Inside My Chinese Startup Negotiating With China's Biggest Factories transcript

This is one of those days that reminds me why I made the move to China and risked it all. We'll visit one of the largest and most advanced tile factories in the world. And tonight, we've been invited into a private event for China's biggest factory owners. All I know is that we're the only Westerners who will be in that room. So, we're at one of the top three largest ceramic factories in all of uh Foschan here in China.

Um, and so Fosan is known as like the ceramic capital of the world. And so, yeah, this place is unbelievably large. Literally like there's warehouse on warehouse on warehouse. Um so you could probably drive around for the next 10 minutes and literally just see more space. So like we literally see just here factory for miles. So we're going in here. We're just going to explore kind of the production process, how things work.

Um just trying to check the standards of like what is actually being produced. Um again cuz we're trying to make the best decision on what is best for our retail customer, what are the styles that are available, what are their stock levels. Um and obviously pricing as well is super important. So, we got our slides here on our business model and how it works and hopefully we can convince these guys that we're they're a good partner to work with, especially if we make that decision that um these are ones we want to partner with and and they suit our model and and they're a fit.

So, let's uh go check out how they make some tiles. It's like it's pretty incredible driving around here. You just realize like the absolute scale of this place. Um yeah, something like 1.2 2 million square ft of manufacturing um space and they've got 18,000 people that work across their their production plants literally just producing tiles. And so you think just like trying to compete like say if we were to go open up our own tile factory trying to compete against these guys it's just like you have to be so much better than them to be able to make the margin work.

And so I'm always thinking about like how could we out innovate them? How could we potentially create a more competitive business model to try and like vertically integrate what we're doing? Cuz ideally, you don't want to buy from suppliers. You want to just produce your own stuff. But driving around here, you realize how actually challenging that would be in an industry like Tiles. Um because these guys have been going for so long and they have it down to like a T.

And to like outdo them on like material costs and labor costs and innovation, I mean, it's just like it's just it just like just next level. I have literally no words. I mean, look, it's just walls and walls and walls and walls of of factory. So, we're going to have a look now at their actual factory production line and the kind of stock levels and warehouse um that they've got uh here, which is in one of these 20 warehouses.

Maybe this one. Oh, yeah. This is one. All right. It's all uh automated. Oh, here we go. where I am. Take me back in time. I want to see you. Say, so this is literally like the start of a tile. So you think about actual porcelain itself. It's pressed before it goes into the kilm and gets fired. So this is like the raarest tile that you'll ever see. You literally see here, it's all if I press that, it literally would push in.

Um, and so this is just before it goes into a kiln and gets cooked at like 1,000°. It's just like, but the amount of innovation that you see here, all innovated. Previously before they're saying this was all people. So I had a production line of like 400 people, they reduce it down to 60. And so when I talk about like innovation and China and as we think about it from a business model perspective, how are we like partnering with the right people, building the right relationships, and you're trying to go with people who are like working like this.

This is why coming to these factories is so important and seeing it believe that like you literally throughout the entire process have no people and and whether it's like the production of the tile. So you know about the raw materials, the kiln, the design, the printing, the firing, all of it. There is not one person that we saw along that entire production line. Every single part of the tile automation tile production they've automated here.

And these guys just aren't doing it for fun as like some sort of like mini test experiment. They're doing I think it's something like 2 million I don't know something like square meter of tiles they can produce a year. Um and this factory is unbelievably large. The only reason they have people here is so they can reload the machines of the packing boxes. That's it. Um and so yeah I mean we're lucky enough that we actually have a meeting with the factory owners sons and they already know about the model the Bloomfield model going direct to retail customers in Australia. only 1% of what they sell goes overseas.

This is all pretty much for the China domestic market. So, what we'll be doing is like giving Australians access to production like this. Like they're using AI quality checks. It's insane. So, this is going to be next level quality for like literally half the price that you can get this stuff anywhere. I'm excited. That was great. Thank you for that. It's very very good tour. Okay. You're welcome. >> I like your I like your buggy, too.

