Tuesday, November 13, 2012

China means cheap

The issue on the impending fiscal cliff that America may experience this year doesn't bode well with domestic consumers.

Try to get inside any Wal-Mart or K-Mart shopping stores and you will witness how the diverse consumers are being taken for a joy ride. This despite calls by some cause-oriented sectors to boycott Chinese-made products that form majority of the display at these shopping stores across America.

But why do American consumers flock to these giant stores to buy cheap goods from China? Has it ever occurred to them that the more they buy Chinese products being sold at these big shopping stores, the more China's economy become much stronger and stable? In short, the more trade imbalance between the two countries will be experienced.

The answer is simple. Chinese products are much cheaper to buy, even though their quality and durability are questionable. To the millions of consumers, it doens't matter anymore. In these trying times, when the value of the dollar is strained and China holds much of America's debt papers, it in only incumbent upon the small and medium-income earners to tighten their belts for a little while.

And this can only be done by spending their money wisely on commodities that are much cheaper to buy. It seems that Wal-Mart's advertisements on television and the print media were effective enough to attract more and more consumers to part with their hard-earned money.

Based on my observation, it appears that most of Wal-Mart's customers are small and medium-income earners. How come Chinese products sell well in a rich continent like North America, especially the United States?

As reported by Frontline of the Public Broadcasting System:

"Early in his company's spectacular expansion, "Mr. Sam," (referred to Sam Walton) as everyone called him, decided to reach across the Pacific and make imports a pillar of Wal-Mart's business model. Forcing his American suppliers to cut costs, stressing sales volume over high margins, and wowing customers by showcasing one super low-priced item in each category -- all hinged on importing to find the cheapest prices."

According to Bob Ortega, author of "In Sam We Trust," Walton himself estimated that imports accounted for nearly 6 percent of Wal-Mart's total sales in 1984.

"But another observer of that period, Frank Yuan, a former Taiwan-based apparel middleman, who dealt with Wal-Mart in the 1980s, puts the number, including indirect imports, at around 40 percent from "day one." Either way, Walton's vision was a harbinger of far vaster global sourcing today," Frontline said.

No comments: