Consumer Electronics–Good news?

In my younger days I was a regular attendee at the International Consumer Electronics Show, both as an exhibitor and as a buyer.  At the time it was the biggest trade show in the world.  It may still be, but I’m not positive of that.  At any rate, it’s definitely one of the biggest.

An AP story is reporting that it will be smaller this year than it was in 2009.  But the article goes on to point out that pre-Christmas consumer electronics sales in the United States were up 5.9% from the same period last year.  That’s not bad for products that aren’t exactly necessities.  In fact, following a successful November-December exhibitors were signing up for the show as late as last week.

Always looking for good economic news, I’d say that this is a good sign for 2010.  Floor space at CES isn’t cheap.  Suppliers scrambling for floor space the last week of December is surely a good sign.  It will be interesting to see how other shows fare in the coming months.

Chinese Imports, again

I must have ESP (or some other cable network).  Yesterday I mentioned that US government-imposed restrictions on Chinese products might have consequences.  You may recall that I suggested a more grass-roots approach to the problem of cheap Chinese goods.  Lo and behold, our government did just what I suggested that they not do yesterday.  (Big surprise!)

The government has imposed new duties on Chinese steel pipe.  Chinese pipe manufacturers have been taking advantage of subsidies by their government to dump low-priced pipe on the US market, costing thousands of American jobs this year.  It’s hoped that the tariffs will slow down the flood (pun intended) of low-price, low-quality steel pipe and restore lost American jobs.  Stay tuned to see how the Chinese respond.

I promised yesterday that I’d give you a little insight into the process of sourcing Chinese goods, from a manufacturer’s perspective.  Here goes.  For the last year before my “retirement” I was involved in purchasing new items for my former employer, specifically small electrical and furniture items.  It was a very frustrating and disappointing task.

For the most part, Chinese manufactures aren’t set up to supply quality merchandise.  In fact, it often seemed like a “foreign” concept to them.  While we may try to spec a premium item from them, they are geared up to produce “low price” items for the mass merchants.  When their production lines are set up to produce millions of “just good enough” items for the big box stores, an order for a few thousand quality items just isn’t worth their time.  Make no mistake, the big boxes and their big buying power are very much in charge of the products that are shipped to the US, even to other suppliers.

Here’s a typical scenario.  I would email a supplier asking them to send me a sample of an item based on my specifications.  A few weeks would go buy and samples would arrive that basically were nothing like I asked for.  Nine times out of ten they would fail our QC tests.

I would send the testing results to the manufacturer asking them to correct the problems and send me what I asked for in the first place.  A few weeks would pass and I’d get new samples, exactly like the first ones.  Strike two!

Keep in mind that we were paying high air freight rates to get these samples shipped to Saint Louis.

This would go on for several cycles and maybe, if we were lucky, we would finally get something close to what we asked for.  Sometimes we never did get what we wanted.

I spent over a year working on two particular items and never did get what I wanted.  Often the response was that such-and-such big box chain sold thousands (sometimes millions) of the inferior products and why was I so particular?

A simple process of building something that would pass minimal quality standards took months and often never did result in a salable product.  If I had hair, I would have pulled it out.

Bottom line, there is no motivation for  the Chinese manufacturer to build anything above minimal standards.  They flood the market with low-priced, low-quality merchandise.  American manufacturers can’t compete.  So, they either lower their quality to reduce the price, or move their operations off shore where labor costs and benefits are much lower than they are here.  Even then, they are going to face higher returns and damage to their reputation because the imported goods aren’t what their consumers expect.

Don’t get me wrong.  I have Chinese friends, including some who I’ve worked with as suppliers.  Because China is a totalitarian state, they are under a lot of pressure to tow the company line.  Language problems and a society where the Chinese people are accustomed to low-quality products often make it almost impossible to explain to them that we want good products.

The solution, as I pointed out yesterday, is for American consumers to demand quality and to be willing to pay for it.  Until that happens, this problem is only going to get worse and at some point it will be too late to fix it.

Chinese Checkers (and everything else)

My end-of-the-year rant.

Earlier this week several local newspapers carried  an AP story by William Foreman on China’s booming economy. He begins by pointing out that hundreds of US manhole covers were stolen all over the country and sold on the black market to be made into steel for Chinese skyscrapers. Thank goodness! I didn’t think we were exporting anything to China anymore.

Foreman points out that China is one of the biggest investors in Africa.  Of course we all know that the Communist nation holds billions of dollars of US debt ($800 billion in Treasury securities) which may prove to be disastrous sooner, if not later.

China’s telephone company has more than 1/2 billion customers and 338 million Internet users, more than the entire population of the United States (307 million).

China’s new-found prosperity has led it to become the biggest polluter on the planet.  The article points out that 16 of the 20 worst cities for air quality are located in China.  So while the United States is looking to spend billions of dollars cleaning up the air, both here and in developing countries abroad, China just keeps on polluting and taking American jobs in the process.

Meanwhile our insatiable desire for the cheapest price on everything continues to fuel the Chinese engine while our own is sputtering to a stop.  Will the two giant Chrysler plants in suburban Saint Louis ever reopen?  Probably not unless a foreign (possibly Chinese) company buys them.  Have we passed the point of no return?  I hope not but a lot of things are going to have to change pretty quickly.

