Nathan: What is up y’all? Welcome to another episode of e-Commerce On tap brought to you by Sourcify. My name is Nathan Resnick and today we have one of the experts in the third party logistics space, Stephen.
So Steve, thanks so much for joining us on e-Commerce On Tap we really appreciate you being with us, I know you’re based in Hong Kong, so we appreciate you making time, especially the time difference.
I really just want to start you know understanding your background as an entrepreneur you know Floship, the company that you co-founded and grown is now one of the most well-known 3PL fulfilment centers in the world and really bridging that gap with international commerce. Steve thanks so much for joining us and you know if you can just kind of start a bit about your background, how did you end up founding Floship?
Steve: It was about to be proven beyond Nathan and you know thank you so much for giving this opportunity to share. So, in terms of getting on board with Floship– really my journey started in China; so I really had this appetite; it was around like 2012 at the time where I really saw the immersed in China and you know being a guy that just has a career experience in the US, I just thought that if I’m going to really be this international business guy, I need to merge basically not just you know what’s top in the West, but you know tops in the East now in China.
And really with that thought in mind, I decided to venture out to Shanghai in 2012 where I was involved with a start up there and then eventually I got involved with a Chinese 3PL or cross border fulfilment company called importPX and today, I would say that they’re the largest in terms cross border logistics today but the target audience is mostly Chinese merchants that are selling not e-Bay or Amazon etc.
So, I really– my time there, I had experience doing international business development and I had an opportunity to head a company or projects with import PX and there was a time when they called upon me to head up one of the international sales team to lands, international merchants, to leverage for PX’s performance services.
At the time, you know knowing about 4PXs is you know services and quality, it wasn’t exactly to my expectation levels and you’ll be able to be selling a product or a solution that you don’t really believe in and it didn’t really jive with me well. So, I had two opportunities presented to me at the time which was that’s always the rector position versus you know incubating and growing a subsidiary company. And so I decided to take this subsidiary company out, because I felt like to be able to build something myself from scratch, I can more confidently sell that service.
So, that is really what led me to think “Hey! There is an international fulfillment solution out there that is close to you know if everyone’s a beginning of their respective supply chains, you know for manufacturing in China, then there must be a service that excels in terms of customer service so they don’t go around a circle is trying to explain something to let’s say a Chinese salesperson or a Customer Service representative but also providing world class technology that the Western seller is accustomed to.
So, if you’re using a Shopify, if you’re using a Magento etc you have certain expectations when you’re interfacing with the software and you’ll probably be looking for a similar experience when you’re looking at the various technologies that will integrate with that software. And so, that’s a really precipitated idea of Floship and I had an opportunity to go to Hong Kong e-Commerce leaders’ event when I was based in Shenzhen working for PX and that’s where I met my co-founder who also has a similar background to me; working in the consumer electronics trucks and space. And I say, “Hey! Why don’t we join forces and build the largest drop shipping in company in the world” and that’s what really led to the idea of Floship and both of us really already had the knowledge and expertise to do something like this and so Floship started officially in February of 2015.
Nathan: That’s awesome, that’s an amazing turn of events you know I feel like as a fan of myself you know, it seems like just the great companies that stem from past experiences where you see problems in the market and you know it sounds like for you, and when you created Floship, you know you saw a huge problem stemming from you know logistics out of Asia and in particular, I think Floship is in such a unique position where you’re based in Hong Kong so you have that direct connection you know right across—I don’t even know if I call it border or— I guess it is technically a border but you know basically take a high speed train now in your area a center of all these factories in Guangzhou and Shenzhen and you know it’s such an advantage to be in Hong Kong.
And so, before we dive into you know third party logistics, I get kind of question in terms of the process of setting up an actual company in Hong Kong you know, what was that like being an international Entrepreneur and saying “Ok, I want to incorporate a business in Hong Kong, is that a challenge? Is there a lot of entrepreneurship and a lot of startups and Hong-Kong? Kind of what’s the scene like over in Hong Kong right now when it comes to startups and entrepreneurship?”
