INSIGHTS by HDTS

What is Alibaba.com? What isn't Alibaba.com?

Thu, 14 Mar 2013 08:30:51 -0400

Alibaba.com is an incredibly powerful service for small businesses and entreprenuers looking to cost effectively source quality products. The allure of Alibaba’s International Marketplace is quite apparent; millions of suppliers, millions of products, and highly competitive prices. I’ve spoken with several entrepreneurs who have used Alibaba.com to launch their brands. The success stories are absolutely amazing and inspiring. But for every success story, there seems to be a handful of horror stories that have seriously harmed Alibaba.com’s reputation. All you need to read is this article about the resignation of the company’s CEO and COO to understand the risks of using the service.

So what is Alibaba.com? Last year I attended Alibaba.com’s Sourcing Fever event in Manhattan, where I had the opportunity to speak with Michael Lee, the company’s Director of Business Development and Marketing. Here’s Michael’s answer; “Alibaba.com is like match.com for finding suppliers. We’re a platform to help buyers find suppliers, but like any relationship, we can’t guarantee it will be a success.” Not the most encouraging response, but I certainly appreciated his honesty.

We like to call Alibaba.com a destination website. This means, it is a single place where international businesses and consumers (AliExpress) can go to discover suppliers and products.

This begs the question; What isn’t Alibaba.com? Alibaba.com isn’t a place where you can source products free of the risks of scam, order inaccuracy and quality uncertainty. According to Alibaba.com’s 2011 annual report, there were 2.24 million storefronts on the International Marketplace (32% year-over-year growth). When you’re talking about such a massive supplier base, there are guaranteed to be some bad apples. But what percentage of storefronts are worth avoiding? The answer is unclear. If anyone can reliably estimate this, please share it with us. Here’s a link to Alibaba.com’s banned paid members.

Is it the business model? Alibaba.com generates the lion share of its revenue from Gold Suppliers on their platform. These “Gold Suppliers” pay upwards of $2,900/year for trustworthiness, I mean premium search rankings and company profile. As a result of Alibaba.com’s historical leniency in approving questionable Gold Suppliers, the platform has suffered an erosion of buyer confidence and the value of the Gold Supplier status has diminished. It should come as no surprise that the number of paying suppliers dropped 10% in 2011.

Buyer confidence is a sacred thing. A friend of mine, Jeff Grass, CEO of BuySafe, the first e-commerce guarantor, taught me about the importance of buyer confidence. It’s very simple; when buyers are confident with the supplier, they make purchase decisions faster, and in higher dollar value. Due to Alibaba.com’s unhealthy reliance on suppliers as a means for monetization, buyer confidence was undoubtedly compromised. Jeff made a great point; without buyer confidence, a marketplace cannot function. Buyer confidence is, therefore, a sacred thing.

Back to the drawing board. One thing is for sure; Alibaba.com is working incredibly hard to repair its tarnished image. Earlier this year, the company delisted its publicly traded shares from Hong Kong’s Hang Seng stock exchange to repair its business model and focus on supplier quality and buyer experience. I have to commend the company for their innovations on this front over the past two years. To protect buyers, the company launched several initiatives. First, AliExpress provides buyers with small sample size orders. Next, Escrow was released to provide a safer payment method. Then, Assurance Plus was introduced, albeit in limited capacity, to refund buyers when goods received are not as described when purchased. Finally, Inspection Service was launched to provide a rolodex of approved Alibaba-compliant quality assurance firms.

The million dollar question. Is it too little too late? I personally don’t think so, it’s still early and Alibaba.com has a massive lead with 27+ million registered international users. Further, the company, especially Jack Ma - a true visionary - deserves a great deal of credit for the incredible opportunity it has created for small businesses and entrepreneurs the world over. Especially those leading China’s rise to dominance.

What are your thoughts?

Using 3rd Party Fulfillment To Earn Brand Loyalty

Fri, 01 Mar 2013 08:30:53 -0500

When bringing your product to market, you need someone you can trust to protect and promote your brand through the eCommerce and retail channel. A trusted partner will have facilities that are modern and secure and located near hubs for major carriers with the technology, physical network, and caring service to delight your customer. A good fulfillment partner will provide an information interface so that you and anyone you choose can have real-time visibility to inventory and the status of orders.

With product positioned in a third party warehouse, your product is safe, secure, and deployed near your customers. Orders can often be shipped same or next day and arrive at your customer’s door within one or two days using low cost ground shipping. You brand and logo will be featured on all documentation which includes a personalized thank you note with your customer’s name. Promotional materials may be printed on demand at the time of order to draw attention to your brand and products and compel repeat purchasing. You customers will begin to associate your brand with great service and pleasant experience.

There are also advantages to aggregating export shipments. In order to keep costs down, it’s better to ship full containers, but that requires more operating capital and puts more inventory at risk. By combining your shipments with other suppliers, a third party can lower allow you to ship smaller quantities more often. A fulfillment partner provides a place for your goods to be shipped and stored, but remains available for sale to any customer through any authorized channel.

The long term success of your business rests on your ability to earn brand loyalty. You have the opportunity to build your brand on a controlled and scalable supply chain foundation that will ensure the greatest customer experience. In this age of omni-channel commerce, 3rd Party Fulfillment provides a powerful competitive advantage that must not be ignored.

Bob Klunk is Managing Director of DMI Fulfillment, an HDTS Fulfillment partner.

The 800 Pound eCommerce Gorilla

Fri, 01 Mar 2013 00:35:33 -0500

dwshorowitz:

Only 40% of China’s 1.3 billion population currently uses the Internet, and China’s per capita income is 1/11th that of the US, yet per capita eCommerce spending by Chinese consumers is 78% that of US consumers.

China’s eCommerce tidal wave:

2011 2012 2013 2014 2015

USA ($B) 188 209 230 250 270

Growth Rate 11% 10% 9% 8%

China ($B) 125 194 265 348 445

Growth Rate 55% 37% 31% 28%

In case you were unaware of the momentum, potential, competitive landscape, and nuances of eCommerce in China, here’s a wonderful infographic.

So you have a successful Kickstarter campaign. Now what?

Wed, 13 Feb 2013 23:30:00 -0500

Hardware Renaissance

Recently a number of factors have made starting up a hardware company much more possible. An investor/mentor of ours, Paul Graham, recently coined the term ‘Hardware Renaissance’ in an essay where he outlines why we may be seeing an influx of hardware companies in the very near future. He mentions that hardware performs very well on platforms like Kickstarter and Indiegogo. These websites can prove a market before any real manufacturing. While investors may be slow to move on new trends, they still clamor at the opportunity to bet on a company that already has millions of dollars in sales with only a prototype.

