Having been in the China sourcing business for almost 11 years now, I am often asked what is the most difficult aspect of working in China. My short answer is “Communication”. China manufacturers want to create the product you are asking for. What I have come to appreciate is just how nuanced our thoughts are, and how good communication is taken for granted. Continue Reading…
Usually I am writing detailed blogs about China Sourcing. But not this time. It is time to take a break from China Sourcing and celebrate life. One of the perks of being in China for over 10 years now is having the privilege of participating, in a small way, in the lives of my staff and friends in China. As I sift through all the memories of factory tours, difficult negotiations and solving a miriod of issues associated with each case, the things I remember the most from my 39 trips to China so far, are the personal memories. And what strikes me today as I write, is watching the children my close friends in China grow up. It is startling sometimes to see such big changes when I swoop in from the US 4 times a year.
China Sourcing seems precarious.
China has a reputation for knocking off or copying products.Â This reputation is well deserved. If you look at it from a neutral point of view, it is kind of amazing. I say amazing because, not only are the accuracy of knock-offs impressive, but the speed of copying a product is breathtaking. On one hand this is a good thing if it is your product Â and you are trying to source it in China. However this uncanny skill is not so good if you are thinking about a factory copying your product without your permission and penetrating your market.
China Sourcing with perspective.
But let’s take a step back. Usually, most knock-offs are commissioned by competitors outside of China and not initiated by the Chinese. And most of these knock-offs are introduced in third world markets and not head to head with, say a US or German market, because our markets are very difficult to enter. I know there are lots of high profile examples that seem to indicate otherwise, but I am talking about the majority of knock-offs I see. Â I am not excusing this practice either mind you. It is not good. But it is a reality. So it begs the question, what to do about it?
One more China sourcing diversionÂ before we talk about solutions. I am going to make a bold statement. Chinese people are are Â extraordinarily honest and honorable. Considering China sourcing issues I just talked about, how can I make such a statement? Here is how. China is not a nation of laws. If you think about it, China has only recently become a world player in the industrial age. And the laws and judicial infrastructure are not in place compared to the west. Just imagine how businesses in the US would behave if we were not a nation of laws. It boggles my mind when I think about it. So I am amazed at just how well behaved the Chinese are considering these factors. And that the integrity of the people and the culture. On a side note, this is why relationships are so important in China. It is difficult to take someone to court over a dispute so both parties must get to know each other and trust must be earned.
What to do about China Sourcing while protecting your Intellectual Property.
Well, if you want to manufacture a product in China while minimizing being copied, the most straight forward solution is to have components of your finished product produced in different factories and assembly and packaging in yet a separate factory or even back home, wherever that may be. This way, no one company sees the whole picture or understands the function of your product. Also you should trademark, patent and copyright your products in China. The irony is that as China strives to evolve from the low cost provider to more sophisticated manufacturing, it is starting to produce its own intellectual property that needs to be protected not only world wide, but from the Chinese themselves. So patent, copyright and trademark laws are starting to be enforced in China out of necessity. I have seen dramatic change just over the past few years. (For more information, read this from the WSJ – “Is China Finally Getting Tough on Piracy?)
In part two of this blog, I will give you a personal example of a product I source in China for world distribution and what I have done to protect my Intellectual Property. (Hint: China Sourcing, Go on the offensive.)
Relationship Sourcing in China
There are tons of articles and books on the do’s and don’t of etiquette and culture in China. Everyone who wants to do business in China should have this basic understanding. But once you are past these formalities and want to develop a long term relationship, the foundation I like to build on is “I am not the hammer and you are not the nail”
Sourcing in China – When I Started My Business….
10 years ago when I started my China sourcing business, I saw China as a cheap place to produce goods for my clients. And my job was to get the lowest price possible at an acceptable quality. Sounds reasonable right? I was the hammer and they were the nail. I was a relentless negotiator. And this worked fine for awhile. I had found success. But as my business matured and I was looking for repeat orders and not event driven, one time deals, it became apparent that I needed to build relationships and my hammer/nail strategy was not working. In fact, it was not long before I found out I was not even getting the lowest price I thought I was. How could that be? I was getting bids from multiple sources and pitting them against each other. What I found was that these manufacturers were used to guys like me and knew exactly how to work me. I was the nail and they were the hammer.
Sourcing in China Requires Being a Good Listener?
So I took the time to stop negotiating and start asking questions and being a good listener. And what I heard was that these manufacturers wanted the same things but we were not listening to each other. We both wanted relationships. But in China you need to invest in the relationship. The fact that you are the buyer does not hold as much weight as you might think.
So what does that relationship investment look like? First the Chinese manufacturers want commitment. They would like to know that you are ready to give as well as take. They want to understand your long term goals so they can begin thinking about how they can contribute to a mutual future. They want to connect with you on a more emotional level to see what kind of person you really are. They want to build trust over time. And the thing that struck me the most was how I had ben missing the point all along. Stability and relationship were factors in not only the price but quality as well. As I changed my tact and became attentive to stability and relationship, I found out that price and quality took care of themselves.
I am not saying you still don’t negotiate price. You absolutely do. But you do it in a more sophisticated way. And you do have to watch quality closely, but when trust is part of that equation, communication and goals become aligned. When goals become aligned, greater accountability follows. And instead of a hammer/nail relationship you have an investment in your future in China. Contact Gary for your sourcing in china needs.
Every year at this time I am giddy with excitement and anticipation at the prospect of attending the Canton Fair in Guangzhou China. I have attend the Canton Fair over 12 times in the last 10 years and I am always amazed. Maybe I am easily impressed but you tell me if there is anything trade show wise that is more impressive than the Canton Fair?
