Cut Shipping Costs By 30% For Your DTC Brand In Less Than One Hour (With Mehtab Bhogal) transcript

the same concept applies across vendors in general I found American vendors are better about this like they don't need to be turned off usually unless they are like a very strong monopo or a larger company that's where you Ty have to do that but if it's a smaller 3p they tend to be more reasonable around negotiations walk through the actual order of operations here so step one you literally go to your 3pl or your I mean like just AB stop shipping with a certain shipping carrier right so let say it's F yeah I mean we'll we'll go to FedEx and say hey look you know we need to negotiate rates this is just not competitive relative to what else we're receiving quoteswise and we'll show them the rates were being quoted from another carrier whether there's laser ship or someone else and they'll just say no usually and we'll say okay great we're turning you off then and we will just turn them off um and we don't lose money because we use ship Haven which basically beats their rates no matter what it's a great hat service um we haven't had any issues using them in four or five years I I don't have any relationship with them but yeah yeah um that that's how we do it so yeah okay and then once you do that they're willing to say like well hold on maybe we can the rep will come right back every time 100% of the time never fails the rep comes right back they're like oh no what can we do to win your business back blah blah blah and um just works every time with the shipping carriers unfortunately I mean like obviously I prefer not to do this all but it's the only that works so incredibly actionable I'm going to immediately turn around and reach out to my um to some of my clients and just say like go do this thing now because it is uh it is so awesome have you done this across the board with shipping carriers yeah probably we've probably done this like 20 or 30 times now um what do you how much money do you think that has resulted in Saving uh oh millions millions of dollars um really oh that's millions of dollars like total but on average I'd say probably the first time you do this you'll save anywhere from 10% to 30% on shipping and that depends if you integrate other you should be integrating a lot of the smaller carriers too like laser ship uh they're great they totally work and it depends on where you are geographically because some of them will not service to you like for example DHL laser ship and a few of these other guys they want to operate in some of the smaller States so it does depend on where you are but it's definitely worth looking into and there's if you just Google it you'll find a bunch of them if you and if you're working with a 3pl um to to do this sort of thing are you like doing that in concert with your 3pl at all or are you just calling the sh car directly well it depends on the three p and your relationship the three p and if you know you're using your own postage accounts or their postage accounts Etc but the the same concept applies across vendors in general I found American vendors are better about this like they don't need to be turned off usually unless they are like a very strong Monopoly or a larger company that's where you typically have to do that but if it's a smaller 3p they tend to be more reasonable around negotiations um and I would really approach with 3pls were're we're more collaborative so we'd work with them to they redesign packaging Etc or just go and look at how they're picking and packing our product um yeah makes sense is um what about um let's let's take that out to that next level then vendors in general you have this piece of advice that you say just declare that you're going to pay them 3% less over the next 18 months like to tell me like this is a this is a bold move and I think a lot of people would feel nervous about doing this uh I I don't think you would but tell me tell me about uh this strategy yes there's no real downside to doing this it works best if you can send it from someone kind of authoritative like the CEO or the CFO I like the cfoz everyone just assumes CFO is kind of like you know tough um and it gives us someone to blame because usually like the CEO might be negotiating direct they you're working directly in product Dev with say a a manufacturer right so you could just kind of force that on the CFO and that way you don't torch the relationship but just sending out an email to all of your vendors saying that you're now paying 3% less and if anyone sends you an invoice without having I guess read that email you just subtract 3% and send it back and just remit that amount of money and say do you not read the email that we sent you and this works probably it'll probably work with 85 to 90% of your vendors when you say it works do you mean you have to get to the point where you just uh pay the 3% less like they won't actually uh or they or were they most times were they just invoice you 3% less I'd say probably 60% of them will invoice you 3% less the other ones will be surprised but that's just their fault for not checking their email that's so funny and uh I I like the CFO move too it totally makes sense everybody just expects the CFO is just like some numbers monster sitting in a corner somewhere trying to trying to slash you know whatever you know that personality listt like they don't you know whatever as a CEO be I'm so sorry my cfo's like uh you know uh really holding me to it you know so yeah basically in any supply chain book you'll see that they recommend separating out like the the purchaser from the relationship of like from from being the same person who negotiates if that makes sense so if your job was to be the person pulling the trigger on purchase orders I want someone else who