesome. I want to make this. I think this can change the pet industry or change the children's toy industry, whatever that might be, and that might be true." What happens when you have to answer for what if my manufacturer... Is my product protected with my manufacturer? How do you protect yourselves as part of either intellectual property, obviously, besides going to lawyer patents, trademarks, things like that? Instead of going that way, what if someone rips off a knockoff of my revolutionary product? How do you go about protecting yourself that way?
Zack Leonard: Sure. I mean, again, great question. First, if your product is crosstalk.
Ryan Cramer: inaudible, come on. No, I'm just kidding. Well, I mean, it's a concern for a lot of people, right?
Zack Leonard: Absolutely. Absolutely.
Ryan Cramer: Amazon has been-
Zack Leonard: It's a valid concern.
Ryan Cramer: Time and time again, Amazon just takes it. They undercut your supplier, and they just cut you out of the equation. You might be out hundreds of thousands of dollars. How are sellers now protecting themselves in this case?
Zack Leonard: I think, again, if it is a revolutionary technology, at the very least, you get a patent, at the very least. If it's a utility patent, which means that you're patenting how it's used, more of the function, you can get a provisional patent pretty quickly, and you don't need as much collateral to do that. You just need to show how it works. The next step is, again, if you're creating a product, a design patent, which, again, only costs a few thousand bucks maybe between all the filing fees, and also if you have a lawyer that you're going to have file for you, things that we connect you to through Gembah, through our platform, we have IP attorneys we work with. That'd be first. Definitely do that, and make sure that, again, it's in the country that you're going to be selling the product, and so if you're selling in the United States, get a U. S. patent. Get a U.S. patent.
Ryan Cramer: crosstalk. Exactly.
Zack Leonard: If you're selling in the United-
Ryan Cramer: Well, and that's crosstalk. Sorry to-
Zack Leonard: If you're selling in the United States, don't get a European patent, unless you plan to sell in Europe, or you plan to manufacture in Europe.
Ryan Cramer: Well, as an international growth company, we always have to make that... We've had a couple of patent attorneys that say, " You have to do that for every marketplace that you want to sell in, so you have to think about that at the beginning."
Zack Leonard: That's true.
Ryan Cramer: If you sell in the United States, obviously, you need to start to take that to Europe. You could have someone subvert you and say like, " Hey, I can get a patent," theoretically, not always true, but make sure you get a patent on every marketplace that you sell on, so caveat.
Zack Leonard: Right. That's absolutely right.
Ryan Cramer: I'm just putting that there.
Zack Leonard: That's absolutely right. That's first. The second thing is have agreements with your manufacturing partners that have stipulations based on what happens in that event. There's stuff out there called NNN Agreements if you're working in China. Non- disclosure, non- circumvent and non- compete, that's what the Ns stands for, which would hold up in court. Are you going to go to China and fight a legal battle? I don't know. I don't know if you're going to do that as a business owner, but at least they might think you're more serious, or they might take you more serious. The second thing is there's a lot of research that you can do with someone locally there on Chinese- based websites that will tell you that a lot of the history of some of these factories. You can see if factories have missed their payments. You're scoring on them from their suppliers. We've seen as part of our vetting process when that pops up. It's the qualitative side of the factory, right? Is the owner going to stiff his bill to the supplier or something like that? We've had to deal with situations like that. The customer's coming to us and saying like, " Help me through that process." Those are things that you can do that, again, is research or small financial in comparison to losing out on the sales of the product that is revolutionary for you. I think you have to make a business decision on where you want to sell it. If you're scared that Amazon is... If it's revolutionary, and it has potential to be huge, do you want to take the chance and risk on Amazon? That's up to you as the business owner. I mean, there's other places you can sell it like your own Shopify website or WooCommerce or big commerce. Whatever it is you want to sell it on, you can do that. That would give you ultimate protection over everything. You would know your sales.
Ryan Cramer: That's awesome.
Zack Leonard: You would know your sales. Amazon doesn't know your sales, so they're not going to know if it's a hot product. If it ends up being a hot product to the point that Amazon wants to copy it, I mean, again, if you have the patents and everything set up, not much they can do. They can try and copycat in some degree, but, again, you have the legal basis for all that, and they won't have your data.
Ryan Cramer: Where are sellers winning right now in terms of logistics in manufacturing? In this chain and part that you guys are representing, where are sellers really excelling at right now?
Zack Leonard: Where are they excelling? I think if you are very good at selling these products, you have a very good handle on your overall operation. Meaning, you can forecast inventory really, really well. You don't stock out ever. Regardless if you're selling on Amazon or off Amazon, do not stock out. If you're able to get... If you're selling multiple products, are you able to aggregate shipments into one container or control shipping lanes a little bit more? If you're scaling, and you can get to that size where you can do all those three things, you're doing it well.
