I am reading Poorly Made In China, and it is a real treat. Paul Midler, the author, does a great job at analyzing the psychology of oversea buyers.

He gives examples where the importer got himself locked into a relationship with a given factory. The manufacturer could feel it, and took advantage of it to raise prices… and, at the same time, reduce its cost by degrading quality. Each time the buyer protested, the supplier just pushed back. Here are two extracts that detail the mechanism at work:

Contract manufacturing was not like buying fruits, where if you didn’t like the goods at one shop, you simply walked across the street to a competitor’s. Supplier relationships took a great deal of effort to set up, and it took a long time to work out the kinks.

Outsourced manufacturing was a bit like marriage in some ways: even when things got rocky, it generally made more sense to work things out than to leave in the hope of finding a better partner elsewhere.

While importers claimed that they wanted to learn precisely how their products out of China were being made; at the same time, they were afraid to dig too deep. Pressing for details might mean uncovering a problem that could not be ignored. It meant fixing things, and pressuring a supplier to improve quality put upward pressure on pricing.