Mitch Free, Founder of MFG.com, writes in for Forbes.
Following is the English text of an article I wrote earlier this week for a popular website in China.
Running the world’s largest online marketplace for the manufacturing industry has allowed me to have a view of the world’s manufacturing economy and trade that very few people get the privilege of seeing and learning from. Over the 13 years since I founded MFG.com, I have spent a lot of time on the ground in China, made a lot of friends and developed relationships with many entrepreneurs and CEO’s. I also spend a lot of time with entrepreneurs and CEO’s in America. Listening to business leaders on both sides of the world has helped me develop a lot of thoughts, ideas and wisdom about how to enhance trade between companies in America and China.
The first thought I want to write about is related to the fact that Chinese companies feel they have to compete very aggressively on price when trying to win the business of an American customer. I often see marketing emails from Chinese manufacturing suppliers talking about how cheap their prices are and how they will beat the price of any competitor. That is not the way to sell to an American customer.
The greatest barrier to more manufacturing business between American companies and Chinese companies is not price or quality. The barrier is trust. If a Chinese company can earn the trust of American companies and knock down the trust barrier, the company will be rewarded with loyal American customers and they will expect to pay a fair price and not the lowest price.
American companies want to feel that they can trust you:
- With their engineering drawings and that you will keep their intellectual property confidential
- That a copy of their product will not show up in the market
- That you will deliver the product to them on the dates you promise
- That you will not substitute a lesser quality material or workmanship
- That you will honor the price you quoted to them and not change it during the production process or just before shipping the products to them
The cost to the American company for any of the above points not being honored is very high in terms of money and reputation. This fear by the American companies is very real and hurting the flow of trade between American product companies and suppliers in China. Every time an American company has their intellectual property stolen, their product copied or their brand used illegally it is reported in the American media and increases the fear of American companies about doing business with Chinese companies.
I know from my time in China and from the many high quality manufacturing companies that are MFG.com members that most of the manufacturing companies in China are trust worthy and very respectful of their customer’s intellectual property and brand. Unfortunately, it is a small number of companies that cannot be trusted that make it more difficult for all the good companies. The culture needs to put pressure on those companies who violate the trust of their customers so that they will stop. If that can happen, everyone will benefit.
If I were running a Chinese manufacturing company, I would make sure that part of my company culture would be to protect my customers designs and brand. I would then talk about that heavily in my marketing to American companies. I would also provide references of other American customers that could verify our quality and verify that we can be trusted. It cannot be just talk, you must truly be trust worthy and make sure your customers feel safe doing business with you.
If you build this trust with American companies you will be able to charge a higher price than your competitors and American customers will be happy to pay extra for the security of doing business with you. It will also create loyalty because after an American customer knows they can trust you, they will not want to take the risk of switching to a new supplier that they are not sure they can trust.