Little cart. It's very cool. Um well, I think David's told you kind of like what we want to do. >> So, like we think we think the problem in China at the moment is uh nuan. >> Yeah. Yeah. Yeah. >> Yeah. Everyone's like trying to get cheaper and cheaper. So we we want to like not do that to you. >> Okay. >> Um so as David was saying, you know, there's a tile factory >> today, the old way. Tile factory, agent, brand, store, and then customer. >> Us is we go tile factory to customer.

So we're direct link. >> So think about a direct link to Australian market >> customers and then eventually America. >> Um our prices are much better than uh like a Home Depot or a Bunnings. >> Yeah. So we can sell for much cheaper but then your factory cost as well. We're not trying to squeeze you and try and constantly get a big price >> and the price about the price uh I I know from David that you are uh going to Don or other factory.

I also want to know what the what the price they give you from the beginning because this is the big problem to every factory because you said you have quantity in the future time and we don't know how long and as our old corporation we we gave we only gave low price in the big quantity. >> Yeah. >> But at the beginning we maybe have uh give the the normal price we are doing right now. Is it okay? >> No. So, so think it requires maybe we pay a little bit more from day one and that could be okay, but we still need to be very competitive in our market.

And so, whilst I know that we're not ordering a big one big order, which is the old way of doing things, which is how you deal, think about it as like if you trust and we'll be able to prove to you that we're able to order big quantities over time. There's maybe a period of like 6 to 12 months where you give us reduced pricing. >> Yeah. >> Like we're ordering large quantities and if we don't end up ordering enough over that period of time, we should set some milestones then you can reset back to like >> okay >> standard pricing.

So if you believe in us as a business and we can talk to whoever as well and give them just based on our already our track record as a business um and my track record as a person then potentially there's a way that we could get that access to cheaper price just like Dong Pang is willing to do. Um but if we could work with you guys and you have much bigger facilities and scale and we like your stock range more and you could give us some more competitive pricing then you know we would be like open to doing that.

We also have another way that we cooperate with other clients that they >> uh also we we can give a competitive wide price at first but they need to sign up the corporation uh contract with us that you would need that quantity in a year >> a year time and then we give you a competitive price but uh you need to give some guarantee in the rounds that to promise that you will by that quantity of >> Yeah. commitment. Yeah. >> Yeah.

Yeah. >> Okay. >> It's kind of similar to what I to what I said about having that initial >> substantial order first. >> Exactly. >> Establish that relationship. So at least like you know you've put your sincerity on the table and then >> down the line if they see that you've proven that the the quantity like you say in the long run it's it's uh much larger than in the short short run then then you can continue that relationship that way. >> Yeah.

Yeah. Totally. Yeah. >> Good. And as uh David said, I think like our biggest thing is we want it to be a win-win relationship and especially for you guys if it means unlocking the Australian market and being able to grow and expand and not have to go through, you know, distributors and all these middlemen and then the retailer and then that finally gets to the customer. We see it as like a great opportunity to be able to unlock that and not ask you guys to produce custom tiles and do all these different things. just sitting there in the warehouse and all the different it's like a it's like a channel to market where we understand the Australian and the US market.

That's where you know I grew up. We understand we've been in the construction industry for a long time and so we get kind of how to sell there and so but you guys get how to manufacture and you do that very well. 1 + vice versa cuz no one does online building supplies well in Australia. >> And so we think we'll grow one of the biggest businesses there very quickly. Um and so with tiles, it's already people are already selling tiles online in Australia and doing very very well, but they're very expensive.

All right, so that concludes our factory tour. I think we kind of convinced them like this would be a big deal if we're able to get this over the line. Um, yeah, I I I think they seem sold, but again, he's like, super senior sales. David, who we're with, knows the two factory owner sons, and so I'll potentially come back next week and meet with them to try and get them across the line. he understands the model. They've actually wanted to crack into the international market for a long time.

