”Or worse than that, business owners import blindly. They figure that the different culture, the different laws, the work that needs to go in to building maintaining a relationship with a manufacturer, is all too hard. The goods are so cheap they figure they’ll risk it. They mentally prepare to throw their money to the wall,” Goodhand says.
No one knows this better than John Hunt, who sits on the Australia China Business Council’s committee in Queensland, and runs Mox Group, an industrial hardware and software provider with more than 400 employees.
He says that alongside wilful blindness, many business owners who come to the ACBC for advice have been arrogant in their dealings with Chinese manufacturers.
”The dictator approach runs something like this: ‘We know exactly what we want and we’re going to tell you how it needs to be done.’ That attitude is hardly conducive to a long term relationship,” Hunt says.
DealsDirect.com.au, a fast-growing online retailer with revenue of about $40 million in 2006-07, has been buying direct from Chinese manufacturers since 2005.
The founders, Michael Rosenbaum and Paul Greenberg, started out as most Australian business owners do – attending trade fairs and using a local agent.
But the big profits were out of reach while middle men carved out commissions.
”The future of retail is selling direct from the manufacturer in China to the customer’s front door,” Greenberg says.
They spent the first few months of 2005 testing their business model with trading companies (these are similar to wholesalers in Australia).
”It’s important to get comfortable before committing to sourcing on your own,” Greenberg says.
Their next step was to hire a Shanghainese buyer that had spent the previous decade working with Go-Lo – the pioneers of discount retailing in Australia – and open a small office in Shanghai.
Their representative then started sorting through the factories that presented at trade fairs and building relationships with those that had a strong reputation.
”Now that we’ve been in China for a few years manufacturers will travel to us [in Shanghai] and line up in the passage way to show us their wares,” Greenberg says.