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China Importing Secrets Transcript

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					                  China Importing Secrets Transcript


Richard
Lindner:        Hey, welcome to today’s training on Importing from China. My name is
                Richard Lindner and I’m lucky enough to be sitting here today with a
                very close friend of mine, Perry Belcher. Perry, thank you for sitting
                with us today.

Perry Belcher: I’m glad to be here.

Richard:        Let me give you a little background on Perry for those of you who don’t
                know anything about him. As I said, Perry and I have been friends for a
                while and when I met him he was already a veteran importer; he was
                bringing in a ton of stuff from China. He has been in more industries
                than I can count even with my shoes off.

                Perry and I talked and he said he wanted to put together a product for
                people who want to start importing from China. This is when I said,
                “Hey, man, I’ve been there.” I’ve had the pleasure of going to China
                with Perry on several occasions, so I wanted to be the guy to grill him
                on how to go about this process.

                This is what we are going to do today. We’re going to get into how to
                import from China.

                However, before we get started, Perry has a few things to get out of
                the way for the lawyers’ sakes. Perry, go ahead and jump in and
                appease them.

Perry:          I absolutely will. I want to make a couple of quick disclaimers. First of
                all, neither Richard nor I are attorneys are able to give any sort of legal
                advice on the training. If we talk here about past experiences or
                personal experiences, don’t take those as legal advice. Everybody’s
                situation is different. If you have a legally based question, you need to
                seek out an attorney and get their opinion and take their advice.
           Secondly, we are not accountants or tax professionals or anything like
           that, so if we talk about taxes or tariffs or anything like that as far as
           goods coming in, those laws and things change regularly. Again, we
           are sharing personal experiences from my importing career. It doesn’t
           mean it applies to you.

           Lastly, as you can tell, we are not at Sony Studios with 15 musical
           directors, 7,000 microphones, and all that.

Richard:   This isn’t Sony Studios?

Perry:     We are basically inside a shoebox right now. I’m kidding; it is not quite
           that bad. We are in a small studio, so if we ooh or ah or hum or sniffle
           a little bit—I have a sinus problem today—or cough or hiss or
           whatever, we’re just going to leave it in. We’re not going to go through
           all the editing expense of that.

           If we did, this training could be $2,000 and we don’t want to do that.
           We know you just really want the raw information; you want to know
           what to do and how to avoid mistakes when you begin to import from
           China.

           Now we got that out of the way.

Richard:   It sure does. Let’s go back. I had mentioned that Perry was a veteran
           importer. I mentioned he has been in a ton of different industries
           including importing and things like that.

           However, I would like to go back because, to be totally honest, I don’t
           know how Perry got started in importing. He was already doing it when
           we met. I’d like to take Perry on a trip back in time and have him
           explain how he got into it. Then we’ll move forward from there.

Perry:     I started importing before I went to China. I had a candle
           manufacturing company where we manufactured a ton of those little
           inexpensive candles. My company was partially bought by a Chinese
           guy who was an importer.

           We started importing the glass that we put our candle wax into and at
           the time we were paying about .60 cents a piece for glass. We
imported the glass for something like .16 cents a piece. I saw the
benefits immediately of importing, but fortunately I had a partner who
was a giant importer, so I didn’t have to learn all the ins and outs of it.

A few years later, as I branched out into other manufacturing
businesses and got out of the candle business, I needed equipment
and supplies. I started selling on the Internet a lot and I was thinking,
“Man, it would be cool to direct import some products and sell them
online.”

I was too big of a chicken to go to China by myself. I finally talked a
friend of mine into going with me on the first trip. He had never been to
China either, so I don’t know why I thought he was going to help.

I had a Chinese fellow who worked for me and he had relatives there.
The very first trip I went to China I was there for three and a half
weeks. It was a pretty amazing trip and I ended up buying nothing, I
was so doggone confused. I was more confused when I left than when
I got there.

I came back and felt really foolish after having spent all that money and
time, so I started developing a little system. If I went back again, what
would I do? This is they way my mind works. I have to systemize
everything or else I would never get anything done.

I started developing a system involving how to get the best sources,
how to get the best prices, and things like that including shipping and
duties and all that. I documented it all and the next time I went back to
China, I had my homework done.

I began bringing in a few products. I was using some of those products
in my own business; some of it was equipment I used in the
manufacturing business I was in. I brought stuff in for personal use and
I also brought stuff in to sell.

In this training we’ll talk about how I select what I’m going to sell based
on some particular criteria.

I would go over and get hundreds of catalogs. Richard, you’ve done
this with me.
Richard:   I was going to say that we came back with suitcases of catalogs.

Perry:     We’d come back with suitcases full of catalogs and we’d go through
           them all. We eliminated products based on things like the marketplace
           being too small, the competition was too big, and things like that.

           Eventually, some patterns started to arise and we developed a system
           for buying winners predominantly. Everything I have purchased has not
           been a winner. I won’t say that every product I ever bought was a
           winner, but I have actually figured out how to make money from losers.
           The process I have, I believe, is the very best process I have heard of
           for eliminating the risk in importing.

           There is an inherent risk in importing, if you don’t know what you’re
           doing. It comes from many different directions. It comes from a tax and
           tariff perspective; from agents and guys like that trying to screw you;
           from buying incorrectly and buying for too much. It is a zero sum game.
           If you pay too much for the products you import, they may be worthless
           when you get them here.

           I’m not saying this to scare the heck out of you, but I’m telling you that
           you have to take this seriously as a business.

           The upside to the importing business is that I have met very few
           importers who have been importing for more than four or five years
           who are not very, very successful people in life. You don’t meet a lot of
           people who have become importers without becoming successful.

           You meet a lot of people who become importers for a minute, lose all
           their money, and then go away. It is a little bit like stock brokerage or
           commodity brokerage. If you don’t know the rules and how the game is
           played, you can get beat up pretty good.

           In the next little while here, however long this takes, we are going to try
           to give you a very strong education in importing; a strong education in
           how to reverse risk and put it back on the sellers and other people; and
           even how to use other people’s money to start your importing
           business. Even if you don’t have a lot of money to invest, if you have
           the knowledge and connections, typically speaking there is more
           money out there than there are knowledgeable people to run a
           business like this.

Richard:   All right. Perry, you went into a couple of things there that might have
           scared a few people. There are dishonest people in everything and
           there are some tips and tricks here that we will hopefully drag out.

           If there is all this risk and all these people going broke with importing,
           why do you like it so much?

Perry:     The answer is money.

Richard:   What do you like about money?

Perry:     Importing gives you an incredibly unfair advantage. In the buy low/sell
           high business, everybody knows that the money is made on the buy
           side. If you could buy a new Mercedes Benz for $5,000 a piece, could
           you make money? Of course, you could because there is a market,
           right?

           There is actually an established market for practically everything. We
           just find the established market price and if we can buy that product for
           less than the established market price and get it to market, get it in
           front of the eyeballs of the people who are the potential buyers, we
           pretty much win the game and you can’t compete.

           In a little while I’m going to talk about Old Navy, but I’ll bring it up here.
           Old Navy is a clothing retailer. If you’re not familiar with them, you
           probably should be because they are everywhere. They are owned by
           The Gap.

           Most people sell a pair of jeans for $40, right, after paying $20 for the
           pair of jeans. They bought it from a designer, a U.S. company that had
           it made somewhere and went through all the steps.

           Old Navy figured out that if they could import the jeans themselves for
           $2 or $3 a pair—I don’t know what the price is, but let’s just say $2 or
           $3 a pair—this gave them an amazing amount of money to spend on
           marketing. This is how they can run all those cool commercials and run
all those great, big stores in the really high traffic locations. They have
an unfair advantage over the other clothing retailers.

This gives them the margin to market and the margin to advertise. If
you don’t have a margin to market your products, it is very difficult in
today’s marketplace to win. Everybody is marketing very heavily. The
Internet has created an entire new breed of people who know how to
market.

I would venture to say that 20 years ago you could count all the great
marketers in America on two hands, probably. Now there are still only
hundreds, maybe, but there are hundreds of great marketers now. It
takes marketing dollars to market, so you need margin to be able to
spend marketing dollars.

I had conversation with somebody a couple of days ago. They sell a
product for $5 online which is the dumbest thing I ever heard of. They
sell a product for $5 and I was explaining to them that if I sold the
same product for $20, I could spend $10 on marketing. I could spend
two times in marketing what they sell their product for. This particular
product had a lot of price elasticity; you could sell it for $5 or $20.

In this case, I would choose the higher price and spend the money on
marketing. I would absolutely dominate the competitor; I would crush
them. There is no way on earth that they could get in front of the
eyeballs that I could get in front of.

This is the reason I love the import business so much.

Also, the import business consists of real merchandise. We’re going to
talk about merchandise that is consumable. Many times you can do the
work one time and make money for a long time. If you can start selling
consumable things that come from China to the U.S., the same
customers will come back to you and buy month after month after
month after month.

Believe it or not, at some level most things are consumable. Spark
plugs are consumable, obviously; tires are consumable. Believe it or
not, to a distributor, to a wholesaler, microphones are consumable.
           They’re not consumable to an end use customer, right? You buy one
           microphone like we are talking on now and it will last me a lifetime.

           However, for the music store where I bought this, they sell 30, 40, 50,
           100, 200, 500, or 1,000 microphones a month. This is a consumable
           thing to them.

Richard:   They will run out and need more.

Perry:     They will run out and need more. The thing is, if you are importing
           correctly and choosing your markets wisely, you will probably find
           markets where you can set up a relationship one time, begin to bring
           products in, establish customer relationships on the U.S. side or
           wherever you are, and then consistently, every month, just deliver
           those wholesalers or retailers more and more and more goods.

Richard:   That’s fair enough. There is a ton of money in it.

Perry:     There is an absolute gazoodle of money in importing when you get it
           right. There are billion-dollar and multibillion-dollar importing
           companies.

           The gentleman who bought my company sold a billion dollars a year
           worth of home décor, chachkis, stuff that you set around your house.
           They had a 40-foot section inside every Walmart store in the country.

Richard:   I was really shocked on one of the first trips to China with you that
           Garden Ridge was there.

Perry:     A lot of the retailers are there buying directly now. Bass Pro Shops is
           one. You can’t be more American than that. “Let’s go bass fishing.”
           Pick up some of the Bass Pro Shop stuff and I challenge you not to
           find “Made in China” on the back. They have buying offices in
           Guangzhou and Shanghai now and Hong Kong.

           The big retailers are turning onto the fact that they can go over and
           buy, but there is still a service you can provide to them. They will never
           be able to buy all of their stuff themselves; they never will be able to.
           Secondly, there is another whole rung of wholesalers and retailers out
           there that are not billion-dollar a year retailers like Bass Pro Shops,
           Garden Ridge, and multi-hundred-million-dollar companies. They don’t
           have that ability and they’re stuck with buying things at markets in the
           U.S. where they can only make a 50% margin or so.

           We’re going to talk about each of those different kinds of businesses.

Richard:   You hit on a couple of things there, especially with the margins and
           stuff like that which I want to definitely get back to. I know that works
           into your system, so I don’t want to get you out of your groove here;
           we’ll keep everything in order.

           I do want to touch back on one of the things you said. You mentioned a
           lot of things such as tires, sparkplugs, and a ton of stuff like that. You
           gave some retail examples.

           What are the best products to import? How do you choose?

Perry:     I wish I could just say, “This, this, and this are the best things to do.” It
           kind of depends on you and your particular skill set. I will go through
           probably ten different kinds of products I know of that you can bring in
           from China. I’ll give you examples of each of these.

           The first is commodity products. I have an example of a commodity
           product and I’m sure there are a lot of other great examples like
           lumber, concrete blocks, carpeting, and whatever; things that people
           use and fundamentally buy based on price or they buy a lot of it at a
           season period of time.

           When I was in business with my Chinese partner, one of the biggest
           items we brought in every year was artificial Christmas trees. How
           many houses in America have an artificial Christmas tree up at
           Christmastime? It’s probably 95%, right?

           The downer is that there is an established price for those. An eight-foot
           Christmas tree is worth $47.20 or whatever the established price is.
           The downer is that there are so many of them out there and they are
           fundamentally the same doggone thing; they are not very different; one
           is not a whole lot different than the other. They have an established
           price and those markets are driven by price.

           If you’re selling bamboo flooring, I don’t know how much it is worth, but
           I’m sure it is worth roughly X number of dollars per square foot. People
           buy it in massive bulk because tons of people use it. I would imagine
           the margins in bamboo flooring are extremely tight.

           Does this mean importing commodities is a bad idea? No, it doesn’t. It
           means that if you are going to import commodities you’re probably
           going to be a different kind of importer. The kinds of people who import
           commodities are typically people who look at importing as if it’s a stock
           trade.

           They can go to China, buy a million dollars worth of hardwood flooring
           with practically no risk, knowing the hardwood flooring is already sold
           by the time it lands here for $1.2 million. They can make a 10% or 20%
           return on their million dollars in 60 days. If you trade stocks, that isn’t a
           bad return.

           There is the ability to import like that, but here’s the downer to that. In a
           commodities business you have to have the best price possible. If you
           buy wrong, you’re dead in the water. If you buy for more than the
           market, it is a zero sum game.

Richard:   It turns that profit margin upside down.

Perry:     Yeah, and if you have a quality control issue, you’re dead in the water.
           If the boards are supposed to be four inches wide and they are 4 !
           and it doesn’t fit anybody’s blueprints or floor plans anymore, you have
           a million dollars worth of firewood.

           The commodities import business is not my favorite kind of importing
           for these reasons. You are basically trading dollars and I have never
           been in that position. Also, you make such a low margin that it is not
           worth your time unless you are investing $1 million or $2 million at a
           time. It is hardly worth making 10%. Does that make sense?

Richard:   Yeah.
Perry:     There is one way to make money in commodities and a good friend of
           mine does this. He brings in Freon for one of the largest automotive
           supply companies in America. In this call, you will be surprised at all of
           the things that are imported.

           It is a commodity, but he made the relationship with the factory and got
           that locked down. He then went to the automotive distributor and said,
           “Look, I can get you Freon for $30,000 a container. If you are willing to
           put up your letter of credit, your money, and take the risk, I’ll go all the
           work for you for 8% per container. I’ll handle all the importing for you.”

           He had a track record of being a successful importer. They wouldn’t
           just let Joe Anybody do this.

           These containers come in and there is $100,000 worth of Freon in a
           container. He makes $8,000 per container and they bring in several of
           them per month. This is zero risk to him.

           There is a downer to that model. They could decide to screw him out of
           the equation and go directly to the source. They wouldn’t do this, if
           they’re smart. The importer does a lot for quality control, as you will
           understand in a few minutes.

           Most of the retailers get the benefits of using a good importer who has
           a relationship with the factory.

Richard:   They’re scared to lose their money, too.

Perry:     Yeah, they don’t want to lose. That is basically what he does.

           The second is the gift and décor market which is a huge market. You
           could say gift and décor and fashion market are the same. I’ve never
           imported clothing from China because there are really weird laws
           about quotas and all of that. Most of those laws went away in the last
           year or two, so it is a little easier now to import clothing than it used to
           be.

           As far as gifts, décor, and clothing go, basically you need to have good
           taste or somebody with good taste, possibly a designer. Good taste to
           you may not be the good taste that sells and I’ll tell you a funny story.
Richard:   Taste is objective, isn’t it?

Perry:     Yeah, this is a really funny story when I was working with the Chinese
           guy. He was a home décor importer and he sold all of his stuff to
           Walmart.

           I think I have a pretty good eye for design, so when we started working
           together I started bringing him designs of all these really high end
           candles and things I’d seen in New York at Bloomingdale’s and
           Bergdorf Goodman and all these high end department stores.

           Every time I’d bring something in, he’d go, “No, no, no; it’s all wrong.” I
           was getting all of my design ideas out of these high end magazines
           and going to very expensive stores in New York, Europe, and all over
           the place. I was getting these fantastic ideas, I’d bring them in, and
           he’d say, “All wrong; all wrong; all wrong.”

           Finally, I was so frustrated that one day I said, “Look, they have this
           here, here, and here,” and I showed him the different stores. He got
           frustrated with me and he said, “You don’t understand. Only 5% of
           Americans have really good taste. We sell everybody else.”

           He knew his market. He knew exactly who is market was and they
           would buy the Jeff Gordon NASCAR candle long before they would
           buy the fancy, beautiful, frosted candle that looks like a cake.

Richard:   Who doesn’t like their Jeff Gordon NASCAR candle?

Perry:     Who wouldn’t? That’s what I’m screaming. Anyway, you get the idea.

           The upside to home décor is that the margin is sick; it is ridiculous. The
           margin is sick and you’re probably looking at anywhere from an eight
           to ten times your money purchase price in China for most of the home
           décor and fashion stuff. That is cost of retail.

           Typically speaking, by the way, here are the margins you are typically
           shooting for as an importer. You will want to write this down.

           You want to buy products at one-third of their wholesale price.
Richard:   Is that U.S. wholesale?

Perry:     Yes, it is. For instance, we were talking about jeans earlier. Let’s say
           we’re selling a $40 pair of jeans. We have to wholesale that $40 paid
           of jeans to the retailer for $20. We probably want to pay no more than
           $6 and that is called FLC (First Landed Cost).

           In other words, the $6 should include the price of the materials, the
           initial warehousing, the freight, and the duty. You want to be in at about
           $6 on a $20 wholesale item.

           This gives you the ability to do something. The stores are paying $20 a
           pair for the jeans and selling them for $40. If, for whatever reason, this
           particular purchase doesn’t perform well or there is a minor flaw in it or
           whatever, it gives you the ability to sell it for two times your cost to a
           liquidator.

Richard:   You double your money on a bad batch.

Perry:     That’s right. The other thing is that when you’re selling for $20, you are
           typically going to have to wait to get your money. You can use a
           factoring company. They advance you money on your invoices. If you
           need to find out about them, look up “invoice factoring” at Google.
           There are some good invoice factoring companies that, as soon as you
           ship your product to your customer, will go ahead and cut you a check
           for 80% or 90% of the purchase price.

           Here’s the drag. They will charge you 2% to 3% per month interest on
           that money until the retailer pays you.

Richard:   So don’t give a ton of crazy terms to your retailers.

Perry:     You have to realize that when you are selling to the end use customer
           for $20, you are probably going to have what we call “cost of money.”
           You will have a cost of money expense; you will have some returns
           unless you have a ridiculous return policy. There are other costs
           involved that will not allow you to keep all of that $20.
           This gives you a lot of fluff in between. The worst case scenario, if you
           import based on this rule I’m giving you, is that if you had to you could
           sell the jeans for $6. You could dump them to Big Lots or Dollar
           General Store, flea market vendors, or somebody who would give you
           $6 for them.

           While the importing business is risky sort of, if you understand the last
           part of the importing business which is liquidation, there is not a lot of
           risk in the business. Does that make sense?

Richard:   Sure, it does. If you’re going through all the checkpoints, making sure
           you know how to buy, what to buy, and you’re following the points
           being laid out here, while you are risking your money sometimes and
           sometimes other people’s money, you do have that Plan B, I guess you
           would call it.

           You’ve said some terms and I’m sure a couple of people are saying,
           “Hold on! What the heck is a tariff? What is this or that?” Perry is going
           to explain all of that, so no one needs to freak out. Keep listening here
           and he is going to get into all of that, but you will need to know some of
           those terms.

           We’ve been through commodity and gift and décor. You were talking
           about buying at a third of U.S. wholesale.

Perry:     Sure, and that will work in those two markets. It will work in the market
           we just talked about pretty well. You try to make it work everywhere
           you are, if you can.

           In some cases, like the commodities business, for instance, there is no
           way on earth that will happen. You will be bringing stuff in at probably .
           80 cents on the wholesale dollar. You will bring in for .80 cents and sell
           for a dollar.

Richard:   Your margin is a whole lot lower in that case.

Perry:     However, for the most part, if you are going to end use, this is what you
           want to do.
           Outside of gift, décor, and fashion where you need to have a sense of
           taste and be on the ball there, the next type of business is where I
           spent a lot of my time. I’m talking about niche markets.

           This might be hobbies. It could be something where you have
           specialized knowledge of the industry. Maybe you are a model train
           builder and you know there is no real branded track. Maybe the trains
           are branded, but the tracks are not. I don’t know; I’m not a train guy;
           I’m just making this up.

           You may decide that the price you are paying for your model train track
           is ridiculous. It is, let’s say, $10 a foot and you may be able to find it in
           China for .50 cents a foot. You know you have a market there. You can
           bring in the product knowing pretty much what the market is based on
           your specialized knowledge.

           Let me give you one of the best examples I’ve seen of this. I met a guy
           a couple years ago who is an importer. He used to work for Ford Motor
           Company and he was one of the guys who designed and worked on
           the little keyless clickers for locking and unlocking your car.

           I used to have a building next to this guy which was pretty wild. I didn’t
           know what he did, so I went over and talked to him one day. Imagine
           this for a minute. Every couple of days I’d see a 40-foot shipping
           container back up to his back door and they would unload it.

           The entire contents of those containers were keyless door clickers for
           cars and he sold them to car dealerships, to automotive parts
           companies, and so on, as a replacement for when you lose your car
           clicker.

Richard:   I can only imagine you could fit a lot of those in a container.

Perry:     It was an absolute ton of them. He told me the number, but I can’t
           remember what it was. It was a ridiculous number of them in a
           container.

           Basically, the big deal was that these things sell for $150 to $200 a
           piece from the car dealer. He sells the replacements to other people
           who sell them for $50 or $60. He gets anywhere from $12 to $20
           wholesale for them and he is paying $2 to $3 per clickie.

Richard:   I’ve been on the end user end of that deal and it sounds a whole lot
           worse now than it did when I actually went in and paid the $120 for the
           replacement clicker.

Perry:     This is where he knew his market, but he knew his product. He found
           all of these different places, non-traditional places, to sell his goods. He
           not only sells these things to retailers, but he sells them to parts
           suppliers. He sells them to car washes, so when you’re walking
           through the carwash watching your car get washed and you go to
           check out there is a rack of these little key clickies.

           He sells them to locksmith companies. Do you think they sell some of
           them? You bet they do.

           He is getting anywhere from $12 to $20 wholesale. Remember, he’s
           paying $2 to $3, so there’s your margin difference, right?

           You may be on this training because you already know what you want
           to import. I meet a lot of people who already realize there is a hole in
           their particular market that they need to fill.

           Next is B to B stuff. This is all business to business goods. I had a
           company for a while that I sold a couple of years ago called Cleveland
           Equipment Company. We had manufactured for us case tapers which
           is a piece of packaging equipment; liquid fillers; heat sealing
           equipment to shrink-wrap products with.

           Do you remember what else?

Richard:   Gosh, there were vacuum sealers.

Perry:     It was all sort of packaging equipment which is real niche B to B stuff.
           Believe it or not, I was still able to get my one-third of wholesale buying
           price there and still be ultra competitive in the market.

           I was selling directly to end use consumers. We did this via the
           Internet; we did it via trade shows. We had a repping network that went
           out and showed our products to other people. I sold a lot of these
           products; it was pretty wild!

           You want to become prime; this is your ultimate goal. Write this down.
           You want to become prime. This means you are the source for
           everybody to get their whatevers from. There were certain products we
           sold like heat sealers where we became a prime vendor. This means
           we always had the product in stock and the stock was good. We had a
           lot of good quality control testing; we had a lot of units out in the field;
           and we knew that everything we had was good.

