Made In China

Welcome to Not Priced In, a newsletter about interesting stories in business and finance. I’ve written previously about my own life, and this post starts where that one left off. As to whether its interesting, I’ll let you be the judge.

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Pachinko is a 2017 novel by Min Jin Lee. It tells the story of three generations of a Korean immigrant family, during and after the Japanese occupation of Korea. It’s a beautifully written book, and has been adapted by Apple TV into a web series as well.

The protagonist, Sunja, is an uneducated housewife who barely speaks Japanese. After a series of tragedies, she is compelled to start selling kimchi in the market to keep the household running. I could only find a bootleg upload of the scene on YouTube, so apologies for the poor audio and video quality:

When I first watched this scene, I almost had a panic attack. I was transported right back to 2016 and the Canton Fair grounds.

But first, some background. After my previous business imploded in mid-2015, I spent a few months adrift. Initially, I didn’t even pretend to be looking for the next thing. I was exhausted, embarrassed, and probably depressed. My days consisted of just being online, watching the world go by, not participating.

In December, I stumbled upon a listing for blood glucose strips on Flipkart. Since there were no barriers to entry, I listed 10 units slightly below the prevailing price, just to see what would happen. The response was stunning- all 10 units sold out in the next hour. I scrambled to procure the inventory, since I had to ship the orders out the same day. And of course, I put up another 100 units for sale on the portal.

I was back in business! If memory serves, I sold about 300 units in the next week, getting into a price war with other sellers and driving prices down for everyone. Then the returns started coming in. This was 2015, the early days of e-commerce in India. Most orders were Cash On Delivery. Courier norms, packaging norms, none of that was in place yet. Or, at least, I wasn’t in the loop. Some orders were returned undelivered, but the boxes were mangled beyond hope. Yet others were customer returns, sometimes with all the strips missing. I disabled my listing.

Just another misadventure? No – the geyser of online orders was real. And surely, the demand wasn’t just for blood glucose strips. I looked for alternate products, and quickly found an imported toothpaste that was routinely prescribed to kids. Some dentists would dispense, others would refer the patient to medical stores. But many folks had no clue where to get it. There was a gap in the distribution, which I intended to fill.

This product did well for the next few months. Margins were decent, even accounting for the opaque payout structure of marketplaces. But soon other sellers caught on. There was a race to the bottom, and eventually prices stabilized just above break-even. I’d gotten better at the packaging, but a single damaged return could still wipe out the profit of 10 orders.

The way forward was obvious – I needed an exclusive product, so I could set the price. My next stop was Alibaba, the directory for Chinese factories. I found something that had perfect synergy with the toothpaste – an electric toothbrush for kids. The factory was happy to do a trial order. But I had no idea how to import things. I found an importer who was willing to procure the shipment for an absurd mark-up. Not a problem, I told myself. We’ll make it up down the line. Hopefully.

The shipment reached me a month and a half later. And it was gorgeous. Take a look:

The brush by itself didn’t sell all that well, but a listing that bundled it with the toothpaste took off, and there was finally a sustainable competitive advantage. Along the way, I learnt product photography rules and listing and advertising norms.

In a month or so, the reviews started coming in. They were not good. There was a quality issue: water would flood the battery compartment and it would just stop working.

Another misadventure. But I was optimistic that this could be resolved. The next step was clear: I was going to China.

However, I couldn’t go right away. Something personal was brewing in the background – we had our first child that September. After years of gloom, my daughter was a ray of sunshine in my life. I couldn’t bring myself to leave her and my wife alone just yet. I decided to go in October. But there was a trade-off. I would be missing her first Diwali.

It had to be October though, because that’s when the Canton Fair happens in Guangzhou. Officially called the China Import and Export Fair, it is a biannual showcase of China’s manufacturing might. The dedicated fair complex is a staggering 12 million square feet and the fair happens over three phases, with different exhibitors in each phase. The scale is mind boggling.

After a heartbreaking goodbye, I turned up at the Malaysian airlines counter of Bangalore airport. Bad news though. The connecting flight was cancelled. Typhoon Haima had led to a closure of the airspace over Hong Kong and Guangzhou. I’d have to go back home and return the next day. Not a chance, not after that tearful farewell. I took option #2, an overnight layover in Kuala Lumpur.

My comrade-in-arms for the KL layover was a North Karnataka gent who was in the business of importing solar panels. We had met at the Bangalore airport, companions in misery. He couldn’t drive back home and opted for KL too. Having traveled to China regularly, he was far better informed than me, and was kind and generous with his knowledge. He helped me form a rudimentary understanding of how importing from China works. But more than that, he gave me the confidence that I had chosen a promising path and it could be quite lucrative if I did well.

I also got to see the Petronas Twin Towers, thanks to the largesse of Malaysian Airlines.

