- Published on Wednesday, 22 June 2011 16:24
by David Dayton in 'Silk Road International'
First, for those who attended the presentations and couldn't receive the email with the PDF of the presentation, here are downloadable files of presentations from the Dubai show. Parts One and Two.
Second, this is another follow up on the "feeling" of the Global Sources show in Dubai. And while I'm not sure that this is good news—it now means that our worst fears are confirmed, problems in China are systemic—it is nice to know that "it's not just me
." Literally every one of the hundreds of buyers that I talked to last week in Dubai had issues with their Chinese suppliers.
SIDE NOTE: Out of the hundreds of buyers that I talked with, the percentage of traders/wholesale buyers in Dubai was close to 90 percent. Different from the Hong Kong shows, which are about 50/50 new start-ups or companies trying to go direct for the first time vs. experienced buyers, the Dubai crowd was almost all buyers that had significant experience in China. I've been working in East Asia for more than 15 years and I met more people with more years of experience in China than I have ever met at any other show before. Also, there were buyers representing more than 100 countries at the show as well. If you're looking for a single marketplace that services millions of people from three continents, Dubai is the place for business for Northern Africa, the Middle East/Southeastern Europe/India.
Buyers that have been working with China for two or three generations were asking me about dealing with supplier issues—most were just living with a very high rate of rejected product in each order. As I mentioned last week, so many buyers had issues in fact that I started keeping notes on their issues. Here are some more details on their list of concerns:
- No respect for contracts. I say this in my presentations as a "caution," that buyers should expect rounds of price negotiations from their Chinese suppliers. When I said this in Dubai, for the first time I received knowing laughter from a large number of the attendees.
- No honesty. Please don't shoot the messenger. I'm not saying that Chinese are not honest, I'm saying that both Westerners and Middle Easterners have issues with the ethics in China—and, if you're a long-time reader you know that Chinese themselves have this concern about buying from other Chinese as well. This isn't exactly new or news and it certainly shouldn't be seen as me being xenophobic or racist. As the Chinese themselves say, "it's cultural."
- No commitment to quality.Quality Fade is one thing, but the conscious and consistent attempt to lower quality to save money is another thing entirely. One buyer that has been working with the same supplier for decades now shared with me that every other order or so he has to review and reiterate and retest for the same quality standards. Despite the fact that it's the same product, the same standards and the same supplier, he's found that if he doesn't have the "standards discussion" at least once a month the quality will immediately and noticeable go down until the conversation is had again.
- Always want to cut you out of the agreement. More than one businessman talked with us about the fact that large Chinese companies come into Yemen, SA, UAE and other areas here, start to work with locals, refuse to sign onto anything other than single-deal-contracts and then as soon as they knew the details of the end-buyer they cut out all the locals and drop the prices to make sure that no matter what happens the locals can't get back into the deal.
- Not willing to share info about problems/delays. Contrary to the old adage, "No news is good news," no news from you Chinese supplier usually means that they are either having issues and don't want to tell you or trying to get substandard product on a boat ASAP so that it can't be rejected. Or both. Most buyers are just expecting 10 percent or more of their container of good to be substandard and either have to discount it or trash it.
- Willingly break the law to get a good deal. While there are ethical issues everywhere, in China where there is not even a history of any type of religious standards outside of the law, Chinese are seen to be all about the current deal and nothing else. Many from the Middle East said that with any of their other suppliers and buyers a handshake sealed the deals. But with Chinese there wasn't anything that seemed to be more important than getting the deposit. I'm sure that it's true that (almost) everyone has their price, but it seems to be the consensus that the "price" for most Chinese suppliers is very very low.
- Not to belabor the point, but mentioned many times was the very nefarious practice of faking testing standards to make a deal. Not only is this dishonest, but it's potentially very expensive and possible deadly too (depending on the test that's being faked and the actual raw materials used). I was told that you can buy any testing document that you could ask for about 1,200 yuan. When real tests can cost thousands of USD, this is just one more reason why you do NOT want to give your Chinese supplier too much control over the final quality of your goods (or any more of the negotiations process than you absolutely have to).
The point is that when buying from China (and sure, probably other places too) buying problems exist regardless of where you're coming from. But hopefully this post helps a bit; when you can name the game, you don't have to play, right?