In the US or in Europe, private companies are very careful with their reputation. They know that angry customers tell their bad experiences to their friends. Poor customer service can kill a company, and this is more and more the case thanks to social media.

When it comes to OEM manufacturing in China, things are totally different. Knowledge, and the power that comes with it, is not in the hands of buyers. It is a strange world…

Do you know which suppliers behave correctly? This information simply does not exist in the open. Business-to-business websites list the companies that pay, not the ones that proved their good standing with solid customer references.

Competition for new business is so tough here, you would say the Chinese treat every customer like gold… But most of the time the way they think is “I make such a small margin, and buyers are switching suppliers so often, I can’t afford to take a loss on any project”.

Do you know where your competitors purchase their products? Probably not. This information exists, based on data from the Customs, but few buyers know about it. It is collected by hearsay and often inaccurate.

There are typically thousands of suppliers for a given type of product, so how to keep track of who works for whom and who is happy about whom?

What is the consequence? Chinese suppliers don’t feel pressure to keep their image intact. In most cases, they will piss off a customer rather than losing money on a given order. And don’t count on the pressure from the supplier’s community… In China, screwing buyers is sometimes seen as clever.

From what I see, only two kinds of Chinese vendors really think of their reputation: the very large ones, and the ones who sell to a tightly-knit industry where buyers discuss regularly about their suppliers.

Importers should plan accordingly. They have to put in place a plan that keeps suppliers in line (with the right mix of penalties, back-up factories, a quality control plan, an enforceable contract, etc.)

Now, don’t think YOU can screw Chinese suppliers repeatedly. YOU have to pay attention to your image. It is unfair but that’s how things work here.

First, you obviously have to take care of your own customers, and delivering to your promises… While at the same time relying on suppliers that don’t do business according to the same rules.

For example, in April I talked with a long-time trader based in Hong Kong. He sells mostly on the Middle-Eastern market. Ten years ago, he decided not to inspect a shipment that was actually unsellable… Big mistake. He told me “it broke my reputation on the market, and everybody talked about it; it was blown out of proportion like the Tiger Woods affair. I had to start everything again from scratch.”

Second, you also have to behave correctly with your suppliers.

Let’s take an example. I used to work with a French buyer who included insidious terms in his letters of credit. Whenever he was not really happy about production, or when his own customers did not like a certain style, he simply cancelled it. After a while, prices went up and nobody took this importer’s orders. He had to concentrate on a few regular manufacturers and make them happy…

Why? The word spread in his industry. Exporters gather at trade shows, they do business together, they exchange their experiences, and they name the buyers to avoid. I remember visiting a factory, 4 years ago, where I saw some cartons with this importer’s shipping marks. The manufacturer explained to me that “this buyer cancelled the order after production, and we haven’t been able to sell it to anybody else since then. He is very bad, very bad.”

Conclusion: ask for customer references and check them, pay for background checks and/or factory audits, monitor production as closely as possible, and don’t play games with your suppliers.