And of course, they do. I mean, they've tried before in China selling tiles online, but didn't work very well for them. Um cuz everyone wants to kind of see tiles in person. That's why we're like, well, that's why selling samples is the right way to do it, and here's how you convert customers. And they obviously never tried all that. So, yeah, I think we have something really special here. If we can just have them as like our one launch partner, I think that would be like the thing because the less suppliers you have to deal with in China, the better. and the less things that can go wrong.

And so I'm feeling like optimistic, bro. But like you see how big this factory is. We're just like in the depths of some random two brrizy guys in the depths of China. Um but no, tonight we're actually going to a factory owners event. And so um David's father-in-law runs one of the largest like just groups of factory owners around this Fosan area. Um and so a lot of like Chinese big dogs, big dog factory owners will be there.

Can we speak English? No. Uh, sorry. Can we speak ch Can I speak English? Clearly not. No. Can I speak Chinese? No. Um, but uh can we use WeChat chat and translate? Yeah. So, we'll just be some two random Aussies uh in this uh factory event. And apparently some like CCP like Chinese Communist Party uh officials are going to be there. And so, it's about how the government works with business. That's kind of the forum of this event.

And so, um they've already asked if we put any like anti-government stuff on our Instagram before. And I'm like, "No, no, we haven't." Um so, yeah, it should be an interesting event. Nice. Uh, nice show route. >> Don't want to be late for the event tonight. No, of course. I think I think you'll you'll find it quite fun. >> Yeah. No, it should be great. Anyone there speak English? >> Me. >> Good. Good. All right. One person How many people work in the company? >> Uh you mean the headquarter or the factory? >> Uh headquarters and then factory. >> Uh headquarter about more than 1,000. >> Yeah, thousand people >> in including the four B production bases.

So about >> 18,000. >> 18,000. Yeah. Nice. >> Because every production basis is very big. You can see one of them. Yeah. Yeah. Yeah. Massive >> because we may be the we maybe have the most SKU in the tile industry in China. >> You reckon? Most SKUs in all of China. >> Yeah. Because because No, we have the most capability in the China. >> Yeah. >> We have about two 200 million square meters per year. We can produce >> 200 million square me. >> Yeah.

Yeah. Yeah. Do you reckon you can buy 200 million square meters of tiles? >> So, my personal use for my for my >> palace. Yeah. Yeah. It's a big ass house. Um All right, cool. Let's keep moving. This is great. >> Yeah. So, we're just looking at some of their bestselling products now. Um they have a whole entire showroom that looks like a shopping mall. I mean, look at this. And this is just like one out of their four showrooms here that we're able to go around and have a look at.

This is just like their export building as well. So this is the products that they export, but they're a business that does hundreds of millions of dollars a year in tiles. So one of the largest tile suppliers apparently in China. Um, and these guys can do pretty much anything. And so only like 1 or 2% of their product is exported overseas. And so there's a massive opportunity I think for us to like tap into tap into that.

So yeah, it's pretty cool. Look at this. Is actually the most impressive tile showroom I've seen. Ever. >> Ever. Um, and I've seen a lot of tile showrooms over the last couple of months. All right, it's time to go meet some factory owners. We're going to say nihow or ja. uh Alia or I Guangja Guongjour. I love China. Anyway, we're we're off to this event tonight. And so for us as two Aussies is an incredible opportunity to go and I don't think there's any other international people invited to to this event and there's going to be yeah some interesting people in attendance.

How are you feeling, Byron? >> Yeah, it should be should be a good time. >> Yeah, I don't I actually don't know what to expect at all. Um but I don't think any Australian has ever been to an event like this before. Um, maybe I'm lying, but I have a feeling. So, uh, yeah. And then tonight we've got to get a car all the way back to Guanggha. We're staying the night in Guongja and then back to Hong Kong tomorrow. But today, I think it's been like super successful with our supplier meeting. you know, that factory tour I'm still like thinking about um because the opportunity to like partner with them when only 2% of what they sell currently is international and we can be like their international partner, especially direct to Australia, um is like a big Anyway, my head's got to be in now networking.