           Here’s what happens when you’re prime. Your market becomes global
           and it will really trip you out, especially when you are in specialized
           stuff like special equipment. We sold equipment to England, Germany,
           South America, Brazil, Iceland, Canada, South Africa, Australia, New
           Zealand, and all over the place. We had kind of odd products for which
           there was a specialized need.

           In those products in B to B equipment, for instance, we would bring in
           a piece of equipment for $700 that we retailed for $3,700. That’s
           $3,700 from $700. That was a pretty normal market, wasn’t it?

Richard:   The numbers stay the same.

Perry:     Yeah, the numbers stay about the same. Here’s the good or the bad
           thing. If I bought that same piece of equipment from the States, I would
           have paid $3,400 for it.

           Imagine this now. There are a lot of guys out there competing with me.
           They’re paying $3,400 for a piece of equipment and trying to sell it for
           $4,000. Well, I’m beating their brains out at $3,700.

Richard:   You’re saying if you had purchased it to resell.

Perry:     If I had purchased it domestically for $3,400, I would be like everybody
           else who was selling these particular fillers for $4,000 while trying to
           make a few bucks in between. However, once I come into the market
           at $3,700, they have to reduce their price to match me or they won’t
           sell any.
Richard:   They’re already on a slim margin.

Perry:     Yeah, so now they are making $200 or $300. What can they spend on
           marketing to get a customer?

Richard:   Not much.

Perry:     It’s practically nothing. I could spend $1,000 per customer in marketing
           and still make way more money than they do. This is where the
           advantage to importing really, really comes in.

           There is another type of product to import. I never used to look at
           products that were low dollar or very, very inexpensive little pieces. I’ve
           since been corrected. Lately, I’ve seen people importing for lead
           generation.

           What do I mean by that? This is particular big for people who are into
           Internet marketing or online marketing. In most businesses, if you’re
           not already selling your products online, you will eventually be selling
           your products online.

           This is a really neat tactic they use. There are two companies like this
           that I can think of. One imports guitar picks and one imports
           pedometers. The one that imports guitar picks, basically imports extra
           guitar picks from a guitar pick factory in China.

           I went to the guitar string and guitar pick factory in Guangzhou where
           they make these things. This guy buys all the extra guitar picks they
           have that are overruns or whatever. They throw them into a big bag
           with millions of guitar picks in these giant boxes. They send them to
           him, he weighs them out, and he figured out that a quarter of a pound
           equals 200 guitar picks or whatever the number is.

           He sells bags of guitar picks on eBay. He doesn’t make a lot of money
           selling guitar picks, but if you’re going to buy guitar picks, you really
           want to buy them from him because he’s really cheap, right?

           Who buys bags of 1,000 guitar picks at a time?
Richard:   I’m guessing it is probably someone who owns a guitar or at least
           knows how to play one.

Perry:     Either that or they own a guitar store. He has used this to build a
           business of people buying his picks and now he wholesales strings to
           them. He brings in guitars and musical instruments now because he
           found that most of his customers that were buying the picks for $19.95
           were small music store owners. Perhaps they just wanted to put up a
           fishbowl of picks.

           He got them as a customer and now he can sell them all sorts of other
           stuff. He doesn’t make any money to speak of on the picks, but he
           makes a ton of money from acquiring the customers. Does that make
           sense?

Richard:   It absolutely does. He’s basically grouping people based on a certain
           need. He is building a list of people that would probably want
           something else he has. That’s smart.

Perry:     I know I’m being long-winded on this, but I want to make sure you get
           all these.

           Importing to rent is another big market right now. We met a gentleman
           in Canton Fair in China who imports oxygen generators. I’m going to
           throw in a little lesson here.

           Oxygen generators are basically a replacement now for using oxygen
           tanks. A lot of people who have problems breathing have this little
           machine they can use that helps generate oxygen for them. Social
           Security and a lot of medical plans will pay a rental of several hundred
           dollars a month to rent the machine for the patient.

           They don’t want to buy them because they are quite expensive. The
           machines normally are $4,000 or $5,000 and they rent them for a
           couple hundred dollars a month.

           This guy goes to China, buys the machines for anywhere from $500 to
           $600 a piece, comes back, and rents them for the same $200 and
           change a month. In three months, he’s in the black. Plus, guess what
           that gives him? It gives him marketing money. It gives him much more
           money to spend to acquire the customer than his competitor.

           His competitor is 18 months down the road before he breaks even. My
           guy breaks even three months down the road. Who wants the
           customer more? There is no question that he wants the customer
           more.

           I’ve seen this work with higher dollar construction equipment, concrete
           floor finishers, and all sorts of stuff like that. In China, many times,
           believe it or not, you can buy a piece of equipment for about the same
           amount as a monthly rental in the States.

Richard:   Do you think you could make money with that?

Perry:     You get a company like Home Depot, for instance, and they have a
           concrete finisher out there. It is a little machine that smoothes out
           concrete and it rents for $50 a day, let’s say. That is $1,500 a month.
           The concrete finisher in China is probably $400. In less than a month’s
           time, it is paid for.

           This is an area that I really like and I’m speaking of business
           opportunities. I’ve seen more of this going on lately. There are guys
           going over to China, buying a piece of equipment, and then building a
           business around it. They then sell it as a business opportunity.

           They may go buy a power plumbing snake. Those things are usually
           $2,000 or $3,000 in the States, but in China they are $300 or $400.
           They package that plumbing snake along with a business operations
           manual, some ad slicks, and the use of a brand name. They then sell it
           either a business opportunity or a franchise or a license agreement to
           be Mr. Super Rooter, or whatever, in their area.

           There’s a company that goes over and imports these floor steam
           cleaners that clean grout floors. Instead of just selling the piece of
           equipment, he sells the piece of equipment with a Grout Genie kind of
           franchise thing. He is able to put together all the pieces.

           One of the cool things about importing things from China is when you
           can take something you’ve imported and add other things to it that add
           value. Then your customer is not just comparing apples to apples.
           Does that make sense?

Richard:   It absolutely makes sense. You’re really anchoring it.

Perry:     Yeah, you’re really adding value and you’re keeping them from saying,
           “This guy has the same piece of equipment over here for $20 less.” It
           doesn’t matter at that point. They are more buying into the business
           opportunity than the piece of equipment or whatever you imported from
           China.

           It doesn’t necessarily have to be a piece of equipment. It could be that
           you have a wholesale source of cell phone covers. You can from a
           pushcart in a mall filled with cell phone covers because you’re the
           direct importer. It gives you advantages. You’re building continuity and
           residual building.

Richard:   This is like what you talked about with consumable products.

Perry:     Exactly. Here is another one. I met a gentleman who did this business
           which is just remarkable. I know other examples of it, but this one
           example is a really great one. I’m speaking of parts and raw materials.

           China is huge in things like chemicals, stone, and granite countertops,
           by the way. Almost all the granite countertops are imported from China.

           This particular guy I know imports aluminum extrusions. This is a big
           word for aluminum trim. It is the stuff that goes around a dry erase
           board, for instance. I met him because I used to buy aluminum
           extrusions from him.

           Aluminum extrusions in the States sell for an average of, let’s say, $3
           or $4 a pound. Basically, they take aluminum and push it through a
           Play-Doh maker. It makes a big, long stick of aluminum. They heat the
           aluminum a little bit and they squish it through this extruder machine
           and it comes out in a shape.

           I’m giving you rough numbers; I don’t know that these are accurate.
           When aluminum is a dollar a pound, for instance, and they’re making
           an extrusion in the States, they usually charge about $4 a pound for
           extrusion. In China, they charge about $1.25 a pound for extrusion.

           Well, this guy had the greatest business in the whole, wide world. You
           talk about a risk-free importing business. He would go to other
           manufacturing businesses. At the time I was manufacturing dry erase
           boards. He had people that manufactured screen doors and screen
           windows.

           Aluminum extrusions are on a lot of stuff like cubicles; they’re all over
           the place. They’re on almost everything you pick up.

           Anyway, he would go to these other companies and say, “Hey, my
           name is Paul. I know you’re buying a lot of aluminum extrusions right
           now and I know you’re paying about $4 a pound for them because I
           know where you are buying them from.

           “What if I could get you all of your aluminum extrusions for $2 a pound
           and cut your price in half? Would you have any interest in that?”

Richard:   I doubt he got many nos.

Perry:     He didn’t get a lot of nos. He would take their samples, send them to
           China, and China would send him back samples of the extrusions. He
           would take their order at $2 a pound, have it secured and locked down
           in a purchase order, and then he would tell them it would be six to eight
           weeks to get delivery.

           They were fine with that because they were saving half. All they have
           to do is plan out a little bit more. They’re already buying it for $4.

           He would take the order, deliver it, and then they would set up what’s
           called a JIT (Just In Time) Inventory. You want to learn that term.

           After the first order, after they saw everything, the quality was good and
           it was going to be okay, he would say, “Okay, let’s set up a Just In Time
           Inventory for you. How many extrusions are you using, when, and all
           that?”
           They figured out they were using one container of extrusions every two
           weeks, so he would place orders six weeks out, eight weeks out, ten
           weeks out, or 12 weeks out, and every two weeks they were getting
           another container of extrusions in the back door. Every two weeks—

Richard:   He was getting another check.

Perry:     —he was getting another check. You call on that business one time,
           basically. The rest of it was just maintenance.

Richard:   No one ever says, “Hey, I really think I’d like to go back to paying $4.”

Perry:     No, they’re never going to go backwards. That’s the reason that right
           now Chinese imports are up more than ten times in the last ten years.
           That’s a 1,000% increase in the last ten years. Whether you like it or
           not, you can either be mad about it or you can float with it; it is one or
           the other. Being mad about it will not make you any money. I can
           almost assure you of that.

           Let’s talk about the last type of product we will mention for now. It is not
           even really a product; it is services. Sometimes these are service and
           product tie-ins. Sometimes it is a product matched with a service. This
           is one of the coolest ways of importing I have found in a long, long
           time.

           I met a guy on an airplane going to China not too long ago. He was an
           importer of trophies. I said, “Oh, you import trophy parts,” and he said,
           “No, I import finished trophies.” This was his business.

           Most trophy parts come from China. If you have ever seen a trophy, the
           parts came from China. Most of the time they make the trophy parts,
           they assemble them here in the States, and they do the engraving here
           in the States, and they sell them.

           He made a deal with Federal Express to rent out some additional air
           cargo space. He has a factory in China that not only manufactures the
           trophy parts, but he will literally have each one made and custom
           engraved in China.
           He does this based on his orders that he gets from big Fortune 500
           companies. They do a lot of plaques, mainly plaques. A company like
           3M may give him an order for 10,000 plaques to go on their
           distributors’ walls.

           The labor in China is less than a dollar a day compared to labor here.
           Figure in equipment costs and the engraving equipment, the factory
           over there does it. A lot of times, it will blow your mind.

           We were asking about granite countertops one time. We were asking
           what kind of equipment you had to have to finish out the granite
           countertops once you got them here and the machine is something like
           a half a million dollars to do all that.

           I said, “Is there any way you guys could finish one side of the granite
           countertops for us and cut the sink holes?” I had a client who was
           building giant condos and every kitchen in every condo was exactly the
           same size. We need enough of the same piece of granite for 1,100
           condos.

           I said, “What would you guys charge us to finish out this edge, cut the
           hole for the sink, and cut the hole for the drain?”

           The guy looked at me and said, “Oh, no charge.”

Richard:   That’s amazing.

Perry:     It was no charge. They did the custom work for no charge. For what it’s
           worth, this is why they did it for no charge. They took the hole, they cut
           out a sink, and they made marble cutting boards and sold those as a
           separate product. The bottom line is that they are laughing at me all
           the way. They’re thinking, “What a dummy! We get a totally free thing
           for cutting the hole out.”

           For me, it was a matter of not having to invest a half a million dollars
           into equipment and having everything sent to me perfectly cut to go
           into the job.

Richard:   With a little bit of negotiating you might have come away with the
           cutting board.
Perry:     I’ve seen that happen. One guy is a pure labor play. He exports truck
           engines to China. They take them off the boat in China and use
           Chinese labor to completely rebuild the motors. Once they’re rebuilt,
           they put them back on a container and send them back to the States.

           By the way, I believe that is a duty-free pass-through, too. I’m not sure
           about that, but there may be no taxes or duties on that.

           Basically, he would pull a big engine out of a semi truck and the labor
           to rebuild that engine was something like $5,000. The labor to rebuild
           that engine in China is something like $200. They just ship it to China
           to do the rebuild. It was worth the shipping there and the shipping
           back. He was still saving money.

           There is another place I’ve seen doing the same thing lately. There is a
           dental laboratory here in the States that is becoming very, very big in a
           lot of the cities. When you get crown work, bridge work, denture work,
           and all that, they are making the dentures. They take all the molds that
           the dentists take, Fed Ex them to China, and in a matter of two weeks
           or so they are Fed Ex’d back to the States.

           The cost of raw materials inside a crown or a denture is almost
           nothing. It is almost all labor. They are able to build crowns, bridges,
           and dental work in China for .10 cents on the dollar versus the cost of
           a wholesale dental lab here in the States.

           Sometimes, by the way, in examples like the trophies and the dental
           work, this stuff is all done by air. The good news is that once you’ve
           secured the vendor, you are virtually in a no-risk situation.

Richard:   Most of that is prepaid, right?

Perry:     Most of it is prepaid. You are in a practically no-risk situation. Importing
           doesn’t always mean 40-foot containers and $100,000 worth of stuff at
           a time. As a matter of fact, it is pretty easy to buy almost anything in
           China $5,000 to $10,000 at a time.

           You will have to wait because your freight will be a little slower. You
           have to use a freight consolidator and we’ll talk about that in a few
           minutes. Your freight expense will be a little higher because once you
           start shipping less than container loads, the freight goes up quite a lot.

           However, many of the factories over there will sell you $5,000 to
           $10,000 worth of something. You don’t have to go over there and buy a
           40-foot container of everything you look at.

Richard:   Those are basically nine of your favorite markets or, at least, nine of
           the most common ways to import and what to do with the stuff once
           you import.

Perry:     Absolutely.

Richard:   Let’s dig into your process. Let’s talk a little bit about your import
           process, your system that you use to import from China. I really don’t
           have much else, so I’d like you to dig in at Step One and take us all the
           way through.

Perry:     This part is more of the process than my process. It is pretty much
           what you have to do, the steps you have to go through to import
           anything, if you’re going to do this yourself and really be in charge of
           the process.

           First of all, you have to do your product research. You have to know
           where your market is. We’re going to talk about limiting risk in a minute
           and this kind of plays into that.

           You need to do some price testing. You need to do some elasticity
           testing and see how much stretch there is in the amount of money
           people charge. You need to know the high, the low, the in between,
           and things like that.

           You need to research quality. What features are needed, the features
           that people will just not live without? One time we were bringing in
           shrink-wrap machines and we didn’t have a knife that cut off the shrink-
           wrap. People didn’t want our product. It was a new feature that another
           manufacturer added and it basically made our stuff practically obsolete.
           We had to close out a bunch of heat sealers and order new ones.
           By the way, this is something you need to do. If you ever run across a
           situation like this, the best thing to do is get rid of the product you have
           as quickly as you can for whatever you can get out of it, if there is a
           major development in your technology market.

Richard:   That quickly became the industry standard.

Perry:     Anyway, you are going to do your research. Next you are going to
           source your product. You are going to find a source of quality
           manufacturing. We’re going to talk about finding quality manufacturers,
           how you contact them, and the different sources for doing that in a
           couple of minutes.

           Next you will get a sample. You want to physically see an exact
           representation of what you will get when you get your order. The
           understanding is that the sample is what will be on the container when
           you get it.

           Next you want to get your quote, whatever the quote for the product is.
           You will negotiate this a couple of times. You will get at least two
           quotes, probably three quotes, during the negotiation process.

           Next you want to customize your product as much as is allowed. When
           I mentioned earlier that you could import a small quantity of things,
           sometimes when you are importing small quantities, this is the only
           down side. You typically can’t get as much customization work done.

           If you are importing a container of something from China, you can get
           them to brand it to you almost always for no additional charge.

           Next you are going to actually place the order. You are going to write
           the spec, place the physical order, and get all the paperwork in place.

           The next step is having quality control during the manufacturing
           process. You need quality control people who will watch the
           manufacturing and shipping process.

           You are going to negotiate the terms for the sale. Believe it or not,
           there is credit on most of what you buy from China. They work credit in
a kind of weird way, but we’re going to talk about credit terms
extensively.

You will deal with freight-forwarders and getting all the freight
documents done. You will deal with your documents. Everything is
done in China based on a bill of lading and a set of documents you
have to have in order to receive your freight.

Lastly, we are going to talk about damage. As the last step of the
process, what do you do if your freight comes in damaged or unusable
for some reason?

Basically, this is the import process as I see it. There is a big thing I’m
going to talk about as we go through each one of these steps and I
want you to always keep this in mind. My number one concern when
importing is limiting risk. This is everything to me. You can have three
or four good import deals and then have one or two bad import deals,
lose all your money, wash out, and not make anything in between.

It is really important that you begin with a mindset at the start of the
process of avoiding risk. My first strategy for that is preselling.

As an importer, people will look at you like a three-headed monkey.
Most people do not understand what importers do; they don’t get it.
They say, “What do you mean? You go all the way over there to China
and you deal with all these Chinese people?”

Yeah, you do. These people will never be importers. Most people are
scared of the process; they don’t understand it; and they’re not going
to be part of it.

For this reason, it is usually easy, especially if you have a great price, a
great product, and great quality, to go out and presell, if not all of what
you import, at least enough of what you import to avoid any risk.

I recall the story we were talking about earlier. We import hand dryers
like the ones that go into bathrooms. It is a very romantic business. If
you’re in this business going, “I have to have something I’m passionate
about,” it may or may not work for you.
Richard:   You may not want to step into that niche.

Perry:     We import hand dryers that blow your hands dry. We wanted to bring
           them in, so we got a quote on them and it was a fantastic price. They
           sell for about $400 each and we were buying them for $50 from China.
           The quality was outstanding.

           We had the factory send them labeled and branded. Because we were
           known as an importer by this manufacturer, they went above and
           beyond and actually printed and branded the samples they sent us to
           our brand. They were literally exactly what we were going to get.

           Oddly enough, next door to the building we were in at the time was this
           company called Sani-Clean or something like that. They basically go in
           and clean toilets for a living; you know, the path less traveled. They are
           in a very romantic business, as well.

           Anyway, they had 30 trucks and they maintain a problem most people
           don’t want to deal with, meaning the restrooms inside their businesses.

Richard:   That’s the other thing. They maintained the restrooms including the
           supplies.

Perry:     We knew they used hand dryers and they were paying wholesale
           anywhere from $250 to $350 for a hand dryer. They would sell to the
           retailer for $400 or $500 when somebody needed one.

           We went to them knowing we were going to sell our hand dryers for
           $295. We went to them and said, “Hey, we have these hand dryers.
           We want to buy a bunch of them. Would you be interested in cooping a
           shipment with us? We can get them for you for $150 a piece.”

           That is way less than half what they were paying for the hand dryers. I
           got a commitment from them to buy one-third of the container and
           three times what I was paying.

           The container came in, I dropped it at their place, and unloaded one-
           third of the hand dryers off the container. They gave me a check and
           they were paid off.
          At that point, I was absolutely even. The container moved over and
          dropped behind my dock and dropped off $65,000 worth of absolutely
          free merchandise into my warehouse. This is what I mean about
          preselling. This is the number one way to eliminate risk in importing.

          You have to find bulk users. This is another find that was good for me.
          We were retailing a lot of stuff online and we don’t do so much of that
          anymore. (60:00)

[59:52]

Perry:    That’s the number-one way to eliminate risk in importing. What you’ve
          got to do is find bulk users.

          This is another find that was good for me. We were retailing a lot of
          stuff online. We don’t do so much of that anymore. We were basically
          building a Web site and retail selling. We don’t do as much of that as
          we used to because we’re kind of lazy now.

          Here’s what we really found out that was cool. I did this with lock
          boxes, key cabinets. We found out that we wanted to be in the key
          cabinet business, so we put up a Web site; and the key cabinet
          business did okay.

          The thing was that there was a lot of competition. There were 100
          different sites online selling these big key control boxes, and we were
          just one of them. We had the best price and the best whatever.

          In this particular market, we had a ridiculously good wholesale price. It
          was so good, in fact, we didn’t want to reduce our price down to just
          become the cheapest, cheapest, cheapest in the market because it
          would make our quality look poor.

          Here’s what we did instead. I don’t remember the exact numbers, but
          let’s just say that we were selling a key box everybody else was selling
          for $200 that we were buying – though it’s ridiculous to say – for about
          $12.
           So, everybody else is selling it online for $200 and we’re paying $12.
           We kind of figured out that all the other guys selling online were paying
           about $100 for that lockbox.

           It was way smarter for us to not compete retail head to head. It was
           better for us just to go out and sell the lockboxes directly to all the
           other Web sites for $55 apiece.

           I made my four- or five-times markup – or at least my three-times
           markup – and I didn’t have to ever mess with having to deal with retail
           customers, selling individually.

           The cool part was that the product became much more of a
           consumable product at that point. I had a group of buyers buying these
           things.

           So, once you get that base established, now you can direct mail all the
           locksmiths in the country, which we did. You can go to the locksmith
           supply companies and sell them wholesale. You can go to trade shows
           for apartment complexes, for car dealerships, and for big arenas; and
           we did all that.

           You basically pick the low-hanging fruit first. You’ve just got to find bulk
           customers, and it’s not that hard to do. Again, if you have a few
           samples you can send out to your bigger suppliers, that’s a risk-free
           proposition.

Richard:   It sounds like a really easy way to hedge your bets, too.

Perry:     Yeah, it really is. Even if you’re going to retail, it’s a great way to help
           get rid of some of your slower-moving inventory.

           There’s a little booger there, though. If you’re retailing online and
           you’re selling wholesale online, you’re sort of straddling the fence a
           little bit, and the wholesalers may not like you very much.

Richard:   You’re competing with your clients.

Perry:     Yeah. That sometimes ticks them off.
           Next is something called dry testing. There are two kinds of dry testing.
           We don’t do pure dry testing because I don’t think it’s very ethical.

           Dry testing is basically seeing if a product is going to sell before you
           buy it. You can do this on the Internet very well. In other words, you
           just go out, put up a Web site, and begin to sell something.

           Some guys will do it and just be out of stock of that thing. I don’t think
           that’s a good idea because you’re sort of being deceptive when you do
           that. You never really had it anyway. Here’s what I like to do instead.
           For most things that you’re going to import, there’s already a domestic
           supplier of that thing.

           Let’s say, for instance, that it’s lockboxes. I’m going to sell lockboxes
           and I know I can buy lockboxes for $12. To buy them wholesale in the
           States, though, they’re $100 apiece; but everybody’s selling them for
           $200.

           I’ll put up a Web site selling lockboxes for $125, just to see how many
           I’ll sell. If I sell some, I’ll go buy them from the other company for $100
           wholesale and fulfill my orders; but only until mine get here.

           It’s a great way, rather than saying, “I know what I think. I think these
           widgets are going to sell. I’m going to go ahead and invest a bunch of
           money, buy them, and bring them in. When we get them in, we’ll put up
           a Web site, and then we’ll see if they sell.” That’s just dumb. The better
           way to do it is to know that you have a market before you ever get
           started.

           One of the things that I like to do with samples is make sure that I get
           more than one sample. I’ll ask for a dozen or two dozen samples, and
           I’ll be willing to pay extra for them if need be.

           A lot of times, I’ll have five or ten suppliers out there, and I want to
           send them a sample along with a letter. I want to get good
           photography. I want to get everything together so that they’ll give me a
           buying commitment, so I know whether or not I want to import.