Ryan Cramer: Is order on demand or ordering when you need it, is that dead now, or is it more of you have to start ordering more for a yearlong inventory, or is that where sellers are starting to move to, instead of the, " Hey, I have to very..."
Zack Leonard: I don't know.
Ryan Cramer: The science has to be perfect, because like I said, because a lot of people have said that the phase of entrepreneurship and selling online is almost dead because of logistics. That's my next segue is where are there concerns moving forward in the logistics and the supply chain, because 2020 put a lot of stress test on everything in terms of logistics, in terms of deliverables, manufacturing timelines, just around the world in terms of... What are those concerns for you guys moving forward?
Zack Leonard: I think as you've seen over the past three to six months, there's a huge congestion issue in the port systems in the United States as the number of farmers-
Ryan Cramer: Is that our fault? Is that the United States' fault?
Zack Leonard: Honestly, I don't know. I don't know if it's crosstalk.
Ryan Cramer: Is that we're just buying a ton of stuff from overseas?
Zack Leonard: I don't know if it's a fault or a finger- pointing thing. I think it's just the case... The reality is there's more ecommerce sellers popping up every single day, and they all have to fulfill somewhere, and they all want to get an order in before Chinese New Year and right after Chinese New Year to get their inventory into their warehouses. When you have a natural break in the action for almost a full month, it gets more challenging, and everything has to go out and come in at the same time. That's why, again, if you're talking about diversification, places like Mexico and India don't celebrate Chinese New Year. Vietnam shuts down for a couple weeks, not all four weeks. Again, those are all the things that you need to consider when you're going through it, but that doesn't... Then you may be able to avoid the Chinese New Year shutdown completely if you move into those types of countries, right? If you go to Mexico, you don't have to worry about the ocean at all if you're selling in the United States, right? You don't necessarily have to. All those things are things you need to put on the table. Again, maybe it's not a, " I need to have all of my production going out of one country." Maybe it's, " I have my backup plan or some of my production going out of one country, and some of my production going out of the country for those, " oh, crap," moments when I don't have inventory ready to go. It might costs more, but it won't cost as much as me stocking out for so long. Those are all the things that, again, if you have a really good understanding of your inventory management, you have full control of your supply chain to where you know exactly when and where things are, and how to get them out of your manufacturer into your warehouse faster, that's where, again, people can excel and be ahead of the game, and step above the rest as a seller, and win in that capacity as opposed to just manufacturing in China, and playing a game that is what everyone else is playing.
Ryan Cramer: When you're going into different markets, what's the easiest market to get your goods into, country, I should say? Is it the United States, or is that difficult? I have never tried to get product from one country to another in mass quantities. I don't know if the U. S. is hard to do that, or if it's pretty easy and comparative to Canada or Europe or wherever. What's the easiest market to get into, and what's the hardest one?
Zack Leonard: I mean, I think that's all relative, but as far as regulations go, Canada and Europe are, are stricter in some categories than the United States in terms of their compliance measures.
Ryan Cramer: What categories? Is there any high level that we can take away? I'm putting you on the spot. If you-
Zack Leonard: I mean, food products for sure. I think electronics as well and baby products, kids products. There's just a lot more rigor that goes behind it in those countries.
Ryan Cramer: U. S., we don't care about this stuff. We just want our products crosstalk.
Zack Leonard: We do. We do. It's just not as strict.
Ryan Cramer: I was going to say you-
Zack Leonard: We just care a lot. We care a lot. I think a lot of the baseline-
Ryan Cramer: Not as much as Canadians or the Europeans, though.
Zack Leonard: I mean, a lot of the baseline is the same, though. I mean, there's certain chemicals that can't be any product like mercury and phthalates and lead, because those are dangerous for consumers. That's across the board. You know what I mean? Then there's just some other things that are not the same in both. It really just depends on the product.
Ryan Cramer: I heard this actually in the Clubhouse. You and I were talking about... Real quick, we're talking about insurance, right? Insurance is a big key in terms of like, " Hey, my goods don't get to me. Hey, they're dysfunctional. They're inspections and whatnot." There's a whole big component of whose fault it is, and even taking it to the next level. Say, if you don't get your eyes on those goods, and they're not inspected, they go into a warehouse. They get purchased by a consumer, and then that has a defunctive or a defunct product, for example, right? If something breaks... I think the example was a dog leash. The dog jumped at something. It snapped, snap back at the person's eye, and they lost their eye. In this component, are you the seller culpable, culpable in terms of they can come back and sue you as a third party seller for... If this is your product-
Zack Leonard: Oh yeah.
Ryan Cramer: How do you protect yourself in that case? I'm not saying you're one of the-
Zack Leonard: I mean, that's a great question. As far as my understanding of the legal basis, the seller-
Ryan Cramer: You're not a lawyer, so we're going to take this all an opinion.