- Phase 1: 15th-19th October 2010 9:30-18:00
- Phase 2: 23rd-27th October 2010 9:30-18:00
- Phase 3: 31st October – 4th November 2010 9:30-18:00
- Exhibition Space: 1,125,000 square meters (12,100,000 square feet)
- Number of Booths: 56,915 standard booths
- In 2009 the number of international buyers to attend the October Canton Fair was 188,170 from 212 countries
The organizers completely change out this vast facility 3 times during the 20 day event to accommodate the three phases. Just that alone amazes me. I am struggling with descriptors of this amazing event which happens each October and April in China so I thought I would attach a video I made of the fair from last year.
If you are involved with merchandising or manufacturing in any way you really should treat yourself and spend at least 3 days at this fair. If you have never been there, I promise you it will blow your mind. And even though I have been to the Canton Fair many times with clients in tow, every time I go, it starts the creative juices flowing for new products available for my customers, and ideas of new customers I need to be calling on because of what I have experienced at the Canton Fair.
I always say that there are three big reasons to have China on your radar.
- 1. Sourcing Products and Services in China to save cost and make your business more competitive.
- 2. Understanding the 2nd largest market in the world, which is China of course. You should be considering offering your products and services to the Chinese market which is growing by leaps and bounds.
- 3. China is a competitor with almost every business category you can name and it is a very good idea to get to know your competition.
And in many cases it is all three of the above reasons. And there is no better way to get your arms around China than to attend the Canton fair.
This seasoned Canton Fair attendee wonders if you are ready to attend and if not, why not?
So what does business transparency have to do with China Sourcing?
I will get to that in a minute, but let me set the stage.
As the transparency movement drives businesses to be more open about their products and services, it is becoming routine to expect full disclosure on the who, what, when, where and how our products and services are offered. It has gone way beyond “features and benefits”, and now with instant tools like FaceBook and Twitter,Â just to name a few, we are at the instantaneous mercy of the fingertips of our customers. There are whole new sets of questions being asked about our corporate cultures, how we treat vendors, employees and customers and even what our corporate values are as it pertains to our local environments and the world as a whole.
China Sourcing: Transparency Drives the Market…
From the consumer’s perspective, “Why are we in business” has more to to do with making life better and doing no harm than some of the seemingly more practical answers of the past, i.e, Â making money, creating jobs and providing opportunity. Those things are great, but not what people are tweeting about. And we are judged on these transparency driven questions as much if not more than our features and benefits these days. And the thing is, we have got to get it right as someone is always watching.
Sound scary? Not really. It just sounds different and the good news is that it is driving a more responsive and responsible business culture.Â Now back to China.
Providing Value to Your China Sourcing Project with Transparency…
In my business, transparency has been part of our business model for almost 10 years. As a service oriented business, we have always made all information we find on behalf of our customers available. It always seemed to make sense to me. The goal has been success for our clients and there is no way we can possibly know everything about every client business we serve. So we need to partner with our clients to make sure great decisions are made on their behalf. When I first started, most people said that I needed to protect my sources, that customers would go around me if they find out critical information. I always believed that if we were structured to offer value through transparency we would be stronger for it. This has turned out to be the keystone of our business. And yes, we get asked about sweat shops, child labor and other socially responsible questions. These types of things are factored into everything we do in China. And the interesting thing is that these movements and ideals are permeating China too despite things you might read. I see it first hand. It is starting slow, but gaining momentum.
China Sourcing Transparency: What are your thoughts about the transparency movement? What are you doing about it?
I was thinking about my job and what it really represents. It struck me that sourcing products and services in China is all about change and I am really a change agent. I guess that is why I only deal with top executives as change is too difficult to power up from the bottom. Powering change from the top down is where change is most likely to occur. And change seems like such a natural process, but I know from personal experience that it can be painful. So I Googled “Change Agent” and found a wonderful Blog by Bill Taylor of the Harvard Business Review. (The 10 Questions Every Change Agent Must Answer) “Indeed, when it comes to creating the future, the only thing more worrisome than the prospect of too much change may be too little change.” – Bill Taylor-HBR
I can speak from personal experience that China is all about change and creating a new future. It is breathtaking. And the winds of change in China are contagious. Well, as I fancy myself as a change agent, Bill Taylor’s blog is challenging me. What I hear him saying is that wise people are always looking for and embracing change. In that way, because change is inevitable, it can be strategic and painless, as long as it is part of your plan.Â What am I doing to change my business prospective?
Here is what I have decided to do to initiate change and become a little wiser. We have been sourcing products and services in China for almost 10 years. Most of what we do ends up as goods coming from China to the US market. China is now the 2nd largest economy in the world and I think it is time to develop a liaison service that helps our customers introduce their products to the burgeoning Chinese domestic markets. So this fall I will travel to China to start developing relationships that will allow us to offer the Chinese domestic market to my present and future clients. This is what I intend to do that represents purpose driven change in my company. How about you and your company?
Tell me what will you do to create purpose driven change in your company or life in 2010/2011?
BTW: Here are Bill Taylor’s 10 questions.
- Do you see opportunities the competition doesn’t see?
- Do you have new ideas about where to look for new ideas?
- Are you the most of anything?
- If your company went out of business tomorrow, who would miss you and why?
- Have you figured out how your organization’s history can help to shape its future?
- Can your customers live without you?
- Do you treat different customers differently?
- Are you getting the best contributions from the most people?
- Are you consistent in your commitment to change?
- Are you learning as fast as the world is changing?