Richard:   It’s also a good way to check consistency from a manufacturer.
Perry:     Absolutely.

Richard:   I know that we had stumbled across a couple of bad items when you
           did that once; and that was just the sample lot.

Perry:     Here’s the other thing that I’ll give you if you want to curve your
           learning curve and your time a lot. I say “Stateside,” and I’m assuming
           I’m talking to people who are in the U.S. If you’re in a different country,
           please forgive me, but you’ll understand the concept.

           I call it “Stateside prototyping.” Basically, what I found out through
           being in business with this billion-dollar importer for a while was that a
           lot of people try to get their prototypes made in China.

           You try to draw a drawing or give them a spec or whatever, and you
           want this thing built a certain way in China. You’re trying to explain it to
           them; and they’re trying to understand what you want.

           I always joke about it. I say, “If you send a drawing of a football to
           China, they’ll send you back a baseball. If you send them a baseball,
           they’ll send you a baseball.”

           The best thing for you to do is to get designers or yourself to build your
           prototypes in the States if that’s possible. If you can’t build a prototype,
           then maybe there’s one for sale already. You can buy one and send it
           to them, and ask them to make one like it.

           Now, there are patent laws and trademark laws that apply there. One
           of the worst things that you can do is get a container-load of something
           here that violates a patent. If you get the merchandise here, now you
           just can’t sell it, and you have no choice.

Richard:   Or sometimes they just won’t give it to you.

Perry:     Yeah, sometimes customs will just hold it; but usually not. Usually it will
           come on to you. However, if you start to sell it, the next thing you get is
           a Cease and Desist. At that point, that merchandise is absolutely the
           worst merchandise you can have because you’re not even allowed to
           liquidate it. You just have to destroy it.
Richard:   And you have to pay to have it destroyed.

Perry:     That’s the worst possible problem that you can run into. What I suggest
           you do is build your prototypes on the States side, send them to China,
           and say, “Make me an absolute duplicate of this.” They’re fantastic at
           duplicating things. They’re not very good at creating things from
           concept.

Richard:   You still have them send it back to you.

Perry:     Yeah. Here’s one of the last things, and this is something you can do
           later on as you get savvier. For instance, right now Richard and I both
           can pretty much walk into anywhere, look at an item, and tell you within
           five or ten percent either way what that thing probably costs in China.

Richard:   That’s a blessing and a curse.

Perry:     Yeah, it is. If you go shopping with your wife, you’ll say, “I’m not buying
           that stupid thing! It’s three dollars in China!”

           She’ll say, “Yeah, I know, but this one’s $150 and it’s pink!”

           “I don’t care!”

           I’ll tell you, though, that happens all the time, and it does irritate you.
           The good thing, though, is that once you learn what stuff costs in
           China, you have this real big advantage.

           I told you before that I worked with a guy that was huge in the home
           décor market. It was pretty cool what he would do. He went to the
           Atlanta market, which is a wholesale market selling to other stores.

           A lot of times, he would go out into stores and find a vase or a knick-
           knack that was at some store – maybe even in the thrift shop – that
           was popular 30 years ago. He would just polish that thing up, put it out
           on the shelf for sale, and take orders from it.

           If a lot of people ordered, then he would go buy it from China. If people
           didn’t order it, he would write a letter back to the ones who did and say,
           “You ordered this, but after some internal testing, we realize it’s
           probably not going to be a good seller.”

           He was seen as a hero for protecting them from a bad seller. Also,
           though, he was able to have a big display of stuff in his showroom.

           I’ll tell you, that was one of the biggest lessons that I ever learned in
           retailing. I call it “the sticker method.” You can actually scrape the other
           guy’s sticker off the bottom of it and set it out there.

           In order to do that, you have to know your market and know your
           business well. Robert can look at something and say, “That ashtray in
           China is going to be 65 cents.” He knew within a dime how much it was
           going to cost.

           As long as he was selling it for two or three dollars, he was in fine
           shape and it didn’t matter. He would just guess at the price, but guess
           on the high side. Does that make sense?

Richard:   Yes.

Perry:     Those are some ways that you can limit risk. We’re going to talk about
           limiting risk more as we go through the other steps.

Richard:   Hopefully, that’s going to be a theme, because the main part of this is
           that you can make a lot of money. You’ve already said it: you can make
           a lot of money importing.

           However, if you don’t take some of these steps – or all of these steps –
           to limit risk, you could really get caught with your pants down and get
           broke real fast.

Perry:     It’s not quite as bad as I let on, to be honest with you. I am extra
           cautious. When it’s my money, I’m a little more risky; but when I’m
           talking to a student or somebody who’s new, I really push them hard to
           be extra, extra, extra cautious.

Richard:   Let’s go back to the import process as a whole, and really dig, step by
           step, into exactly what those processes entail. The first step of the
           process is sourcing your product. Let’s just start from ground zero.
           How do you go about sourcing a product?

Perry:     There are a couple of ways to do it. There are about three ways that
           you can really go about sourcing products from China. Basically, they
           are online sourcing, using an agent, or actually going to China. We’re
           going to cover all three of those different processes right now.

           Number one, a lot of people approach me now and talk about online
           sourcing; things like      HYPERLINK "http://www.Alibaba.com"
           www.Alibaba.com. It’s probably the biggest Web site for sourcing
           products from China. Yahoo owns part of that company, and it’s
           sanctioned by the Chinese government. They have a lot of support.

           Basically, a lot of the Chinese manufacturers have their products on
           Alibaba, so you can view them and send in any inquiry asking about
           the product, the quality, samples, et cetera.

           There’s another one I’ll give you as well, called HYPERLINK "http://
           www.ttnet.net" www.ttnet.net. Those are two of the best. There’s
           another one called Global Sources.

           I don’t care for it as well, but you can go to HYPERLINK "http://
           www.GlobalSources.com" www.GlobalSources.com if you choose to. I
           think Global Sources is more of a Hong Kong based company. I’ve
           never been able to get manufacturers that have good pricing from
           Global Sources.

           Let’s talk about Alibaba and ttnet first. They’re going to have you sign
           up for an account. They’ll tell you to send your inquiries in through their
           system; and you can do that. There’s nothing wrong with you doing
           that.

           However, here’s a biggie. When you make contact with a Chinese
           company, I’ll bet you can send in ten inquiries through Alibaba and
           probably only get back two or three replies. Is that pretty accurate?

Richard:   Yeah. Even though it’s a service that they’re kind of signing up for, it’s
           not one of the more traditional ways of contact.
Perry:   Also, they get a lot of knuckleheads that just go on with, “Hey, how
         much for this thing?” You just can’t approach them that way. We’re
         going to get into this in depth, but I want to start talking to you about it
         here.

         Chinese manufacturers will treat you a certain way, based on how
         good a businessperson they think you are. If you seem like a
         chucklehead, they’re going to treat you like a chucklehead.

         Here’s what that means. If you act like just the blind idiot walking
         through the door, they’re going to totally ignore you, because they
         assume you’re just full of crap anyway and aren’t going to buy
         anything.

         You can bet that every one of these places gets dozens of inquiries
         every day through Alibaba. They just look at a large majority of them
         and go, “That guy’s an idiot. He’s not serious.” They don’t even reply.

         For other ones, they’re going to say, “That guy’s an idiot, but he looks
         like he’s an idiot with some money to waste, so let’s sell him just a
         truckload of garbage.”

         They’re going to assume you’re going to be out of business in no time
         anyway. They’ve got nothing to lose. Why not just take some money
         from you if they can? They will tear you up, man.

         Everybody thinks that the mentality of Chinese business is long-term
         relationships and all that stuff. That’s absolutely true, if they feel you’re
         worthy of a long-term relationship.

         If they don’t feel you’re worthy of a long-term relationship, they’re going
         to try to skin you for as much money as they can get out of you, as
         quickly as they can before somebody else does.

         That’s the way they see it. They see you as an idiot walking around
         with your wallet hanging out of your back pocket; and eventually,
         somebody’s going to take your money, so they might as well be it.
         They’ll just send you a container of junk and you’ll just be screwed.
           The beginning of this process starts with you looking like a
           professional, because they judge you based on that. I’m not that old,
           but I can remember in the 1980s when I started in business, there
           were still a lot of older companies that wouldn’t do business with you
           unless you would send them a letter on letterhead, asking them to do
           business. We still had traditional wholesale channels in the States back
           then.

Richard:   It was more formal business.

Perry:     China is still, today, very much like that. If you want to get a quick
           response, I promise you this will get you a response 10,000 times
           faster than anything else you do.

           Go ahead and send in the Alibaba form or the ttnet form if you want to,
           but type up your request and fax it on letterhead. If you’ve got to create
           letterhead in Microsoft Word, that’s fine. Fax it on letterhead to the
           supplied fax number for that company.

           I don’t think I’ve hardly ever sent a fax to a company that I haven’t
           gotten a response to overnight.

Richard:   As long as we don’t go to Kinko’s and fax it. Get yourself a fax
           machine, because most of them fax it back.

Perry:     Yeah, you can use eFax. There’s a company called HYPERLINK
           "http://www.eFax.com" www.eFax.com. If you don’t have a fax
           machine, you can go there for about five dollars a month – or
           something like that – and get a fax number where you can send and
           receive faxes. They’ll just literally send your faxes to your e-mail
           account in a PDF form.

Richard:   That was a big key when we started. The initial fax communication
           came back and forth a couple of times, both ways, via fax.

Perry:     You’re going to use faxing for all of your orders. Every order you ever
           place is going to be placed by fax, so you’re going to have to have
           faxing in order to make it work long term. So, that’s online sourcing.
           Also, we’re going to give you a sample of an online request for
           information. You don’t make the price the first and only criteria that you
           want to know. You want to ask them about quality, about their
           company’s turnover.

           Ask them a lot of questions about whether or not they’re reputable. You
           should ask them their factory location: “Where is your factory located?
           Are you the prime owner of the factory or a broker? Can you send me
           a prospectus on your company? What is your annual turnover?”

           That’s a big question. We don’t use that in the States at all. Annual
           turnover in China is “How much are your annual sales?” A big pride
           issue in China is how much they sell.

Richard:   Another good question is “What percent of your annual sales are in….,”
           and then just basically enter the country that you’re in. If you’re in the
           U.S., ask them what percent of their annual sales are sold to the U.S.

Perry:     Also, ask them if they have a stateside warehouse. If they do, you
           probably don’t want to do business with them because they’re probably
           going to become your competitor. That’s not always true, but a lot of
           times it’s true.

           So, that’s the first way: using these online tools. They’re very self-
           explanatory. There’s no reason to go into how you find stuff. You
           literally just search a name and you find it.

           One little tip I’ll tell you is that you’ll miss searches in Alibaba if you
           search in plural. For instance, if you search “tennis shoes,” a lot of
           times you’re not going to get a return because most Asian
           manufacturers and most Asian people don’t use plurals: “We
           manufacture tennis shoe.” They don’t use plurals.

Richard:   “Heat sealer.”

Perry:     Yes, use “heat sealer,” not “heat sealers.” Don’t use plurals in your
           search queries because a lot of times you’ll return a zero result.

           So, source number one is finding people online. I’d say that’s my least
           favorite source, although I did use it a great deal in the beginning.
           When I’m going to import, though, I’m typically looking at importing a
           million dollars a year or more worth of product from somebody, so it’s
           worth a trip for me to go see.

           However, I’ve got a friend right now that I talked to the other day. He’s
           in an equipment business where they’re doing three million dollars a
           year, and he’s never been to China. He does 100% of his importing
           online, so it definitely can be done.

           The second thing to do is to find an agent. Agents were more popular
           than they probably are now. An agent is just somebody who
           understands importing better than you do.

           They’ll typically take a fee of somewhere between eight and fifteen
           percent to go out and put together your deal for you: to source your
           product and to find your manufacturers; to do all that.

           There are a couple of problems with agents. One problem with agents
           is that they typically don’t want to mess with you if you’re not doing
           volume. They claim to only take a small percentage, so they don’t want
           to go through a lot of trouble.

           Did you hear the key word in that phrase? It was “claim.” They claim to
           take a small percentage. I have yet to ever meet an agent – at least
           one on the Asian side of the water, in Hong Kong or China - that didn’t
           have a back door deal with a factory. Almost every single one of them
           has a back door deal with a factory. So they’re going to be charging
           you on your side.

           They’ll swear to everybody on earth that they’re not making any money
           on the back side and that is bullshit; they’re all making money on the
           back side, every single one of them.

Richard:   That’s just something that you need to accept, deal with, and get over.
           As long as they are a quality agent and providing you some services,
           then that’s just the nature of the beast.

Perry:     There are basically three agents. I’ll tell you the kinds that I like to use.
           You’re going to find agents in Hong Kong and Shanghai. When you go
           on and look up China Import Agents you’re going to find a lot of those
           guys that are in Hong Kong and some that are in Shanghai.

           I typically avoid Hong Kong and Shanghai agents, especially Hong
           Kong agents. I’ve never had a Hong Kong agent quote me a
           reasonable price on anything – ever.

           If you’ve not been to Hong Kong before, it’s an incredibly international
           metropolitan city. It cost a fortune to live in Hong Kong.

Richard:   Or to visit.

Perry:     Or to visit. If you’re going to be an agent living in Hong Kong, I’d say
           that those guys are making a minimum of anywhere from $500,000 to
           one million dollars a year brokering goods. Unfortunately, based on
           their circumstances, they have to make a lot of money on the front and
           backend of you to make it work.

           Shanghai is becoming the new Hong Kong. A lot of guys are now
           moving from Hong Kong to Shanghai; or they have an office now in
           Hong Kong and Shanghai.

           Does that mean that every Hong Kong broker and Shanghai broker is
           a bad guy? Absolutely not. I don’t know every one of them. There are a
           billion of them. (I’m kidding.) However, I don’t know them all; but the
           ones that I’ve had experience with in the past have not been good.

           If I were you and looking for an agent, I would look up Trade Agents in
           Guangzhou; I think that you’d have a better shot there. It doesn’t mean
           that it’s going to be that much better; but I think it’s going to be a better
           shot.

           Guangzhou is more “real China.” That’s what I call it anyway. When
           you’re in Shanghai, it’s all pretty and shiny. It’s westernized; Hong
           Kong is incredibly westernized, too. However, when you’re in
           Guangzhou in Southern China, you’re still really in China.

           Believe it or not, a huge percentage of what’s manufactured in China is
           manufactured in the south, in Guangzhou. This is because a lot of the
           raw materials are down there. It’s in Southern China. It’s very warm;
           usually a tropical type of temperature.

           You can also go to a State side broker. We help a few people that are
           larger clients; but for the most part, we don’t really get into that.
           However, there are some State side people. I’ll give you a list of a
           couple of State side people that you can deal with that may be able to
           help source products for you.

           If you use a State side company you need to make sure that they have
           an office in China. You need to get the address and phone number of
           the office in China. Be sure and call the office in China to make sure
           that they aren’t full of crap.

           You’re going to have to do a little due diligence here when it comes to
           your brokers.

Richard:   If you just assume, you need to also assume that you’re going to get
           ripped off.

Perry:     Yes, absolutely.

           Anyway, the second way is by using an agent.

           I think that the third way is the best way; but it’s scary as hell for most
           people. It’s to get your oars out, get in your rowboat, and row to China.
           Or you can fly if you want, it’s more convenient.

Richard:   Or, if you just don’t have the time for rowing.

Perry:     Yes, that’s true.

           Like I said before, I waited a long time before I went to China. I turned
           down three or four invitations to go to China. I’m not sure what freaked
           me out about going to China; but it just scared the snot out of me. I
           think that it scares a lot of people.

Richard:   I was scared to death the first time that we went.
Perry:     It’s really weird. You think it’s going to be this dangerous whatever
           place. Honestly, the only thing about China is that it’s not a very
           convenient place.

           [Laughter]

           Was that a pretty good description?

Richard:   That was very P.C., which isn’t what I’m used to from you.

Perry:     Yes; it’s not very convenient. Things that we’re used to being easy and
           simple are very formal and systematic there.

Richard:   People just go with it. They don’t question it.

Perry:     Yes, people conform to anything.

           If there’s a line with a hundred people in it waiting for a taxi, nobody will
           cross the street and try to get a taxi on the other side of the street.
           They’ll just stand in the line even if it takes an hour and a half. They
           don’t care. As a person from the U.S. – Western – that will just drive
           you nuts.

Richard:   We’re used to everything right now; fast, fast, fast, fast, fast.

Perry:     Exactly.

           Okay; let’s assume that you decide to go to China. I would say that you
           would want to focus your trip around a trade show. There are a number
           of trade shows in China. There is a whole list of them.

           You can go to the Guangzhou Fair Complex. We’ll put a link to that site
           in the resource guide. It used to be called the Canton Fair. It’s the
           biggest trade fair.

Richard:   It’s over one hundred years old?

Perry:     Yes, over one hundred.
           They have a ton of other trade shows that happen at that complex.
           There’s a listing of them on their Web site. We’ll also send you that.

           You may be into a specialty thing where you want to do that.

           The first show that I ever went to was the Canton Fair in Guangzhou.
           This is the biggest trade show of them all.

           There are trade shows in Guangzhou, Beijing, and Shanghai. I know
           that the best trade shows are in southern China – in Guangzhou. This
           is because you’re very near to the manufacturers down there. I like that
           a lot. You can literally be at the factories of a lot of the manufacturers
           that are at the Canton Fair in an hour.

Richard:   You should.

Perry:     Yes, you should. We’ll talk about actually, physically going to the
           factories and touring them.

           So, pick your trade show. I really prefer the Guangzhou shows versus
           the Beijing or Shanghai shows.

           There are a lot of new shows that are starting in Beijing and Shanghai
           – particularly Shanghai – right now. They are new shows. You’re going
           to fly to China, get there, go into a building, and there are going to be
           100 vendors there. That is a real drag when you’ve flown 14 hours to
           go to a show with a hundred vendors; you’re done in two hours and
           didn’t find anything that you were really interested in.

           The Canton Fair is quite the opposite. The Canton Fair is now in three
           phases over a four week period in China. Each show holds about
           2,000 booths. If you want to stay for the full ride it’s about 6,000 booths
           of merchandise.

           They are semi-categorized. One area of the show is apparel and
           consumer goods; one area of the show is business to business;
           another area is industrial.
           However, it’s not unusual to see some guy sitting outside who sells
           bulldozers and hair bows. It’s really not that strange to find a company
           that...

Richard:   It will be in his catalog.

Perry:     Yes, it’ll be in his catalog. On the back page of the tractor catalog there
           will be a whole page of hair bows. Don’t ask me; I don’t know how they
           do that.

Richard:   If you sell bulldozers and hair bows State side, you’ve just hit the
           jackpot.

Perry:     Roscoe’s Chicken and Waffles, right?

Richard:   It works.

Perry:     Exactly. So, basically they are categorized, but not very well.

           The longer that you can stay in China and see more of the show, the
           better off you’ll be. This is especially true for the first time that you go.

           As confused as you’ll be, you’ll have a good grounding into what it’s all
           about.

Richard:   You come back breathing a little easier about the whole process. You’ll
           come back with a little bit more understanding; but also a little bit more
           confused; if that makes sense.

           [Laughter]

Perry:     You really do.

           I think I’ve been to the Canton Fair 11 times now.

           Let’s talk about the Canton Fair for a minute. There are basically three
           different fairs that go on at the same time. There used to be two but
           this is the first year that they’ve broken it up into three.
           There are two centers now. There is a downtown center and there’s an
           amazingly beautiful, brand new convention center on the outskirts of
           town. Of course it’s in the opposite direction of the airport, which is also
           brand new.

           When I started going to Guangzhou the airport was not air conditioned.
           Get you some of that, buddy.

Richard:   Pretty much no one on the call can imagine it.

Perry:     It was a funk beyond imagination. It was pretty bad.

           When you go to the Canton Fair it’s an amazing thing. It’s a multi-
           cultural, international event.

           The last time that I was there, they were announcing some statistics.
           Only nine percent of the buyers are from the United States of America.

Richard:   I remember you telling me that.

Perry:     There’s almost no one from China that attends. They don’t let the
           Chinese people go into the Canton Fair, unless they are a vendor.
           They won’t hardly allow them.

           A Chinese man and I went over there once from the United States. He
           had a very difficult time getting into the show because he was Chinese.

Richard:   Translators can be difficult to get in.

Perry:     Translators are a pain in the neck to get in. We’ll talk about that in a
           minute.

           However, fundamentally, there’s a show for a week. They break it down
           for about five days. Then they have another show; break that down for
           five days; and then have another show.

           You can choose what you want to do, but what I usually did was to go
           on factory tours during the days that the shows were closed down. Or,
           you’re tired – worn out. A lot of times I would take a plane over to
           Thailand, the Philippines, or Malaysia and just relax for four or five
           days.

Richard:   There’s a little island that’s south of China called “The Hawaii of the
           Orient.” It has crystal blue waters and white sand. It’s also dirt cheap.

Perry:     I’ve never done that because I’ve just wanted to be out of China for a
           little while. I wanted to go somewhere where people smile and speak
           English.

           However, China is great. It’s a cultural experience; it really is. I think
           that I’m richer for having done it; but if you have gone a lot of times, it
           isn’t a place that you really want to stay around a long time. To me it’s
           sort of like a bus station. Bus stations are cool the first time.

           [Laughter]

           I’m going to have people from China sending me hate mail.

           Here’s something that you need to be prepared for when you go to the
           Canton Fair. There is incredible price gouging. Overall China is an
           inexpensive country to travel in. It’s inexpensive to stay, fly, and eat
           there.

           However, when you go for Canton Fair week, they just pipe it to you,
           man. They know that you’re there to spend money.

           The hotel rooms that are normally $30 to $50 a night are $400 a night,
           depending on where you stay. I’ll give you some recommendations
           (based on price) of where to stay in a minute.

           Honestly, with all the bad things being said about the Canton Fair, I
           think it is an experience that every importer needs to take in to actually
           understand how things work.

           There will be an area in the Canton Fair where they have industrial
           equipment. They’ll have entire manufacturing plants set up in a trade
           show. It has to take them just days and days and days to put these
           things together.
           They’ll be blowing plastic bottles and making bags. There was a guy
           there last year that had a machine set up that made something like
           1,600 drinking straws every minute. There were bubble wrap making
           machines, et cetera.

           You can watch all these machines running; the kitchen equipment
           running. All of this stuff is actually functioning while you’re sitting there
           talking to the guy. If you’re into equipment, he can show you how the
           machine works.

           They have vehicles, motorcycles, mini bikes, and other things that you
           can ride. You can go out into the outdoor yards. There will be complete
           school buses, tour buses, tractors, giant heavy equipment, oil wells, oil
           drills; all kinds of crazy stuff sitting out in these lots.

           You can literally go up and buy yourself an oil drilling rig if you want to
           – or, if you have enough money, a dozen of them. It’s just crazy what
           all you can see there.

           Then you go from out there inside to the guy that’s selling the new nine
           dollar and ninety five cent magic hot dog roaster that’s going to be sold
           at Walgreen’s next year.

Richard:   When you get there you’re just taken back by the size and variety.

Perry:     Yes; if you’re an entrepreneur – and I’m sure you are if you’re listening
           to this – you go into entrepreneurial overdose. You say, “Oh, I can
           make money with that. Look at that; I can make money with that. That’s
           crazy.” You’ll just go nuts.

           You’ll need to take it all in and then have a refining process, which we’ll
           talk about in a little bit.