Steve: Well, you know I’m very fortunate to have a co-founder that already you know conducted business in Hong Kong, so when we both decided to team up, he already had about 8-10 years of experience you know setting up a business in Hong Kong and working in Hong Kong.
So, that different but you know when we decided to set up Floship, I would say the process is pretty, pretty seamless then it takes too long you know to get the business registration going in from across standpoint. I’m not sure exactly sure what the cost is today but it’s around I would say it’s less than $500 to get it going.
And you know the beauty of Hong Kong is that the tax rate is relatively low; I would say compared to the international landscape and you’re looking at anywhere from 16%-17% on corporate taxes. So, that’s if they’re a profitable company.
And the other aspects of– I would say the most challenging aspects of setting up a business in Hong Kong would be the bank account. So you know being a foreigner, be an American guy, it’s actually the worst country to set up a business account is Hong Kong.
Actually, I remember a good friend of mine who is an entrepreneur who applied to about 20 banks here in Hong Kong and it was the really bad that it was the twentieth bank that decided to accept his back account. So, it’s actually a little more strict in terms of to get the bank account set up because of the money laundering activities that is going on from China into Hong Kong. I think that would be the biggest hurdle but overall in terms of you know setting up the Hong Kong business entity to Hiring staff, I wouldn’t say it’s challenging. I can go on forever in terms of you know conducting business in Hong Kong; I’ll just speak on the setting up aspect.
Nathan: Got it, makes sense; and in terms of you know just the sentiment of e-Commerce in Asia and specifically in China right now, I mean it seems like it’s growing like crazy, what you really feel like on the ground floor you know in the day to day life of Hong Kong and throughout China? You know it seems like a lot of these factories and a lot of these fulfillment centers have kind of transition from being more retail focused to now focusing on all the you know Shopify and Amazon sellers that you know transition that you see as well over there?
Steve: Oh yeah, definitely! I think with the emergence of technology and more of the focus on e-Commerce, there’s definitely a lot of a growth in the market. So I would say that I mean just keep giving us statistics, the cross border growth is expected to double between you know let’s say you know from the 2017 number that I got through to a trillion dollars about 2020. So, that really shows that the world is just getting smaller to conduct business.
You don’t have to exactly send a container ship over to the US and then propose your goods your customers because of the emergence of cross border e-Commerce and all these Chinese sellers selling on eBay or Amazon platforms, there’s been a lot more innovative solutions that have been coming up to enable shipments to be transferred from China or Hong Kong into the international markets at a relatively cheap cost may be comparable to domestic shipping and at a speed that is respectable compared to maybe even express shipping.
Nathan: And now I really want to dive into the actual 3PL industry you know what people in an e-Commerce entrepreneurs should be looking for when they change partly the logistics company to work with; you know listeners of e-Commerce On Tap are either into starting and just starting to scale some of the e-Commerce companies who are there are you doing you know 6-7 figures in revenue.
I mean when you look at different 3PL and from e-Commerce founders perspective, what do you think people should be looking for in a 3PL? What are the key dynamics of the 3PL they should be looking out for?
Steve: Well, I think every fulfillment company is different just in terms of you know offerings and then you know there comes the freight that you’re looking for from a 3PL standpoint; maybe if you’re a more traditional kind of company, you want to work with a traditional 3PL and it’s OK for you to work with EI file transfers or CSP loads etc, right?
I mean you have a task force to handle a lot of the men who work there but I think you know in more of this new digital age where you have maybe a digital that I would like to be more hassle free, have a more automated kind of workflow system.
You may want to work with a company that has no software that immediately plugs in to your shopping cart platform may be a Shopify or Magenta to find it and so commerce or even the marketplace is like an Amazon or eBay etc
So, I think that’s maybe the technology aspect is one key thing that you should be looking for and I think another thing is when you’re looking at 3PL, you’re probably– that’s a very key elements of your e-Commerce business because the operation doesn’t go well, that parcel doesn’t get delivered to customer let alone the problems occur who is behind you know the customer service desk replying to your inquiries or do you have someone dedicated that you can go to and have those problems solved?
