Putting quality on the line
Global Sources is moving to connect buyers and mainland China suppliers with more than just price advantages, writes Adam Main
With more buyers questioning the quality and safety of products made by mainland manufacturers, Global Sources is offering a product that can help.
This month the Hong Kong-based business-to-business giant launched a Chinese-language website called China Global Sources Online (www.globalsources.com.cn) that specifically helps domestic and foreign firms doing business in China navigate what can often be a difficult landscape.
Chief operating officer Craig Pepples said the website was a natural accompaniment for the Nasdaq-listed company's other businesses of publications, trade shows, research and events.
He said the company had been using websites to connect buyers and suppliers since the mid-90s. It was only in the past few months, however, that he'd noticed a major change in the mainland's 'visioning strategy' that suppliers in China needed to emphasise now as a result of quality concerns in the aftermath of recalls of toys containing lead, toxic toothpaste, tainted organic pet food and faulty tyres.
'It is a very timely moment that people should be thinking so clearly about quality and the problems that happen if you are not paying attention to quality. Global Sources has been working on this for some time because we anticipated there would be this kind of change.
'The launch of the new version of the website is perfect timing in terms of providing the buyer with everything that's available on the web and, more importantly, with a select group of quality suppliers that we have verified.'
The verification feature of the website is perhaps the key offering that will benefit buyers most in their sourcing. Through a tie-up with the Belgium-based certification authority Bureau Veritas, potential buyers can get a full assessment on a supplying company's facilities, production capabilities, management systems, quality control and key clients.
The assessments are made through multiple site visits, face-to-face interviews and third-party verification. Mr Pepples said the company had about 150 people working on the verifications, helping to gather materials and helping suppliers identify their unique competitive advantage before they are put on the website.
Global Sources categorises everything on the site according to buyers' needs. A buyer can view and be able to search for product information from anywhere it appears on the web. Prioritised within that are suppliers that the company has verified.
While Mr Pepples would not say how much money had been invested in creating the site, he said it was several months in the making with about 350 people involved in the process.
'In addition to the verified supplier group, we will provide additional tools for the buyers to use with third parties. Some of this will need to be paid for while some is free. The revenue opportunity is not so much on the buyer paying for those services, but from the large number of suppliers who will realise the advantages of being listed and appearing on the Global Sources website.'
The Kentucky native said the mainland was by far Global Sources' largest market, accounting for almost 50 per cent of its revenue. The company has about 1,700 employees at 44 locations in the mainland.
While Global Sources has had a China presence for 36 years, he said it could be difficulty territory for foreign buyers to explore.
'It always has been. I look back to an important turning point when China entered the WTO in 2001. Before then, all buyers knew that China had some really exciting products and interesting price points, but they had political concerns about the most-favoured nation status being revoked. So they couldn't take all of the China opportunity. They had to balance that with alternatives. After the WTO entry, pretty much every buyer in the world came racing into China, and there was a huge increase in China's importance in their overall sourcing.
'But buyers soon found there was a huge learning curve in how to deal with suppliers and how to find the right ones. As more suppliers were established, a price war started and the stakes became higher.
'For a long time we have been trying to provide information that helps buyers make the right selection. And now, with these quality concerns, that's an even more important part of the puzzle - to figure out who is the right supplier.'
Mr Pepples said following the recent spate of recalls of mainland-made products around the world, he could sense a 'symbolic change', as it was only a minority of companies that had created the problem.
'It is symbolic in that this is the logical outcome of too much emphasis on a price advantage to the exclusion of other competitive advantages. There is an end point to a low price strategy and that's where we have arrived at.
'If you are a supplier who is not that minority of bad apples, you have suddenly realised that you have to stand up and speak clearly about what your advantages are besides a simple price point advantage. These include quality issues as well as the design, features and innovation of that design. Symbolic change is causing people to think in a new way now.'