           Let’s assume that you’re going to travel to the Canton Fair. Where do
           you stay?

           I fly on Chinese Airlines. There are three of them; but I only fly on two.
           If I’m going to Guangzhou I fly on China Southern Airlines. The reason
           that I fly on China Southern Airlines is because I can fly China
           Southern out of L.A. first class for not much more money than flying
           coach.

Richard:   Coach on domestic U.S.?

Perry:     Yes. So, for example, if I’m flying coach on domestic for $1,200; I can
           usually fly business class on China Southern for $1,700. Business
           class on a Chinese airline is like domestic first class on an American
           airline; but to be honest, it’s a little better than domestic first class.

           Again, you need to remember that rates vary and things change. In the
           example of coach being $1,200, I can usually fly business for $1,700.

           For about $3,000 you can fly first class. The seat makes into a bed;
           you get three really amazing meals; total peace and quiet; slippers;
           cologne; and toothbrush. They give you everything. You also might get
           lucky enough to sleep with Jaime Pressly on a flight. I did one time. I
           was on a flight going to China. I slept next to Jaime Pressly. I didn’t
           know who it was. She’s an actress; the My Name is Earl chick.

           However, one thing about first class....I have made a lot of really good
           business deals in first class. I’ve gotten a lot of really good connections
           in first class going to China.

Richard:   Other people that are in the know also fly these.

Perry:     Yes, the experienced players are going to be in first class. If you can
           swing the three grand ticket, it’s worth your while to fly first class. I
           greatly prefer it.

Richard:   There’s just a tad bit of spoiling being done up there, too; pampering.

Perry:     Yes. I take a Unisom and a couple of Ambien and I’m out like a light. I
           eat the meal, watch about half of my movie, and then I begin to snore.

           When you’re traveling, one thing that you want to do is to bring some
           travel clothes. This is a 14 and a half hour flight, ladies and gentlemen;
           it’s a flight.
           I bring some “Who’s your Daddy?” pajama pants that are pretty
           awesome.

Richard:   I’ve seen them.

Perry:     I have a uniform for going to China. If you’re ever on a plane going to
           China, and you see a guy in some “Who’s Your Daddy?” pajama pants
           and a white smiley face t-shirt with a blue piping that looks like it’s
           about three times too big for him, that’s me. I’m going to be comfy. I
           have 14 or 15 hours of flying in an airplane.

           China Southern flights leave late at night. They usually leave at
           midnight. You’ll fly out at midnight and arrive roughly at seven or eight
           o’clock AM two days forward.

Richard:   You cross the International Date Line.

Perry:     It’s going to be pretty weird. You’re going to lose a day going over.

           If you’re planning on being there on Wednesday, you have to leave
           Monday night. You have to leave Monday night if you’re going to be
           there on Wednesday because you cross the International Date Line.

           Anyway, I get comfortable clothes. I eat my meal, take my sleeping
           pills, watch half of the movie, and fall asleep. Usually at about five
           o’clock in the morning somebody will come along, nudge me, and ask
           if I want breakfast. Now, mind you, I’ve been asleep for 12 straight
           hours, okay?

Richard:   With a little assistance.

Perry:     With a little assistance.

           So, when I wake up, have some coffee, and a little breakfast; I’m
           tanned, ready, and rested. Usually I come off the plane, check my bags
           in my hotel, and go directly to the trade show. I would suggest that you
           do the same.

Richard:   You almost have to. You cannot check in.
           You have to understand. This is a huge trade show. Hotels are booked.
           You usually have to check your bags with the bellman and go ahead
           and go. Your room isn’t going to be ready at eight AM in the morning.

Perry:     You also need to know this in China. If every room in the place was
           empty and check-in time is three o’clock, you’re going to get to check
           in at three o’clock because they’re not going to break a rule.

           One thing that you need to understand when you go to China – they do
           not break rules for people....no matter what, no matter how ridiculous
           the rule; the rule is the rule.

           The people that work in these hotels in service jobs don’t make very
           much money at all. For the most part they have nothing to gain by
           doing a great job; but if they don’t follow the rules they can get into a
           lot of trouble. The one thing that they don’t want is to get into trouble.
           They’ll do whatever they can do to avoid that.

           Let’s talk about where to stay. I’m going to give you a couple of
           recommendations of hotels that I like in China. I’ll give you a small,
           medium, and large.

           If you’re on a budget, I would start out by checking the Guangzhou
           Holiday Inn. There’s a Web site called          HYPERLINK "http://
           www.AsiaRooms.com" www.AsiaRooms.com.

           The Holiday Inn isn’t too bad. I’ve stayed there before. It’s not my
           absolute favorite place, but it’s fairly clean and the rates are probably
           going to be somewhere in the $150 to $180 range.

Richard:   Again, during the Canton Fair, that goes just about as high as you want
           it to go.

Perry:     The second place that I like that I’ve had good results with in the past
           has been the Ramada Inn Pearl Hotel. The Ramada Pearl has one
           little downside to it; it’s kind of in between the two show arenas. You’re
           going to have to take transportation. However, there are shuttle buses
           that run in between all of these. There are shuttles that will take you
           back and forth to the trade shows.
Richard:   They’re usually on the hour.

Perry:     Yes.

           You definitely are going to want to use those.

           The Ramada Pearl is a reasonably priced hotel, probably around the
           $200 per room rate.

           Let’s move up to the medium to higher priced hotels.

           The China Marriott Hotel is the oldest hotel there. The rooms are okay;
           they’re pretty good. However, this hotel is fantastic because it sits
           directly in front of the old trade center. The old trade center is one of
           the two trade centers that they still do shows at.

           The rate is going to be somewhere in the $300 price range. However,
           the cool thing is, they have the best dining restaurant in Guangzhou.
           For the most part, the food is American; it’s excellent. It’s not
           inexpensive; but it is absolutely excellent food. I’ve never eaten a meal
           there that made me sick, et cetera.

Richard:   I’ve eaten a lot of meals there....three times? I can’t imagine how many
           you’ve eaten there.

Perry:     Yes, it’s really an excellent place. I’ve had really great experiences
           there.

Richard:   It’s the International buffet, right?

Perry:     Yes, it’s an International buffet. It costs about $40 a person. That
           sounds ridiculous.

           I was there one time at the end of the Canton Fair. I stayed over two
           days after the fair was over. Then the buffet was $14.

           That kind of gives you the lay of the land.

Richard:   That shows the mark-up during the fair.
Perry:     Yes, they mark them up just a tad.

           Anyway, I’ll give you two more hotels that I really do like. One is the
           Asia International Hotel. I like the Asia International for a whole
           different reason. Asia International has an amazing spa in the hotel. It’s
           a five star hotel and one of the nicest hotels in all of Guangzhou. The
           ninth and tenth floor of the hotel is a spa. They do the best massage –
           foot massage, saunas – it’s fantastic. They do an hour and a half long
           foot massage for $20; it’s amazing.

           Once you’ve walked those shows, especially by the third day, your feet
           are going to be pounding.

Richard:   Don’t go over there wearing your alligator shoes trying to look Slick
           Rick, either. You’re going to want to take something that you can burn
           some mileage on.

Perry:     We’re actually going to be talking about what to wear when you go.

           So, the Asia International Hotel is a great hotel with decent food.
           Unfortunately, it’s not centrally located. It’s about ten or 15 minutes
           from the old convention center and 45 minutes from the new
           convention center. However, they do run shuttles.

           You’re going to be treated four star there, even though they claim it’s a
           five star. It has four star service. That’s going to be $350 to $400 a
           night; they are not cheap.

           Now, if price is no object, my number one favorite recommendation –
           and where I stayed the last time – is the Shangri-La Hotel. However,
           the food still sucked at this place, but the hotel was amazing. It is
           brand new and was built directly across the street from the brand new
           convention center. It’s about $400 to $450 a night and is truly a five
           star hotel.

           You’re going to be directly across the street from the main convention
           center. When you leave in the morning you’re going to be two to three
           minutes to get to the convention center versus a 45 minute ride. Those
           rides really suck in a bus load of people.
Richard:   It’s better than a two hour taxi line.

Perry:     Exactly.

           The other thing that’s really good about all of these is that they all have
           shuttle buses. All of the hotels that I’ve told you about will also allow
           you to register for the show at your hotel. I absolutely recommend that
           you do this. When you get to the show the next day you’ll thank me for
           that because usually the line to register at the Canton Fair is about an
           hour and a half to two hours long the first day of the show; about an
           hour long every other day.

           You can do it in your hotel in ten minutes. You can get your badge and
           be ready to walk into the show the next day.

           Transportation

           Again, I’m spending money when I go. I’m a little bit spoiled because I
           know that I’m going to be spending money.

           I call and ask for the hotel to send me a car and a driver. That will
           usually cost you twice as much as a cab, okay? However, in my
           opinion, it is money well spent. You’re going to get a nice car. They’ll
           probably bring you bottled water and a newspaper to read; they’re
           going to treat you real nice. When you get there there’s going to be a
           driver standing out in front of the terminal holding up a sign with your
           name on it.

Richard:   However, more importantly, if he comes from the hotel, he probably
           knows how to get back to the hotel.

           [Laughter]

Perry:     That’s true.

           Here’s the other thing about cabs. Even though they’re expensive,
           during the Canton Fair there are lots of hustlers around. There are
           guys asking, “Do you need a ride? Do you need a ride?” Don’t ever go
           with those guys. Only go in the red or blue taxis. They are allowed to
           come to the airport. Those hustlers can take you anywhere.
           However, I’ve ridden with them before and not had any bad
           experiences; but I could tell how bad it “could” go, okay? They could
           tell you it’s going to be $500. If you don’t want to go, they’ll just drop
           you off wherever you’re at. That would be a drag.

Richard:   On my first trip to China with you, on our first day, I got lost. Do you
           remember that? I absolutely got lost. I turned around and didn’t see
           anyone with my party left. I opted not to buy the Chinese cell phone
           that morning on my way into the fair so I had no way to contact you. I
           did due diligence. I stayed at the Canton Fair all day.

           When it was time to leave the taxi line was around three and a half
           hours. I figured that there had to be a way around that and I found it. It
           was one of the scariest 45 minutes of my life.

Perry:     I do remember that and I bet it was.

Richard:   Luckily I had a room key that I was able to show, “I need to go back
           here.” I wasn’t certain that’s where I was going. I had been in China all
           of about 12 hours at that point.

Perry:     It’s pretty easy to get turned around.

           You want to make sure that you have a room key. In fact, that’s
           something else that I need to tell you about transportation. Keep your
           hotel room key with you at all times. It usually has a logo on the front of
           it and a map on the back.

           You can ask them to draw you a map back to the hotel, too.

Richard:   I always had the bellman give me a card. I said, “Will you write me a
           card to give back to the taxi driver when I’m ready to come back to the
           hotel?”

Perry:     You can be almost certain that the cab driver that you get will not be
           able to speak English. I don’t know if I’ve ever had a cab driver that
           spoke English.
Richard:   That’s a stomach sinking feeling, too, if you’re already a little freaked
           out.

Perry:     Yes.

           The other thing that Richard brought up that was a really good point, is
           one of the first things that I do when I go to China. I get a Chinese cell
           phone. Inexpensive cell phones are less than $100 or lower in China.

Richard:   You can go as low as $20 or $25 U.S. It’s going to be a pain to use, but
           on any budget you can go get a phone and have some minutes.

Perry:     I would strongly recommend that you do that.

Richard:   It gives you credibility and some safety.

Perry:     Yes, you’re going to definitely want to have that. They’re just not going
           to treat you the same way if you don’t know the game; if you don’t look
           like you know where you’re going.

           With the cell phone you can talk to your other people. You need to
           exchange numbers if you’re going to go in a group. I assume that
           you’re not going all by your little lonesome, especially the first time; you
           shouldn’t. You need to be sure and exchange numbers with whoever
           you’re with.

           Cell phones work differently in China than they do in the United States.
           You can buy a cell phone and minutes any where. There are little
           minute cards that you buy; you can scratch them off.

           If you can communicate with the young lady wherever you buy a
           minute card, you can ask them to enter your minutes.

Richard:   You can basically renew them. They’re almost like a scratch-off lottery
           ticket. It gives you renewable minutes. You dial in and that’s how you
           add minutes to it. It’s fundamentally a pre-paid cell phone.

Perry:     That takes us to the next thing on our list – finding a translator.
           You’re going to be able to find a translator to work for you, believe it or
           not, very, very easily. This is not their first rodeo. They’ve been doing
           this for a while.

           I like going to the old center the first time at the Canton Fair because,
           typically speaking, there are more translators down by the old center
           because it’s near the university.

           There will be hundreds of young men and women from the college
           holding up signs that they translate. Some of them translate into
           French, Spanish, and Russian. However, there will be more English
           translators than anything else.

           You should go along and talk to them. Don’t just pick one based on
           their looks or that they seem nice. You need to ask them a few
           questions. “Tell me how you’d order a cheeseburger for me if I was
           going to McDonalds. I want a Big Mac with cheese, no onions, two
           packs of fries, and a coke. How would you say that?” See what they
           say back.

           [Laughter]

           It might be surprising to you what you get back.

           You need to speak relatively slowly to them. Give them a fair shot. For
           the most part they’re going to be able to do all of this little stuff that
           we’re talking about, like getting you a cell phone and minutes, et
           cetera.

           When you’re at Canton Fair, the only food that you want to eat is
           probably going to be McDonalds. There’s a McDonalds there. Guess
           what? You aren’t the only one with that idea.

Richard:   Yes, the lunch line starts just a hair before they open for breakfast.

Perry:     Yes, I usually send my translator at 10:30 to go to McDonalds and
           stand in line. I’ll give her my order and usually around noon she’ll give
           me a cell phone text back to tell me that lunch is ready.

Richard:   You said something there that was pretty important – “her.”
Perry:     Yes, I usually use female translators. I’ve tried male translators on two
           occasions. On two occasions I’ve been sorry that I did.

Richard:   I was there for one. His name was Rock.

Perry:     Yes and he chewed this nasty stuff. I don’t know what it was. It wasn’t
           tobacco. I know what it smelled like, but I’m not positive what it was.
           Whatever it was, it was pretty bad.

Richard:   I’m not 100% positive that it wasn’t.

Perry:     His name should have been Dumb-As-A-Rock. He was not a very
           smart dude.

           Again, you may find a male translator that’s absolutely fantastic for you.
           However, we’ve always done better with young ladies. They’re usually
           nicer. They’ll usually have friends, too.

Richard:   People are nicer to them, too, though.

Perry:     Yes.

           I’m going to talk to you in a minute about why you need that translator
           so desperately when you go up to trade booths.

           They are usually going to charge you $30 a day for their services.
           That’s pretty much a set rate. However, the Canton Fair is going to
           charge you $50 a day to bring them into the fair. You’re going to have
           to go and get them early. Even though you have a badge, you can’t
           register your translator. The translator can only register at the show.
           You’re going to have to stand in line with them, show your passport,
           and show that they’re your translator. They’re going to get badges.

           If you’re pretty sure that your translator is who you want, go ahead and
           get them a three or four day badge – or as long as you’re going to be
           there; otherwise you have to get them another badge every day.

Richard:   At the end of the day, when the time is over, you need to make sure
           and take their badge though.
Perry:   Yes, so they don’t come back. This is kind of weird, but it’s one of the
         little tricks you need to know about. They can come back the next day
         – they have a very unique selling proposition for getting a different
         client. They can say, “Hey, take me. I’ve already got a badge.” Or,
         “Give me $40 or $50; I already have a badge.”

         I’ve never had that happen to me; but I know that it can happen to you.
         I’ve heard of other people who have had that happen to them and I’d
         prefer that it didn’t happen to you. So, I usually just take their badge
         with me at the end of the day.

         The translators get time off of school and credit for doing this. Typically
         speaking, they’re just amazed with the culture that you’re from. They’ll
         be willing to stay with you in the afternoons or early evenings as long
         as you want. If you want them to take you somewhere to get good
         food, to a mall, get a suitcase, or a cell phone, they’re very
         accommodating to that sort of thing. They’re not too wigged out about
         their time being over right at five or six o’clock. They’re usually overly,
         overly helpful.

         I will tell you that if you have a female student translator, you need to
         be very proper in the way that you communicate with her. They don’t
         take romantic jokes or flirting very well. It’s considered a taboo to do
         that.

         I think a lot of guys go over there and want to flirt with this cute little
         girl; but you’ll really offend them. They’ll end up not doing a very good
         job for you, or just leaving completely. So, please don’t do that.

         Again, translators can go and get food for you. They can do anything
         that you need for them to do; but more often they’re going to be
         helping you to communicate with the people in the booths and shows.

         Let’s talk about what to bring when you go to China.

         First of all, you need to be able to go so you’ll need to have a passport.
         You also have to have a Visa. China does require Visa for entry for
         U.S. citizens. It’s not a big deal to get a Visa; anybody can get a Visa in
         a day.
I’m going to refer you to a service in L. A. called U.S. China Travel
Services. I’ll add that to the resources list that I give you. By the time
that you get this if Danny Gann (I’m not sure the last name is spelled
correctly)

Danny usually handles all of my travel. I’ll send him my passport – you
have to send in your passport, so don’t get freaked out by that.
Anyway, I’ll send in my passport and Danny will get me a Visa the next
day along with my passport. Or, he can just hold them with my other
travel documents.

Danny can get the Visa for you really easily because he has an
arrangement with the government. If you’re getting it some other way,
you may need to get a Chinese company to give you an invitation to
Canton Fair.

You can also go onto the Canton Fair’s Web site and ask for an
invitation. They’ll send you one by email. Then you can send it in with
your Visa application.

By the way, Danny is awesome! If you’re ever in a big rush, Danny has
actually come to the airport and brought me my Visa and passport
because I was on short notice. He did charge me to do that; but it
wasn’t bad. He’s a real nice guy. That’s why I always recommend his
services.

With all of that said, I need to say that I wouldn’t do any of that myself;
I’d get somebody else to do that for me.

Here are some things that you’re going to have to have with you and
this is one of the more important things that I’ll tell you to bring – you
need at least 1,000 business cards. Business cards are the weirdest
thing in China ever. You can’t get anything done without a business
card.

They won’t talk to you in the booths. They won’t give you a price or do
anything for you unless you give them a business card. It needs your
company name, your name and email address. However, don’t put an
email address on there that you use all of the time because they are
           going to email you pretty heavily. You might want a special email
           address for that card.

           You also want a fax number on it. You want everything on there that
           makes it look like you’re a legitimate business. They’re really going to
           look at that.

           If you have a cute card or a card with your picture on it, they’re going to
           look at you like a goof ball. You want a very professional looking card.
           It should also have your company logo on it. If you don’t have a logo,
           make the card black text on white cardstock. The heavier the
           cardstock, the more seriously you’ll be taken. That’s the weirdest thing
           in the world; but it’s true. You need to think, “How can I look the most
           established?”

           When you walk up to a booth, one of the first things they’re going to
           ask you for is a card. Also, I need to mention that there are certain
           people at a trade booth that you should never talk to. I’ll tell you why in
           a few minutes.

           Next, if you take any sort of prescription medicines, you need to make
           sure that you have an adequate supply of them with you. To get
           pharmaceuticals over there is the very next thing to impossible.

           You can go get pharmaceuticals or almost anything that you want at a
           pharmaceutical window, believe me; but God knows what’s in it.

Richard:   That’s true even with the over the counter items.

Perry:     Yes, I would definitely bring your own medicines with you.

           Now let’s talk about clothing.

           If you’re going to the Canton Fair you’re going to want to wear
           something that’s relatively cool. I absolutely recommend that you do
           not wear shorts. A lot of people go over in shorts and tennis shoes; but
           I’ll usually go in khaki slacks, button down short sleeve shirt, and black
           tennis shoes. The reason that I wear black tennis shoes is because
           they kind of look like dress shoes. I don’t want to look too informal; but
           I definitely don’t want to be in shorts. When you’re in shorts over there,
           it looks like you’re a very junior player.

           By the way, Richard just brought up a good point. If you have a Skype
           I.D., you want to put your Skype I.D. on your business card, too. A lot
           of business is done in China now via Skype.

Richard:   If you don’t have a Skype I.D.; they’re free; go get one.

Perry:     Yes, just go to HYPERLINK "http://www.Skype.com" www.Skype.com.
           Skype is a way of communicating in China free, with voice or text
           communication.

           Okay; let’s get back to the clothing discussion.

           You don’t want to go over there in a suit and tie, although you can if
           you want. I have seen a lot of people that do it. However, I don’t
           usually go over in a suit and tie because I would get very
           uncomfortable. It’s a long day.

           On the other hand, you don’t want to go over there in shorts and a Pink
           Floyd t-shirt either, as you’d look like a goober. So, I try to dress in
           between those two.

Richard:   Logos; they really like to see Logos.

Perry:     Yes, I like to use a Flip video camera with me. You can have another
           kind of video camera if you want. I use a Flip HD video camera. It’s a
           pocket size video camera. It’s about the size of a pack of cigarettes.
           You can shoot really high quality video.

           I always ask permission before I shoot video in a booth. It’s considered
           extremely rude to shoot video without their permission.

           So, if you’re seriously looking at a product and want to shoot a video,
           just say, “Do you mind if I take a video of this to take back?” They
           usually won’t mind; but you need to be sure and ask first.

           I always carry a voice recorder with me. That way when I’m walking
           through a booth and want to go back later, I can record the booth
number, name of the company, what they had to sell, and a note to
remind myself why I want to go back there. For example, the booth
may be real busy the first time I’m there so I just plan on returning later.

The key is running through this thing with incredible speed. What
you’re going to try and do the first day of the Canton Fair is to make a
pass through. You’re going to try and see as much as you can see, as
quickly as you can see it.

You have four or five days for each of these legs. So, the first day or
two you can make a quick run through. Then you have three more
days to go back to the things that you were the most interested in and
really hone down on them. So, when you’re going through the first
ones, you’re going to be running and gunning.

The next thing that I want to mention is very specific. It’s the simplest
little thing in the world, but you want a spiral notebook and a stapler.

The reason that I say this is because I’ve seen other buyers do it. It
shows them that you’re a serious buyer who knows what he’s doing.
This is the way that they keep up with their leads.

When you walk into a trade booth over there, they almost all do it the
same way. You’re going to give them a business card. They’re going to
open up a spiral notebook and staple your card to the top of that page
in the notebook. Then they’re going to begin to take notes about you
and what you discussed.

If they give you a quote or a price, you can bet your bottom dollar that
they know what it is. So, if you go back to them and say, “You told me
that you’d sell that for two dollars.” They will pull out that piece of paper
and show you, “No, I told you right here it was two dollars and 75
cents. You’re full of bull.”

What you want to do is “when in Rome,” right? You want to be able to
go into the show handling yourself, your business and any leads the
same way that they do. That is what’s going to make you look like a
professional in their eyes. That’s the first step anyway. So, you’re going
to definitely want a spiral notebook. You could even have one for each
day of the show as they get kind of bulky as you staple cards in them.
           What I’ll usually do with mine is to staple the card at the top of one
           page and then the next card at the bottom of the next page. I like to
           alternate back and forth. By doing that it lets the notebook lay a little
           more flat.

           You’re going to want samples. If you have a particular product that’s
           small and portable enough to carry around that you’re sourcing in
           particular, you should bring one with you from the States.

           I had a tool like that that I was doing one time. It was hard to explain so
           I would just go into the booths, hold out my tool, and say, “What would
           it cost for you to make this for me?” They would give me a specific
           quote right then and there.

           That first quote is just what I said, “It’s a first quote.”

Richard:   It’s a starting point.

