Welcome to this moment

1. Welcome to this moment Presenter: Jose Calero Company: LapWorks, Inc. Title: President & Chief Product Architect

2. Product Catergory: Consumer electronics – (accessories for notebooks, iPads and Tablets • Business Start-up: April 2000 • Online since 2001 • Online with Amazon since July 2010 • Over 90 product listed on Amazon • 2013 sales were $1,070,000 • Order off-the-shelf as well as custom made

3. Pole Taking TimeBy a show of hands . . . . . . • A – How many of you are aware of or familiar with ePacket? • B – How many of you order products from China?

4. ePacket Threatens all U.S. Online Resellers

5. Information Sources • Internet Retailer Magazine & Blog • USPS Office of the Inspector General • Ina Steiner’s eCommerce Bytes • U.S. Postal Service

6. The ePacket Threat • How It Could Affect Your Sales And What You Can Do About It.

7. Source: USPS Press Release Date Published: April 20, 2011 • “Today The U.S. Postal Service signed a trilateral agreement with China Post and Hong Kong Post that is “structured to foster growth in e-commerce”. The new ePacket service expands the array of options offered to e-commerce merchants in Hong Kong and China seeking to reach consumer markets in the United States. The ePacket shipping solution features tracking and Delivery Confirmation in the Postal Service network for lighktweight goods and merchandise weighing less than 4.4 lbs.””

8. Great Deal for Chinese Merchants • Shipping a 1 lb. package from China to any address in the U.S via ePacket cost these Chinese merchants just $5.00

9. Not Such A Good Deal for Us • Shipping a 1 lb. package from the U.S to Shenzhen, China via the USPS International Express Mail cost just $49.76

10. Here’s A Real World Example • An Amazon reseller was selling remote controlled helicopters. • They sold so well he could not keep them in stock. • One day he sees his Chinese supplier is competing with him. • The Chinese supplier lists the helicopter under the U.S. sellers listing.

11. Real World Example Continued • The helicopter is being sold at wholesale – exactly what the U.S. reseller purchases it for. • The U.S. reseller could not compete and sold off the inventory. • It happens just like this – one day you wake up and your being undersold by your Chinese supplier.

12. Source: eCommerce Bytes Date Published: August 31, 2011 Title: USPS Deal With eBay Helps Expedite Chinese Imports • “The U.S. Postal Service entered into a deal with eBay and China Post last year to help Chinese sellers send small packages to the U.S. in a much shorter period of time than regular international delivery services. eBay revealed that the agreement has led to 30,000 parcels a day being sent from its sellers in China to U.S. Consumers with package-tracking included.”

13. Source: eCommerce Bytes Date Published: August 31, 2011 Title: USPS Deal With eBay Helps Expedite Chinese Imports • “Nearly 40% of eBay sellers in China are using the ePacket service to ship to the U.S. with over 80% of items delivered in five to 10 days. Upon arrival in the U.S., these shipments are processed as domestic First-Class Mail, with a one to three-day delivery standard.”

14. Source: Internet Retailer blog Date Published: July 13, 2013 Title: “Chinese manufacturers aim to increase direct sales to Western online shoppers” • “This new ‘manufacturer-to-consumer’ e-commerce is growing steadily, as Chinese factories seek to make up for softening domestic demand in China. A new industrial park opened last week (July 8, 2013) in a major e-commerce center that’s designed to facilitate cross-border e-commerce.”

15. Source: Internet Retailer blog Date Published: July 13, 2013 Title: “Chinese manufacturers aim to increase direct sales to Western online shoppers” • “With domestic demand softening, Chinese manufacturers are looking to keep their factories humming by selling directly to online shoppers in the West.” • “The CEO of E-DreamValley, says he’s encouraging Chinese manufacturers to stop thinking solely about their business-to-business opportunities and also think in terms of manufacturer-to-consumer sales via the Internet. “M2C helps manufacturers reduce the layers of sales channel and increase their profits significantly,” he says. “Generally, the profit ratio will increase from 5% of B2B model to 30% of M2C.”

16. Source: Internet Retailer blog Date Published: July 13, 2013 Title: “Chinese manufacturers aim to increase direct sales to Western online shoppers” • “One example of a large seller that’s launched its own site is Gofavor.com, which sells inexpensive jewelry. While the company would not reveal its sales in dollars, the company said it ships 60,000 to 70,000 parcels per year, mostly to Europe and North America, and is growing annually by 30%.”

17. Source: Internet Retailer Magazine Date Published: August 2013 Title: “DIRECT FROM CHINA – Chinese Companies Selling Directly To Online Shoppers In The United States Are disrupting Some Categories With Ultra-Low Prices” • “Further evidence of the emergence of Chinese e-retail competition comes from eBay, Inc., which since 2007 has been helping Chinese companies sell on eBay's marketplaces around the world and encouraging them to use its PayPal services to accept payments.”