I’ve had a successful Kickstarter campaign, I’ve won right?

There are a number of factors that lead to a successful Kickstarter campaign. I am not going to go into any of them besides that having a kick ass prototype certainly helps. Most of the hardware companies that have performed very well have done so for a reason, they have an awesome prototype and the world wants it bad. It is important to look at how the top companies have performed afterwards.

This image is from a CNN Money report titled Why 84% of Kickstarter’s top projects shipped late. The problem is that creating a great prototype and bringing it to market are two very different processes. I wonder what would happen to the reputation of KIckstarter and the implication on future campaigns should the % of late shipping products does not decrease.

What we have learned

Our friends who build hardware have asked us for advice on how to source components and manufacture products. It actually shouldn’t have surprised us but most of these hardware teams would love to keep focusing on making a great product and not on the nuances of sourcing, manufacturing, assembly, logistics, customs clearance, fulfillment and distribution. Sourcing great products is not easy, especially on websites like Alibaba where you have no trust in the suppliers you are dealing with. This trend made us take a hard look internally and this is what we found:

We build tablet based Quality Control software and have partnerships that give us access to hundreds of QC specialists on the ground in China.
We already sorted through the crap; we have relationships with premium suppliers in major production regions.
We are already integrated into the supply chain.
We are building a vetted B2B marketplace with multiple sales channels.

Our New Goal : Assist hardware startups bring their product to market

Pretty simple. We are excited to be working with some of the best new hardware companies to help with all the nitty gritty of shipping products on time. We are even more excited that we can now provide a fulfillment solution that hits over 50% of the US population in 1 day and over 98% in 2 day ground shipping. While our marketplace is still in beta, we are also already putting select products in front of millions of consumers and businesses as a part of offers programs. In fact, we buy these products at wholesale quantities and then we handle the rest.

If you have had a successful campaign, you probably know the feeling

“In the first 24 hours, everyone is happy and slapping your hand,” says Oculus CEO Brendan Iribe. “And 48 hours later, the reality sets in. There’s a bit of fear: We’re going to have to make all of these.”

It is important to ask yourself:

Do we really have the expertise in sourcing, manufacturing, quality control, logistics and fulfillment?
Do we really want to spend our time worrying about the nuances of bringing a product to market?
Is E-commerce driven from our SEO marketing strategy for our website enough to hit our sales projections?
Do we want to build a multi-channel distribution strategy from scratch on our own?
Would we rather spend our time focused on building a great product and iterating?

Chances are, you need a partner you can rely on.

Email us at [email protected]

Daniel Sugarman CEO & Co-founder

The Future Of Watches Is Here; Meet Pebble. Pebble - a fellow Y...

Mon, 11 Feb 2013 22:44:06 -0500

The Future Of Watches Is Here; Meet Pebble.

Pebble - a fellow Y Combinator company - has created a revolutionary smart watch that integrates seamlessly with iOS and Android devices. The company raised a record $10.2 million by preselling 85,000 watches on Kickstarter, a leading crowdfunding platform.

Eric Migicovsky, Pebble’s CEO and co-founder, speaks with TechCrunch’s John Biggs. This video is an excellent preview of the highly anticipated device, and the limitless potential of connected, software-driven smart watches. It is also a wonderful study on how to handle a rude interviewer.

China’s Men Lift Luxury Market. It’s a phenomenon...

Mon, 11 Feb 2013 08:30:49 -0500

China’s Men Lift Luxury Market.

It’s a phenomenon with global economic implications. Men from Mainland China are showing an insatiable appetite for international luxury items. Prestigious French, Italian, British, German and American luxury brands are well positioned. But, given the infancy of brand recognition and awareness, newer, less well-established luxury brands can employ culturally attuned tactics, and leverage HDTS, to steal mind and market share.

You don’t know what you don’t know.

When you enter the China market, you must carefully consider the varied tastes, behaviors, and psychology of Chinese consumers. Many foreign luxury brands are still figuring out the appropriate marketing plan for Mainland China, a major challenge in such a dynamic and still early consumer economy. Countless mistakes have been - and will continue to be - made by companies that ignore the nuances of marketing to Chinese consumers, and stubbornly employ tactics that worked in Western markets.

With a focus on long-term value creation, HDTS leverages it’s platform and relationships with leading market experts on the ground in China to ensure your brand and product offerings are positioned on a fundamentally sound and adaptive framework.

For a free consultation, and to learn more about our bespoke Premium Supplier Program, call us at +1 (917) 675-4018.

China Steps Up Buying In US

Mon, 11 Feb 2013 02:34:58 -0500

China Steps Up Buying In US:

Chinese firms are on the prowl for US companies. The acquisition spree is just getting started for the following reasons:

Chinese firms are flush with cash.
Chinese firms want to acquire established businesses and their brands to accelerate an otherwise painfully slow US market entrance requiring brand development.
Chinese firms are looking to secure intellectual property to enhance their current product offerings.

As Shaun Rein emphasizes in his acclaimed book The End Of Cheap China, acquisitions led by Chinese firms need not be looked at in a negative light. Comparatively inexperienced with Western business best practices, Chinese companies are typically disinterested in overtaking operations. Instead, they tend to invest passively and keep senior management in place. The healthy balance sheets of these acquirers allows for increased investment which fuels US job creation.

Don't Judge A Person By Their LinkedIn Profile. Too Late.

Fri, 08 Feb 2013 09:30:28 -0500

We’ve all seen it, and it’s painful. I’m talking about the professional who is not from an English speaking country, does not possess a strong grasp of written English, and therefore has a LinkedIn profile that would drive a 3rd grade English teacher to pop Xanax. I’m also talking about the person whose LinkedIn profile picture looks like a county jail “mug shot” taken with a Kodak disposable camera and scanned into the computer. Finally, I’m talking about the random person who has 27 connections and somehow decides to invite you to connect. Perhaps you’ve seen all three?

Business is based on trust, and trust is built on personal relationships. In this ever-globalizing world we live in, where we do more sitting behind a computer than we care to admit, the quality of our LinkedIn profile is more important than we might wish to think. We encourage our foreign partners to think about their LinkedIn profile as an extension of self. Just as in the physical world, in the digital world, you only have one first impression. So why not make it a great first impression?

If you need help fine-tuning your LinkedIn profile, or if you would like receive feedback and best practices, we invite you to email us at [email protected]" target="_blank">[email protected]. Our staff is happy to help.

Daniel Sperling-Horowitz, coFounder

Hurun Report: Psychology and Habits Of Chinese Millionaires

Thu, 07 Feb 2013 09:30:54 -0500

We wanted to share these incredible China market insights. Equip your company with the knowledge necessary to turn China into a primary market for your products.

