Every year, I guess thousands of companies decide to start importing from China. Some of them already exist, and others are founded specifically for this activity. But overall, most of these companies know very little about China.
They know it can be risky. They heard of all the struggles over product quality. They were told business is conducted differently. So what do they do? They try to work with somebody who knows all the tricks. They hire Chinese purchasers in their country, or they work with an “connection” of some sort.
In my view, this is a mistake. There are plenty of service companies in China working for importers, and they usually know their business better than your cousin’s friend who happens to be Chinese.
There was an interesting post today on China Law Blog (Your Chinese-American VP Don’t Know Diddley ‘Bout China Law). Dan Harris describes situations where Western companies placed one of their employees in charge of everything related to China, simply because these employees were of Chinese origin:
In spite of this Chinese person’s lack of ANY legal training or business training, this person is typically chosen to be the lead person to start up operations in China. The company is of the view that because this person grew up in China (even though this person probably has never done any real business there and has not been back but for a vacation or two in the last ten years) this person must know everything about the legal and business aspects of starting and running a company in China.
Lawyers are not the only ones to observe this. Last year we started doing a few inspections for a new company that designed a collection and outsourced production in China. The owner had worked previously with someone from Hong Kong, but in a totally different line of product. What was decided? The Hongkonger became his agent and followed all the development and the production schedule.
But the agent didn’t know anything about the goods to produce, so they hired us to perform some inspections. The plan was that he would help us by looking at packaging and labeling, and maybe look for some defects. But without proper training, he really couldn’t do much. So we ended up doing the usual job, in the factory and in his presence.
The first collection was successfully produced. For the second season, the client was more confident in the factory’s work. Big mistake. The factory accumulated delays (because this is a small customer), and then subcontracted the job in small workshops. The result was terrible. The client told them to ship whatever they had, because he had to deliver his own customers. Then he had to re-produce some styles because 50% of the pieces were unsellable. And what do I notice, during the inspections of the re-production? The importer deals directly with everything, without the agent’s help.
This client of mine learned a lesson the hard way. No doubt many other importers will make the same mistake again.