This morning I was reading the Shanghai Daily over my bowl of Cheerios and I saw the headline that the Chinese are now the # 1 consumers of luxury goods worldwide. Of course this should not surprise anyone, as China’s transformation from one of the world’s poorest countries to one of the richest is widely acknowledged. But it does pose problems if you are travelling to China and want to take your vendor a gift, what overseas buyers have traditionally done over the years when sourcing in China.
As recent as 10 years ago when travelling to China it was never hard to come up with a gift for vendors, a carton of Marlboro cigarettes, or some Chanel # 5 would always go over well and would ensure that your vendors listened a little more carefully when you outlined all your production and lead-time concerns. In those days, your average Chinese could not afford these products and when you showed up in China bearing luxury gifts, people were truly appreciative. In fact, when I worked in wholesale and had a trip to China planned I always requested that management allow me to buy gifts for vendors and the people working on our orders, including office personnel and some workers. It was an effective way to separate yourself from the factory’s other clients.
So last week when someone emailed me and told me they were headed over to China this week and asked me what kind of gift they should take to their vendor, I must admit I was at a loss seeing as the Chinese are now the World’s # 1 consumer of luxury goods and can pretty much buy anything they want. I imagine that nowadays if I showed up with a carton of cigarettes for a vendor they would just laugh and look down at me as a hick.
As I am wont to do when I have a question about China, I emailed my friend Jessie in Shanghai. Jessie is an old colleague from my textile days, and one of the most savvy Chinese business women you will meet. When I asked Jessie what is a good gift for a female vendor these days, she also didn’t have an answer. Finally she suggested a handicraft gift, or something that would not be available in China. This made sense and so I emailed back the person who had asked me what to bring and suggested she take a high-end designer bag that is sold in boutiques here in the Bay Area and NYC and is made in the Philippines.
But the more I think about this now I really am inclined to believe that the days of travelling to China bearing gifts for your vendor are over. Unless you have a very special relationship with someone there is no need to bring gifts I would say. And the next time I go over I will follow my own advice as odd as it will undoubtedly feel.
Tomorrow I am going to visit an electronics importer here in the Bay Area. This is a small company but they are experiencing tremendous growth and want to ramp up their operations, which of course includes their China operations. I was talking to the CEO on the phone the other day and he told me he was very happy with his main supplier now. I asked him how long he has been doing business with the supplier and he replied three years. My first thought was that three years is not really a long time and that this company still needs to be careful and treat this vendor as a new vendor. This means they have to do their part and get the vendor orders on time, clearly indicate product and testing requirements, avoid last minute product design changes and, of course, they have to inspect orders before they leave China. And they have to develop alternate suppliers in the event that problems arise with their current supplier, as far off as that scenario might seem right now. In fact, this is one of the Golden Rules of China sourcing, never feel complacent with a situation, no matter how long-standing the relationship with your vendor is and how well things seem to be going. Because something can always happen when you let your guard down.
A good parallel is this past weekend’s football game between Michigan and MSU. With ten seconds to go in the game and possession of the ball all Michigan had to do was punt the ball away and they would win the game. What happened ? The punter fumbled the snap, tried to kick the ball anyway ( when he should have just fallen on it) and it was returned by MSU for a game winning TD. In the post game discussions and write-ups all of the blame was directed at the punter, yet I think much of the blame should go to the coaching staff for not telling the punter what he should do if there was a bad snap or fumble. That is what coaches are there for, isn’t it ? Yet the Michigan coaching staff just assumed the punter would kick the ball away and apparently did not discuss the contingency of a bad snap or fumble. The lesson to be learned is this: When the game is on the line don’t take anything for granted. When you are a small business and are sourcing in China, and are succeeding at it, don’t feel you have won. You are winning but you have to be vigilant with every order and until the end.
