Hi, this is Daniel here and I want to give you a quick update today on something that's really important for you to be aware of if you're sourcing products in China. But really if you're sourcing anything from anywhere, I'm gonna mention two concepts as well here that are important for you to understand that aren't talked about much. So you know, whether you're sourcing products in China right now or not, I think you should pay attention to this video. But now, first of all, if you are sourcing products in China or are planning to, then you know, this is really important to be aware of right now and it's really unfolding and I'm bringing this to your attention basically ahead of the curve. So this is something that's going to become, I predict a, you know, issue and a problem for a lot of people, but it's just starting to happen now.
And I just returned from China's last Hong Kong and became, you know, really starting to become aware of this. And I'm seeing this happen at the moment and I just gave my, uh, students in APEX. seller an update on this. Uh, but even for those of you that may not be as advanced, I think this is still relevant because it can impact anyone, even if you're about to source your first product. And of course if you're an established seller, then this becomes even more important for you. So what am I talking about? Well, as I'm sure you know, China right now is going through sort of an economic slow down and a bit of a downturn, uh, because of the trade war and all of that stuff that's going on. And of course, you as a seller, you know that this is a bit challenging to deal with or can be.
And it does affect us as sellers, but it doesn't only affect us, it also affects the manufacturers in China and the suppliers. And anytime there's like a contraction with anything, uh, and economically speaking as well, you know, not just theory, but in practice, uh, the implications of an economic slow down or downturn, things get more challenging is that, you know, things basically contract, right. And out of all the suppliers and manufacturers in China, there's a certain part of them that's going to have more difficulties than others. And while everyone might suffer a bit because they are losing business, you know, some companies are switching their sourcing to other countries like Vietnam or going out of business because of what's going on with the tariffs. Now, obviously the business in China for suppliers is getting hurt as well. And what's going to happen is that the, uh, the suppliers sort of on the edge here that are maybe less established, they're smaller, they're basically in a weaker position.
They might not be able to sustain losses, for example, or loss of business in, in either case, for long, you know, they're going to basically go out of business or they're going to have serious issues. They could even have cashflow issues and things like that. So that's what I want to bring to your awareness. But really for you, for us, what is important to understand here is that this can expose our businesses to a lot of new and unnecessary risk. So if you're sourcing from a less established and a smaller business in China, so a smaller manufacturer or like a trade agent or trading company, um, you might be exposed to a lot more risk now than before because what could happen is that one day, this supplier or this manufacturer or this trade agent, this trade company might simply go out of business and close their doors and with Ultimate's notice, and of course if you're selling products, let's say you have a product that's doing well, you're, you know, battling to control and manage inventory and plan for integrating sales might be going up.
You need to really stay ahead of the curve so you don't run out of inventory. It's can be a really bad thing or was the big loss in revenue there. But no, the risk is that either the supplier that you're using is going to be slower, they're going to have issues because of cashflow. Which causes you run out of inventory or worse yet they might simply go out of business and close shop and now you're definitely going to be out of inventory and you might be out of inventory for a long time because what you have to do is you have to find another supplier and if you have a product that you know has been customized a bit or you have, you know, specific things, you might have your own tooling or you might even just have your own packaging and different things like that.
Obviously setting that all up with a new supplier can take many months. So you might be out of one of your most important products or even a big portion of your portfolio if this happens to you for a long time. Which obviously, it can be devastating for your business. So I want to bring this to your attention now before you potentially have an unfortunate situation like this because what is happening is that some suppliers are starting to struggle. So China is doing what they can to inject casts and to support the businesses and everything. But some businesses are going to have difficulties and especially the smaller, less established suppliers. Again, couldn't be actual factors, could be training companies, training agents. And I'm seeing this as happening already because sometimes we prefer to work with smaller suppliers because they're more flexible. It can be better to start new products with them.
They might be quicker, they might have lower costs, lower MOQ is things like that. Um, but what I believe is the case for a lot of you as well as you may not really understand who you are working with. You know, that's something I've seen quite a lot. So you might think you have a great supplier, someone that's established that's um, you know, solid. But in reality there might not be that established and they might be dependent and rely on a reliant on other things. So, you know, maybe it's a, like an assembly shop and they're reliant on their suppliers that can have issues and you know, there's all kinds of variables at play here that can basically exposure to a lot of risk. Right now. And again, this is just starting to happen. I'm just seeing this starting to happen now, but in as the trade war drags on, this could get worse and worse.
And you know, if you're in Facebook groups and things like that and you might start to see this kind of thing pop up where people are having this problem, you know, almost a player just disappeared or told me they're going out of business, you know, and if you're not prepared for it, then you might have a serious issue. So I wanted to give you, um, had a heads up on this basically before the problems really started happening for a lot of sellers. So you can take the necessary action to basically prevent this situation from happening to you and this problem happening to you potentially. So what is the solution, you know, what can you do to actually help mitigate this risk? Now there's basically the two things. And um, the first thing is to obviously, understand your supplier. So I use an internal process for auditing everyone we work with, like factories and suppliers and really understanding, uh, you know, their situation, even like the ownership structure and things like that.
To really know, you know, what is this company, uh, how long have they been in business? What is the potential or the most likely, you know, cashflow situation or structure behind the business, you know, how it, how's it basically a setup and how, how is it running, who was running it and all that kind of stuff. I mean, this stuff is important to understand because if you're dealing with a supplier that's really like a small shop, they might be coming across to you like a bigger business, but maybe it's just like a, a middleman or a trading agent or something, but they appear to you like a trustworthy manufacturer and it might be able to supply your product and everything. But if there's really not much substance behind that, um, partner of yours when it comes to your product or your products, then this can potentially be exposing you to a lot of risk because they might not have a lot of backbone, so to speak, to go through difficulties and, and you know, a loss of business and things like that.
So the first thing is to really understand who you are dealing with on a deeper level and make sure you're only really dealing with more established manufacturers right now, or at least for any product that you have that is driving substantial revenues. You should make sure that that product is being made by a supplier that is, you know, likely to basically withstand any, uh, you know, any stronger winds so to speak in the environment, right now where they might lose some business and things like that. Things might be harder, their profit margins might go down and you know, they need to be able to basically, uh, sustain that until things get better again. So that's number one, make sure that, especially for your most important products, you have solid manufacturers in place. But the second thing, and this sort of adds to this, it adds more protection, is to have a backup supplier.
And especially for any product that is established that's driving substantial revenues, you should have a backup supplier in place. And this isn't just because of this reason, it's just really how to run on professional supply chain is one of many things that most sellers don't do, but you really should do if you want to have a solid business and a professional supply chain for your private label business. So how do you do this? Well, the key thing to understand with backup suppliers is you need to have them fully set up, right? So it's not enough just to know about another supplier that you could use. You need to actually go through all the steps with that supplier for them to become like a true backup supplier because what do you have to be able to do is in case you have an issue with the first supplier, the main one, and again this can happen at any time.
They might have all of a sudden like a 90 day lead time and they used to have a 30 day lead time. They might again go out of business or you might have quality issues all of a sudden pop up or something happens to the relationship, things like that. What you need to have in place is a supplier that you can switch to immediately, right? And place an order with them. And if all you do is just know about another supplier, you have a long way to go into, we can actually do that, right? You need to like do a factory audit. You need to understand them, their situation on a deeper level. You need to uh, obviously compare suppliers and choose a good one that has good pricing and good quality and all of that, right? So you need to actually get samples. You need to, if you have a customized product, you really should have like a specification sheet in place to give to them to make sure that it's done exactly the same way as with a current manufacturer, right?
If you have tooling with the current manufacturer, you need to basically be ready to switch that to the backup supplier in an actually, depending on the importance of your product, you may want to have separate tooling even made an in place with a backup supplier potentially. But you need to really think about all these things and you need to really actually do a test order with a backup supplier to make sure that they can do it right. And if you've done all of that, then there's even more to it. But really if you have a supplier that you not trust and you know that can make your product right and the right quality, you know, with a good lead time at a good price, all of that, now you have a true backup supplier and really you could have your product made from either supplier.
Uh, so instead of just having one supplier, now you have to, that can make your product and if one has an issue, you're good cause you have another one. Right. And one of them might have like the first one, the main one might even have just like a capacity issue at some point as you grow now, well you can increase the capacity and how many products you can have made, um, within, you know, a reasonable amount of time because you have two suppliers. So there's a lot of benefits. But really now The, with the risk of your supplier, you know, being more likely to have issues and go out of business for any product that's driving substantial revenues, you really should have a backup supplier because what happens if the first one goes out of business? Again, you either need like six months to set up a new one and have the product made and you're going to be out of stock.
And if you're selling an Amazon, you know that that's going to cost, you know, is it a serious loss in revenue, but also you might lose your rankings and your positions that you've, you know, basically invested into gaining on Amazon and it can really harm your business. You know, someone can come in and really, take you over. So, um, yeah, extremely important to have a backup supplier for any product that is driving substantial revenues. It's totally worth the time and the investment to have this in place to dramatically reduce the risk in your business. Because no, if you have, again, an issue with your first applied for any reason but a new reason that is going to become more prominent, is that the potential issue of someone having cashflow issues or going out of business? Well, no, you're pretty safe cause you have another supplier good to go and most likely both of them are going to go out of business, uh, at the same time.
And again, you should also make sure that both of these suppliers are solid. You understand their fundamentals and you understand them at a deeper level. Uh, because you don't want to be working with a supplier that's basically, you know, has no substance behind them. And really it doesn't take much to shake them up to the point where they go out of business. That's the risk here. And again, it's just starting to happen though. That's what I'm seeing. But I predict, uh, if the trade war and and things like that and the tariffs linger on which I totally believe they're going to, then it's going to become, you know, a bigger and bigger potential pitfall and a problem for private label sellers sourcing from, from. So I wanted to make you aware of this and I hope this helps. And again I think the main message here is that the supply chain really is becoming more and more delicate and important for private label sellers.
You know, things like your costs need to be really competitive quality and things of that nature and things that most sellers don't really pay a lot of attention to. And I'm going to include a link below this video if you want to check out your free video that I have a that talks about more of these systems and these things that most sellers don't pay attention to. But really you should be more of the fundamental things that support your business and your success. And these are the things that can either like have a dramatically negative impact on your business and can cause serious issues if you don't have them in place or they're going to drive and support consistent, reliable, long term growth and success as the ability for your business. So again, there's a link below this video if you want to check out that other video and learn more about that.
Um, but besides that, let me know what you think in the comments below as well. I would love to hear your thoughts on this and if this was helpful and if you have any insights to share as well and things like that. And you can also like this video if you like it. And yeah, we'd love to have you join the conversation by commenting below and let me know what you think. But I hope this has been useful. Again, I would really take this seriously if, if I were you, if you're selling a product or even if you're above the sort of new product, you know, pay attention to, again, the suppliers that you're working with. And as soon as you have a product that's established that's driving substantial revenues, make sure to have a backup supplier fully set up because this is your business and this kind of risk is unnecessary. And you want to make sure you completely eliminate this type of unnecessary risk. And you don't have this in your business as a big risk just because you don't think about it and your maybe lazy or you don't know the processes and the systems to, to put in place to prevent, uh, these potential, uh, very damaging issues for your business. So again, hope this has been helpful and I'll talk to you again soon. Bye for now.