18. Source: Internet Retailer Magazine Date Published: August 2013 Title: “DIRECT FROM CHINA – Chinese Companies Selling Directly To Online Shoppers In The United States Are disrupting Some Categories With Ultra-Low Prices” • “In a November 2012 report eBay said more than 7,500 of these large eBay sellers and PayPal merchants in China, Hong Kong and Taiwan were selling more than $100,000 a year to online shoppers in other countries with 598 selling more than $1 million a year.”

19. Source: Internet Retailer Magazine Date Published: August 2013 Title: “DIRECT FROM CHINA – Chinese Companies Selling Directly To Online Shoppers In The United States Are disrupting Some Categories With Ultra-Low Prices” • “The Chinese have gotten smart about it – they used to sell to us through resellers, distributors and mall kiosks. Now they realize they can sell directly to the consumer. Indeed they can, with the Internet making it possible for them to market to consumers everywhere, and globalization making international shipping and payment easier every year. This is no reason to think there will be less direct competition from Chinese e-retailers in the years ahead.” • REPEAT: “There is no reason to think there will be less direct competition from Chinese e-retailers in the years ahead.”

20. Source: USPS Press Release Date Published: April 20, 2011 • “The Postal Accountability and Enhancement Act” (PAEA for short) which was approve by the U.S. Congress in 2006. This Act allows the Postal Service to enter into bilateral agreements with foreign posts to promote an efficient operation of postal services with other nations. The bilateral agreement governs the exchange of international products and services between the USPS and China Post and supersedes postage rates established by the Universal Postal Union.” 

21. “. . . . to promote an efficient operation of postal services with other nations.”

22. Once Upon A Time In China . . . . . • Prior to the launch of the ePacket program, we were the only pathway or sales portal these Chinese companies had to U.S. consumers. • They needed us to buy their goods and sell them to our U.S. customers. • Why, because their freight charges from China were so expensive.

23. Once Upon A Time In China (Cont’d) • But the moment ePacket was launched, it allowed thousands of Chinese companies (at least 7,500 that we know of from 2012) to leap frog over us and sell directly to our customers through eBay and Amazon . . . . and always at lower prices than what we are selling the same product for ourselves. 

24. Chinese Merchants Strategy For Stealing Our Orders On Amazon • Their strategy is simple enough and goes something like this: • They identify a product that is selling well on Amazon • They clone the product and post it under that product claiming it's exactly the same thing

25. Chinese Merchants Strategy For Stealing Our Orders (Cont’d) • The Chinese counterfeit product is always cheaper than your product by 20% of 50% • The next thing you notice is that your sales for that item begin to drop off • At the same time you see the counterfeit Chinese product's sales start to grow

26. Why This Issue Is Important To LapWorks, Inc. • Our company has been purchasing goods from China since 2001. The reason this is a big deal for us is that last year alone we spent over $270,000 in purchases from China. Obviously our business is heavily invested in product sourcing from China. And we’ve already been under attack by three Chinese companies so far this year who posted their counterfeit products under ours at cheaper prices.

27. Source: USPS Office of the Inspector General Date Published: February 25, 2014 Title: “Inbound China ePacket Costing Methodology – Audit Report” • 1 - "The Postal Service did not isolate the cost of China ePackets, which limits its ability to establish effective pricing strategies.“ • 2 - "Until accurate costs for ePackets can be identified and used as a basis for pricing, the risk of revenue loss for ePackets remains high.“

28. 3 - “If the Postal Service isolated costs for ePackets from other letter post mail pieces, it would have more insight in the cost, pricing and a profitability of this significant inbound international mail piece.“ • 4 - “While China ePacket revenues increased by $19.2 million between FYs 2011 and 2012, the Postal Service still lost $9.6 million in FY 2011 and $29.4 million in FY 2012.“ • 5 - “Therefore, it is difficult for the Postal Service to determine whether this increasingly popular mail piece is sufficiently covering its attributable costs."

29. 2012 Sales Breakdown By Online Retailers Source: Internet Retailer Magazine Individual: Don Davis, Editor • In 2012 North American Online Retailer Sales were $245Billion dollars • Top 500 Online retailers sales were 80% or $195B • 501 to 1,000 Online retailers 1.6% or $4B • Small Business = 18.77% or $46B

30. LapWorks Experience With Chinese Poachers In 2014 All three of these Chinese poachers followed the same process in order to list on Amazon: • They registered on Amazon as a foreign supplier. • They posted their product under our Amazon listing at a 20% to 30% cheaper price. • Customers started placing orders with these Chinese companies because of the cheaper prices • The order would ship from China and usually takes 10 of more days to arrive to the customer.

31. LapWorks Experience With Chinese Poachers (Cont’d) • Customers didn’t read the fine print to understand that there would be a 10-day delay in shipping. • Soon you begin to receive customer's phone calls asking where their order is and that it's taking much too long to arrive. (This is because the customer usually doesn't read the fine print – they just select the lowest price.) • 7 – The next thing you begin to see is negative “Customer Reviews” posted under your listing saying “your product is cheap and poorly made”. 

