When Did China Manufacturing Become So Easy?

Just read The Future of Manufacturing in China: Three Big Trends over at ChinaImportal. (h/t to Quality Inspection) and I agree with 88% of it. The post does an excellent job of explaining where China manufacturing is today — with an emphasis on what so many got wrong in their predictions on where China manufacturing would be today — along with where China manufacturing is going. The post does this by breaking down into three main themes:

1. Production will remain in China, despite increasing costs
2. Manufacturing is becoming as accessible to Startups and Small Businesses, as Software development
3. Importers will need to excel at branding and marketing to stay in business

I will examine each of these in turn.

1. Production will remain in China, despite increasing costs.

ChinaImportal talks about how Chinese suppliers are facing increased costs, among which are a rapidly improving Chinese tax collection system, but despite this, “China’s East Coast grew into an even stronger manufacturing base. Shenzhen is the brightest shining star, and has cemented its position as the World’s center for manufacturing.” Shenzhen is today “an ecosystem that cannot be simply transplanted.  ChinaImportal correctly notes how this reflects that “China is losing out in some areas, but gaining in others.” I agree, and for my take on this, check out China Manufacturing: Cha-Cha-Changing….

ChinaImportal sees China eventually losing its cost advantage entirely, “compared to the US, EU and Japan, due to cheap robotics, AI and 3D printing. But that’s at least two or three decades away.” Okay.

2. Manufacturing is becoming as accessible to Startups and Small Businesses, as Software development

ChinaImportal then argues that manufacturing in China is becoming so routine and so easy that even a college student can do it:

Today, a product can get financing on Kickstarter. Then, Alibaba comes in with their Trade Assurance program to secure the transaction with the supplier.

Once ready for shipment, just book a quality control online at Sofeast.com, and get a free shipping quote from Flexport – directly delivered to an Amazon FBA warehouse.

In the last few years, the entire supply chain has moved online, and this is just the beginning.

I vehemently disagree with important parts of the above. Let me break it down, claim by claim:

• “Today a product can get financing on Kickstarter.” This is indisputably true, as far as it goes. But as we recently screamed from the rafters in China, Indiegogo, Kickstarter, The Internet of Things, Marshall Goldsmith, and Suing Your Lawyers and Sourcing Agents Because It Is Getting Really Really Bad Out There and in Worthless China Contracts: First, Let’s Sue All The American Lawyers and in China and The Internet of Things and How to Destroy Your Own Company and even way back in 2014 in Kickstarter And China Manufacturing. You Are So Wrong On Your China Risks, having Kickstarter funding does not mean a thing when it comes to protecting your intellectual property. All I can tell you is that about once a week one of our China lawyers has to tell some recent college graduate with $250,000± in Kickstarter funding that he or she no longer has much of anything because they have relinquished it to their China supplier. And once the China supplier owns your essential IP, your China supplier will be free to double the cost of manufacturing what you may still consider to be your product, and they will.

• “Then, Alibaba comes in with their Trade Assurance Program to secure the transaction with the supplier.” Wrong again. In the last six months or so I personally have had at least four companies come to me after having ordered between $25,000 and $250,000 in product and then received bad product but little to no compensation from Alibaba’s Trade Assurance Program. I also know that at least one of these companies is talking to lawyers about pursuing a class action case against Alibaba for “acting as though it is providing insurance, when it really isn’t doing anything of the sort.” I would love to hear from others out there regarding their experience with Alibaba’s Trade Assurance Program? Has Alibaba treated you fairly? Did it pay you what you believed you were owed? Or did it essentially tell you to go pound sand?

• Once ready for shipment, just book a quality control online at Sofeast.com, and get a free shipping quote from Flexport – directly delivered to an Amazon FBA warehouse. I buy this.

• “In the last few years, the entire supply chain has moved online, and this is just the beginning.” I buy this.

3. Importers will need to excel at branding and marketing to stay in business

I completely agree with this, or as ChinaImportal puts it:

As manufacturing becomes accessible to (almost) everyone, the market is becoming flooded with products.

The core of every business is the product, or service, it sells. However, a product is only as good as the marketing and sales processes that supports it.

The future belongs to those businesses that can not only bring a product to market, but also master the art of product branding, customer service – and online marketing.

In fact, these skills are combined more important than the product itself.

ChinaImportal then correctly notes how “what makes a business successful in the OEM manufacturing game is irrelevant when selling on Amazon, and other B2C online channels” ChinaImportal then points how that since so “many [China] suppliers struggle to respond to emails within a week, they are nowhere near having the ability to last more than a month on Amazon.” ChinaImportal is absolutely right on this as well. But ChinaImportal is also right to point out that the competition from China is slowly getting tougher:

That said, the younger generation in China has a much better understanding of branding, and the importance of solid customer service.

The question is how much of an advantage they will have in the future, given that they have better access to manufacturers than their American and European competitors.

That advantage is not negligible, but an understanding of the target market has been always more important, than an understanding of the supplier that makes the product. This holds true, regardless of where in the world you do business.

What are you seeing out there in the world of China manufacturing?

We will be discussing the practical aspects of Chinese law and how it impacts business there. We will be telling you what works and what does not and what you as a businessperson can do to use the law to your advantage. Our aim is to assist businesses already in China or planning to go into China, not to break new ground in legal theory or policy.