negotiates because you help but build a relationship with whoever you're working with on the other side right yeah easier this advice reminds me a little bit of I remember hearing Moy Ali say a long time ago a long time ago like everything is negotiable it's way more negotiable than you think and you just never try it and you should negotiate everything you can and every two and three% you could possibly get you should take you know yeah the way we look at it is just like a lot of a lot of um suppliers will just declare a 3% price increase so when go the other way I mean I'll just declare a 3% decrease that's that's a great great way of framing it yeah um I love that um anything else on the on the base time on the Baseline uh like sort of vendor relationship stuff like you've got a note here about getting FaceTime with people like I'm curious to hear you talk about how that plays in and sort of um any anything else big picture with like actionable ways to reduce costs with vendors yeah totally so a lot of DC Brands end up dealing with man manufacturers that are overseas I think it's important to keep in mind that other cultures are much more FaceTime heavy and even in the US there's still like you show up they'll take you much more seriously they'll be much more willing to negotiate than if you didn't show up but overseas that that's probably like another three to four times is important so I think actually going on trips to China India Vietnam wherever you Source from is really really critical and then remembering that there is still there's like a bit of a big man culture in Asia and this is pervasive across a bunch of countries there where people don't like it if you're and even in the US right people don't like it if they negotiate with you directly purely on cost they'll feel like they lost no one likes to feel like they lost a negotiation what we found works better is saying hey let's work on a new product together that cuts out a lot of the unnecessary things that our customers don't care about and reengineer it together even if you are essentially just beating them down on price just phrasing it differently tends to help a lot or even pushing for something like terms where they don't realize like they don't think of it the same way as just a pure cash discount even though it functionally is right um really diving into the the term side I think understanding the financing structure of whoever you're negotiating gamst is really really important uh keep in mind if you're an exporter you have access to State subsidized financing Almost 100% of the time pretty much every country offers some sort of State subsidized um financing function for exporters so uh in China for example the sinosure um in India there's a bunch of subsidies available and it's important just to take it doesn't take too long maybe a few hours just to Google around and see what's available to them and often often the the counterparty won't realize that their cost of financing is exponentially lower than yours so if you're DC brand that's pretty small let's say 5 to 20 million you're probably paying for for a debt that's not personally guaranteed you're probably paying anywhere from I want to say 10% to 18% in interest rates depending on again no pH depending on how large you are balance sheet looks like they're paying way less than that they're paying like in some cases they're paying like 3% or something just because State wants to subsidize exports so much so heavily um so if you work with them around that you can often find bigger price breaks that way around terms than just straight up cost um so so basically you're bringing that to them telling them that and saying hey can you finance this instead of me basically I'm going to pay a little bit less because you just have access to better rates than I do I mean how are you actually leveraging that bit of information into the negotiation yeah that's totally it or or just getting them to do things like keep more inventory on hand because their cost of holding that inventory is much lower than yours right so you say look there's no risk for you because you're still holding the inventory there there's a little bit of risk it's not like they're shipping it to you and you have it and they don't right so you say hey why don't you guys hold more inventory in stock so that way there's less of a wait time between you placing a purchase order and getting your product still so there's still that same net benefit but they're just holding it on their balance sheet do that makes sense totally makes sense and then are you are you framing that at that point as this will help me grow which will help me generate more business for you and and by by sort of essentially I mean it's essentially a cash conversion cycle issue at that point right you you're now being able B to reduce your lead time make smaller orders and then say to them at the same time like this is going to help fund my business's growth I'm therefore going to order more from you it's just this I need you to leverage your better terms than mine in order to make that happen and now everybody wins yeah exactly most of the time they're totally willing they just didn't understand that Dynamic and again maybe a lot of Brands don't understand the dynamic where it is cheaper for the vendor to hold the inventory on their books so yeah it's also 100% true if you say those things you know it's like this is like such a fundamental pain point for e-commerce brands that like and there's no markup right like for the for them it's just the cost of whatever their inputs were so say labor material cogs etc for you there's still the manufacturer markup right so like their cost the Baseline for what they're holding inventory is lower too plus the cost of financing so yeah it's a win-win [Music]