So essentially, you want someone that can kind of act as your operational head because you’re outsourcing, your operations as part of their business and do you have someone that can dialogue with? And that’s very important and you kind of have that transparency. I’m only giving an example when I’m talking about my former company customer service lives, I felt like the guys were going around in circles and not being able to fully answer those questions or try to interface with the warehouse and get their problems solved because maybe the companies were too big but then you also have the language barrier increase as well. I would say number two, maybe having a good Account Manager or a customer service interface is very important as well.
And then the third thing that I would focus on is really the solutions that the 3PL is able to provide, so if you are a e-Commerce retailer that may just be focused on the US market then you know maybe it makes sense for you to just work with Amazon affiliate because you can offer Amazon Prime and offering that’s the leverage to customers where there’s a number of other domestic players that can offer a good service and offer also technology that I was referring to your as well.
Now, if you get into the international landscape, that’s where perhaps cross border international 3PL makes more sense; you have let’s say about 30% of your customers coming from the US, you have 20% coming from Australia and 30% in Europe etc. And I think there are advantages in looking at across border international 3PL because you’re able to really reduce, optimize on your on your international shipping costs because I tell you what you’re trying to ship internationally from US, I mean it’s just really expensive right now I mean an apples to apples comparison, shipping from US versus shipping from Hong Kong, I mean you’re looking at risk like 30% savings just for international shipping.
Yeah so, I would say that if you do have an international market presence definitely international 3PL, you have to do all your logistics or maybe if your US market or your Australian markets question all have of the fullness and are there and have you know international 3PL and international summits.
Nathan: Got it, I want to walk you through two scenarios right now and it kind of dives into you know the situation that most listeners are in. Number one let’s say you are a e-Commerce entrepreneur that is just starting to see some growth you know maybe you’re starting to ship 100 units a month, you know other differences between what this e-Commerce company should look for in a 3PL and let’s say a e-Commerce company that’s already shipping thousands or ten thousand plus units a month, I mean is there like what are the key differences between the 3PL people solution and scale you know when they’re just starting up?
Steve: Yeah you know so my advice is that, I think it’s very important for you or sellers who have at least experiment with logistics themselves because once you start on what is your 3PL then you will understand the nuances and the various issues that you can encounter with logistics so you’re sneaking a lot smarter when you talk with that 3PL and you’re getting what you want.
So, I would recommend that you know if you’re newer seller, or you know check out some of the software where you can just plug and play into your shopping carts and print out labels on the fly like you know like a ship station or a ship easy they’re often easy you know there’s a number of you know software that you can look out look at and offer fulfilling yourselves.
Now, when you get into that one hundred orders plus you know and then you realize that it’s occupying about it. Like half of your day and temples and marketing or your business and that’s where you might want to you know entertaining a 3PL and you know I think 3PLs, maybe they don’t have minimum you know they do have minimum. So, that’s something to be aware of.
And you know their research definitely I think– I mean there’s just so many fulfillment centers that are out there these days and it’s really about finding what’s right for you; I think that the comics draft day you can experience is cost. You know really if you just go over costs are going to get where you pay for. I mean just understand that and I think for us here at Floship that’s how we really want to differentiate ourselves; yeah you know we’re going to do whatever we can to offer the best rates possible but that our main focus is to provide a great experience for you and making sure they get a reliable service.
Nathan: That’s awesome, I love it! Do you think it’ll ever makes sense for an e-Commerce company to focus on fulfillment in-house as a scale up? Is it going to be beneficial for them to work with their own margins and not like basically run their own warehouse? I mean does that really make sense?
Steve: Yeah you know that’s a common question for e-Commerce seller, so I mean think about it this way– If you’re an entrepreneur who really cares about you know company culture, people, you know think about your knowledge workers and then the people that are actually working at a warehouse.
Working at a warehouse maybe never had a you know you don’t have a college diploma let alone a high school diploma or you know your workers that may not exactly integrate you know what there was guys in the office. So that’s something to really, really you know consider because as you start growing, you’re going to hire more and more staff and you know costs will go up, you have to think about HR and culture issues and making sure that they’re compensated correctly, if they’re not and they’re made leads to another 3PL fulfillment center because there’s many possible they can go to and you know maybe even have you know the occasional strikes you know use even you even seen it with Amazon where you really have maybe even a union to kind of take care of these types of workers.