People (American people, that is) have got to learn that it’s not cheaper to buy a cheap Chinese product that doesn’t work properly and doesn’t last.  It’s more expensive in the long run and that’s just in out-of-pocket expense.  It doesn’t take into account the loss of jobs and the selling off of the American dream that’s taking place today.

It’s pretty obvious that we can’t count on our government to help us.  In fact any kind of tariff on Chinese goods could cause them to retaliate which wouldn’t be good.  (Remember that $800 billion in Treasuries that they hold.)  So, while an official boycott may not be in order, there’s nothing stopping you and me from individually avoiding their stuff.

No, you and I are the answer.  Don’t buy cheap Chinese crap! Spend an extra buck and get American-made quality.  Of course the real problem lies in the products that are no longer made in the USA.  The list is quite long.  Try to find an American-made sewing machine.  Let me know how that works out for ya.

But we have to start wherever we can.  Buy American cars (while you still can).  For crying out loud, if the Chinese attempt to penetrate the US automotive market (which they probably will very soon) don’t buy one! Even the Chinese don’t like Chinese cars.  Anything else you buy, look for an American label.  If you can’t find one, ask the retailer why not.  We’re all in business to satisfy our customers.  If there’s a demand for American-made widgets then the market will satisfy the demand.

I don’t want go on too long and I don’t want to give the impression that I think things are hopeless.  Far from it!  We’re about to begin a new year and a new decade.  It’s time for all of us to stop being selfish and/or foolish and recognize that this is the greatest country in the world and we can overcome anything.  We just have to get of our backsides and make something happen.

Thanks for putting up with my rant.  Here’s wishing you a very, very

Happy New Year!

2009

2010

Come back tomorrow and I’ll wrap up the year by telling you about my experiences in buying Chinese.

Christmas Eve Eve

Here we are on the twenty-third day of December, 2009.  We’ve almost completed the first decade of the twenty-first century and it’s certainly been a challenge.  The fact that you’re reading this is a sign that you’re one of the best of the best.  You’re a competitor and a survivor.  Congratulations!

No one knows what 2010 will bring but I suspect it will be interesting.  The current administration doesn’t seem to be a friend of small business in spite of their claims.  As I’ve said here many times before, small business is the engine that drives the American economy.  That’s been true in good times and in bad.

So, as we prepare to celebrate Christmas and the beginning of a new year, keep the faith!  Keep doin’ what you’re  doin’ and take advantage of the agility that only a small business can muster to beat the competition.  I have confidence in you.

Jelly of the Month Club

Merry Christmas from the Obama administration. Our “Christmas gift” make’s Clark’s jelly-of-the-month club membership look generous by comparison.

If you own a small business I urge you to contact your senator and congressperson before you go home today and point out that a vote for the so-called health care reform bill is an act of political suicide.

Maybe if they realize that they’re about to lose their uber-generous health care when they lost their jobs, they might reconsider.

They’re Still Spending Money

Silver Dollar City

Christmas Lights at Silver Dollar City

I spent an extended weekend in Branson, MO, injecting myself with a megadose of Christmas spirit.  For those who don’t know, Branson is one of the few places in the world where belief in God and country isn’t just a good thing, it’s the only thing.

Branson is also a shopper’s paradise.  Three outlet malls, a high-end shopping promenade along the lake front, and hundreds of small retail establishments  mean that you can shop ’til you drop and still not get it all in.  Naturally, you would expect the crowds to be small what with the recession and all.  WRONG!

We stayed in our second-choice motel because our first choice was full.  “No Vacancy” signs were visible all over town.  There was a long traffic backup just to get on the parking lot of the largest of the three outlet malls on Saturday morning.  The stores were full and people were carrying packages.

Maybe people were spending less than usual.  Maybe they were attracted to the outlets for their lower prices.  I can’t say.  But the non-outlet stores were just as busy.

One amazing sight was the Coach outlet store.  For the men in the crowd, Coach sells purses at outrageously high prices.  For most people, buying a Coach purse will mean that you won’t have any money left to put in it.  But, I digress.

Again, maybe it’s the discount prices.  But even at an outlet store, a Coach purse is definitely a luxury purchase.  But there was a line outside waiting to get into the  store!  There was a “bouncer” at the door, only admitting a customer when one left.  It looked more like an upscale nightclub in a big city than an outlet store in the Missouri Ozarks.  Amazing!

Make no mistake, people are spending money.  How much money remains to be seen.  But it’s out there.

“Black” Friday

Saint Charles, MO, "historic main street"It’s unfortunate that the media have chosen this particular name for the day that often makes or breaks an American  retailer’s year.  It is the day when many retailers bottom line changes from red ink to black, but the term still has a negative connotation for many people.  In fact, depending on the outcome of today’s business, it may really be a black Friday for some.

Of course, we hope it’s a great day, especially for small business.  Personally I will avoid the malls like the plague.  But my lovely and talented wife and I will spend the afternoon and evening shopping the independent shops on Main Street in Saint Charles, MO.  It’s a “tradition” that we started last year.  The crowds are smaller, and much friendlier, than the rampaging mobs that started surging through the chains as early as midnight this morning.

There are just as many bargains to be had, and the gifts tend to be much more personal, some even personalized, compared to the “Made in China” stuff found elsewhere.

So, here’s hoping that it’s a good day for all of our independent retail friends and the beginning of a successful Christmas shopping season.  That’s all for now.  I’m off to do my part in boosting the economy.