Hurun Report presents findings from Chinese Luxury Consumer Survey 2013:

Luxury watch industry has tough year with only Longines listed as a preferred watch brand for gifting, coming in at fifteenth
Millionaires don’t sleep much, only 6.5 hours a night. At the weekend, half an hour more.
Burberry, Gucci and Montblanc jump into Top 10 Preferred Brands for Gifting
The super-rich spend a third of their time on the road, 9.2 days a month
Australia out of Top 3 as preferred luxury destination for first time since 2006
France most popular luxury destination, Britain rises to fifth
Switzerland is the year’s big performer as an education destination
Millionaires prefer the internet to source news, TV is down to fifth place from first last year
The wealthier Chinese millionaires are, the more unhappy they are
Chinese Millionaires are concerned with improving their health and family life

(Shanghai, 15 January 2013) The Hurun Research Institute today released the Hurun Report Chinese Luxury Consumer Survey 2013. The survey reveals the lifestyle and brand preferences of China’s wealthy consumers, and is intended to provide a holistic understanding of the spending habits and lifestyle changes of this burgeoning, influential and ever-changing consumer class. This year the survey included questions for the first time on the ‘happiness index’ of these wealthy consumers.

The Survey also ranks the brand preferences of the Chinese luxury consumers, which are presented at the annual Hurun Best of the Best Awards today. 2013 is the ninth year of the Hurun Report Chinese Luxury Consumer Survey and Hurun Best of the Best Awards.

Preferred brands for gifting

Moutai has struggled this year, falling to thirteenth place in the Preferred Brands for Gifting, down from fifth last year. This drop in popularity came on the back of a public debate about whether government officials, the largest customer base for Moutai, should be allowed to consume a brand which is effectively a luxury brand with its main product retailing at RMB 1800 a bottle, and also a health scare involving the use of plasticizers. Moutai is the only Chinese brand to make the list of preferred brands. French wine maker Chateau Lafite was the only drinks brand to make the Top 10 brands for gifting, a clear representation of the Chinese luxury consumers’ newfound love of wine.

The luxury watch industry has had a tough year, perhaps brought on by bad PR for the industry following cases involving financial irregularities of government officials and watch ownership. Swiss watchmaker Longines was the only watch brand to make the list, coming in at fifteenth place, and replacing the more expensive Rolex brand, which dropped off the list altogether this year.

French gifts are still all the rage, dominating the list. Accessories (leathers etc.) are the gifts of choice. The UK has an entry in the Top 10 this year, with fashion brand Burberry. Luxury brands Gucci and Montblanc also performed particularly well this year, both breaking into the Top 10 for the first time.

Apple moved up to second place for Preferred Brands for Gifting by Men, from fourth place last year. LV and Chanel were top for Preferred Brands for Men and Women respectively.

Hurun Report Founder and Chief Researcher Rupert Hoogewerf said, “This year, there is a clear trend towards gifting more modestly-priced top luxury goods.”

Best Brand for Gifting by Men

Brand % Key Gifting Category Country

Louis Vuitton 13.9 Accessories France
Apple 8.9 Electronics US
Hermès 7.2 Accessories France
Chanel 6.7 Apparel, Accessories France
Cartier 5.6 Jewelry, Watches France
Gucci 5.0 Accessories Italy
Montblanc 4.9 Pens, Accessories Germany
Dior 3.9 Accessories France
Burberry 3.3 Apparel, Accessories UK
Château..Rothschild 3.0 Alcohol France
Armani 2.9 Apparel, Accessories Italy
Prada 2.8 Apparel, Accessories Italy
Moutai 2.2 Alcohol China
Tiffany & Co 1.9 Jewelry US
Longines 1.7 Watches Switzerland

Source: Hurun Chinese Luxury Consumer Survey 2013

Best Brand for Gifting by Women

Brand % Key Gifting Category Country

Chanel 15.9 Apparel, Accessories.. France
Louis Vuitton 14.3 Accessories France
Cartier 11.1 Jewelry, Watches France
Tiffany & Co 10.6 Jewelry US
Apple 7.9 Electronics US
Montblanc 6.4 Pens, Accessories Germany
Gucci 6.0 Accessories Italy
Prada 4.8 Apparel, Accessories Italy
Dior 3.2 Accessories France
Burberry 1.6 Apparel, Accessories UK

Source: Hurun Chinese Luxury Consumer Survey 2013

Personal Investments

Property is still the key personal investment option for most surveyed (over 60%), despite increased government control on property purchases and a generally poor market. Shares are again in second place, but the % of those listing it as an investment fell to its lowest figure in 4 years.

Confidence

One in four are extremely confident when asked on the economic future, even though this number has fallen to a four year low, the figure is still surprising considering confidence levels in Europe and the US. Those who responded “not confident” rose this year to 9%, still a relatively insignificant number, but again, the highest since records began four years ago.

Social Responsibility

Tax is still considered the best way to be socially responsible, and environmental concerns are still important, especially among respondents who are over 45.

Collections

One in three respondents classify themselves as watch collectors, which is still by far the most popular collectible, however, this does represent a significant fall in popularity compared to three years ago, where one in three collected watches.

The popularity of Contemporary art collection continues its downward trend, falling in position again this year.

Trophy property collection is on the up and is considered by a growing number of Chinese luxury consumers to be an essential jewel in their collection portfolio.

Travel

Travel is the number one leisure activity. However, Chinese super-rich are going overseas less – 3.4 times a year compared to 4.2 the year before. Chinese super-rich are also on the road less than the year before, 9.2 days a month, three days less than last year. Sanya is the most preferred holiday home destination.

Best International Luxury Destination

2013 2012

France France
U.S.A. U.S.A.
Singapore Australia
Switzerland Maldives
UK Japan
Italy Switzerland
Australia Dubai
Dubai Hawaii
Germany Singapore
Maldives Canada

Source: Hurun Chinese Luxury Consumer Survey 2013

Australia’s popularity has fallen dramatically from third to seventh on the list of favoured international holiday destinations, the first time it has fallen out of the Top Three since 2006. The Maldives, which shot into and then remained in the Top 5 for two years, falls to tenth, possibly indicating that the island destination is going out of fashion. Most notable, is the surge in popularity of Europe as a luxury destination, which had its most successful result since our records began, with half of the Top 10 destinations, European. The UK, perhaps on the back of the London Olympics, is in at number five and Switzerland has also performed well. This year, Japan dropped out of the Top 10.

Sports

Swimming is the hobby of choice according to the results, beating golf to top spot. Both swimming and golf have taken the top two sports in recent years. The surprising result was that of Horse riding, which is up to fifth and is the fastest rising sporting pursuit among China’s wealthy.