Perry:     It’s a starting point; an idea, okay? Typically speaking, I take the first
           quotes that I’m quoted and usually knock off about 40 to 50 percent of
           that price. Or, at the very least, 30 percent of that price; you can
           always do better.

Richard:   I’ve seen you take those samples, too, and compare them to their
           version.....

Perry:     For the quality.

Richard:   You can see how this one is missing this, et cetera. If it’s the industry’s
           standard and you can take it with you, take it to show what the industry
           standard is where you’re from.

Perry:     Absolutely.

           You’re also going to want a laptop computer with you. By the way, all of
           the hotels that I mentioned have good broadband Internet access. I
           said, “Good.” What I meant was that they have broadband Internet
           access.
Richard:   Kinda.

           [Laughter]

Perry:     “Good” is a subjective term there.

Richard:   So is “broadband.”

Perry:     Yes, so is broadband. Asia International and China Marriott have
           excellent broadband. I’m not sure about the Holiday Inn any more as I
           haven’t stayed there in a long time. The Ramada Pearl is okay; it’s
           pretty good. The Shangri-La is fantastic; it has great broadband. It was
           built in the last couple of years.

           You definitely want a laptop computer with you. Now if you don’t have
           one, for whatever reason, the hotels, like Asia International, have a
           computer center. In fact, almost all of these places have them. You can
           go and use one of their computers but it’s very expensive, believe it or
           not. They charge so much a minute for every minute that you’re on the
           computer.

           What you’re going to want to do is go on and find out what things are
           selling for that you’re looking at. You’re going to have this whole list of
           stuff and think, “Man, that’s awesome. I bet that’s a cheap price.”
           You’re going to need to have research for that first couple of days to
           help determine who you’re going to go back and see.

Richard:   You really want to make sure that that is understood.

Perry:     Yes.

           I love going to the spa and being lazy after the show, et cetera.
           However, typically speaking, the first day or two of the show is wicked
           hard work. What I’m typically doing is working all day in the show,
           taking back all of the catalogs at night, picking up McDonalds on the
           way back to the hotel, getting up in the hotel room, opening up the
           computer, start going through the catalogs, and start doing pricing
           research.

Richard:   We make piles.
Perry:     We need to determine who we’re going to go back and see in the days
           to come, right?

           If you’re going with a group of people, it’s really cool when you’re going
           with a group. A lot of times you can sit down in a circle and compare.
           You then see all different kinds of things because everyone got
           different stuff.

           I promise you, you’re going to miss stuff. There just is no way on earth
           that you’re going to see everything.

           I’ve had people that have walked down the same aisles with me – right
           behind me in a show – and we’ll get back to the hotel and they’ll show
           me all kinds of stuff that I never saw.

           The other thing to mention is going online in China. There have been
           times when we have extra days left at the end of the show. A lot of
           times we’ll go on         HYPERLINK "http://www.AliBaba.com"
           www.AliBaba.com or           HYPERLINK "http://www.TitiNet.com"
           www.TitiNet.com while we’re in China and find factories in Guangzhou
           so that we can go and tour the factories while there.

           One of the best deals that we ever found on a product...we’ve been
           buying stanchions which are the things in airports – they’re the little
           stand that stands up. It has the band on it. It’s where people go in and
           out of.....like a little rat maze.

           We were buying those for $20 each. We’d gotten a quote for $26, then
           $20, then finally down to $18 or $19.

Richard:   $19.81

Perry:     Right. We never got great prices on them but we were selling them for
           $77 a piece, so we didn’t really care.

           So, we were in China and had a little extra time. We started searching
           for stanchions. We found a supplier – the one that we have now – that
           just happened to be in Guangzhou. They were about 15 minutes away
           from our hotel. We called them up, took a cab right out to their place,
           and toured the factory. The bottom line is that we ended up buying
           stanchions better than the ones that we had for $12.40 a piece.

Richard:   Not only that, but they had two other lines of totally different products
           that we were able to pick up.

           Do you mind if I interject something here?

Perry:     Sure.

Richard:   When you’re initially searching on             HYPERLINK "http://
           www.AliBaba.com" www.AliBaba.com, if you’ve never been over to
           China – or, even if you’ve been there 15 times – you don’t necessarily
           call a tennis shoe a tennis shoe. There might be a different name that
           they know it by instead.

           So, when you’re in China at the Guangzhou Fair, you’re going to see
           items that you’re looking for and see what they’re classifying them as;
           what they call them.

Perry:     What they’ve tagged them as.

Richard:   Now you can go back to            HYPERLINK "http://www.AliBaba.com"
           www.AliBaba.com and search with the proper search reference. Then
           you’re going to find a ton of factories that you didn’t find before.

Perry:     Yes; they may have a totally different English name for them.

Richard:   You’re right. That was my big take-away on the second trip to China. I
           learned that once I knew the correct terminology, searching
           HYPERLINK "http://www.AliBaba.com" www.AliBaba.com became a
           much more powerful tool. It just opened up manufacturers.

Perry:     I just got some updated rates on hotels. Shangri-La is $547 a night
           now. The China hotel is $220. There’s a Westin now that’s $423 a
           night. These are all pretty high dollar.....the Ritz Carlton Guangzhou,
           which is pretty new, is $191 a night. That sounds like a pretty dog gone
           good buy.

Richard:   Wow.
Perry:     Asia International Hotel is $236 a night. The Ramada Pearl hotel is
           $140 a night; it’s pretty reasonable.

           I think that the rates are actually coming down a little bit in Guangzhou
           right now because they’re finally building a lot more hotels.

Richard:   Yes, you absolutely could lose rooms over there. Three or four years
           ago rooms during the show were worth their weight in gold.

Perry:     Yes. Anyway, that covers that.

           One quick thing that I talked about before when we were on the initial
           video that got you here, was about getting free samples from China.

           One of the things that everybody needs is samples. It’s something that
           we have to have as importers. This is true whether you’re working via
           fax through HYPERLINK "http://www.AliBaba.com" www.AliBaba.com
           or if you’re at the show in Guangzhou.

           Getting samples in Guangzhou is relatively easy. If you carry yourself
           well at Canton Fair; you look like you’re a professional, they realize
           that you’ve flown 15 hours and probably spent thousands of dollars to
           be there. They’re not going to be wigged out about sending you
           samples.

           If you’re in home décor, or something like that, a sample to them isn’t
           viewed as very valuable.

Richard:   It’s more the shipping price.

Perry:     That’s totally it.

           So, when you’re over there and you’re asking for samples, they say,
           “Oh, no. We can’t send samples.”

           Here’s the one big word that will get you all of the samples that you
           want, “Fed Ex. Here’s my Fed Ex account number.”

Richard:   You’re absolutely right there.
Perry:      If you’re willing to give them your Fed Ex account number to ship the
           sample from, nine times out of ten they’ll give you the sample. If it’s
           less than $50, they’re almost always going to give you a sample for
           free – as long as you’re willing to pay the Fed Ex to ship it home.

           So, when you’re asking for samples, be sure to have that Fed Ex
           account number ready.

Richard:   Fed Ex will call you, too. You have to approve it. So, don’t get wigged
           out on that.

Perry:     Yes. You can actually send Fed Ex to pick it up. You can make a pickup
           request on the State side to go and pick it up from the factory.

           A lot of times I have cash with me when I’m at Canton Fair. I’ll give
           somebody cash for the shipping. They’ll call and get the shipping price;
           then I’ll just give them the cash at the show. If I lose $50, so what; but
           so far – knock on wood – I don’t think I’ve ever had a single person
           that I’ve given Fed Ex money to send me samples not send me the
           samples.

           For the most part, Chinese people are incredibly honorable people.
           They’re not cheats by nature. I hope that I didn’t imply that. I think that
           they are very honorable business people. However, they’re not going
           to waste a lot of time or effort to do a quality job for you if they don’t
           feel like you’re going to be around as a customer for them.

Richard:   If you’re not worthy of a relationship, they’re not going to treat you with
           relationship potential.

Perry:     That’s exactly right.

Richard:   Okay Perry. Let’s just assume that we’re in China. It’s the first time....

Perry:     We’re not in China.

Richard:   Are we not?
Perry:     I guess that we could try to pretend. We could have Chinese food for
           lunch or something.

Richard:   That’s not like the normal Chinese food. I like the Chinese food here.

           [Laughter]
           Here’s a funny story. What do we eat and drink when we’re in China?

Perry:     McDonald’s and cheese sandwiches.

Richard:   Yes, but at night? Japanese food.

Perry:     Yeah, Japanese food. If you stay at the Ramada Pearl, by the way,
           there’s a Japanese restaurant directly across the street that’s
           awesome; but that’s about it.

Richard:   That’s about it. We typically have Japanese beer and Japanese food
           after flying to China.

Perry:     Yeah, that’s good stuff. It’s because the Italian really sucks.

Richard:   Although the dancing pizza is interesting.

Perry:     The fish dancing pizza. Alright, back to the trade shows.

Richard:   We’re pretending. We’ve got on our imagination cap and we’re
           pretending we’re in China. It’s the first time and we’re getting ready to
           go to the first trade show. Everyone’s excited: “Whoo hoo!”

           What do you need to be ready to do? How do you need to prepare?
           How do you need to act?

Perry:     Be ready to walk your butt off, number one. You’re going to walk a lot.
           I’ve got a little kit that I prepare before I go into the trade show. I’ve got
           a roller bag that rolls behind me; I’ve got a smaller shoulder bag, like a
           tote bag, that I bring with me. That’s for my assistant. I pull the roller
           bag and the assistant usually carries the little tote bag. Every time the
           tote bag gets a lot of stuff in it, we just put it into the roller bag.
           Basically, you’re going to be picking up a ton of catalogs, materials,
           and things like that. Literally, I’ve shipped back a 65-pound box of
           catalogs from China before; that’s not unusual to do.

           As a matter of fact, there’s a place in Canton Fair where you can go
           and put all of your catalogs in a box, and ship them directly from
           Canton Fair home, if you want to.

Richard:   If you have a FedEx account number.

Perry:     Yeah, you need a FedEx account number. Bring your FedEx account
           number with you. Anybody can get an account at FedEx in a couple of
           days just by calling them, basically. They’ll give you an account. If you
           don’t qualify for credit, you can put it on a Visa or MasterCard, and
           they’ll give you an account based on where they ding your Visa every
           time.

           Anyway, you’re going to want a bag. A lot of people carry backpacks. I
           don’t care for them because it’s so much walking during the day.

           You’re going to want to have on dark pants and a decent-looking dress
           shirt – but usually short sleeved – or a golf shirt, so that it’s nice and
           fairly professional looking.

           If you have a logo shirt from your company, that’s totally fine. As a
           matter of fact, it’s probably best if you do. If you don’t, it’s not going to
           be a big deal.

           I usually wear dark tennis shoes – as I said before, dark sneakers –
           because they’re rubber soled and comfortable; something with a lot of
           arch support.

           I’ve guessed at it before, but I would guess you’re going to walk
           somewhere between five and seven miles a day. It’s a lot of walking. If
           you’re not used to a lot of walking, it’s going to absolutely wear you
           out. So, I would do that.

           Number two, you definitely need your badge. You have to have it to go
           in and out of the show. You’re going to definitely need your hotel room
           key, so you know which hotel van to go back to.
           If you don’t know where the vans are, there are literally 150 vans sitting
           in a parking that take people back and forth to hotels when you come
           out of the Canton Fair Show. You can either try to find yours, or you
           can hold your room key out and ask the lady; and she’s going to tell
           you a number. Whatever the number is, that’s the number of the slot
           that your van is in.

           I have been out there on a damned hot afternoon, really tired, really
           thirsty, and really hungry, looking for my bus; and it is no fun.

Richard:   Remember, we were saying it’s hot.

Perry:     Yeah, it’s typically always hot.

Richard:   Imagine 150 buses running in an asphalt parking lot. It tends to elevate
           the temperature just a tad bit.

Perry:     And if you’ve not heard, there are a lot of people in China. When you
           get there, there’s not a lot of free roaming space, if you know what I
           mean.

           You don’t hear about Chinese free-range chickens. There’s no such
           thing. They don’t have to cage them up. They’re just crowded by
           nature.

           Anyway, you’re going to want your badge, and you definitely, definitely
           have to have your business cards with you. I’d say to take at least 200
           or 300 business cards with you every day.

           This is going to be a big deal. How you act and how you approach this
           – your positioning in China – is gigantic. I’m going to give you a few
           tips here. You’ll learn more as you go along.

           You should immediately give your business cards to your assistant or
           translator when you get into the show. You don’t need to have any of
           them on you. That way, you’re not tempted to reach in your pocket and
           give somebody one.
           Here’s a big deal. When you walk into a trade booth in China, the
           person who is the most important person in that company is probably
           in the far left or far right corner of the booth, sitting in a corner, reading
           a book or newspaper, or talking to a reporter or somebody else.

Richard:   The guy who looks like he wouldn’t spit on you if you were on fire.

Perry:     Exactly. That’s the boss, chances are. They’re going to have a number
           of people in the front of the booth waiting on people. They’re going to
           immediately ask you for a name card. They call business cards “name
           cards.”

           We need to shoot a picture of this to put in Resources. I’ll show you a
           picture of how you’re supposed to have her present your card. If you’ve
           got a good assistant, they’re going to know how to present your card.

           They present business cards there by holding both of the top corners
           of the card and holding it out in front of them with a slight little bow.
           You’re going to want to do that.

           When they go to give you a business card, ask them to please give it
           to your assistant. Don’t take their business card and don’t give them
           your business card. Have your assistant exchange cards with them.
           They can staple it to the book. They can hand you the notebook to take
           notes if you want to take notes of the conversation.

           The vast majority of the conversation needs to be between you and
           your assistant. Your assistant can communicate with the person at the
           booth.

           In a lot of cases now, the person at the booth speaks very good
           English; still, it’s not a good idea so much, if you can keep from it, to
           talk to those assistants.

           In China, if you’re talking to the assistant, you’re assumed to be at the
           level of their assistant. Does that make sense? It’s a class system
           there; it really is. It’s better to have your assistant speak to theirs.
Then, if you’re more interested, have your assistant ask, “My boss
would like to set up a meeting with your boss. When would that be
possible?”

It might be possible right then. Then you’re going to talk to the other
guy. There’s an extremely high likelihood that the person who runs the
company will not speak English. That’s very common.

The younger people – the assistants, the hostesses, and the ones
working the booths – speak pretty good English. A lot of times, the big
bosses speak absolutely no English at all. This is where your
interpreter and their interpreter are going to really come in handy.

However, it’s a good chance to meet them. At that point, you can
present them with your business card directly, if you want, even if
you’ve given one to the assistant. If she passes it to the other guy, then
you don’t need to give him another one; if she doesn’t, it’s a good idea
to present that.

You should ask for a prospectus on their company. Pretty much every
manufacturing company in China has a prospectus – like stock
companies do in the U.S. – that tells you what their turnover is. It has
picture of their factory and bios on their executives. Although a lot of
times these are in Chinese and you can’t read them, it’s a good idea to
ask for them.

Here’s the thing. I’m going to start at that point and we’re going to be
hitting on this all the way through this process. If you look like you
know what you’re doing, they’re going to treat you like you know what
you’re doing. If you look like a chump, they’re going to treat you like a
chump. We’ve talked about that before, but this is where this process
starts.

They would never do business with a company that they didn’t
thoroughly investigate first. They’re assuming that if you’re not going to
investigate them, you’re not doing your due diligence; you’re probably
not a very viable person. So, you want to ask for a prospectus for their
company. A lot of times, they’re in the front of their catalogs, by the
way.
           We’ve already talked about who to talk to. When you want to request a
           price, don’t make that the first question you ask. You can ask for a
           price – that’s fine – and they’re going to give you a price in the show.
           However, ask for some more information before you just ask for a
           price.

           The bottom line is that the price is going to be what you want it to be if
           you do a good enough job negotiating, probably. That sounds like a
           pretty bold statement to make. For the most part, though, if something
           costs $100 in the States, it’s $15 or $20 in China.

           It runs along those lines. That “three times at wholesale” is a pretty
           standard thing unless you’re in commodities. So, you know about what
           the price is going to be.

           However, you don’t want to just to compare things by walking down the
           aisles and asking, “How much is yours? How much is yours? How
           much is yours?” without knowing the quality, the manufacturer, the
           terms, or any of that stuff. That just makes you look kind of stupid.
           Don’t make everything about the price.

           At the end, after you’ve asked a few more intelligent questions, you
           can say, “Can you please give me an opening quote on this product?”

           There’s a reason you want to say “opening quote.” You’re telling them,
           “Give me your book price. Obviously, I’m a savvy businessperson, and
           I’m not going to pay anywhere near that, but go ahead and tell me
           what it is anyway.” It’s basically like asking an advertising agent what
           his rate card is.

Richard:   You’re starting the game.

Perry:     They’re going to give you a ballpark. You can use that just to make
           sure that they’re not insane before you waste any more time with them.
           That’s how you get a first price. I usually will expect to work
           somewhere 30-50% under that initial price quote.

           Again, if you’re in a commodities market – if you’re buying blank CDs
           and they’re nine cents each – no, you’re not going to buy them for four-
and-a-half cents. You might be able to shave a penny off or something.
That’s a commodity item. People buy a jillion of them.

However, if you’re buying something that’s unusual, different, and
unique, I usually get somewhere 30-50% backside of that by the time
I’m done and I’m ready to buy. I might not get that on my first order,
though, and that’s a big deal.

I don’t try to win the war on the first order. A lot of times, if a guy quotes
me $20, and I like the company and I like the quality, I may offer him
$17 or $18 for an initial offer for an initial sale to get the first container
in.

Once you’ve got a first container in, and you’ve sold it through fairly
quickly and everything was good, now is a wonderful time to
renegotiate.

Now they know that you’re a customer. They know that you burnt
through their first container of goods in two or three weeks. They know
that you can probably burn through a full container of goods every two
or three weeks.

That’s a time where you can go back to them and say, “It looks like this
is going to work out. I really like the quality of your product. However,
financially, I just can’t make it work at this price. I can make it work at
$14. If you’ll give me $14, I’ll promise to not shop anymore, not ask you
for any more discounts, not ask you for any more concessions, and
give you 100% of my business in this product.” Usually, if you’re willing
to do that and if it’s within their power to do it, then they will.

By the way, they’re typically working on a one-third product cost when
they’re dealing with you. You should know that coming in. If they’re
charging you $20, their real cost is about six bucks, so they’ve got a lot
of room to wiggle. They’ve got the same amount of room to wiggle that
you’ll have when you go to wholesale the product to somebody else.

When you start importing from China, it’s disgusting. You’re going to
walk into a store and you’re going to realize that somewhere, some
importer bought this $20 thing for six bucks. It only cost the company
that made it a dollar, 50 cents, or 80 cents to make it, and you’re
           paying $20 for it. It’s ridiculous, but the margins are just that doggone
           big. They just are.

Richard:   There’s one thing that I’ve seen you do, that I wanted to point out;
           when you were talking about your initial orders. The last time that I was
           over there with you was when you actually found the stanchion
           manufacturer.

           When you were negotiating that first container, you did exactly what
           you were saying. You didn’t beat them up real bad on that first price.
           You did tell them, “Let’s do this for the initial order, and we’ll
           renegotiate for the second one.”

Perry:     Yes. Always let them know that you’re going to give in to them for now.
           Actually, here’s what I like to do to follow up. You want to do your
           online research. You want to take a look at the quality and the market.
           You can do that at the hotel at night when you go back.

           However, when I go to China, I’ll look at 200 opportunities while I’m
           there. I’ll hone down to five or ten, and really try to get down to two or
           three. For the two or three I’m the most interested in, I’ll ask to go to
           their factory while I’m there. You will never get as good a price as you’ll
           get if you go to their factory.

           With that, we move into negotiation. We’re assuming, for now, that
           you’ve gone to the show, you found some stuff that you like, and you
           think that you might want to make a buy.

           Here’s the real next step. You can buy there at the show. I’ve bought at
           the show before. Basically, you can’t exchange money. All you can do
           is write a purchase order. Then, when you get back home, you’ll send
           in a proper order along with payment and everything will get arranged.

           You really can’t spend money at the show. It’s almost impossible to do.
           However, you can give them the intent to place an order, which is cool
           if you want to get the process started.

           One of the things I really always try to do is read the prospectus of the
           company. I want to see that they have a turnover of at least the
equivalent of a million U.S. dollars per year. I think that, without that,
there are way better places to go.

I ask to go to their factory. This is one of the biggies. I don’t care what
you do at the trade show – I don’t care if you stand on your head or if
you come in with a Wal-Mart badge on – you will not get as good a
price as you’ll get if you go touring that factory.

When you’re in there, you need to be turning those products upside
down and on their sides, and looking at them from the bottom. You
need to be basically dissecting the product. You want to show them
that you’re not an idiot; that you’re only going to buy exactly what you
want.

Don’t ask them to quote 5,000 things. Find the things you really want
and have them quote those things only. The number-one thing that
people go in and do is, “How much is that? How much is that? How
much is this?”

That’s just the biggest sign you can give them that you’re a total
amateur at what you’re doing. Pick the things that you’re really
interested in and quote those things; then, basically, pick them apart.
Pick them apart before you ask for a quote, by the way.

You want to look at the quality of the product as it compares to an
American product, and see where the weaknesses are; whether or not
people are going to be able to tell that it’s a Chinese product.

There are a whole lot of products in American that have a little “Made
in China” sticker on the bottom of them somewhere, but that most
people assume were made in the States or were made somewhere
else. Indeed, most consumer goods are all made in China now.

You can brand a product. This is a big thing with China. When you’re
touring the factories, especially, it’s a great time to bring it up. You can
typically have any product you buy customized to your liking. Here’s
the great news: most of the time, it’s totally free.

If you want something done with your color; if you want something
done with your logo; if you want something done a certain way; if you
           want the handle put on the backside instead of the front side; little
           customizations that don’t require retooling, typically speaking, are
           absolutely free if you’re willing to buy a container, or sometimes less
           than a container-load of something.

           Here’s a good example. A couple of years ago, when I was in the
           equipment business, we brought in heat sealers. Everybody in the
           world brings in these little heat sealers from one company in China.
           They’re an aqua blue color and they’ve got a silver chrome piece
           across the top of them.

           Everybody has the same ones. They just scream, “I’m a Chinese heat
           sealer.” They might as well just put on the front of them, “Chinese heat
           sealer.”

           Our company name was Cleveland Equipment, which is a very
           American-sounding name.

Richard:   Yeah. You don’t get much more American than that.

Perry:     We had a Cleveland Equipment logo that was very old school. It looked
           like it was 50 years old. We asked that all of our heat sealers be
           painted a darker red color. We did that because we wanted to go the
           polar opposite of the blue.

           We were able to command a higher price in the market for exactly the
           same heat sealer, just based on the fact that our heat sealers were
           branded to our company, and that they were boldly different in color.
           When you’re doing anything like that, you can absolutely customize it.

           Another thing that you can do is value add. When I was in the home
           décor business, we used to buy candles from one factory, and then
           have them shipped to another factory where they would put a bamboo
           wrap around them, shrink wrap them, tie them with a bow, and put a
           tag on the side of them.

           The two factories worked together: you shipped from one factory to the
           other. That way, there was nobody else selling the same kind of
           product when it got to the States.
           Here’s a biggie. This is a big point to go on a rant about; but when I’m
           walking through the Canton Fair to buy a product, this is the mindset
           that I have. I don’t want to buy anything that you can buy at Wal-Mart,
           Kmart, Home Depot, Target, or anywhere like that, unless I plan on
           selling it to them.