So, it'll be fun. Jackie station. Welcome sitting at our table here today. It's like one of they they the largest LED panel manufacturer. Um, also the largest stainless steel manufacturer in China is literally like six meters away to my right. Um, and up there was a guy that owns 70% of the infrastructure in one of the African countries that that we all know. And so like you just think about in every single minute I'm learning about who these people actually are.

Um, and obviously I can't speak Chinese and so like getting these introductions, meeting these people. Uh we just got invited to go and meet the guy who runs one of the largest ceramic factories in China who we haven't met yet. And so like just you think about this access and opportunity that exists in rooms like this. And I literally got asked to stand up all of 5 minutes ago um to recognize the international bias that that we are um in this room.

And so it's crazy when you think like you know where where these Australians in the center of China getting asked to like stand up. It's like oh it's a wild experience. And so, um, yeah, incredibly grateful to to be here, but it's like a representation of all the years of like hard work and networking and access and opportunity. Um, you know, you can't just be someone selling something online for the first time and led up in a room like this.

And so, I'm just so glad that maybe we can give some of this opportunity to people watching and to open doors and give access because no normal person gets this level of access in China. So, uh, yeah, we're just going to take this opportunity and run with it. It's pretty cool. So, uh, let's, uh, let's let's eat before we have to get up and go say automobile. >> Thank you. Watch out, Jack. >> Thank you. We're going around with the main family getting introduced to um to everyone.

And I've got no idea what these people are saying, but that was a government rep. Um another important person, another important person. And so I It's cultural in China. You just stand there, you cheers, they introduce you, you try to get your glasses lower than theirs to show respect. We just made it back from dinner and that was the craziest dinner networking event I had first of all ever known existed in China, let alone been to myself as definitely the only non-Chinese person in that room of a thousand people.

So he literally came with the organizer who and his family were the ones at our table and literally across from me was like the largest manufacturer of LED lights in China. the largest ceramic manufacturer in China was to his left. Um the guy who does all the copper wiring for the Chinese government to his right. Like it was unbelievable. And you saw they literally shouted me out. They had to like stand up and say hi and and sit down.

And so you just think like the amount of just wealth network and access in this one room. It was just crazy. And it speaks to like how important getting in the right room with the right people, being on the ground, and putting yourself in every single situation possible makes such a difference. I only moved to Hong Kong a week ago. I've only been in China properly, like living here for a week, and it's kind of like is the whole reason why I did it and it's already coming true.

A good friend of mine said like the dolphin appears when you jump in the water and you take the plunge. And uh yeah, that's what we saw. So anyway, we're now off to dinner with the organizer's family. We've been invited to it's called an after dinner. And so just even learning about the Chinese customs and you know cheesing below the host and just saying nihow and nodding um was a big thing. And so we're going to snake dinner now.

Literal snake. So wish us luck. But um yeah, I'm so excited. This is this is what China's all about. So we're now ready to go eat some snake. Here in China in Australia we try and kill them. In China they try and eat them. So we're here. Um, it's now 10:30 and we're having family dinner with the uh the big family. So, uh, should be fun. >> This is the rice porridge. >> Rice porridge. Is snake in there? >> Well, uh, this one I don't see. >> I don't think they they put it in there, but yeah, behind there.

See that bowl there? That's snake. >> Snake there. >> Yeah, but it's a it's a type of water snake. >> Oh, is that is that frog? None of this happened because it was perfectly planned. It happened from showing up, meeting people, putting myself into uncomfortable situations, just being willing to have a go. A lot of times things don't go your way. You'll get rejected. You'll make mistakes. You'll walk into rooms where you don't know anyone.

And hey, that's okay. It's all right to feel small sometimes. And it's okay to not know everything. That's why you're there. To figure it out, to grow, and to learn. The people who built something meaningful aren't the ones who figured it all out. They're the ones who kept going, who kept trying, who kept showing up. Because in the end, hey, this is what makes the journey worth it.