Study Abroad

There is no change at the top on the previous year’s results for study abroad preferences with the US ahead, followed by the UK and Canada. Australia dropped a place to fifth and France jumped from ninth to seventh.

Media

In terms of media preference for accessing news, TV dropped to fourth from first place last year. The internet was the medium of choice for news, followed by newspapers in second and magazines in third.

Millionaire Happiness Report

The inaugural Millionaire Happiness Report is a sub-report of the Chinese Luxury Consumer Survey 2013, documenting the satisfaction that Chinese millionaires have in their lives. In general, the report shows that the richer you are, the less happy you are.

The report shows that Chinese millionaires don’t sleep that much, 6.6 hours on average during the working week. The Chinese super-rich, fall into two categories, those who are workaholics and those who are winding down, supposedly toward early retirement.

Self-made female millionaires are more likely to be divorced, 35% of the respondents, with an average age of 37 years, are either divorced or remain unmarried which is twice the figure amongst their male counterparts.

Men consider setting up their own company as the happiest moment of their life, whereas women consider theirs to be falling in love.

Both male and female millionaires are dissatisfied generally with their health and want to spend more time with their children.

For their children, Chinese super-rich wish most that they will either become entrepreneurs themselves or take over the family business.

Millionaires and the super-rich are better educated than expected, with 43% and 56% respectively claiming to have a post graduate degree, mostly Executive MBAs.

Methodology

Between June and December 2012, the Hurun Research Institute, a wholly-owned subsidiary of Hurun Report Inc, surveyed 551 Mainland Chinese ‘millionaires’, defined as individuals with a personal wealth of RMB 10 million (equivalent to USD 1.6 million / Euro 1.2 million / GBP 1 million). Amongst them were 69 super-rich individuals with wealth of RMB 100 million (USD 16 million / Euro 12 million / GBP 10 million). Their average age was 38 years (40 among the super-rich band); the ratio of men to women surveyed was 7:3. Respondents were from 31 first and second tier cities. The Hurun Research Institute has carried out this survey now for nine years running, making this the largest and most authoritative survey of its kind in China.

This press release is an executive summary of the Chinese press release. For the full press release, please refer to the Chinese-language version on the www.hurun.net website.

About Hurun Report Inc.

Nobody Knows China’s Rich Better!

Established as a research unit in 1999 by British accountant Rupert Hoogewerf, Hurun Report Inc. has grown into a leading luxury publishing group based in Shanghai, China. Hurun Report Inc. has a stable of four luxury magazines, the Hurun Research Institute and an active business events division targeting China’s entrepreneurs and high net worth individuals.

The flagship Hurun Report magazine is published monthly and reaches the households of 110,000 proven wealthy Chinese individuals and their advisers. Hurun Report is best known for its annual Hurun China Rich List, widely considered the bible of wealth and de-facto Who’s Who of Chinese business.

Hurun Report Inc. also publishes The Schools Guide Series and Wings & Water.

The Schools Guide Series explains the respective education systems of various destinations such as the UK, US, Canada, Australia and New Zealand, Switzerland and Singapore, issues parents need to take into consideration when making the transition from the Chinese system, and lists the top preparatory, secondary and undergraduate schools.

Wings & Water is for the so-called lion kings of China; those individuals who lead industry and shape opinions. It addresses the needs of those entrepreneurs looking to purchase a jet or yacht, as well as setting out how to maintain these big and costly machines.

For further information, see www.hurun.net.

傅吟秋 Angel Fu

胡润百富市场部

电话：021 - 5010 5808*160

手机：137 6432 9969

邮箱：[email protected]" target="_blank">[email protected]

A Swiss Army Knife For Doing Business With/In China

Wed, 06 Feb 2013 13:02:00 -0500

23 months ago I was watching Bloomberg TV - on a short list of my favorite channels - when I encountered the fresh perspective of a man named Shaun Rein. Rein, Founder and Managing Director of Shanghi-based China Market Research Group, was brought on the March 2011 show to field questions about bearish outlooks on China from several Western thought leaders including famed hedge fund investor Jim Chanos.

Having spent over 3 months in China the previous year, during which I met extensively with business owners, real estate developers, and government officials, I felt fairly informed about China’s economic development. While visiting cities such as Shenzhen, Dongguan, Guangzhou, Beijing and Tianjin, I couldn’t help but believe the real estate sector was overheated in a manner that, if not properly addressed, would comprise China’s socioeconomic stability and continued economic growth trajectory. A jungle of cranes and skyscrapers as far as the eye can see (which admittedly, in many cities blanketed by a thick and ominous fog, is not necessarily too far), and vacant, speculatively held properties exceeding $3,000 per sq. meter were enough red flags to catch my attention.

But Rein made a compelling case as to why China, facing 10-20% wage and commodity inflation, and guided by prudent economic stewardship, was not threatened by a looming collapse of its real estate market. I wasn’t yet convinced, but I was listening. (Video: Bloomberg TV)

A few weeks later, while surfing the web, I stumbled upon a CNBC article titled “Why Best Buy Failed In China”, written by who other than Shaun Rein. This guy was popping up all over the place, and for good reason, his uncommon insider’s perspective was, arguably, more thoughtful than any other expert on China.

Over the next few months, and a few articles later, I reached out to Shaun to thank him for his research-driven insights on the China market, and pick his brain about related topics. Shaun was gracious, responsive and genuinely interested in helping out fellow entrepreneurs entrenched in the international trade space.

In November 2011, Shaun reached out personally to inform me of the forthcoming release of his highly acclaimed book; The End of Cheap China: Economic and Cultural Trends that Will Disrupt the World. Pleased to receive this news, I quickly secured my preorder on Amazon.

In the Spring of 2012 I had the opportunity to meet Shaun at a Midtown Manhattan book signing and networking event. The venue was packed with successful China-focused intellectuals and businessmen from America, China, Korea, Russia and Africa, among other places. Equipped with a seemingly endless supply of anecdotes and market facts, Shaun captivated his audience, especially those less familiar with his enlightened thoughts.

Sidetracked by the responsibilities of growing HD Trade Services, I was not able to write a review, until now.

Chapter 1: Chinese Billionaires Outnumber American Ones

Much to the contrary of conventional Western thought, Chinese businessmen are savvy and sophisticated. The most successful businesses in China are focused on building great brands, not copying Western intellectual property and business models. Further, Having experienced the depths of despair firsthand, economic momentum has created a palpable optimism looking into the future.