Zack Leonard: I'm not a lawyer. Take it with a grain of salt, because I'm definitely not a lawyer. I mean, there are consumer product safety attorneys that you can get all these questions answered with, and compliance attorneys that do all this stuff, and, again, people that we work with at Gembah to make sure that all this stuff is correct. Like what we do, each product, we have a compliance review that we do that says all the things you need to do or should do to make sure that the product is safe for importation into whatever country that you're going to sell it in. That's part of the development process getting that done. At the end of the day, you as the seller are liable for that. Where the chain of command goes is going to be dependent on how far the recall goes. But again, these are all things you can put in the contracts with your customers or with your manufacturers. What happens in the event of a recall? Who bears the cost? You can negotiate that with your factory. If they say no, you just have to know what happens in the event that there is a recall, right? Who foots the bill? If they say no, and you agree to that, then you foot the bill as the seller. There's things that... I mean, again, that's how it works when you're in the product game.
Ryan Cramer: Interesting.
Zack Leonard: The goal is to make sure that you have everything lined up from a compliance standpoint so that you can limit your risk as the seller. That's the part that you need to make sure you have set up correctly.
Ryan Cramer: That's why Gembah is here to work with legitimate companies. They're making great quality products, so stuff like this doesn't happen, but it happens. The greatest made products can just self combust, and we don't know why.
Zack Leonard: I mean, how many times you've had a recall notice on your car? It happens.
Ryan Cramer: I have two right now. I need it taken in. Thanks for reminding me on that.
Zack Leonard: You're welcome, but it happens. These are billion- dollar fortune 500, fortune 100 companies that... It happens.
Ryan Cramer: Those are obviously things that we don't want them to happen, but these are questions that do pop up inaudible. It was a very topical thing right before this. Thank you Clubhouse for bringing this in the 48 hours I have been on clubhouse, but there's another conversation is that you should be on clubhouse for just whenever the time is. We don't have. Favorite marketplace to deal with besides Amazon. Is there one that you always tell, " Hey, you guys should really look at marketplace X, Y, Z? Is that Etsy? Is that Shopify? Is that WooCommerce, Wish?
Zack Leonard: I mean, I think if you want to maximize your own profit, Shopify is the best possible one because you're in control of everything at that point, or WooCommerce, big commerce, anywhere where you control the commerce. You don't have to pay the fees to an Amazon or Walmart or whatever it is. You control the data. You control it all. That to me is the best possible place you can sell. Amazon, again, you're paying for the FBA side of it, and you're paying for their marketplace. Those costs can add up to 40% of your product, which is a lot. It's a lot.
Ryan Cramer: You look at Amazon, and they charge you a fee. It's what I tell people. It's like, " You think about selling on Amazon. You get a bill in the mail." Like, " You thought about selling online with us, so where's our cost?" Before we wrap up, Zack, I know there's so many questions and rabbit holes we can go down really high level about getting products to market quickly. Is there... I know we talked about concerns, but is there exciting things that came from 2020 that you think will innovate because of the spotlight we shone on, again, getting goods to port quicker, 3PL logistic companies maybe innovating? Ecommerce now is in the mindset. I always ask this as... I don't think it's no longer as a... it's no longer a in terms of a... It's more a necessity now instead of a luxury, so we've made that switch over in that line in the sand. We're now a necessity. What do you think your company in general logistics side of things, what's that exciting part moving forward in terms of learnings from 2020 moving forward?
Zack Leonard: I think just in general from a macro level, the barriers to entry to sell a product has become almost nothing. You can go on Alibaba right now. Buy something that's already been made, and put it on Amazon very quickly. You can do that if you want. I think what's exciting is this wave of innovation that's going to come out of that, because it's getting so competitive to white label that people are going to have to create these modes, and have to create your own products and private label and go down the path of development. For me, I think that's exciting, just because we sit in the middle of that, but also, I think it's going to be exciting for the world, because you're going to get a bunch of awesome new products out there that solve all of your problems. I think to me, that's what 2020 has really been about. It's enabling that entrepreneurial and that creative spirit that I think is the awesome part of humanity that we are creators, and we help foster this creativity that's going to continue into 2021 and beyond.
Ryan Cramer: One final question. Has there been a favorite product that you've worked on from beginning to end, like concepts to market if you're allowed to tell us what it is? Maybe describe it if you can. Let's say, " This is what it is."
Zack Leonard: I mean, there's a product we just-
Ryan Cramer: You have to have a favorite.
Zack Leonard: A favorite product, I don't know. I mean, there's been a lot, but I think we've done a massage gun. We've done some cool aerobic weights.
Ryan Cramer: Not the shake weight, but just aerobics weights.