           The reason for it is because you’re going to walk through and you’re
           going to see some amazingly cool things. You’re going to say, “Wow.
           That’s an awesome little $20 consumer product. How much is it?”

           They’re going to say, “It’s five dollars.”

           You’re going to go, “Wow! That’s the coolest thing I’ve ever seen. I’ll
           sell a million of them!” So, you buy a container of them for five dollars.

           Guess what? You ain’t the only cowboy there that notices the cool
           thing. There’s no more disgusting a feeling in the world – ask me how I
           know – than going and buying a container-load of five-dollar widgets,
           sending your money to China, waiting for your container to get here;
           and three weeks later, you’re walking through Walgreens and they’ve
           got the widget you paid five dollars for in China on sale at Walgreens’
           end cap for $4.99.

Richard:   Yeah, that stings a bit.

Perry:     They walked in there and said, “Okay, we’ll take two million of them.
           We’ll pay you two dollars each,” and the factory said, “Okay.”

           So, I run away from new mass-market widgety, cool items because the
           chances are somebody else will pick up that thing. Those guys have
           infinite buying power. That’s the reason I told you I like niche markets a
           lot better. I like value adds a lot better.

           Here’s the cool thing. We used to buy candles from a factory that sold
           them to all these other retailers. However, when we got our candle in,
           we put it in a little pot and had a wrapper on it, we had the bamboo
           thing around it, and we had the tie on it. All that only cost about 20
           cents a candle to do.
           Guess what? Nobody else had we had. It’s called the “blue ocean
           theory.” You want to have the only one of your widgets that there is. We
           had the only one around.

           All that customization only cost us about 20 cents apiece to do, but it
           allowed us to go into places where nobody could say, “Oh, I’m already
           buying that for a dollar.”

           No, you’re not. You’re buying a stripped-down, ugly version of it for a
           dollar. You could buy my beautiful one that sells three times better for
           $1.50, and you’ll get more money for it. That way, you’re comparing
           apples to apples and oranges to oranges.

Richard:   You can separate yourself a little through customization.

Perry:     You can either brand with customization branding, or with value
           adding.

           Here’s another cool thing you can do with branding. I’ve done this
           before and it’s worked out really well. We had a product we were
           bringing – a stanchion product – some time back. We branded the
           stanchion product with a name brand. We own our own brand of
           stanchions. Stanchions are those little poles in the airport that we
           talked about before.

           So, we own our own brand name of those. If you go to the brand name
           site for that product, they’re $170 apiece. It’s a very corporate-looking
           Web site. Guess how many get sold from there? Practically none,
           because we don’t promote that site.

           We’ve got a discount site that sells other people’s stanchions and our
           stanchion. On that site, we sell those stanchions, discounted 60% off,
           for $77 apiece.

           If they don’t believe our 60%-off price, all they’ve got to do is go over
           and look at the corporate Web site that lists how much they are.

           It’s called “decoy pricing.” Basically, it really works well, and a lot of
           companies do it. There’s nothing odd about it. It’s the way the outlet
           mall business works.
           You’ve fundamentally got Kenneth Cole selling a watch in a
           department store for $200. Because of that, he’s establishing the value
           of that watch at $200.

           When you go into the Kenneth Cole Factory Outlet and that watch is
           $60, you snatch it up, no questions asked. By the way, for what it’s
           worth, those watches only cost about three dollars apiece. Guess
           where they make them? China!

           The watch costs three to five dollars apiece, anyway. It doesn’t matter.
           The rest of it is just marketing. However, when you can establish the
           price point high in a retail setting, and then discount it down in the
           wholesale or the outlet setting, that just snaps. That clicks people and
           pushes them over the edge, really, really well.

           Back to a little bit of my risk reversal. I told you that I’m very risk averse
           in the importing business. This is maybe the only area in importing
           where you can really lose all your money. It is with trademarks and
           trade regulations.

           Let me give you a couple of examples. We did something like this
           once. Didn’t we have a patent issue on something that we couldn’t see
           them? It seems like we did.

Richard:   We had a patent scare.

Perry:     Here’s what can happen. You can go out and bring in a product from
           China that just looks like the most awesome product in the whole wide
           world. We almost did. We were going to buy a container of big luggage
           carts for hotels.

           In the midst of it, we were sending out a couple of feelers to our
           customers, sending them a picture of the luggage carts. We had
           Harrah’s Casinos and a bunch of other people that were customers of
           ours.

           Evidently, one of them had a good relationship with a guy that owns
           this company here in the States that makes luggage carts, and
           happens to have a patent on this particular type of luggage cart.
           Before we could even buy the container, thank God we got a Cease
           and Desist letter from the manufacturer of the patent holders. They
           said, “We have a patent on this. You can’t sell them.”

           The Chinese factory would have never told us that. All the Chinese
           factory did was buy one of this guy’s luggage carts in the States, bring
           it to China, and knock it off. They don’t care about trademarks, patents,
           and all that. In a lot of cases, it doesn’t apply there.

           They would have very easily sold us those. We could have gotten them
           here, we would have paid for them, and we would have gotten them to
           our warehouse and paid the freight. The day we went to sell them…

           If you get a Cease and Desist letter and if you’re violating a patent, you
           can’t even liquidate those good at that point. They are boat anchors.
           As a matter of fact, you typically will have to pay a company to destroy
           them, in addition to the legal costs and all the crap that’s associated
           with that.

           The same is true with trademark issues. Right now, you can go over to
           China and buy an iPod knockoff that is an absolute duplicate in every
           way to an iPod Shuffle for about three dollars. There are people doing
           it and selling it in the States. I wouldn’t touch those with a ten-foot pole.

           You could bring in a container of those things, and it could get stopped
           at the border and Customs not even release it. Then Customs sends
           you a bill for destroying it.

           Let me tell you, you can destroy it a whole lot cheaper than Customs
           will pay to destroy it. They’ll send you a bill for destroying it, in addition
           to you losing all your money.

Richard:   Yeah, they’re not using Joey’s Junkyard.

Perry:     No. So, you need to be keenly aware of those two things. Trademark
           and patent issues are really big deals when it comes to bringing in
           products.
Richard:   How do you go about initially researching that? Do you have any
           ideas?

Perry:     Normally, you can tell. If it’s a home décor product or something like
           that, it’s usually not a big deal; although it can be with design.

           If you’ve got something that you have a big question about, send it to a
           patent attorney and get their opinion on it. Also, ask in China if they
           pattern the thing after something else. That’s usually where these
           things will come into play, and it does happen all the time.

           As far as trademarks go, you can go to the U.S. Patent and Trademark
           Office at HYPERLINK "http://www.USPTO.gov" www.USPTO.gov. If
           you’re planning on using a particular trademark name, you can go
           there to search.

           That’s not the most thorough search, though. If you’re really going to
           use a trademark name you plan on investing a lot of money in, I would
           get a lawyer to do a full trademark search for you. On the Web site,
           you can search the direct name exactly as it is, but that doesn’t always
           cover you.

           We got a domain name not too long ago, and there’s a plural to the
           domain name already registered. I didn’t see it, so we bought this
           domain name and paid a lot of money for it. Now, I own a domain
           name I can’t use.

           You can do that with products. Once you’ve printed those products,
           you’d have to label over that name or do some remediation work to be
           able to use it.

           Again, here’s another little area that can really sting you. I’m giving you
           all my horror stories. You guys are going to think, “I’m never going to
           import!”

           We were bringing in products for a big retailer one time. I won’t say the
           name of the retailer, but you’d know it if I told you. They asked that on
           this candle they were bringing in – I was manufacturing and importing
           candles – that they have a topper put on a candle.
           The lid of the candle had their company name printed in the corner,
           with a price tag, so they could pull off the little topper from the candle.
           The candle was made for this one particular retailer. They were buying
           three or four million of them a year from us.

           We said, “Okay, sure. We’ll do whatever you want. Just tell us what
           you want to do.” That’s what you do when somebody wants to spend
           several million dollars a year with you.

           So, we made all these candles. One day, the new planogram came out
           and they said, “We’re not going to buy candles from you anymore.”

           We said, “Wow. That sucks. We’ve got 200,000 candles on the floor
           right now with your name on them.”

           They said, “We don’t want them, but if you sell them to anybody else,
           we’ll sue the snot out of you.”

Richard:   Because you had their logo.

Perry:     Because their name was on them and they didn’t want them in the
           liquidation market. We literally had to take each one of those candles,
           open the top of the candle, and replace it with a different topper. The
           labor to do it was almost more than the candle was worth.

           Just remember that anytime you’re printing bar code tags, price tags,
           or special brand label tags for retailers or stores, you really could have
           an issue with that.

           Let’s assume that you’ve gone through all that. You’ve toured the
           factory, you’ve checked out the quality, and you’ve reviewed the
           prospectus.

           You’re ready now to absolutely get down to your price for your first
           order. There are two ways to do it. I always say that take-its-or-leave-
           its don’t work when it comes to China importing.

           At this point, you can start to request the real price. You’ve been to the
           factory, you’ve really checked the quality, you’ve really checked the
           prospectus, and they’ve given you a quote already.
           You can sit down with them now and just begin to explain that you like
           the product and you like the quality. You compliment them a lot. Tell
           them how well their product is built. Tell them how much you like their
           factory and the professionalism of their staff. Give them a lot of
           compliments.

           Then say, “I would love to buy from you. However, I can’t pay more
           than $15 a unit. The math just doesn’t work for me.” See how close
           they’ll get with you. That will start the negotiation process.

           Don’t expect to buy for $15 if you start at $15. You’re going to meet the
           ground somewhere in between. You already know about what their
           hard cost is, though. It goes from the first quote that they give you.

           They’re going to give you a quote at roughly three times their hard
           cost. If it’s $20, that means they have about six bucks in it. So, offering
           them $15 is not an insult.

           As a matter of fact, in a situation like that, you can tell them easily, “I’ve
           gotten quotes on similar products as low as $12,” if you’ve got
           legitimate quotes.

           Sometimes they’ll ask you who the company is. If you can reach in
           your bag and pull out one and really show them, most of the time,
           they’ll meet it; almost every time.

           However, if you’re just B.S.ing your way through, a lot of times, they’re
           not going to buy that. They’re good negotiators, for the most part.
           These guys are good negotiators.

Richard:   They know a lot of their competitors locally.

Perry:     They really do. They’re going to know when you’re full of bull and when
           you’re not. There are a couple of things that I will do. This is one more
           little play that I’ll make when negotiating.

           Sometimes I will write them a buyer’s order and just state a price. I
           don’t like to do that in a live negotiation, but I’ll do that after I get back
           home.
If I’m getting close to where I want to be – if they got close to my $15,
$12, or $10 – I’ll literally enter a buyer’s order at $10 and fax it into the
factory; and ask them for wiring information of where to send the
deposit. Sometimes they take it and sometimes they don’t.

Here’s what I’ve had experience with in the past. Let’s say it’s the
situation of the $20 item; I wanted $15 and they wanted $18. If I come
back and send them an offer at $12 or $13, if they don’t take my offer,
they will at least usually come back and give me the lowest price that I
asked for to start with; the $15. You’re going to re-adjust their thinking
a little bit.

You’ve got to remember this: these Chinese factories are all about
paperwork. Words don’t mean anything. It’s about paper. It’s what
they’ve got on paper. They can walk into their boss and say, “Boss,
look. I got an order for 1,000 of these things, but they want them for
$12.”

Now, in their mind, they have a bird in the hand. Before, they were just
talking numbers back and forth. It really didn’t matter. It wasn’t real
math. Now they have a bird in the hand.

So, when you’re just orally communicating and negotiating, you’re
probably not going to get your best price there. It’s probably never
going to happen. They want that bird in the hand, so a lot of times I’ll
do a low-price offer.

Let’s assume, now, that we’re ready to make the offer. Maybe we’ve
negotiated orally and we’ve agreed. If you’re going to do it there live, I
want you to say, “Okay. I’m going to give you the terms you want on
this first order, and I’m going to try to make money with it. If it doesn’t
make money for me, then we’ll have to talk about whether we’re going
to continue our relationship or not by the time we place the next order.”

Let them know right up front that if the price doesn’t work out, you’re
going to go elsewhere. Just don’t let them think that you’re agreeing to
the price they’re giving you forever.
           If you make the lowball offer and they take it or you reach negotiation
           there, that may be as good as you’ll ever do. That’s the downside to
           that. That’s probably as good as you’re ever going to do.

           Here’s what you can do now. Once they’ve agreed to the price, then
           we want to go back and work on the specs. These are some of the
           coolest things that you would probably never think to do in a million
           years when it comes to importing.

           Number one is to ask for special packaging. You can usually get them
           to print you a box, full color, with your images, your pictures, or
           whatever on the outside of the box for your product to go in. It will
           usually cost you nothing or very near nothing to have that done.

           If you want, you can have a really nice box for your thing to go in,
           where it can go out on the shelf. You’ve been in Wal-Mart before and
           picked up a ceiling fan. You see the whole side of the box is full-color
           graphics.

           That stuff in China costs almost nothing. It costs a couple pennies
           more than a regular box. They’ll just give it to you. It’s almost no sweat
           off their back at all, but it can make a huge difference for you when you
           go to sell.

           Remember this: if they agree to that, you’re going to have to get
           artwork over there in enough time for them to get your box printed. Isn’t
           that cool? You get free packaging.

Richard:   Yeah.

Perry:     Also, this is something I always ask them to do. When I was telling you
           guys about this course, I said there’s one thing that can really cut your
           damages. I always request double boxing.

           I want my product boxed, first. Then I want it put inside another box.
           That will eliminate as much as 90% of your damage in freight. Typically
           speaking, again, they’ll do that for free or very close to free.
           If you’re talking about a dollar item, they may not do it for free. If you’re
           talking about a $20 or $30 item, they’ll almost always do it for free
           because it costs practically nothing. That’s number two.

           Number three is one I’ve made so much money doing. It is absolutely
           ridiculous. Ask for free add-ons that you can then sell. We’ve had
           experience with heat sealers with that. We’ve had experience with
           rubber stamps with that. Tell about the heat sealers.

Richard:   When we were importing these heat sealers, they had a heating
           element. Over time, the heating element would go out. It’s normal. It
           wasn’t anything that was specific to our brand or the company that we
           imported from. That’s just what happens to these particular items.

           They were a cheap item, from a manufacturing standpoint. It was
           almost considered a throwaway cost item.

Perry:     It was about $4-20, our cost. We sold them for $20 to $70.

Richard:   Yeah. From a manufacturing standpoint, it didn’t cost a whole lot of
           money. Typically, people would throw them away and buy another one.
           However, we started getting a ton of calls asking for replacement
           elements in these particular items.

           What we were able to do here was to go back to the factory and
           negotiate individual kits of three or four additional elements in the
           package.

Perry:     What happened was that we just complained to the factory that the
           elements were burning out. They said, “Okay. Next time, we’ll just put
           four extra elements in.”

           I said, “How much is that going to be?”

           They said, “No charge.” They cost two or three cents apiece.

           Here’s what we’d do. When we would sell one, we would ask the
           customer, either on the phone or on the Internet, “You’re buying the
           heat sealer. It’s $29.95. Is that right?”
           They’d say, “Yeah, that’s right.”

           We’d say, “Sometimes the heat elements burn out in them. You can get
           four extra heat elements for them so it will last a whole lot longer, and
           you’ll never be out of heat elements, for another $9.95.”

           We’d say, “Most people,” and this is big piece of verbiage you need to
           remember. “Most people who order the heat sealers get the extra
           bands. Would you like me to add those to your order?”

           The vast majority – almost 70% of people – would say “Yes.”

           You’ve got to imagine this. We took something we got for free, and sold
           it for $9.95, along with the $30 item. Guess how much the $30 item
           cost? It cost us four bucks.

           The upsell alone paid for the entire purchase and, in most cases, the
           shipping of the doggone item. We made 100% of the purchase price. If
           that doesn’t turn you on, I don’t know what’ll turn you on. That’s hot
           stuff. You can do that in a lot of cases.

           We did it with rubber stamps. Through a rubber stamp manufacturing
           company, we were making rubber stamps. We’d sell people a rubber
           stamp for $12.95 or $13.95 that cost us about two dollars. We got
           bottles of refill ink from the factory. I don’t know if they were free. We
           may have paid 20 or 30 cents for them.

           We would offer the refill ink for the rubber stamp for $4.95. Almost
           everybody took the refill ink, which paid 100% for the cost of the rubber
           stamp and the refill ink.

           If you grasp that concept from consumer goods, you will go very far in
           importing. I don’t care if you’re a little bit slow, but if you can sell
           products and make 100% of the money, you’re going to do okay.

Richard:   Think about how that affects the price per that you’re paying from the
           factory. Talking about that $20 item, you might not be able to get the
           factory down to that $15 price point, but if you can get them to $17…

Perry:     Yeah, and get them to throw in some extra stuff.
Richard:   It’s the same thing.

Perry:     They can throw in a replacement band or whatever. Those
           replacement parts they’re using are so inexpensive, for the most part.
           For them, they cost practically nothing. They would much rather hold
           up their price and give you a ton of free junk.

Richard:   It’s like a house builder. It’s very similar to someone who’s builder new
           spec homes. They don’t want to give you the home at a drastic
           discount because they’ve got other people who are basing their price
           somewhat off what you’re paying. However, they’ll be willing to throw in
           upgrades.

Perry:     Yeah; better cabinets, better carpets, and stuff like that.

Richard:   Yeah, it’s the same deal.

Perry:     You need to triple underline that in your notes because that’s a real
           biggie.

           When you write your specs, here’s something you really need to
           remember. If you have a contractor friend, you might have them come
           over and help you write your first order.

Richard:   Or an engineer.

Perry:     That’s kind of scary, but it’s kind of true. The bottom line is this. I
           believe if you ordered a car from China and you didn’t tell them in the
           spec that it needed a steering wheel, I don’t think it would have one
           when it got here.

Richard:   Or maybe four tires.

Perry:     They literally are going to go by the order to the letter of the order. We
           had something…

Richard:   It was with electricity when we had a big problem. They put the wrong
           electrical plugs on.
Perry:     We had a piece of equipment and we asked that it have a 110 plug.
           When we got it, it indeed had a 110 plug, but it had a three-phase, 220
           motor; so it didn’t work. It did have the plug, though.

Richard:   It blew a lot of fuses!

Perry:     That was, again, a mess. These are things that you’re going to have to
           really be specific about when you write that spec. If you have a
           contractor buddy, they’re used to that. They’re using to dealing with
           subcontractors.

           Subcontractors are the same way. They’ll brick your house without
           mortar if you don’t ask for it. They’ll just stack the bricks up along the
           wall. Those contractors know they have to write very, very, very, very
           specific instructions with that letter.

           When you’re writing that order, you need to be ultra-specific. You need
           to talk about what’s included. You need to talk about the gauge of the
           metal that’s used. The quality of everything needs to be totally gone
           through.

           Here’s another thing. You need to absolutely get hard completion
           dates, along with penalties. Typically speaking – and this is pretty
           standard – the standard manufacturing time in China for most
           everything is 20 days. Is that pretty much the experience you’ve had?

Richard:   Yes.

Perry:     Me too. The quality of everything needs to be totally gone through.
           Here’s another thing, you need to get hard completion dates along with
           penalties. Typically speaking the standard manufacturing time in China
           for most everything is 20 days. Is that pretty much the experience that
           you’ve had?

Richard:   Yeah.

Perry:     That is pretty standard for most factories. The date that you order and
           they receive your money, they will typically build out your order in about
           20 days.
           If you’re on a super hot item, or if you’re dealing with some obscure
           piece of equipment that has to be hand built – I’ve bought equipment
           that has taken up to 60 days to build – but for the most part 20 days is
           standard, what you need to have is an automatic cancel, or financial
           penalty, or something built into that order to make sure. That is what
           the big guys do.

           The big guys say, “Look, you want $10,000 for this order, okay. I’ll give
           you $10,000 and it has to be delivered on the 20th. For every day that
           you’re late there is a $100 penalty that we will take off of the rest of the
           invoice.”

           What happens is if your order is sitting there and a big guys order is
           sitting there and they have a penalty for his order and they don’t have
           a penalty for your order, guess which one they’re going to do first?

Richard:   They happen to have technical difficulties all of a sudden with your
           order. [Laughter]

Perry:     Right! The thing is, you’re going to pay some money down when you
           place your order and you have a cost of money that starts ticking that
           day. When you pay your money your biggest objective is getting it
           made and getting it across the water. It’s really, really important.

Richard:   Especially pre-selling, which you mentioned earlier.

Perry:     Exactly. Pre-selling it across the water. You definitely want hard
           completion dates if everybody agrees to it and signs off on it.

           Lastly, you want an established written damage policy with the factory
           and you also want that with your freight company, or you may want to
           choose freight insurance. It’s up to you. You definitely want an
           established policy.

           The truth, between you, me, and the fence post, if they tell you to go
           p--- off there is not a whole lot you can do about it, but for the most part
           if they agree to something in writing most of the time they will follow
           through with it.
           If they don't agree to something in writing and you get damages, well,
           there you go, “Sorry about that. You never said anything about that.
           You mean you want it to work? You never mentioned that part.” You
           definitely want to have a damage policy that says “In case the freight
           comes in damaged or not as described the factory agrees to
           remediate, send new merchandise, pay for return shipping, or
           replacement,” whatever the case may be.

Richard:   That verbiage is very important.

Perry:     I’ll be honest with you. When I’ve had problems with factories in the
           past, for the most part they try to make it right. Would you agree with
           that?

Richard:   Absolutely. It’s not like Wal-Mart. You’re never going to be able to walk
           into the store and return it with no questions asked without the
           packaging or the original receipt.

Perry:     You’re going to end up communicating in the middle of the night when
           you’re not very excited about communicating. Because the time is so
           different and if you get to the point where you have to talk to these
           people with Skype or messaging or on the phone, it’s going to be late
           at night and it creates a lot of hassle.

           It’s much, much easier to deal with the situation if you deal with it right
           up front in the beginning. Clearly spell out what happens if this product
           is poor quality, or is not as described, or doesn’t work, or is damaged.

           The reason you want to have a contract with them is you can’t go to
           the freight carrier and get satisfaction. They have to get satisfaction
           from the freight carrier and they reimburse you.

Richard:   The factory is packing your container, too. That is something to keep in
           mind. We’ve argued with people before, “Oh, you can fit more in that
           container.” Sometimes you can, and sometimes you can’t.

           “Okay, you told them to put that much in there and it’s clearly outlined
           in your terms,” and they did.
Perry:     I tell people that if they don’t have quality control on the China side
           don’t go into the import business period.

           One of the ways that you’re going to avoid a lot of problems with that
           is, if you don’t know somebody in China that you’re already dealing
           with, you need to hire a third party company and a good one is SGS
           Testing Laboratories. They are in all the major ports in China.

           You can have your sample sent to them so they can go to the factory,
           make sure that it works, they’ll bring a 110V generator to plug in
           electrical things to make sure they work, they’ll go to the factory as the
           product is being built, they’ll mike the metal, they’ll check the paint,
           they’ll send you photos and videos.

           They’ll actually go there while the container is being loaded to make
           sure that it is being loaded safely and tightly so that there won’t be any
           damage in the sea vessel. They’ll watch the container being sealed off
           with the proper count of product on it,

           All that is going to cost you maybe 20% of your shipping costs. It is the
           best money that you will ever spend. Again, when you tell your people
           in your order that quality control will be handled by SGS Testing
           Laboratories, guess what? They know you’re no joke. They’re not
           going to mess with you at that point.