Top Chinese companies have already successfully navigated treacherous domestic competition, the gradual process of brand recognition, and rising input costs, making them fit to compete on a global scale. For this reason, Rein cautions Western executives to beware of aggressive, fast moving, well capitalized Chinese companies which pose an underestimated competitive threat to established brands.

Not only has the day arrived when many Chinese firms offer products that are as good as Western goods, but many compete head to head on quality and innovation.

Aided by rising nationalism, Chinese consumers will commonly select domestic brands of products believed to be of equal quality, even if they are more expensive. Domestic dairy company Mengniu - whose amazing Beijing plant I visited in January 2010 - prices its offerings at a premium to foreign brands as a way to establish the perception of superior quality among consumers. This is especially important in the dairy industry given rampant cases of tainted milk.

Rein asserts that Baidu, for example, accused of being a clone of Google, is actually a higher performing search engine for Chinese text, optimized to the preferences and nuances of the Chinese internet user. It doesn’t hurt, of course, that the Chinese government has greater confidence in domestic owned technology firms to responsively censor according to party mandates.

In the 1990s, fewer than 10% of Western brands were profitable in China. Many became discouraged by consumers they thought would never value brands. This naive outlook did not consider that Chinese consumers in the 1990s had wholly different aspirations and needs than Western consumers. Today, as per capita income has quadrupled, over 80% of Western brands are profitable in China. Those that have patiently positioned their branding according to the evolving aspirations of Chinese consumers, have been rewarded handsomely. And it’s only the beginning.

Chapter 2: Cheap Chinese Labor? Not Anymore.

The resultant of diminishing labor supply is a marked increase in manufacturing wages. In many manufacturing provinces we’ve seen year-over-year increases in excess of 20% for the past three years. This causal relationship is known as the Lewisian turning point.

Rising labor rates and the appreciation of the renminbi (Chinese currency) have made Chinese exports less appealing. Rein contends that factory owners engaged in export must shift their attention to the Chinese domestic market where consumer industries are experiencing double digit growth.

Finally, Rein points out that higher paying jobs are the key to avoiding widening income gaps, the classic downfall of emerging economies such as Mexico.

Chapter 3: Stability Is The Key To Happiness

While the Chinese haven’t forgotten about the tremendous pain and suffering of the Cultural Revolution, a stable society and consistently improving quality of life brought about by economic reform has certainly contributed to generational happiness and contentment with the Chinese Government.

The focus of the Chinese Government is on maintaining this consistently improving quality of life for all of its people. To achieve this, the central government is investing heavily in welfare programs and infrastructure development, and combatting corruption within local government. The central government is concerned about controlling and reducing episodes of social unrest. Given complexities of globalization and advancements in technology, this is easier said than done. Free speech - although valued - that threatens stability is therefore not accepted.

On the topic of free speech, Rein reminds us that the Chinese are not afraid to speak out against corruption in public and on internet forums. Over the past several years, censorship of leading international websites for news and social content has actually diminished noticeably.

Somewhat unrelated; Rein shares an interesting reminder that older Chinese are less receptive to brands and have not participated as equitably in the nations newfound wealth. Therefore, their Children are often responsible for purchase decisions. When selling products for use by older Chinese people, your best bet is to market to their 30-40 year old children.

Chapter 4: The Modern Chinese Woman

Much has been reported about China’s one child per family policy which resulted in a disproportionate ratio of males to females. Not long ago, the strength of males was needed, on farms and construction projects, to support their families. Today, in many socioeconomic respects, women have achieved parity with men. Women now account for more than half of income, and there are more women in universities than men. In many families, women are the main breadwinners, while their husbands are commonly vacating unskilled factory positions to care for children.

Understanding women’s role in Chinese society is critical to the success of Western brands. Take, for example, the fact that women account for 55% of spending in the now $15.6 Billion luxury goods market. Women born from the mid 80s to date are raised as “princesses,” pampered and told that the sky is the limit. As a result, many women are becoming entrepreneurs; according to Forbes, 7 of the world’s 14 self-made women billionaires are Chinese. Women are spending freely, even on credit, with the expectation that wages and opportunities for substantial wealth creation are certain to grow. This is a potentially dangerous mindset can lead to a credit bubble.

When marketing to young women, understand that, because many were and are still pampered by their families, they are less mature. For this reason, they are more likely to purchase things that are “cute” - think Hello Kitty - than “sexy.”

Snoopy-branded clothing is one of the hottest selling brands for twenty-something Chinese women…Barbie, by contrast, shut its $37 million store two years after opening.

When marketing fashion apparel, use a mix of Western and Asian models. Western models convey brand prestige, while Asian models show how styles look on similar body types.

Chapter 5: Why Chinese Consider Kentucky Fried Chicken Healthful

Most Chinese, especially food and medical industry professionals, have lost faith in the safety of Chinese food. Oddly, many Chinese consider KFC to be a healthy option. You would think so too after seeing countless reports of local restaurants using reclaimed oil from sewers to cook food! The Chinese trust Western restaurants would never cut corners, and so they are willing to spend a premium to ensure their food is untainted.

The stories in this chapter are horrifying and captivating.

Chapter 6: Understanding Corruption In China

There are three levels of government; central, provincial, and municipal. Provincial and municipal government are riddled with corruption. This has been a source of civic unrest. The central government often executes corrupt officials to set an example, but Rein suggests the problem is more deeply rooted in the divergent interests of local governments, and the nature of single party government.

When doing business in China, make sure you get approval from local and central governments.

Chapter 7: China’s Real Estate Sector

Many Chinese do not trust the accounting of publicly traded companies, so we see a disproportionate amount of wealth being invested in real estate. To avoid speculative investing and control the residential real estate market, which has more than tripled in the past decade, provincial governments have set limits on the number of properties the wealthy can purchase and implemented mandates for up to 50% down payment.

In order to support its growing economy, China needs to continue to invest in infrastructure projects such as low income housing, bridges, tunnels, subway, high-speed rail, and airports.

Chapter 8: Chinese Neo-Colonialism In Africa And The End of American Hegemony

China holds about $3.3 trillion in US foreign exchange reserves. To avoid over-exposure to an instable US Dollar, and ensure access to natural resources critical to the country’s uninhibited economic growth, China has invested significantly in assets around the world. Countries receiving Chinese foreign investment include Canada, Australia, Iraq, Afghanistan, Sudan and several other African nations. China, irrespective of political and religious allegiances, is looking out for its economic interests.

On this note, China does not concern itself imperialistically with the political affairs of the countries in which it invests. Rein uses the term Soft Power to describe the Chinese approach to spreading its growing influence. Notwithstanding this concept, China is consistently criticized by Western governments at odds China’s economic partners such as Venezuela and Iran.

At the corporate level, Rein encourages us to embrace Chinese acquisitions of Western companies as opportunities to deliver high returns to stakeholders, and grow employment. Unlike Japanese firms, Chinese companies typically keep Western management in place and often invest to achieve faster growth, resulting in much-needed American job creation.

The average Chinese tourist spend $7,000 dollars per trip to the US. As China’s 350 million person middle class begins to travel, Western nations must invest in conveniences (such as accepting China UnionPay bank cards) to enhance the experience for these tourists and optimize profits.

Chapter 9: China’s Educational Sector

Arguably, the biggest problem faced by multinational companies operating in China is recruiting and retaining labor. Rein attributes this to a weak talent pool bred by an education system that overemphasizes rote memory, lacks world class curricula, career path flexibility, and infrastructure to support annual graduating classes of more than 6 million. What’s more, only 30% of high school graduates continue to college, compared with 70% in the US.

The vast majority of China’s wealthiest families are obtaining foreign passports as a means to send their children abroad for schooling.

As China matures, the education system will remain under great pressure to reform. The long term stability of China rests largely on major improvements in this sector.

Chapter 10: What The End Of Cheap China Means For The Rest Of The World

Rein equates China to a teenage superpower.

…displaying glimpses of future genius, but unable to maintain a consistent level of power.” This characterization is fitting, as China’s rapid ascent during a period in which much of the developed economies remain stagnant, has placed the country in a position tremendous power and responsibility.

Global stability is key to economic growth. While the US continues to serve as the world’s police, it is likely that China will continue to focus on improving the welfare of its people through major investments in infrastructure and education. The globalization of commerce, and interdependency of nations provides a compelling support for global stability.

Conclusion

The End Of Cheap China is a wonderfully insightful portrait of where China has been, the state of current affairs (and the underlying reasons), what the future holds, and how to position your company to ride the transformative wave that is China’s burgeoning economy. Driven by primary market insights and well over a decade of personal exposure to China’s economic and social ascent, and institutions; Shaun Rein provides a well organized, riveting, and informed account on China along with priceless actionable insights for business and government.

The one thing missing from this book is the role eCommerce will play on the proliferation of Chinese domestic consumption and International trade. We will follow up with our view on eCommerce - domestic and international, B2B and B2C - and the central role we believe it will play on the continued economic growth of China and international companies that implement a culturally sensitive winning strategy.

I hope the Chinese Government does not censor our website for sharing Shaun Reins insights!

INSIGHTS

27 - the age of the average home buyer (32 in America)
7 of the world’s 14 self-made women billionaires are Chinese
More than 50% of income is earned by women
$7.8 Trillion GDP
1.344 Billion people
350 million middle class consumers
Women like cute not sexy
When marketing clothing, use a mix of Western and Asian models
Guanxi (circle of trust) is overemphasized by Westerners
The average Chinese tourist spend $7,000 dollars per trip to the US

Daniel Sperling-Horowitz, coFounder

HDTS caught up with Zhongguancun, widely considered the Silicon...

Fri, 01 Feb 2013 12:35:57 -0500

HDTS caught up with Zhongguancun, widely considered the Silicon Valley of China. Known internationally as “Z-Park”, the technology hub is located in northwest Beijing. Thousands of companies - from startups to giants like Lenovo - call Z-Park home. We profiled three companies who exhibited at the 2013 Consumer Electronics Show as part of the 2nd annual Zhongguancun delegation.

For more information, visit www.hdtradeservices.com/zpark

While US consumers may not be familiar with ZTE, the company is...

Fri, 01 Feb 2013 05:42:45 -0500

While US consumers may not be familiar with ZTE, the company is swiftly climbing up the ranks as the world’s 4th largest smartphone manufacturer. Grand S, the company’s flagship smartphone, will bring ZTE into the spotlight of American and International consumer electronics.

Launched at the 2013 International Consumer Electronics Show to rave reviews, Grand S represents a remarkable advancement in the smartphone category. We were shocked by the design, slimmer than most 4G devices. Watch our exclusive interview with Joey Jia, EVP, Sales for ZTE USA.

Specifications include 5” Full HD Display (1080P), Quad Core 1.7GHz Processor, 2GB RAM, 13MP Camera, 4G LTE, Android 4.0. Windows 8 expected later in the year.

For more information visit: hdtradeservices.com/zte

HDTS catches up with Hisense at the 2013 Consumer Electronics...

Fri, 01 Feb 2013 05:30:00 -0500

HDTS catches up with Hisense at the 2013 Consumer Electronics Show. From the world’s largest LED TV (110”) to some impressive and powerful tablets scheduled to ship later this year, Hisense is emerging as a Chinese brand with major international potential. Remarkable design, functionality and quality. Hisense has the complete product line and everything it takes to be a contender.

For more information, visit www.hdtradeservices.com/hisense

Chinese Companies Need To Be Seen As More Trustworthy

Wed, 30 Jan 2013 02:44:00 -0500

Chinese Companies Need To Be Seen As More Trustworthy:

An international survey has found that Chinese companies are less trusted than companies headquartered in other nations - by a wide margin - a major hurdle for the growing number of Chinese enterpriseslooking to ”go global”.

Of those polled in developed countries, only 19 percent regarded companies headquartered inChina as ”trustworthy.”

It’s unfair that foreign opinion holds Chinese firms in such low regard. We believe it’s only a matter of time before Chinese firms gain tremendous respect from foreigners. If the history of past emerging economies is any indication of the future, all it will take is a few companies to breakthrough and then perception shifts.

Source: Zheng Yangpeng, China Daily

The 4 Fatal Trade Show Marketing Mistakes

Wed, 30 Jan 2013 01:25:00 -0500

It is our belief that premium Chinese suppliers do not receive the attention from western consumers and buyers that they deserve. This under-appreciation is hurting the growth of small and large Chinese companies without discrimination. But western consumer acceptance is not to blame.

In this article we will expose the 4 Fatal Trade Show Marketing Mistakes that prevent 99.9% of Chinese suppliers from achieving their true potential. Finally, we will provide you with the opportunity to begin implementing our winning solution.

The definition of insanity is doing the same thing repeatedly and expecting a different result. Yet, year after year we witness hundreds of Chinese companies making the same mistakes and achieving the same unfortunate results. Due to rising material and labor costs, relative inflexibility with US pricing, and fierce competition for Chinese domestic consumers fixated on price, OEM manufacturers must aggressively enter international markets or risk destruction. For these reasons, it’s difficult for us to watch as millions of hard-earned dollars are thrown away at international trade shows.