I was thinking today about the conversation I had the other day with the NYC lady who, at the end of this month, is headed off to China for the first time. She certainly sounded nervous, knowing no Chinese as she does and feeling very panicky at the mere thought of getting lost over there, even though she will be staying in a reputable hotel and has already arranged her SIM card on arrival in China. I re-assured her as best I could. Guangzhou, after all, is a very modern city and boasts a very modern, user-friendly subway that would be the envy of most cities around the world. In addition Chinese people are very hospitable and one really does not have to worry about getting lost in a big Chinese city. There are always people who will help you and signs in English are everywhere. Let me put it this way: you are safer knowing no Chinese and getting lost in a major Chinese city than you are getting lost on your own turf, that is in a major American city. So she really has nothing to worry about, other than perhaps getting ripped off by an unscrupulous taxi driver. Even that though can be avoided by taking taxis stationed at the hotel where she is staying and having the hotel doorman quote the cab driver on the fare.
But I thought back to my first trip to China. Now that was scary. It was 1988, just ten years into Deng’s reforms. I flew over on a Canadian Airlines flight from SFO to Beijing. I remember the flight because NBC correspondent Keith Miller was on the same flight, flying coach, as well as the Canadian Olympic Basketball team. The plane landed in Beijing on a warm July evening. There was an enormous crowd of people at the gate coming out of Customs and not all of them were smiling. There were very few foreigners in China then and anti-American, anti-Western sentiment was palpable. To say I felt uncomfortable would be an understatement. My Chinese teacher in NYC had arranged for me to stay with her husband at their apt in Beijing but I had no idea what he looked like and all I had was a name and address. In those days most people in China did not have private telephones but used a communal phone so if for some reason we did not hook up I had no idea what I would do. Fortunately, after several minutes scanning the faces in the crowd (they were as curious to me as I was to them) I spotted my name on a piece of cardboard in a sea of arms and I knew that must be my contact. Needless to say I was very relieved.
Over the next few days going around Beijing I saw perhaps one or two foreigners, and that is all. Although a lot of people smiled at me, not everyone did, and on one occasion we were refused service in a restaurant because I was American. My host was embarrassed by this but in those days that was par for the course in China. It was not an easy place to be and I was very careful not to get lost. Nowadays when I go to China, I feel like I am home. Imagine that !
But I kind of chuckle when people come to me nowadays and tell me they are nervous because they are going to China for the first time. Believe, me, you have nothing to worry about !
I had a call from an entrepreneur in New York over the weekend. She has a succesful online apparel business and for the last three years has been using a supplier in Dongguan to make her products. She is about to head off to China for a few weeks, first to the Canton Fair and then to visit her supplier and other prospective vendors in and around Guangzhou. She is doing the right thing by heading over there, to discuss issues with her current supplier and to scout new suppliers as her business expands.
She asked me if Guangdong Province was the right place to be looking for apparel suppliers. It is a good question. I replied to her that historically much of the textile industry has been up north in and around Shanghai, in places like Jiangsu and Zhejiang Provinces. If I were doing apparel or home textiles heavy in design I would target these areas. About 50 % of the machinery in textile plants in Jiangsu meet international standards and design is probably more sophisticated given the province’s proximity to Shanghai. Having said that, Dongguan is home to over 6000 textile companies (about ¼ the number of textile enterprises in China ) and is probably as good a place as any to get started. If you are looking for a supplier then Dongguan is going to give you plenty of options, albeit much of the apparel production in places like Dongguan or Guangzhou is low value added product. Nevertheless I have known apparel companies over the years that locate their production in the south, where labor costs and the costs of getting goods to port have always been lower.
One trend now is that more and more companies are beginning to source in Central and Western China as labor and operating costs in coastal and Eastern China go up. So in recent years one sees more and more textile production occurring in places like Henan, Hubei, Jiangxi et al. And more low value added production is moving out of China to SE Asia and India so Chinese companies can concentrate on more sophisticated product.
Another thing to consider, if you are doing apparel or home textiles, is if there is a major fabric market near your vendor. If there is not your vendor may have trouble sourcing specific fabrics. In any case, it is good to do a little research to see where might be the best region to make your product. There are a lot of resources online and the better you understand China, and how different regions may meet your needs, the more smoothly your production will go. As they say in China 量体裁衣, “ liang ti cai yi trans. cut the garment according to the figure.