I would really you know take it very seriously if you’re an entrepreneur that cares about culture and also after because you know once you kind of scale up and you get more automated then what do you do with the staff? That’s the thing about maybe even potential layoffs but that may not be a good cultural thing.
So, I would really think it’s more about the management aspects; I’ve even seen like a very successful e-Commerce startups. You know doing a lot of orders and they’re only like 5 men heaps and they may even have a virtual office set up to handle their customer service. So, I would say definitely, try to look to outsource that component if possible because it’s just less headache and cost if you think about it.
Nathan: That makes sense, you know two last questions here wrapping up, number one– you know Floship is based in Hong Kong and one of the most you know well known and well respected but still many companies in Hong Kong in the world you know what are the benefits of running a 3PL? or using a 3PL actually out of Hong Kong I mean what do you think are the main benefits that someone should look into?
Steve: Well, there’s really a number of things and I’ll point out the most important ones, first of all, Hong Kong is a free trade port so if you’re manufacturing in China bring the things to Hong Kong, it’s really seamless to bring this down. If you’re manufacturing in Shanghai, it’s an hour or even less right away to one of our warehouses in Hong Kong.
Number two– is you have this whole phenomenon of trade wars going on you know and I think a lot of people are kind of panicking as to “Hey, my commodity or my product be affected next?” And so, I really think this is now our business model and our location is making a lot more sense you know for online retailers where you can just hedge this risk.
I see a lot of what’s going on and you know as I talk to a lot of the 3PL orders, is that there’s been a lot of volume, people are trying to you know send this through freight, air freight shipments before Trump cracks down and puts another you know a couple hundred billion dollars on terrorists. And you know the problem there is that you may have a lot of working capital you may not be able to sell through you know many percent plus and so you know you’re having to worry about more obsolescence or you know wasted recent imagery.
Now, the beauty of Hong Kong is that you’re able to ship cross border that’s it for the US market as long as the part is declared under $800, it does not have any sort of no duties or taxes associated with the particular parcel. So, that’s where it has a risk, Trump’s going to really target more of these commodities and these larger you know shipments that come into the US.
Single ports so beautifully deliveries right now and there hasn’t been any you know talks about that now, things goes with Australia, thousand Australian dollars goes through GST free as well. So, there’s a number of these markets that you can really take advantage of from you know shipping directly out of Hong Kong and the number three is just to be aware about; Hong Kong is number one freight hub in the world, every home in the world as a result there’s a lot of difference with just it’s options whether DHL or World postal operators like Hong Kong post and then there’s what something called a ‘Direct Injection Option’ which is more like a hybrid between an expressing a postal across to a postal shipments and shipping time you know can be experienced anywhere from about 4-8 days to major markets.
So with those abundance of logistics solutions, even shipments that are originating from China will eventually route through Hong Kong just because of the abundance of flights that go out. And the other thing is China doesn’t allow you to ship batteries, so battery shipments especially would route through Hong Kong as well.
Nathan: Exactly! Can you touch on that direct injection shipping method real quick so you know I think a lot of listeners don’t actually know what that is, if you can just dive into it and explain everything briefly that’ll be awesome.
Steve: Yeah sure so, as I mentioned you know really the emergence of eBay and Amazon sellers out of China has led to more kind of like joint ventures or cooperation between the local port authorities here and the postal authorities in major markets such as like US, Australia, UK, Germany etc.
So, really what the Direct injection is you’re able to pre-label all the goods here with a local host or last mile carrier label so let’s say that you’re trying to ship to the US, know your label the goods here with the goods here with USPS labels and then you would basically, we would work with and air freight carrier to consolidate the shipments and then ship in bulk into the US.
And then once it reaches the US because we have special arrangements you know with USPS, we would be able to clear the goods one by one individual parcels versus clear the entire you know shipment with you know thousands of parcels with this direct injection service. So, with the service you know we need to be to be like a joint venture with Hong Kong post and USPS and so there are special clearances once it arrives into the destination market.
