Seven years ago, hearsay’s goods exportation could generate revenue through a coordinated agreement with 80% of companies; now, only 5% of good-operating companies believe exportation could actually bring them a profit.
China has a larger inland market; the demand for inland goods is increasing, and the quality demanded for these goods is high. Seven years ago, approximately 90% of the goods produced by most factories were exported overseas, while the remaining 10% were sold domestically. This was well known at the time, as China was considered the world’s factory. Now, more factories are beginning to realize that making goods is about generating revenue, not just showcasing their ability to produce a massive quantity and highlighting their superiority. Compared to the overseas market, China’s inland market is now gradually possessing a larger share of its sales and increasingly accumulating a proportional profit. Previously, selling overseas at half the price of the inland selling price was an acceptable fact due to the considerable quantity. Now, most foreign buyers couldn’t offer a significant amount, but kept asking the same low price. My 10-year exportation boss friend told me, 'They’re excessively harsh on slashing prices; they don’t understand that I actually gave them our rock-bottom price in the first quotation, but they still press the price lower and lower.' What’s the point of doing that for an unprofitable order? To us, that’s the same thing. Competition is keen, we all know, and we also understand our client's business and their local market competition, so we all take that into consideration. When we could quote a $5 profit, we quoted $ 1, but the client does not seem to understand; they’ll still ask for a $5 low price. What can we do? Eighty % of local factories are unwilling to engage in exportation now, as they say, due to the risks. They added that most export goods yield a very minimal profit, which has led us to be very careful in material selection, while pushing down workers’ pay. However, these are all based on standard production procedures. Suppose the client requests a strict delivery time. In that case, they must work overtime, which will definitely increase the cost, as workers’ pay for overtime is more and usually double, without taking into account the additional electricity and water costs. Other factors, such as hot weather, cold temperatures, power outages, machine failures, traffic congestion, and government inspections, generally reduce actual production time and increase management costs; ultimately, the minimum profit is eroded by these disruptions. We’re producing orders, but we don’t make money, that’s true. Clients may ask, so why do you accept the orders and do them? A general and common saying is, I think, also true for most other factories: we are fulfilling orders because we believe in our traditional approach, that the client will give us a continuous order next time, which could make up for this time's loss.
Increasingly, factories have stopped dealing with foreign buyers in recent years. Some factories have had their own export departments in the past, but they have now been removed. The foreign buyers are very complex to deal with, a salesperson said. When they send me an inquiry, they also send it to dozens of other exporters, the same inquiry, which is entirely different from the local Chinese culture, which places more emphasis on loyalty and single-minded devotion. On the contrary, local businessmen will always ask one company for a mutually beneficial price and close the order quickly.
Approximately 75% of factories in China do not have an export department; for them, establishing one means incurring high costs and risks. Ten percent of factories attempted to establish an export department. Still, it ultimately gave up due to the massive investment required, only to find that it yielded nothing in return or resulted in a loss on export transactions. I would rather sell through export companies to foreign buyers, to reduce our cost and also exportation risks, one factory owner said, the government policy here are pressing us paying a high tax if we export by ourselves; foreign buyers are tough, you can’t image how harsh they will be if they receive one piece of the goods not qualified, however, if we sell the same quality to inland buyers, they’re understandable. Export companies in China are increasingly integrating product development, manufacturing management, and quality control standards to enhance their operations. They design and develop new products and have a more professional say in products than the factory itself. Most importers can obtain a lower price from the export company rather than directly from the factory itself due to the above reasons.
The difference between local sales and overseas sales is mainly trust. Local people here could meet more frequently; however, as China’s laws are enforced more strictly, people feel safer and more trustworthy, and even more business is conducted without face-to-face meetings. As for overseas business, one sales manager said, I feel so honored when he sends us the order without seeing my actual face. I think that’s really great for two people in different countries,in various cultures, and with varying types of blood and skin colors. That’s an exciting aspect of exportation; it means more than just making money.