Zack Leonard: No, like weight jewelry stuff. There's-
Ryan Cramer: Weight jewelry, what is that? Tell me.
Zack Leonard: I mean, it's out in the market. You can look at a-
Ryan Cramer: Bedazzling your weights.
Zack Leonard: No, it's weights that you put on your arm that can be worn as jewelry, but also like that. They're called Cali Weights.
Ryan Cramer: Basically, it looks like a bracelet, but it's really 10 pounds that you're just...
Zack Leonard: Well, 10 pounds would be a lot.
Ryan Cramer: You might wear like holding up your bracelet to somebody like... It's so heavy.
Zack Leonard: Right.
Ryan Cramer: All right, interesting.
Zack Leonard: Those are cool as well. He was a good guy to work with, the owner of that company.
Ryan Cramer: That's awesome, so just innovative and creative people. Is there a specific area that you guys are really wanting to work with, or do you guys do the gauntlet, or won't work with a specific category, I should say?
Zack Leonard: I think the stuff that we tend to shy away from are... We're not going to build another airplane so big like cars, airplane... not car, full scale car-
Ryan Cramer: Did you build an airplane?
Zack Leonard: No, I wish.
Ryan Cramer: I was going to say you should build another. I was like, "There's a first one." That's awesome.
Zack Leonard: We don't. We wouldn't build an airplane, and we wouldn't build a full scale car. We could build parts of the car like bumpers or whatever. Then typically, we shy away from supplements and stuff you put into your body or on your body. Those are much more regulated from an importing perspective. That's why a lot of the lotions and potions and stuff are actually created here in the U.S.
Ryan Cramer: That's why I say if it's on your body or in your body, it's in the United States. That's what we do best.
Zack Leonard: Exactly.
Ryan Cramer: That's what I've learned. Through this podcast, I've learned if it's in your or on your body, it's from the United States more often than not, not from overseas or anything like that, though.
Zack Leonard: I mean, again, there's so much more regulations you got to take into consideration when you do that. But again, we've done it before, and we're happy to help. Most products that are sold on Amazon, we can help with.
Ryan Cramer: Open for business on other words. Before we go, Zack, what's the best way that people can either contact you, reach out, learn more about Gembah, helping them get to market quicker, and you guys use your expertise to really navigate the field?
Zack Leonard: Sure. You can always check out our website www. gembah. com, G- E- M- B- A- H. com. You can hit me up on LinkedIn, but one of those two ways. We'll definitely be in touch and talk about your product, how we can help.
Ryan Cramer: Awesome. We'll make sure... Those are definitely in the show notes. But for people who are wondering and watching live, again, if you have the questions, again, from social media, the website is going to be in the comment section, again, G- E-M- B- A- H, gembah. com. Go ahead and check it out, or you can go ahead and find Zach on LinkedIn as well. Zack, thank you so much for hopping on. I know we were in just a little bit over time today. But for people who are looking to get in the space, obviously, it's not too late to get in ecommerce. Hopefully that pathway for you guys is booming. From what I understand, you guys are just crushing in and just continuing to move business forward, and it's exciting time for you guys and your business.
Zack Leonard: Thank you. I was excited and enjoyed the conversation. Again, if we can help get your product out to the market, we'd be happy to have a conversation and do what we can to help.
Ryan Cramer: Awesome. Well, thank you so much. From Austin, Texas, I'm glad things are semi back to normal. You guys are open. All of a sudden like, " Everything is open." You go from shut down and nice and whatnot. Now, everything's open. God bless the state of Texas.
Zack Leonard: Exactly. You got to love it.
Ryan Cramer: Well, thanks, man. I appreciate it. Thanks for joining. Again, friend of the show, Zack Leonard of Gembah, so thanks a lot. All right, and everyone, thank you again for joining us again on Facebook, LinkedIn, YouTube or Twitter. That was Zach Leonard of Gembah. We have three more shows again this week live on Crossover Commerce. Again, that was Episode 71. We're just crushing through content here to bring you the best and greatest in ecommerce and Amazon tips and tricks. Go ahead and check out Gembah, again, the gembah. com. For more information, go ahead and look for Zach's information on social media as well. Again, I'm Ryan Cramer, the host of the... Cramer, I can't even get my last name right. Cramer, the host of this podcast. If you have questions for me, go ahead and find me on social media. I'm on Instagram, Facebook and LinkedIn as well. Just go ahead and search for us on Facebook as well, Crossover Commerce with Ryan Cramer, so you get notified of future episodes as well. Again, for Zack Leonard, I'm Ryan Cramer. We'll catch you guys next time on Crossover Commerce.
Ryan Cramer of PingPong Payments talks with Zack Leonard of Gembah, about how to take your product from concept to market.
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