And as I mentioned, shipping costs are very close to the postal delivery worldwide; it would be a maybe even equivalent to domestic shipment into the US in terms of shipping price and also in terms of shipping time as I mentioned, you’re expecting around 4-8 days which is right in between you know express shipment where express shipment could be anywhere from about 1-3 days or 3-5 days and a postal shipment about 7-14 days or 1-2 weeks.
Nathan: And that’s a perfect rundown wrapping up here you know there’s always this question about e-Commerce companies selling in the China, or in the Asia you know obviously there’s millions people that a lot of companies here in America just don’t have access to.
Do you see a trend based in Asia or that companies are now really trying to figure out how to sell to you know Chinese or you know Vietnamese or other Asian based countries; I mean do you see that as a trend that is really happening right now?
Steve: Hey Nathan, that’s a great question and is a great time to address that question. So here at Floship we have started an initiative to allow Western international sellers to tap into Chinese market. Everyone has a fear about you know getting into China because they have to worry about Chinese staffing or how I’m I going to enter into of the world?
And you have to worry about the set up costs on team on which will cost up to about $75,000 you know there’s a lot of fears in the cost that people are concerned about. Well, what we’re really trying to do here is that letting Hong Kong kind of being more of this monster had platform for you to enter the China market. So, it’s more about this process or e-Commerce channel which the Chinese customs authorities cause the BC imports channel and so there’s a number of channels for you to now ship into China. And the BC channel as I mentioned is more going to be that e-Commerce channel for the future.
So, you know there are challenges or for e-Commerce this is the center in China and to ship from China to China in particular if you’re shipping to selling vitamin supplements or cosmetics or any anything that is topical ingested. You have to get it get a certification taste and in particular like a CFEA certificate that can take up to 3-5 years for you to get confirmation for your products. So, rather than having to wait for that period, you can start selling or shipping direct from Hong Kong into China without having to have any sort of approval in place and then you can start testing the China market and you can see if there’s an appetite for your particular product or brand.
And even from a shipping standpoint because we’re right next to China, we can ship to let’s say the Guangzhou or Shenzhen or other province within you know 2-3 days, Shanghai 3-4 days and Beijing and northern China to 4-6 days.
Even from you know shipping cost standpoint, you know we’ve partnered up with STO express and you know cost are very, very attractive as well. So, you know I’m really lining up the team to support this initiatives for China so you know we welcome the world you know any online retailer they wants anything in the China market, want to get Western level, going to customer service with that good technology included, our technology by the way we’re planning to you know have more integration with teamology.com
Even with we chat with this emergence I know anybody really knows about either we test or these days but there is a lot of traction happening there where sellers really don’t have real control of the marketing aspect on teamology.com and so we chat really provides platform where you can really handle your own marketing, get your it your key opinion leaders to your marketing etc. So basically, it’s kind of like Shopify for China.
You know you just you know set up your cover story and then that would be integrated with wechat payments or payments over wechat payments; so I really believe that this is going to be more of a leader in the China marketplace. So we’ll be having more of a seamless integration in place for any online retailer to basically turn on the switch and start going to China.
Nathan: That’s an amazing run down, I mean I really believe in the global expansion of e-Commerce and I think you know Asia is the next frontier for a lot of these companies that are you know doing well here in America and looking to expand internationally. Steve, thank you so much for coming on board, e-Commerce On Tap; if people want to reach out or get in touch with Floship, how should they connect?
Steve: You can contact us at info@floship.com if you want to contact us directly, however if you just go to www.floship.com with you have an opportunity for you to fill out a form and then immediately we’ll have one of our sales reps in touch and basically provide more consultative approach in terms of how you should tackle your international logistics
Nathan: Awesome that’s amazing, Steve thanks so much for coming on e-Commerce On Tap, guys you have it Steve the founder and CEO FloShip, one of the best e-Commerce logistics companies in the world. Keep an eye out for the next episode coming up on e-Commerce On Tap another super exciting guest diving in your e-Commerce and thanks again for tuning in, bye for now.