           You’ve done everything throughout the entire process to show that
           you’re a professional, all the way down to having a reputable company
           coming out to do quality control.

           This is no joke, I’ve had a guy get in a row boat because the factory
           was on an island.He had to hire a guy to get in a row boat to row him
           to the island with a gasoline generator, plug up the generator, get it
           running, plug in one of our pieces equipment and run the equipment to
           make sure that it ran properly.

           These guys do their job. Almost the threat of them is as powerful as the
           service that they offer.

Richard:   In the last section you talked about terms and transferring of money.
           That gets a little wiggy to some people.
Perry:     I’ll tell you, when you’re importing from China this is not a business for
           the faint of heart. You have to have a little gut on you.

           There are basically two ways that money is sent to China. Actually,
           more and more of it is going the second way. It used to be opposite but
           it has reversed.

           There are letters of credit, and this is a simple document where you go
           to your bank or a bank that does letters of credit, which most banks do,
           and it has to be a credible bank that is known in China.

           If you’re at the Bank of Schlockdaw, Mississippi, they might not be
           willing to take a letter of credit from you. Any national bank, Chase
           Bank, Citicorp, Wells Fargo, any of those guys, you go to them and
           here is what a letter of credit is.

           If you are an incredibly creditworthy individual with tons of assets and
           the banker is in love with you then perhaps they will give you a letter of
           credit to let you go buy goods in China without putting up money.

           I have never had that particular experience. [Laughter]

Richard:   I’ve never had that kind of trust bestowed upon me. [Laughter]

Perry:     Typically what you do is you go in and say, “I want to buy a container of
           products that is $30,000 and I need a letter of credit for $30,000.”

           Your banker will say, “That’s fantastic. I’m happy to do it. All I need is
           $30,000.” They’ll put the $30,000 into an account that you don’t have
           control of anymore although the money is still there in your local bank.

           They’ll issue the letter of credit to the factory and the factory will take it
           to a Chinese bank and that bank will give them a loan on your letter of
           credit so they get the money to buy the raw materials to build your
           order; just so you know how that works.

           The bottom line is they will build your order. It will ship to the United
           States. Now, when the order gets to the States you can’t open the
           container until the documents have been released to you to open the
           container and take ownership of it.

           The letter of credit has to transfer at that time. The container lands in
           the States, the letter of credit transfers and is converted to cash, and
           the factory in China gets their money and you have your merchandise.

           It’s sort of like an escrow service, for lack of a better term. You still
           haven’t opened that container yet. It could be filled with marshmallows,
           but for the most part it’s not. They would be committing a pretty big
           fraud against their bank at home in China and all of that. That’s not
           going to happen. I’ve never heard of it happening so I don't see that
           happening to you.

           It possibly could. There could be damage. It could be wrong still and
           you would still have to go through the repercussions of that.

           The only thing that it gives you is the feeling of knowing that you are
           going to get something for your money.

Richard:   [Laughter]

Perry:     You feel better already, don't you?

Richard:   I’ll take two.

Perry:     Here’s the second way. The first way is for chickens! [Laughter] For
           what it’s worth, the second way is the way I do all my business in
           China. As a matter of fact, almost everybody I know that does business
           in China does business this way now.

           It’s called TT Payments: Time of Transfer Payments. That means that
           I’m going to wire some money to a cat in China and hope that he
           sends me something. [Laughter]

Richard:   Someday.

Perry:     Someday. Now you’re wondering why you would want to do that. There
           is an inherent reason you want to do that. They make it a little more
           advantageous for you to do that. Why wouldn’t they?
Richard:   It sounds like a pretty good proposition to me.

Perry:     What they do is allow you to have terms at that point. Let’s say you’re
           buying that same $30,000 container of equipment. They don’t always
           do this but every factory that we’ve dealt with I believe has taken a
           third, and a third, and a third, right?

Richard:   Absolutely.

Perry:     This is the baseline that the terms start at in China, a third and a third
           and a third. You’re buying this $30,000 container of equipment, you
           would TT or wire transfer the money, the factory or the broker – and I
           don’t like dealing with brokers because I trust the factories more than I
           trust the brokers - or whoever is handling it, $10,000.

           They’re going to take that $10,000 and go buy the raw materials to
           make your stuff. That’s why I know how much money they have in it.
           They’ll take the $10,000 and start building your product.

           When it’s built they load it on the container in China, put the lock on
           and seal it, and the document is created that it is coming to the States,
           and at that point you’re required to send them another third, another
           $10,000.

           You’re sending them $10,000 today, and if they perform in the proper
           time another $10,000 in 20 days. I like this form a lot better because
           they don’t get all the money up front. They’re not as slow. They want
           the next $10,000 so they’ll hurry up and get the order made.

           Then the order is on the ocean on its way to the US or Canada or
           Australia or Europe or wherever you are. It’s on the ship coming to you.
           While it’s on the ship coming to you the vessel company has your
           documents.

           When the container arrives at your port it’s frozen until you have the
           documents to go take possession of the container.

Richard:   The original bill of lading.
Perry:   Yes, you have to have the original bill of lading. There is a stack of
         documents you have to have. It’s in a package and freight forwarding
         companies, which we’re going to talk about in a minute, handle all of
         this for you, so you don’t have to know a lot about this.

         In order to get your documents released you’re going to have to pay
         the final payment of $10,000. At that point the shipping company will
         release your documents and the container is yours.

         You still have to deal with customs, and believe it or not, everyone talks
         about customs being difficult, I’ve had one container of goods
         inspected by customs. It’s not really a big deal.

         That’s the way that most people buy. After you’ve established some
         purchases with Chinese factories, a lot of times you can start
         negotiating those credit terms.

         I have good friends that have 30-day net terms from time of landing in
         the United States. It depends on how big a percentage that Chinese
         factory’s business you become. They will do anything they can to keep
         you as a customer. They won’t do so much to get you as a customer.
         They’re more interested in keeping their customers, keeping their
         customer base, and keeping their turnover up.

         Here’s why. Chinese factories, and this was really enlightening when I
         heard it, they don’t make any money through the year. Most of them
         don’t work on much of a profit.

         What they do is at the end of the year for every dollar of merchandise
         that they sell the owner of the factory gets a rebate from the
         government. It’s anywhere from eight to 15% of his total gross sales.

         They don’t really care a whole lot about how much money they made
         selling to you. They care a whole lot more about how much volume
         they do.

         That’s the reason that their export business is so robust. They reward
         their factories and their companies for exporting. They know import
         dollars coming in is what will make their economy grow like a weed.
         That is the reason for the mentality they have.
           They’re really interested in volume and if you’re producing volume with
           them it is really easy to go back and negotiate further terms.

           After the economic slow-down of last year terms have really tightened
           up in China. I hear there are less and less people getting those
           favorable terms right now. That may change, but there were a lot of
           people that just went belly-up and really stung a lot of the Chinese
           factories.

Richard:   Are you talking about the 30-day terms?

Perry:     Yeah. We’ve explained how documents work and here is one more
           codicil for you if you get really big in the importing business. I have not
           done this but I have good friends that have done it and it’s pretty
           remarkable.

           If you have a licensed Chinese company like a Hong Kong trading
           company, or a Shanghai trading company, and there are lawyers that
           can help you set those things up in China, you can get a rebate from
           the government for your own exporting, which is pretty cool.

           In other words, you would buy your products domestically by having
           your Chinese company buy the products domestically in China and you
           pay the price the factory wants. When you export the goods out of
           China to the States you can apply for those government rebates at the
           end of the year.

Richard:   Wow.

Perry:     If you’re doing millions of dollars in exporting a year and importing a
           year, it’s really worth doing though there is quite a bit of paperwork
           involved. It’s for an advanced importer. I think it takes about six months
           to get the company set up. It’s a pretty big deal.

           If you’re savvy enough sometimes you can find trade partners. If you
           can find a broker or agents almost all of them are set up with these
           rebates and it is another way they are making money on you.
           Tell the agent, “Tell you what. I would like to use you but let’s split the
           rebates.”

           At first they’re going to say, “I don’t know what you’re talking about.
           What do you mean rebates?”

Richard:   Huh? What?

Perry:     They’re called Value-added Taxes, VATs. The way it works in China is
           when you go to manufacture something, every time you buy a part or
           raw material the factory pays sales tax on it. We don’t do that in the
           States. That is tax-free.

           Over there they all pay sales tax on that stuff when they build the
           product. When they go to sell it, basically the money they are getting
           back from the government is money they paid in.

           If they export those good out of China they get a refund for 100% of all
           of that tax. If they sell it domestically they don’t get that refund, but the
           trading company does.

           The trading company can export and then get the refund for eight to
           15% of the full face amount. That’s a big deal. If you’re dealing with an
           agent say, “Hey, look. Why don't you split the VATs with me? Let’s split
           the VATs. If you want my business you’ll split VATs with me.” A lot of
           times they will.

           I didn't get that little piece of data right there until I had been to China
           at least six or seven times. This could save you tens of thousands of
           dollars, or even millions of dollars over time if you’re a bit importer. I
           hope that helped.

Richard:   That was very cool. We started talking a lot about documents so let’s
           move on to the shipping and duties and see if you can’t further explain
           what those freight forwarding companies, and all of the other stuff you
           talked about, can do for you.

Perry:     Sure. When you get into shipping you’re going to have to deal with a
           couple of things. When you have your product ready to go you’re going
           to have to determine who is going to be your freight forwarder.
           They are the companies that handle your documents for you. They
           clear customs for you, they shuffle all of the product and paperwork
           around and all of that.

           Let me tell you, you do not want to do any of that yourself. It is a
           paperwork nightmare. The companies that do it are really good at it,
           and they’re very inexpensive. I think it’s just a few hundred dollars to
           handle the documents.

Richard:   Yeah, a couple hundred dollars. There was one trick that we learned
           on buying a bond. It was about $500 a year where you avoided paying
           a $200 per import fee.

Perry:     It is much like an import license. As an importer you have to have a
           bond. You’ve heard of bonded warehouses before? Remember when
           we talked about having damaged goods or lying about duties or
           bringing in contaminated materials, all sorts of different things that can
           go wrong? The government makes you buy a bond which is basically
           insurance in case they have to destroy the container or charge you
           more duty because you didn’t tell the truth. If you fly the coop and they
           can’t find you then the insurance company that sold you the bond is on
           the hook.

           Like Richard said, we were paying several hundred dollars for bond
           every time we brought in a container. Once they realized we were
           bringing in multiple containers a year they said, “Hey, why don't you
           just buy your bond one time for the year?”

Richard:   It’s $500 a year.

Perry:     Five hundred dollars a year to buy our bond and if we brought in 500
           containers it would cover us on all of them. It was much better to do.

           You’re going to need a bond, and freight forwarders are going to help
           you with that.

           The best thing you can do is talk to a freight forwarder. The one we like
           the most is HYC Logistics. I like them for a number of reasons. They
           have offices in L. A., in Memphis, Tennessee, where all the rails meet
           because most freight travels by rail once it’s in the States, and we’ll talk
           about that in a second.

           They also have offices in China. They have a quality control arm and
           also a consolidating warehouse in Shanghai and Guangzhou, which
           means if you’re using HYC they can pick up a pallet of something for
           you, put it on one of their containers, and bring it to the States. There is
           going to be an additional fee for that, and it’s going to be more
           expensive, but at least they have the capability of doing that for you.

           Let’s talk about what questions you need to ask when you’re dealing
           with freight. We’re assuming you’re still in China, and one of the
           questions that you want to ask the company is what port they ship
           from.

Richard:   That is the manufacturing company, correct?

Perry:     Yeah. You want to order from their FOB-VAT port. Let me explain why.
           If you order from their factory, a lot of times the inland freight in China
           can be more than the sea freight to get something to you.

Richard:   You’re talking about moving the freight from the factory to a shipping
           port.

Perry:     Yes. China is a very mountainous country and you can have a remote
           factory that is 500 miles away from a port and it has to go by train
           through a mountain, around a branch, and up and down here all just to
           get to the port.

           You may pay $500-600 just to get the product moved from the factory
           to the port. You want to make sure you have your prices quoted FOB
           their nearest port.

           The fees to ship products in China are going to be different based on
           the port, so you’re going to want to look at a Chinese map and see
           where ports are available. Usually this is something your freight
           forwarder can help you with.

           It costs more to ship from the Guangzhou port than it does from the
           Shanghai port; at least it used to. I don’t know if the prices are still the
same or not, but it was a little more distance to go from Guangzhou to
L.A. than from Shanghai to L.A. You want to make sure you get the
most advantageous port.

The second thing you’re going to deal with is duties. Almost every
product coming into the United States has some sort of a duty on it.
What is a duty? A duty or tariff is the same thing. It’s a tax.

It’s saying, if you’re bringing this product from China we charge five,
ten, 15, 20% of the total invoice amount as a duty. You’re freight
forwarder is going to pay it and you’ll pay them back. That is another
thing that they will handle for you.

Once you go to China and you get ready to buy, you’re not going to
finalize anything until you talk to your freight forwarder. If you want to
get the duty charges call the freight forwarder and say, “What are the
duties going to be on this?”

There are some things that you can bring from China at different times
that have extremely high duties. Those are things that have a high duty
on them as a penalty. Meaning that there is strong lobby or labor union
here in the States, and maybe in your country, that has lobbied
Congress to get a huge duty put on something.

A good example of that, I used to be in the candle business. For a
while because of safety and other things, there was a 70% duty on
candles.

If I bought a candle from China for one dollar I had to pay seventy
cents to the government for the privilege of bringing it into the country.
Believe it or not, it was still cheaper than making the candle in this
country. A lot of times it’s not.

Let me give you an example of what you can do. This is going to get
real technical so if I lose you go back and listen to this again. Most of
this you won’t have to deal with but I’m just giving you the vocabulary
and the terminology so you know what it is, and so you can talk to your
freight forwarder about it.
The way that all that stuff is classified, all products that come from
China or anywhere else have something called a harmonize code.
There is a big book or online service from customs where you can find
a harmonize number for your particular goods.

I’ll give you an example. Let’s say the harmonize code for candles was
ABC321 and the duty was 70%. I started bringing wax from China to
make my candles with, and I brought in a couple of containers of wax
and the duty was zero. There was no duty on wax.

I’m bringing in one container of candles and I’m paying 70% duty, and
I’m bringing in another container of wax and I’m paying zero duty.

I ain’t the smartest guy in the world, but believe it or not I did that for a
year. One day I’m waking up in the morning and this ding went off in
my head and I said, “What is a candle?”

I call up customs and I said, “Can you tell me, when you’re looking at
the classification of the harmonize code for a candle, what constitutes
a candle?”

“The definition of a candle is wax with a wick in it.”

I said, “So you’re telling me that if I brought in candles that had no wick
then those would be wax, right?”

“Absolutely.” This is a big deal. You have to ask them for a binding
letter when they give you a ruling like that. They may tell you anything
on the phone and if you go do it you can get really screwed.

You want a binding letter from customs that that is indeed the case, so
you write a confirming letter saying, “This is a confirming letter that the
conversation I had this morning with Agent ____ that I understand it
this way. Will you please confirm this and send me a binding ruling.” It’s
called a binding ruling.

They send me back a binding ruling so from then on I would have them
drill a hole in every candle I got. This is how simple this gets. I had
them drill a hole in the center of every candle I bought and on the end
of the container, guess what I had? Boxes of wicks.
Richard:   The same product?

Perry:     It’s the same product.

Richard:   They just skipped a step.

Perry:     The wicks were just separated from the candles. I would bring the
           candles into my factory here in the States, we would unload the
           container, open the boxes, and my staff would drop a wick in every one
           of the holes and seal the box back up.

           My duty was zero dollars. That saved me $14,000 per container of
           candles. I had an absolutely unbeatable advantage in the candle
           business. In the import candle business I killed them.

Richard:   Over any other import.

Perry:     I killed them for two or three years. It was forever before people figured
           out what I was doing. There are all kinds of ways. You did DVD cases,
           right?

Richard:   Yeah. What you have to understand is that harmonization codes are
           somewhat open to interpretation. That doesn’t mean your
           interpretation. It means that items can be classified most of the time
           under different codes.

           Initially we were paying like 23-24% duties when we were importing
           blank DVD media storage cases. They were originally classified as
           blank DVD cases.

Perry:     It was an inexpensive item and on a $.20 item it was four cents. You
           were paying four to five cents, so almost a quarter of the value.

Richard:   Again, we’re back into a commodity type item so already you’re dealing
           with a lower profit margin than with some of these others, so every
           penny counts.

           We used a third party auditing service that was recommended to us by
           our freight forwarder, HYC Logistics, to come in and go over everything
           we were importing, look at the harmonization codes we were using,
           and suggest any changes.

           What they ended up doing is telling us, “You can classify this as an
           empty storage container,” which took us from a 23-24% duty all the
           way down to three or four percent. It was a huge difference. We didn’t
           have to get any binding ruling.

Perry:     I happen to remember this number because we brought in so many of
           these. There were 160,000 DVD cases on a container. We brought in
           multiple, multiple, multiple containers of them.

Richard:   Usually two containers at a time.

Perry:     We saved a nickel apiece. That’s a whole bunch of nickels. [Laughter]

Richard:   It was a big deal. It was just changing a code that saved us a whole
           bunch of nickels.

Perry:     That covers duties. So you’ll know the process, the freight is in and
           you’ll get a call from your freight forwarding company. They will say,
           “Hey, you’re container is in port. Have you made your last payment
           yet?” You’ll make your payment and the documents will release to the
           freight forwarder.

           The freight forwarder is going to move your container over to customs
           and ask them, “Do you want to take a look at this?” Customs only looks
           at about 1:200 containers. It’s pretty random. If they say no, usually the
           container will clear customs in a couple three days. It’s a pretty
           standard two to three days.

           What the freight forwarder is going to do is arrange your inland
           transportation. How do you want to get the container from where it is to
           where you need it to be?

           We’re in Texas and they would arrange freight for that container to go
           from Los Angeles to Texas if we wanted to distribute the goods out of
           Texas.
           A lot of people will rent warehouse space in California and warehouse
           their product distributor right from there. It depends on your particular
           situation.

           Let’s say we wanted to bring it to Texas. Nine times out of ten they
           aren’t going to truck that container. If they do you’re going to pay
           through the nose for it.

           They’re going to put it on the rail and send it to you via railroad. In the
           port of L.A. they have these giant cranes. If you get into the importing
           business going to the port of L.A. is a lot of fun. It’s really cool to see
           how a port works.

           They literally are pulling off thousands and thousands of these
           containers off ships each day like they’re tinker toys. They’re moving
           them from the ship to the train.

           They have a number on the side of them and off it goes. They’re able
           to move that container all that way from California to Texas for
           $500-600 by rail. If I had that done by truck it would cost me at least
           $2000.

           They’ll put it on the rail, bring it to me here, and then they’ll back it up
           to the dock. There is going to be a “diberge time.” Usually it’s four
           hours?

Richard:   Usually it’s two hours per 40 foot. We have it at four hours but we
           usually have two dropped.

Perry:     You have a bus to move. You have to have people ready. They’re going
           to drop that container off, and when they drop it off you have a couple
           of hours to get that container unloaded. You can pay for a couple of
           extra hours but it’s pretty expensive.

           If you have a truck stop near you, go to the truck stop and ask if there
           are any “lumpers” that want to do any work. They usually have some
           guys hanging around truck stops that do nothing but load and unload
           trucks. You can get some lumpers to help you come and unload your
           container into your warehouse.
           If you choose coastal distribution, and this is something pretty
           interesting as a lot of companies are going to this, you may have
           warehouses all over the country. It really sucks to move all your freight
           from California to North Carolina and then have somebody place an
           order in L.A. They aren’t going to ship the freight back to L.A., right?

           What a lot of people will do is have stocking warehouses which are
           public warehouses that will rent you space and they will do fulfillment
           for you. It’s call Pick, Pack, and Ship. One of the biggest in the industry
           is Federal Express.

           You can contact Federal Express. They have warehouses in Los
           Angeles where they will break a container up by individual boxes and
           ship one to everyone in North America if you want them to.

Richard:   And if you’re willing to pay for it.

Perry:     And if you’re willing to pay for it. [Laughter] I believe HYC Logistics also
           has fulfillment services in L.A. If they don’t they can put you in contact
           with people in L.A. that can do fulfillment services and public
           warehousing for you.

           Here’s another cool thing about L.A. and the port of L.A. They have a
           lot of warehouses there that have something called a “trade-free” zone.

           I’m not an attorney or tax person, but here’s the way I understand this
           to work. When you bring a container of merchandise into the US that is
           an asset at that point. You own that and you could owe taxes on that
           depending on where you are.

Richard:   Absolutely.

Perry:     In a trade-free zone, the government allows you to leave that
           merchandise in the trade-free zone without any taxes until you ship it
           out of the trade-free zone.

           In other words, you don’t have to pay tax on inventory that is just sitting
           there.

Richard:   A lot of times it’s the duties as well.
Perry:     Yeah. You don’t have to pay the duties or the tariffs or any of that until
           it moves out of the trade-free zone.

Richard:   So instead of paying on an entire container-

Perry:     You only pay on the part that moves out.

Richard:   Right. If you’re using a fulfillment house inside of one of these trade-
           free zones-

Perry:     There are trade-free zones outside L.A., too. I think you can ship from
           one trade-free zone to another, is that correct?

Richard:   That I’m not 100% sure about.

Perry:     I think that’s true but I’m not absolutely sure.

Richard:   Any major port is going to have a trade-free zone. It’s technically not
           US property yet. You haven’t really hit US soil.

Perry:     I wanted to talk about partial containers for a minute. If you go with
           someone like HYC, they will have a consolidation service for you on
           the China side where you can have freight brought in by the pallet
           load. When it gets into the States you can have it shipped back out by
           the pallet load.

           You can stack pallets very high on a shipping container although you
           want to make sure that you don’t stack the pallets so high that it won’t
           fit on a truck when it comes to the States. Ask me how I know!

           There are several kinds of containers. When you’re shipping something
           into the US from China, 99.9% of the time you’re going to have three
           different kinds of containers to ship on. You’re going to have a 20 foot
           standard container, which holds small lots of stuff like the guy that
           brings in key fobs.

           He may not want to bring in a whole 40 foot container.

Richard:   That’s a whole lot of key fobs.
Perry:     Usually what you use short containers for are things that are very, very
           heavy. The reason you do that is because no matter how big the
           container is it can’t weigh over 56,000 pounds.

Richard:   That’s the last number that I remember.

Perry:     Again, these things vary with time and rule changes, but it’s about
           56,000 pounds – maybe it’s 40,000 pounds and 56,000 is the whole
           truck.

Richard:   Something like that.

Perry:     You need to check with your freight forwarder, but it’s between 48,000
           and 56,000 pounds. If you have a 40 foot container and you’re bringing
           in car batteries a huge percentage of the container is going to be
           wasted because you’re going to have more car batteries in weight than
           you fill in space.

           There is a way around that where you can make that work for you if
           you’re pretty savvy, but for the most part what people will do if they’re
           bringing in something really heavy is they’ll bring them in on 20 foot
           containers.

           The 20 foot container is about 2/3 of the cost of a 40 foot container. It’s
           not an even half. You’re going to pay more for the 20 footer, but it’s still
           cheaper. You just pack it tight with your heavy goods, put it up by
           weight, and ship it.

           If you decide to go with your heavy goods on a long 40 foot container
           you can do that and do something called “top loading.” What I mean by
           that is, let’s say that you have 40,000 pounds of stuff that you could put
           on a 20 foot container but instead you put it on a 40 foot container
           because you have 8,000 pounds more you can put on, you might fill
           that with feather pillows, or something that is lightweight.