32. How Chinese Poachers Cheat All Of Us • They hide the fact, as much as possible, that they are a Chinese Merchant • They hide the fact, as much as possible, that the delivery will take 10 days • After these Chinese Poachers register with Amazon and list a U.S. “return shipping address”, they then discontinue the U.S. return shipping address and require the customer to return the product to their office in China • In the case of the first poacher, his product was made of regrind material and it began to crack in the corners. We replaced – for free – 40 units for customers who called to complain. Our sale price for this item on Amazon is $35.00

33. How Chinese Poachers Cheat All Of Us (Cont’d) • In the case of the second poacher, his product was the same except with two fewer accessories. Our sale price for this item on Amazon is $79.95 • In the case of the third poacher, the product was not even the same product. Our sale price for this item on Amazon is $59.95 • Customer responses were phone complaints about slow delivery and bad “Customer reviews” on shoddy material and construction or wrong product altogether

34. Warnings You Can Post On Amazon To Warn Customers of Counterfeiters WARNING #1: • "To protect our brand reputation, we have NOT authorized any other sellers to sell our products on Amazon, including those other sellers "Fulfilled by Amazon“ • We placed these warnings on our first and second bullet point on each product page  

35. Warnings You Can Post On Amazon To Warn Customers of Counterfeiters WARNING #2: • “Please protect yourself against counterfeits. When you receive the order, please check to see it has the authentic LapWorks brand (that we have applied to every product). If it's counterfeit, you have the right to ask for a full refund“ • We placed these warnings on our first and second bullet point on each product page  

36. What The Future Holds For Us? Here's what you can expect going forward: • Choice #1 – We can do nothing and let things continue in the direction they’re going.

37. What The Future Holds For Us? • Or you can make something happen . . . . . • Choice #2 – We can choose to be proactive and stand up and say no! You're not getting away with this because of some stupid mistake the Postal Service made

38. What The Future Holds For Us? • The only way to combat this growing threat to our businesses is to cut off the head of the snake - and ePacket represents the head. • And the only way to attack this threat is to write to the people in Washington who have authority over the USPS and that is The Subcommittee on Federal Workforce, Postal Service, and The Census. • There are seven members on this subcommittee and I have their email addresses and have prepared a sample letter demanding that they re-evaluate the ePacket program.

39. What The Future Holds For Us? • Particularly in light of the negative impact it’s having on literally thousands of American online resellers who are either small mom & pop shops or SOHO (Small Office Home Office) businesses entities selling online. • These same mom & pop shops and SOHO business entities are responsible for generating on fifth of all online sales in 2012 - $46 Billion dollars. That ain't hay!

40. Who to Contact about ePacket? The Subcommittee on Federal Workforce, Postal Service, and The Census: Blake Farenthold– Committee Chair https://farentholdforms.house.gov/forms/writeyourrep/?zip5=78401&zip4= Republican Committee Members Emails: • Tim Walberg = https://walberg.house.gov/contact/contactform.htm • Doug Collins = https://dougcollins.house.gov/email-me/ • Ron DeSantis= https://desantis.house.gov/htbin/formproc_za/zip-auth.txt%26form%3D/contact/email-me/email-me-zip-authenticated%26nobase%26fpGetVer%3D2 • Trey Gowdy= https://gowdy.house.gov/forms/writeyourrep/default.aspx?zip5=29601&zip4=

41. Who to Contact about ePacket? (Cont’d) The Subcommittee on Federal Workforce, Postal Service, and The Census: Democrat Committee Members emails: • Stephen Lynch = https://lynch.house.gov/htbin/formproc_za/zip-auth.txt&form=/contact-me/email-me-zip-authenticated&nobase&fpGetVer=2 • Eleanor Holmes Norton = https://norton.house.gov/htbin/formproc_za/zip-auth.txt%26form%3D/contact/email-me/email-me-zip-authenticated%26nobase%26fpGetVer%3D2 • William Lacy Clay = http://clay.house.gov/contact-form/

42. Where To Find A Copy Of This Power Point Skip McGrath has graciously agreed to host this information on his blog along with the sample letter. Click here to go directly to the page where this information is stored: http://skipmcgrath.com/articles And if for no other reason you should visit Skip’s site for the immense amount of FREE information that he has available to source new products, suppliers and to grow your business. And his newsletter archives are also FREE Here’s the link to Skip McGrath’s Online Seller’s Resource. Visit his site listed here: newsletter@skipmcgrath.com you won’t regret it.Thank you, Skip!

43. How About A Little More Motivation? • “You are what you do, not what you say you'll do.” Carl Jung • “It is easy to sit up and take notice. What is difficult is getting up and taking action.” Honore de Balzac • “In any moment of decision, the best thing you can do is the right thing. The worst thing you can do is nothing." Theodore Roosevelt • “It's the action, not the fruit of the action, that's important. You have to do the right thing. It may not be in your power, may not be in your time, that there'll be any fruit. But that doesn't mean you stop doing the right thing. You may never know what results come from your action. But if you do nothing, there will be no result.” Mahatma Gandhi

44. Q & A . . . . or . . . . Comments • Let’s begin . . . . . . . .

45. OK, Everyone, I’m Done! • It’s been a good time. • I had fun – hope you did too. • And remember, ePacket needs your vote. • Adios, Amigos