Anyway, I landed in Guangzhou the following morning. I had already lost one day, and raced to make it up. By afternoon, I was at the Canton Fair complex, and in about an hour I was at the entrance of the first of a dozen halls.

That’s when I had my kimchi moment, just like Sunja from Pachinko.

I had no idea what I was doing. I wasn’t sure what product I was looking for, how much of it I could sell online, or whether importing it into India was even allowed. I didn’t speak the language – and I don’t mean Mandarin or Cantonese. I didn’t speak the language of trade, the shorthand terms for who pays for freight, or who bears the responsibility for the cargo. I didn’t know a thing about HSN codes or import duties, what FOB or CIF meant.

Besides, I have been an introvert all my life. Striking up conversations with random strangers is my idea of hell. The factory representatives in the booths were seasoned, English speaking professionals who were used to working with people from dozens, if not hundreds, of countries. They would see right through me.

I had a panic attack, and had to sit down. After I caught my breath, I started to think. This trip had cost a staggering amount of money. I was here. There was no Plan B. And more than anything, I thought of my daughter. She was in this world because of me. She was my responsibility. I had to move forward, for her sake.

I got up, and made my way to the first booth. I don’t think the product was even relevant to online selling. I listened to their pitch. And asked asinine questions. I made a complete fool of myself, but I learnt a new term. And then the next, and the next. By day three, I had built up some confidence in my imposter skills. I could pass off as an experienced importer, at least for a short while. A few products were shortlisted for further research, but no major breakthrough happened.

Evenings were rough, though. I could only afford a sparse room in a rundown hotel. There was a nightclub/brothel in the basement, and the hotel hallways were scary to navigate after dark. Vegetarian food was hard to come by, and the internet sucked. For the first time ever, I was isolated and lonely, without even the web for company.

I was there to attend two phases of the fair, and there was a break in between to allow exhibitors to set things up. This break coincided with Diwali festivities. So there I was, on Diwali morning, sipping coffee in a rooftop café by the Pearl River. It was a beautiful clear day, but my mind was clouded. I was missing my daughter’s first Diwali. I had spent all this money, with nothing to show for it. I didn’t speak the local language, and hadn’t had a meaningful conversation with anyone in a week. This was rock bottom for me.

I swear the next bit really happened.

I have no idea why, but I looked straight up at the sky. An aircraft was passing over. No big deal, air traffic in the region is quite dense. But then, another aircraft was also making its way across the sky. It was obvious- they were on a collision course. Oh God, there’s going to be a horrific accident. And I’m going to be stranded alone in this place. Is it deliberate? Could it be an act of war?

The paths intersected, and it was obvious then that the first aircraft was much, much higher. I had been mistaken because of its unusual size. I looked it up, which took a while even with the VPN. Apparently, it was a fucking spacecraft. Three astronauts were aboard, returning from a 115-day trip to the International Space Station. The landing site was in Kazakhstan, and they happened to be passing over Guangzhou just at that moment when I looked up.

Almost 4 months in space. Now that’s lonely. Sounds clichéd, but that moment gave me clarity and perspective. We are capable of so many amazing things. Yes, I had failed with Walk Well. But that didn’t make me a failure. I just had to take my learnings onto the next chapter. And the next.

I went back to the fairgrounds with a renewed vigor. The fact that I had three appointments (including the toothbrush factory) gave me confidence. I was more open about my lack of experience. And what do you know, the sales folks were happy to educate! I think they could see that I really wanted to learn, and was serious about making this happen. I placed orders for the shortlisted products. The trip was a success, and I would wire them the money as soon as I landed back in Bangalore.

I had made it out of the rut. In hindsight, so many people and events came together to help me along. Take away any one thing, and the outcome (and my life trajectory) would’ve been very different. But these things are only apparent when you’re looking back. Living through them is terrifying and exhilarating and lonely and wholesome. As it should be. I did internalise one thing though – I don’t turn down anyone who asks for help. Because I know how difficult it can get, and I’m certain I would be lost if not for the grace of others.

That’s a little too mushy, so I’ll wrap up with an update on the China trip. It had started ominously, with a literal storm on the horizon. I thought it ended quite well – I had a roadmap for at least the next year. I had built good relationships with the factories, even visiting them before I left. I landed back in Bangalore on a Monday evening. The next day, my banker completed the remittance formalities. The documentation was approved, and the transfers were scheduled to go out the following day.

That evening, the Prime Minister came on TV and announced that 86% of the currency in circulation would cease to be legal tender from midnight. No way was I going to launch a new brand in an unknown space in the middle of all that uncertainty. I had to cancel all my orders, and it would be another year (during which the GST regime would also be ushered in), before I could finally go ahead.

C’est la vie!