           We used to bring in stanchions that always weighted out. We could
           have brought them in on a 20 foot container. They have the big solid
           steel bases on them that make them stand up, but we also brought in
           these key control boxes that are big hollow metal boxes for holding
           keys. They don’t weigh anything.

           We would top load the container with the empty, hollow boxes, and the
           bottom would be loaded with the heavy metal bases and the container
           would come in chock full.

           The bottom line is you have a certain amount of cubic feet and you’re
           going to have a certain amount of that on a container and you’re going
           to try to fill every inch of that cubic feet that you can, for two reasons.

           One is efficiency. You want to get the most for your money.

Richard:   You’re paying for it.

Perry:     Right, you’re paying for it you might as well use it. Two, and this one is
           almost as important if not more so, you want that container packed,
           jammed up, and jelly tight. You don’t want any room for movement
           inside the container. That is where damage happens.

           Look at the way movers pack houses. When you get professional
           movers to move you from one city to another they won’t use the whole
           truck. They’ll push everything to the front of the truck and they’ll have
           everything so squished in there you think it’s going to turn into one big
           blob of something.

           The reason they do that is because they know that if they have stuff
           packed in tight that it can’t move around and can’t shift a lot, and that is
           the general idea that you want.

           Partial containers can go in, in China, and we can consolidate them
           anywhere and come out in the US the same way. There are a couple of
           good freight lines that carry less than truckloads that can ship these
           pallets.

           They typically don’t go by rail. They typically go by truck and depending
           upon where you are – we’re in Texas and we paid about $350 per
           pallet from California and that is using ABF Truck Lines, or Yellow
           Freight. Anything else you can think of about California?
Richard:   No, not at all.

Perry:     By the way, if you’re dealing with trucking companies, don’t ever call
           them up and ask for a quote. Call and ask what your freight discount is
           because freight is typically automatically discounted 60% from trucking
           companies.

           If they give you a book rate just say, “What’s my discount rate?” and by
           saying that they will typically take 60% off the original quote. Don’t ever
           pay normal quote fees.

Richard:   Your freight forwarder can act like a broker on that as well. That’s what
           they are there for.

Perry:     These guys are awesome in helping you through the process the first
           few times. They know you’re going to be a little bumpy and that’s okay.

Richard:   It’s a very “done for you” service. They handle pretty much everything
           and that’s nice.

Perry:     There is a lot of freight now that is being done by air. Sometimes it’s
           better to air freight stuff than it is for ground transportation to bring it. It
           depends on what you’re bringing in.

           The guy that does the key fobs is an example. If he’s buying key fobs
           for three dollars and selling them for $20, rather than be out and not be
           able to sell any I would start air freighting boxes in if I was waiting on a
           container.

           You just have to do the math in your head. You’re going to pay
           somewhere around four dollars per kilogram to air freight products in.

           There are two ways to get air freight done; first, through your freight
           forwarder. Sometimes they can get you a discount on air freight.

           Federal Express is probably going to be your most expensive solution,
           but it’s going to get there. If you have to use FedEx you’re going to pay
           four to five dollars per kilo depending on where you are coming out of
           to most of the destinations in the States
           You have to have something that is pretty valuable and pretty light. If
           you’re importing feather quills this will probably work out.

           You have to have something fairly expensive and fairly light to make it
           work. Now, if you go to a normal airline, and the Chinese airlines are
           particularly good about this – China Southern, Air China, China
           Eastern – they all have cargo freight departments and you can call
           them up and get a quote on a per kilo basis.

           They’ll give you a decent quote, but they’ll give you better and better
           quotes depending on how much of a contract you want to give them,
           how long you plan to use their services, and how long you guarantee
           you’ll use their services.

           You can get air freight down to around two dollars and change per kilo
           if you’re willing to sign a contract with one of the major airlines saying
           “I’ll guarantee to bring in so many pounds of air cargo per month.”

           I’ve seen a lot of businesses that have made that work. I met a guy
           that does finished trophies in China, and he air freights twice a week.
           He brings in a full pallet of trophies into the States by a Chinese airline
           two times a week.

           There is also a company that does custom dental work believe it or not.
           They do crowns and bridge work and dentures. This company goes to
           all of the dentists in a city that will work with them and when they have
           molds taken for dentures or crowns, they literally box those up in a
           FedEx box and FedEx the mold to China.

Richard:   It seems like that would be the perfect item; small, white.

Perry:     They FedEx the molds to China, China makes the dental work in a
           matter of 10 days or so, and then ships it back in a FedEx box. Can
           you imagine how many thousands of dollars worth of dentures and
           crown molds you can get in a 10 kilo box? A lot.

           It costs them a couple hundred dollars to send a box and they have
           $10,000 worth of dental work in the box. Air freight is worth it then.
           Anytime you’re doing something like that it can really be worth it.
We were bringing in cigar cutters for a while; high-end, super nice,
cigar cutters. It’s really worth it during the holidays. When we were
running out during the holidays it was worth bringing them in.

I think you get the general idea there. Air freight can be worth it.

There are some things you just don’t want to bring in and ship if you
can help it. Big pieces of framed art are a pain in the neck. Dry erase
and chalk boards are a pain in the neck. I’ve done them all. I’ve sold all
of these things and imported them from China.

The damage is almost more than the actual worth of the goods. It
seems like the bigger the product, the more broad and narrow that the
product is, the more difficult it is to bring in.

They do a fantastic job with equipment. If you’re bringing in equipment
you definitely want to command that it be put in a crate. They’ll wood
crate equipment. If you’re bringing in a piece of equipment that is more
than $400-500 I would definitely demand that it be put in a crate.

When you get it here have someone else un-crate it. We found bugs
and all kinds of crap in those crates; and throw that wood away
because sometimes it just plain stinks. The wood crates have to go
through fumigation and all. It kills the bugs that are in there but it
doesn’t vacuum them out, it just kills them. Just be sure to be careful
with it.

If you’re going to have something brought in that’s worth at least
$400-500 then have it crated.

We talked about using a freight forwarder, your bond, and our import
license so that’s about all on shipping and duties. I hope that covered it
well enough for you.

I’m not going to go into the duties on this and the duties on that and get
into real detail. You could talk for the next 100 years on that.

To be honest with you, the freight forwarder handles all of that. I never
had to learn it. I’ve brought more products into the States than most
           people have and if I’ve never had to learn about duties and all that, you
           shouldn’t have to either. It’s not really a big deal.

Richard:   You’ve talked a lot in the past couple of sections that we went over
           about damaged goods; how to avoid them, written damage policies,
           things you can do with bonds and stuff, but it is still going to happen.
           You are going to have damage in your container.

           What do you do? Do you just throw it away? I know there are ways to
           make money off of it.

Perry:     As a matter of fact, I was going to tell you about that at the end of this
           session. I’ve made a lot of money on damaged goods before.
           Sometimes I’ve made more money on damaged goods than I’ve made
           on “good” goods.

           You’d be surprised. If people get into a bidding war in an auction
           situation you’d be surprised at what they will pay. Sometimes they will
           pay more for stuff you don’t want than you would have ever gotten
           anyway. It’s pretty weird.

           Let’s talk about damaged, or overstocked, goods. I’ll start off with one
           that seems pretty obvious. A friend of mine has a site and he imports
           tapestries, really nice tapestries from China. A tapestry is like a wall
           hanging, like a rug thing you hang on the wall. Why anybody wants it I
           don’t know, but whatever.

           He does a lot of business in tapestries. People return them, or he’ll
           overstock in one that he thinks is going to sell and it doesn’t sell as well
           as the others do.

           Sometimes you’ll liquidate just to balance inventory. We’ve had three
           models of something and one model will sell out in two weeks, but the
           other two will take forever. You’re just willing to sell them out so you
           can reorder. The next time you reorder you’ll know to go heavier on the
           model that sold the most, but you didn’t know that the first time out so
           you just want to liquidate out these others as quickly as possible to
           give you the capital to reorder.
           What I will do is take a look at a lot of my damaged goods or
           overstocked goods and I’ll determine what the best strategy is to
           liquidate the product. Number one, I go to eBay. I go there because I
           want to get the most out of the product.

           You’re not going to get any more out of the product that you’re
           liquidating then you are going to get out of it on eBay. You’re going
           straight to the consumer at that point. I’m going to try to eBay as much
           of the product as I possibly can.

           The same is true with Craigslist. I’m going to try to go to Craigslist and
           sell as much of the product there as I can.

           The friend of mine that does tapestries is fortunate because he has
           1000 tapestries. When he gets returns back that are overstocks or
           damaged, he has one or two of this one and one or two of that one and
           he can have 100 auctions going on eBay for 100 different tapestries
           and that works for him.

           If you have 100 of exactly the same thing you can’t put 100 auctions up
           on eBay for it because you’ll destroy the market and nobody will buy it.

Richard:   Right. That makes sense.

Perry:     It’s a slow going process, but if you want the most money out of your
           additional freight eBay does a good job.

           The second thing is scratch-n-dent sales. If you have a customer base,
           in most cases you’re going to have a list. We did this with equipment
           one time. We had a list of customers and we got in a shipment of fillers
           that was a filler we didn’t sell a lot of. We, or the factory, had made a
           mistake on the order. We meant to order five of one filler and 20 of
           another because we already a bunch of the one we had just ordered
           five of, but they inverted the order or we did it wrong I can’t remember,
           and we ended up getting almost none of the ones we needed and a
           whole bunch of the ones we didn’t.

           We just went to our best customers and said, “We’re having a scratch-
           n-dent sale,” everything coming in gets a scratch or a dent on it
somewhere, “and we have these 20 fillers, and if you want one we’ll
sell it to you for half price right now.”

Remember, you can dock to half price on an expensive piece of
equipment and guess what I’m still making? Money. My first cost is
how much of my sale price? One-third. I’m still making money. I’m still
making a 40 margin.

I was able to go out an liquidate at half price all of the additional fillers
that I didn’t want in one day just by going back to my core list.

Here’s the thing. You can’t just go in and say I’m going to give them to
you at half price. There has to be a reason why. “I’m closing my
warehouse.” “I’m consolidating shelving.” “They’re scratch-n-dent.” “I’m
overstocked.”

You have to have a reason why or you’re just discounting the product.
One thing you have to be aware of when you do that. If you’re selling
to customers who consistently buy from you each month, and you give
them a deal to come in and buy a bunch of your overstock or a bunch
of your damaged goods or a bunch of your scratch-n-dent, you’re
going to take them out of the market for a while. That sucks.

That’s exactly what happened here. We had a guy in South America
that was buying about four fillers from us every month. He was paying
us $3500-3700 a filler. We offered him these scratch-n-dent fillers for
$2000. He bought them all, but then he didn’t buy anything from me for
five months. You have to be sure you want to do that when you do it.

Another thing is to go to retailers like Big Lots and Overstock.com.
Overstock.com will give you a bid on practically anything.

You can send them a photo and some specs of what you have and
they’ll give you a bid on it. Many times Overstock will not even move
the merchandise. They’ll just pay you to pack it and ship it for them.

Big Lots, if it’s a reasonable good, a consumer good, this type of
company will make a bid on it. They will make you an embarrassing bid
but they’ll make you a bid.
           Here’s the deal with them. When you’re starting to deal with guys like
           them and brokers, they’re like us, they’re going to look at that and say,
           “He made about a dollar for that. Let’s give him $.80.” They’re not
           going to be stupid and go for the half price thing unless they just need
           something in that particular category at that particular time. They’re
           going to make you bleed a little bit.

Richard:   They’re not going to say, “That guy looks like he ought to be driving a
           Corvette.”

Perry:     I would much rather lose $.20 on the dollar and turn over my cash than
           let it set there and ride that train all the way into the ground. I’d rather
           turn it and burn it while I can.

           Try local brokers and local discount people. There are a lot of them
           around and if you want to find them here is a really great tip. Make
           friends with some trucking company managers in town, and people
           who handle damaged freight for trucking companies.

           Here is what happens in the trucking industry when they have a
           damaged load. They pay an insurance claim to whoever the damaged
           claim was going to and they keep the goods. The way they try to
           recoup some of their money is by calling surplus brokers and saying,
           “Hey, this is Jimmy over at Passville Truck Lines, and I have a truck
           load of light switches. What will you give me for them?”

           These brokers will make them some offer. The point is that the guys
           who run the trucking company docks know all the liquidation dealers in
           town. It’s a way for you to call them up and tell them, “I’m an import
           company and I have load of damaged goods. If you don’t mind me
           asking, can you turn me on to anybody in town that buys damaged
           freight?” Or maybe you can take him to lunch or for coffee in advance
           before you need it. Finding those guys is good.

           I talked about Craigslist earlier and they’re good. Most cities, or most
           larger cities have liquidation auctions. They’ll usually have them once a
           week or at least once a month. Many times they are called Asset
           Recovery Auctions, or Asset Reduction Auctions.
You can bring in your container of stuff and let somebody bid on it at an
auction and sell it right there. Again, you might not get everything that
you want out of it.

I told you before that sometimes I would make more money. This is
pretty interesting. If you get freight insurance on a product, particularly
inland freight, and it gets damaged between California and wherever
you are, that’s the thing where you are going to get a claim with the
inland company, the trucking company, or the rail company that
brought it in.

If you can show that that is the case, they’ll usually make you two
offers. “We’ll give you $20,000 and we keep the freight, or we’ll give
you $17,000 and you keep the freight.”

I’m pretty good at liquidating so if I can do it I’ll take the lower amount
from the insurance claim and then I’ll sell off the scratch-n-dent
merchandise, which in a lot of cases there isn’t a whole lot wrong with
it.

I’ve had situations where I’ve actually made more money from a losing
container than I’ve made from a winning container because I have $.90
on the dollar for the goods and got a $17,000, $18,000, or $25,000
check from the freight company. There is a possibility that can happen.

Is that a business model? Hell, no. It doesn’t happen most of the time,
but occasionally it will happen.

I think we’ve covered the process. We’ve talked about sourcing. We’ve
talked about how to get your samples. I think I’ve explained how to get
a great quote and a great price. We’ve talked about customizing your
products and value-adding and getting the most apples to oranges
comparisons that you could possibly get.

We’ve talked about how to place your final orders, how to get proper
quality control, how to negotiate great terms with the factories, how to
work with freight forwarders, and how to deal with shipping, customs,
and tariff issues, and we’ve even gotten down to talking about what
you can do if you happen to get damaged goods.
           By the way, on the damaged goods thing, your number one avenue is
           to try to get the factory to make it right. Most of the time they will do
           their very best to make it right if there is any possible way that they
           can.

           Here’s another way you can make money. I forgot about this one. I
           almost left it out.

           If I get damaged goods in and I am able to overcome it, when I place
           my reorder I will ask the factory for a credit for whatever it was that it
           cost me. “I’ll tell you what. You guys really messed me up on that last
           order.”

           They’re going to start calling and emailing you, “Are you ready for
           another order?”

           “No, you really messed me up on the last order. It cost me $10,000 to
           get that crap fixed. If you want to give me a $10,000 credit on that last
           order I might try you again. I might.” Don’t ever give them a sure thing.

           “Oh, okay, okay.” Normally they will do it and they’ll cover whatever it
           was that cost you to remediate on your side of the fence. That is
           another way that you can make money on damaged freight.

           That is pretty much the entire process. That is everything you need to
           know to be an importer, and that’s assuming you probably want to go
           to China.

           I’ve talked to you enough about sourcing online. There isn’t a lot more
           that I can tell you about sourcing online than I have. All the practices
           that I taught you in person, try to use those as much as you can in the
           online process.

           Good documentation, talk to the right people, and negotiate fairly and I
           think you’ll do just fine.

Richard:   Perry that was an absolutely huge amount of information. You’ve really
           taken everyone through the entire process, and I’m sure everyone has
           their head spinning right now.
           I’m going to put you on the spot a little here. Are there any last
           thoughts, something else that is big on your mind that you might like to
           go over and spill the beans on?

Perry:     It’s no big secret, but I love, love, love being an importer. It’s a cool
           business to be in, first of all. “What do you do?”

           “Well, I’m an importer.”

Richard:   It is sexy.

Perry:     “What do you mean?”

           “Well, I go to China and the Orient and Asia and other places and I buy
           products. I trade internationally.”

           A lot of people say, “Really?” You never run out of stuff to talk about at
           parties. You do have some damn interesting stories if you do this
           enough times. Some weird stuff is going to happen to you.

           I had a friend of mine that got locked in a Chinese toilet for almost an
           hour once. [Laughter] There are all sorts of things to talk about.

           Why do I do it? Complete, 100%, market domination. I don’t like to play
           on an even field, bottom line. I’m an importer. I don’t care who you are
           for the most part, you can’t beat me.

           If you want to manufacture against me I will beat your brains in. I have
           no labor costs to speak of. The factories that we use in China and the
           factories that are mine in China, we can just kill anybody as far as
           manufacturing goes.

           If you’re going to import against me you’re probably not going to be as
           good as I am. You’re not going to know all the things I’ve learned in the
           last 10 or 11 years doing this. I love that.

           If you’re trying to retail against me, again, I’m going to kill you. You’re
           buying up a supply chain. I am the supply chain.
           I get to be ultra prime all the time. I can make money all the way up the
           list. I can decide that I’m just going to rep containers for people and
           make five percent of the profit and take no risk.

           I can decide that I’m going to bring the products in and be a wholesale
           distributor and make 50% profit, take some risk, and know that I’m
           feeding a supply chain where I’m still cheap and I can liquidate.

           I can decide to be the retailer. Look at Old Navy stores, for example.
           There are a lot of companies like this. Old Navy, Kohl’s, Ashley
           Furniture, some of the biggest retailers in America right now are giant
           direct importers. IKEA, everything they sell fundamentally comes from
           China, but they sell it direct in their own retail stores.

Richard:   Their brand.

Perry:     Yeah. You can’t touch them. They are selling a couch for $499 that
           they have $60 into. The guy down the street selling a $400 couch paid
           $350 for it.

           You can just absolutely slaughter your competition. There is just no
           way they can possibly compete with you on the consumer end.

           People come up to me all the time and say, “What should I do? Should
           I be a retailer, a wholesaler, a broker? The answer is, yes. You do all
           three.

           If you do it smart and handle it the right way, you have different brand
           names, different companies, and different sites and you can retail,
           wholesale, and help people.

           With brokering you’re selling your connections. The bottom line is that
           there are people that badly need those connections, and badly need to
           know how to handle the paperwork, cross the t’s and dot the I’s
           because they don’t know how to do it and they’re too damn scared to
           ever try.

           You can just be a service based provider like the guy we talked about
           that does the aluminum extrusions.
Richard:   That’s the easiest thing. I don’t see how you can’t win with that.

Perry:     You literally walk in the door and say, “Hey, would you like to pay half
           for that?”

           “No, I like paying full price.” It’s aluminum! My aluminum is aluminum
           too. It’s pretty simple.

           This business has an unlimited amount of opportunities.

           The other reason that I absolutely love it is because I get bored really
           easily. I’m an importer, but this week I’m importing something else, and
           next week I’m importing something else.

           I buy and sell companies, I create companies, I create brands, and I’m
           never, ever, ever bored. I could be selling blow dryers one day and
           condoms the next. I don’t know what I’m going to be selling, right.

           I never get bored in this business because there is always something
           different about it.

           The other thing is that is has some real intrinsic value; selling private
           label to other companies. We’re able to come in and source products
           and brand them to their stores.

           We’ve talked before about bringing in a piece of equipment or
           merchandise or whatever that turns into a business in a box where a
           person can go and put somebody into business.

           Right now we’re considering beginning to buy hair salon equipment
           because Richard has experience in the hair salon business. We can
           literally bring in an entire salon of equipment for about $2800, I think.

Richard:   Well under $4000.

Perry:     We could just sell the equipment, and there are people out there that
           do that. I personally think that is stupid.

           What we will do instead is create a brand name, get an industry expert
           to write us a guide, create a specialized pallet of colors, bring a
           designer in to design a store, and we’ll sell them a design package, a
           brand name, all the art work for their signage and for the embroidery
           and all of that, and all their equipment for $9999.95.

           You can get a Beauty Shop-in-a-Box. A shipping container backs up to
           their back door one day and there is their beauty shop. They pay me.

           Listen to this model, for what it’s worth, because you’re going to dig
           this.

           Let’s say I can buy this for $3800. Guess what I’m going to do? I’m
           going to charge them $3800 down and the balance on delivery. Duh!

           Their other alternative is dropping $30,000-40,000 in equipment.

Richard:   Minimum.

Perry:     With me they give me $3000-4000 and I pay for 100% of the
           equipment. It gets here and drops off at their door. Guess how much of
           that second check I get before they get their stuff? All of it.

Richard:   Other people’s money. No risk.

Perry:     By using other people’s money. In those situations we tell them, “We
           build it out for you in our factory in China and it takes six to eight
           weeks.” Tell them right up front.

           What are they going to do, go to China? I don’t think so. They’re
           cutting hair. That is their business. That is what they do.

Richard:   Or go pay $40,000.

Perry:     Yeah. I hope you get this.

           Lastly, I want to tell you one more thing. If you think about every big
           brand of consumer goods in America right now: Eureka vacuum
           cleaners, RCA telephones, double computer monitors, whatever you
           have in your home or business, guess where they’re made? China.
           Those brands have been built based on Chinese manufacturing. What
           do you think those brands are worth?

Richard:   Probably a few dollars.

Perry:     They are worth a ton. I built a brand name company not too long ago
           and ran the brand for less than a year and sold the brand name off for
           $350,000. It was just a brand name of a product that I was bringing in
           from China.

           I didn’t sell the inventory, I just sold the brand name. That’s pretty
           remarkable.

           People buy these businesses. The exit strategy for an import business
           is establishing product in the market as the product in the market, or
           one of the top three or four products in the market. You don’t have to
           be number one. Being number two or three would be pretty cool.

           Being one of the top brands in the market for whatever it is that you
           sell, and literally just selling your company and your brand. Do you
           know who is going to buy you? Probably the guy that is number one.

           Somebody is going to buy you and envelope you into what they’re
           doing especially if you become enough of a fly in the ointment.

           I’ll tell you, this is one of the coolest things that ever happened to me.
           I’ll never forget when I started importing and I was working really hard.
           This was years ago and I was down in Destin, Florida, where I took my
           family on vacation.

           We went into the grocery store that night to get food for the condo, and
           we went into the discount store next door and we were going to get
           some floating toys and stuff for the kids.

           I walked by and did a double-take when I looked down on the shelf at
           this store in Florida and there was my product. I thought, “I’ll be
           damned. That’s cool.”

           I didn’t know anything about this store. They had bought from one of
           my distributors. The whole time I was in Florida every time I went into a
           store I would look for my product. In about eight out of every ten stores
           I had product on the shelf.

Richard:   Wow!

Perry:     I’ll tell you what. That was probably the coolest feeling I’ve ever had in
           my entire life. There was a store out there that I had never even heard
           of selling my stuff with my product sitting on the shelf. They’re actually
           pushing my stuff making me money every day while I’m somewhere
           else asleep and I don’t even know they exist.

           That was a really, really, really wicked cool thing about importing.

Richard:   Makes you feel like you deserve a vacation a little bit more. [Laughter]

Perry:     It did. I should have stayed a little bit longer.

           Anyway, that’s pretty much it. Get out there and get started and get
           your feet wet. Let me know how you do. I’m dying to hear about your
           success and what you’re able to accomplish.

           I look forward to talking to you soon.

Richard:   Have fun importing, guys. Thanks.

				
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