My friend Gaetan, from Eyo Green Alliance, told me about an incredible story. I mean, incredible to people who don’t know the Chinese business environment. He gave me some photos as illustrations, and he blurred them to avoid any dispute.
Last month he scheduled two factory visits over the same day, in the city of Shenzhen (between Hong Kong and Guangzhou). He was looking for a good manufacturer of LED lamps.
The factory he saw in the morning seemed to have a storage problem — they even placed some cartons in the reception area.
In the afternoon, Gaetan noticed he was driven to the exact same building. It was the same place!
Below is a photo of the same reception area. You will notice two things:
- The cartons had disappeared, and revealed a large logo.
- The company name on the wall was different.
Oh, and also… The prices he was quoted in the afternoon were 25% lower than in the morning!
Could he have spotted it before the visits? No. The company names were different, and one address referred to the area while the other gave a street address.
So, if you want to know whether you are dealing with a trading company or with a supplier that really owns a factory, how can you do?
As the above example shows, visiting the factory is not enough. You have to be curious and ask many questions.
Here are a few examples:
- Some people who speak Chinese ask for the supplier’s name, and then they arrive by themselves (in taxi) and ask the security guard at the gate where that company is located. Guards only know the manufacturer’s name, not intermediaries.
- It is also easy to ask for the name card of a factory manager, and to compare it to that of the supplier’s contact (same design? same company name?). This can actually be done by most third-party auditors if you ask for it.
A more reliable way of checking the nature of your supplier is to pay for a background check on their company. If they own no assets, they are probably a trading company. More about this topic in How to check a Chinese company’s activity.
Any other tips?