The 4 Fatal Mistakes Chinese companies make when exhibiting at international trade shows:

1. Not showing profound respect for english language and western marketing culture.

Although we see this more often with smaller Chinese companies, it is surprisingly common for multi-billion dollar Chinese companies to staff trade shows with company officials and representatives who cannot speak English proficiently. We also see marketing material (signs, displays, brochures) that contain many grammatical mistakes.

In today’s competitive environment the consumer has more selection and power than ever before. Any friction the consumer encounters will dramatically reduce the likelihood that that consumer will become enchanted by your product and brand. As a result, that consumer is not likely to share your products and brand in a positive light with their network of influence. Forget not that trade shows are heavily attended by technology evangelists or “early adopters” who we will refer to as “influencers.” Enchanting these influencers is the secret to mass adoption of your products.

Staffing your trade show exhibit with English speaking models is not enough, in fact, it can be a major source of frustration. Many attendees will not bother to speak with trade show models because they know very little about your products, services, and company. Trade show models should never be used to compensate for a lack of english proficiency. Models, if utilized, must be well trained and actively engaging attendees passing by the exhibit. They should not be standing by, passively, partially engaged with your product or speaking with one another. They should be walking the periphery encouraging visitors to visit your company’s exhibit.

We recommend companies think about the trade show attendee’s experience and poor reflection on their brand that this avoidable mistake surely causes.

When there are unnecessary communication barriers, the attendee thinks:

“If it is this difficult to communicate with their delegate, I cannot imagine what it must be like to communicate with the entire company!”
“If they do not have proficient English speakers, I cannot imagine they are an organized and successful company!”

The lesson here is that Western consumers will not even bother to look at your products and learn more about your company if they are not impressed by your display and the attention you are receiving from other attendees.

2. Not sharing your company’s story.

Storytelling is used to communicate practices and values that shape one’s identity. Since prehistoric times, stories have been used to establish the foundations of community. Stories are passed from person to person and generation to generation. We have observed a significant trend whereby storytelling is used in marketing to communicate brand identity and establish customer loyalty. After all, a basic human need is the need to be entertained.

Believe it or not, the average consumer is exposed to more than 3,000 advertisements per day. Today, it is more difficult than ever to capture the consumer’s attention. Companies that tell a compelling and authentic story are more likely to succeed in gaining consumer attention. Without a memorable story, your brand and products are forgotten. Authentic stories also have a tendency to increase credibility, thereby breaking down barriers of culture and consumer apprehension.

A great example of a story would be that of Haier. Haier America’s website, corporate brochure and corporate video contain wonderful information about the company’s development, mission and values. These resources are excellent for consumer education, provide an excellent understanding of who Haier is as a company, and certainly build trust and credibility.

A poor example of a story would be that of TCL. When an American consumer visits TCL’s USA website, they have to scroll down to the bottom of the website and click About Us. The link takes the visitor to a webpage with the following information:

About TTE Technology

With its US headquarters in Corona, California, TTE Technology, Inc. designs and markets televisions in the United States under the TCL brand name. TTE Technology and TCL Corporation are subsidiaries of TCL Multimedia Technology Holdings Limited, one of world’s largest consumer electronics manufacturers specializing in the development of high-quality televisions and other leading technology products. Headquartered in China, TCL Multimedia operates a global network of research centers, manufacturing facilities, and sales offices.

USA Headquarters
TTE Technology, Inc.
555 S. Promenade Ave.
Suite 103
Corona, CA 92879
Ph: 877-300-8837

Who is TTE? This is inconsistent and confusing! This is far from a story, and we would expect very few visitors to establish an emotional connection to TCL’s brand after reading this page. This feels empty.

3. Not showing uniqueness and creativity.

Western consumers have very short attention spans. At this year’s Consumer Electronics Show in Las Vegas, USA, there were more than 3,500 exhibitors and 150,000 attendees. Distractions are abundant. There is a fierce competition for attention.

Many companies will never have the multimillion dollar marketing budgets of Huawei and Haier, so they must be smarter and more creative in order to obtain high return on investment (ROI) for their marketing campaigns. Guerrilla Marketing is a form of marketing we study and practice extensively for our clients. It is defined as a low-cost advertising strategy using unconventional means.

Our favorite example of Guerrilla Marketing is the story of Half.com. In 1999, the founder of Half.com convinced the city of Halfway, Oregon, USA to change its name to Half.com, Oregon, USA for one year in exchange for $100,000 and 20 computers! The strategy was tremendously successful, attracting national press attention and ultimately led to the company’s 2001 acquisition by eBay.

The lesson here is to be creative. Attract attention or you will be irrelevant.

4. Not identifying a clear target consumer and action plan.

At the 2013 Consumer Electronics Show in Las Vegas, we asked senior management of over 50 Chinese companies ranging from startups to Fortune 500 global enterprises the following question; what is your goal for the trade show and what is your strategy for selling in America and internationally?

The answers were startling and went along the lines of;

Well, we just want to sell our products. We don’t really know very much about the [American and international] consumer. We are looking for a trusted partner to help us with this.

We are impressed by how candid these executive were. We believe this admission is a very productive cry for help. But the cries will not be answered unless you can catch the attention of the right American and international partners.

Conclusion

Please remember that your product rarely sells itself. Taking action and correcting these mistakes will place your company on strong foundations to compete and win internationally.

At HD Trade Services, we actively leverage our marketing expertise and network of influence to create sales and business development opportunities for your company. We have designed a powerful international marketing solution specifically for premium Chinese suppliers. Our marketing place, not to be confused with marketplace, empowers you to beautifully feature your products and company to our Western audience of qualified buyers and end consumers.

The Secret To Selling Is Inside The Golden Circle

Tue, 29 Jan 2013 05:47:40 -0500

Just last week I shared a YouTube link with Nigel Lewis, founder of Global Logistics Media. Shortly thereafter, I received a response from Nigel;

“You’re onto it… I’ve been a fan for a while now, the first video I ever saw was this one [link], the man is a great communicator…”

You should have seen the smile on my face. Here we are, two industry professionals from opposite sides of the world and now we share a common social framework for life and business. I instantly felt a closer bond with Nigel, and because of our shared belief, I was compelled to begin writing this article for the benefit of our community of readers.

The video I shared with Nigel was a TEDtalk by renowned author, leadership expert, and ethnographer, Simon Sinek. Sinek is a trailblazer for the concept that people make decisions based on trust, which in turn is earned through the sharing of common beliefs.

“If you don’t understand people, you don’t understand business…People don’t buy what you do, they buy why you do it.”

The Golden Circle
Sinek calls this concept The Golden Circle, through which he draws a remarkable parallel between the way in which we establish trust and make decisions, and the anatomy of the human brain.

This doesn’t work!

Traditionally, we sell people on buying our products and working for our companies using the path of red arrows shown in the diagram above. That is, we tell people What we do, How we do it, and finally, Why we do it.

Sinek uses the traditional selling approach; “We make great computers. They’re beautifully designed, simple to use, and user friendly. Want to buy one?”

This works!

Exceptional leaders sell to people and organizations who share common beliefs. That is, they sell from the inside out along the path of green arrows shown in the diagram above. They start with Why they do what they do, then explain How they do what they do, and finally, they mention What their products or services are.

Sinek uses Apple as an example; “Everything we do, we believe in challenging the status quo, we believe in thinking differently. The way we challenge the status quo is by making our products beautifully designed, simple to use, and user friendly. We just happen to make great computers. Want to buy one?”

This excerpt captures the essence of Sinek’s Golden Circle:

“The goal is not to do business with everybody who needs what you have, the goal is to do business with people who believe what you believe.

Here’s the best part; none of what I’m telling you is my opinion, it’s all grounded in the tenets of biology. Not psychology, biology.

If you look at a cross section of the human brain, looking from the top down, what you see is the human brain is actually broken into three (3) major components that correlate perfectly with The Golden Circle.

Our newest brain - our neocortex - corresponds with the What level. The neocortex is responsible for all of our rational and analytical thought and language. The middle two sections (How and Why) make up our limbic brains and our limbic brains are responsible for all of our feelings like trust and loyalty. It’s also responsible for all human behavior, all decision making, and it has no capacity for language.

In other words when we communicate from the outside in, yes people can understand vast amounts of complicated information like features and benefits and facts and figures; it just doesn’t drive behavior.

When we communicate from the inside out, we’re talking directly to the part of the brain that controls behavior, and then we allow people to rationalize it with the tangible things we say and do.

This is where gut decisions come from. You know sometimes you can give somebody all the facts and figures, and they say ‘I know all the facts and details say but it just doesn’t feel right.’ Why would we use that verb? ‘It doesn’t feel right.’ Because the part of the brain that controls decision making doesn’t control language. And the best we can muster up is ‘I don’t know, it just doesn’t feel right’. Or sometimes we say ‘you’re leading with your heart’ or ‘you’re leading with your soul.’ Well I hate to break it to you, those aren’t other body parts controlling your behavior, that’s all happening here in your limbic brain…

But if you don’t know why you do what you do, and people respond to why you do what you do, then how will you ever get people to vote for you, buy something from you, or more importantly; be loyal?

Again, the goal is not to sell to people who need what you have, the goal is to sell to people who believe what you believe. The goal is not just to hire people who need a job, it’s hire people who believe what you believe. I always say that if you hire people just because they can do a job, they’ll work for your money. But if you hire people who believe in what you believe, they’ll work for you with blood and sweat and tears.”

I hope Simon Sinek’s transformative insight will serve you and your organization well. My best wishes for a successful 2013 as you “Start With Why” to enchant prospective customers and colleagues.

I’ll leave you with a final question; Why do you do what you do?

- Daniel Sperling-Horowitz, coFounder

P.S. Check out the videos below.

Simon Sinek: How Great Leaders Inspire Action

Simon Sinek: If you Don’t Understand People, You Don’t Understand Business

Sources:

Hurry Up, The Chinese New Year Is Coming!

Tue, 29 Jan 2013 01:06:08 -0500

This post will be short and to the point. The Chinese New Year (translated to ‘Spring Festival’) is fast approaching. The Year of the Snake begins February 10th.

Most of the Chinese suppliers we work with will close up shop for national holiday between February 2nd - 5th, and re-open on or about the 18th of February.

So, if you’re trying to get a last-minute production run in, hurry up!

Defining OEM: A Disambiguation

Wed, 23 Jan 2013 00:39:00 -0500

Just what exactly does OEM mean? The term OEM is used in so many ways it has become a great source of miscommunication among supply chain professionals. We’ve had the privilege of experiencing this ambiguity first hand, so we decided to offer some clarity.

The acronym OEM stands for Original Equipment Manufacturer. The Council of Supply Chain Management Professionals, aka CSCMP, utilize our friend Kate Vitasek’s Supply Chain Management Terms and Glossary. Here’s Kate’s dual definition:

The rebranding of equipment and selling it under another name, or as a component of another product. OEM refers to the company that made the products (the “original” manufacturer), but with the growth of outsourcing, eventually became widely used to refer to the organization that buys the products and resells them. This term has two generally acceptable definitions which are actually opposites of each other and may vary by industry:

1) The OEM reseller is often the designer of the equipment (which is made to order). An example would be a computer manufacturer OEM which includes components built by other manufacturers, and

2) Companies that make products for others to repackage and sell, or to incorporate into a final assembly. An example would be an OEM manufacturing tires for use on automobiles.

Very well said, Kate!

Let’s use Apple to apply these definitions. By virtue of definition 1, Apple is an OEM. Apple designs its own products and utilizes a vast network of suppliers for the input materials and components needed to create their Original Equipment. Interestingly, Apple does not manufacture anything in-house.

Perhaps most notably, Apple contracts its manufacturing to Hon Hai Precision Industry Co., Ltd., better known under the trade name Foxconn. Here’s a list of Apple’s production suppliers for 2011. This list, includes such names as Samsung Electronics Co., Ltd., LG Display Co., Ltd., Advanced Micro Devices, Inc., and Intel Corporation. These companies, by virtue of definition 2, are also classified as OEMs.

So, there you have it. OEM has two definitions, which can certainly be cause for confusion.

At HDTS, we avoid the term OEM. Why? Because we frequently encounter Premium Suppliers who offer “OEM” and “Branded” products.

Premium Suppliers offering “OEM” means they offer unbranded products which our Qualified Buyers can sell under their own brands, thereby classifying the Qualified Buyer as the OEM under definition 2.
Premium Suppliers offering “Branded” products are simply, by virtue of definition 1, OEMs.

Go figure.

When in doubt, do what we do at HDTS and avoid the term OEM…or accept the ambiguity!

HD Trade Services, Cartoonized!

Sat, 19 Jan 2013 15:45:00 -0500

We’re excited to share this awesome animated video explaining the HDTS Platform for international trade.

Enjoy!

How do you discover Premium Suppliers? HD Trade Services visited...

Thu, 17 Jan 2013 17:42:00 -0500

How do you discover Premium Suppliers? HD Trade Services visited with leading Chinese technology companies including ZTE, Hisense, Changhong, and members of Zhongguancun “Z-Park” at the 2013 International Consumer Electronics Show. Only the best Chinese Suppliers at hdtradeservices.com. Music by Chris Pierre.