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*** Wal-Mart China Called Good Fit ***
Madison, WI -- 02/02/2007
"Always low prices!"
"Always low prices!"
That's Wal-Mart's mantra and through a marriage
with China, the world's largest big box retailer has
been able to continually cut costs.
with China, the world's largest big box retailer has
been able to continually cut costs.
Rob Gooze, retired executive vice president of Pacific Cycle,
spoke on the subject Wednesday at the Madison Rotary Club
meeting at the Inn on the Park downtown Madison.
spoke on the subject Wednesday at the Madison Rotary Club
meeting at the Inn on the Park downtown Madison.
Sixteen years of selling Pacific Cycle produced in China
to stores like Wal-Mart and K-Mart, as well as trips to
China to supervise sourcing, have made Gooze an expert
on the subject.
to stores like Wal-Mart and K-Mart, as well as trips to
China to supervise sourcing, have made Gooze an expert
on the subject.
By wrenching the power to dictate price from the manufacturer,
Wal-Mart has caused a fundamental change in the way business
is done, he said.
Wal-Mart has caused a fundamental change in the way business
is done, he said.
"The retailer drives prices for the first time,"
he said.
he said.
Gooze compared Wal-Mart in China to the Sears catalog
which allowed farmers to order and receive supplies by mail
as far as its impact on consumerism.
which allowed farmers to order and receive supplies by mail
as far as its impact on consumerism.
China, with its population of 1.3 billion, offers a large working
class and low wages on average fifty cents a day or $100 per
month. The country's capacity for production gives tremendous
bargaining power to businesses like Wal-Mart because it is almost
always possible to find a manufacturer who will make the product
for cheaper.
class and low wages on average fifty cents a day or $100 per
month. The country's capacity for production gives tremendous
bargaining power to businesses like Wal-Mart because it is almost
always possible to find a manufacturer who will make the product
for cheaper.
There are also minimal barriers for entry in China,
which means new products can be produced very quickly.
which means new products can be produced very quickly.
Gooze gave the example of the Razor scooter, which
became popular in 2000. In six months time, China went
from zero production to production of 8 million scooters.
became popular in 2000. In six months time, China went
from zero production to production of 8 million scooters.
Retailers also have the edge when it comes to brand identity
because the store is what people identify with now, Gooze said.
because the store is what people identify with now, Gooze said.
"It is more important to shop at Target
than to buy a Schwinn bicycle," he said.
than to buy a Schwinn bicycle," he said.
Gooze noted that the most popular dog chow in America
is not Purina or Iams; it is Old Roy, Wal-Mart's house brand.
is not Purina or Iams; it is Old Roy, Wal-Mart's house brand.
"Americans are looking for the lowest price and this is good
for retailers trying to push their own house brands," he said.
for retailers trying to push their own house brands," he said.
Combined with these trends is a more positive attitude about
the label "Made in China," Gooze said. He called the quality
of Chinese labor "phenomenal" and said products being produced
in China are up to global standards.
the label "Made in China," Gooze said. He called the quality
of Chinese labor "phenomenal" and said products being produced
in China are up to global standards.
"China wants to be the next Japan or the next Germany,"
he said.
he said.
The country is already beginning to break into more high-end,
technology partly because of the educated young people entering
the work force. Siemens, the German electrical and telecommunications
company, recently moved their production to China.
technology partly because of the educated young people entering
the work force. Siemens, the German electrical and telecommunications
company, recently moved their production to China.
The argument that moving production to China takes away
American jobs seems to have disappeared along with
Wal-Mart's "Buy American" campaign of the 1980s and 1990s.
American jobs seems to have disappeared along with
Wal-Mart's "Buy American" campaign of the 1980s and 1990s.
"Low price tags trump all in the end," Gooze said.
With suppliers sourcing to Asia, their biggest competitors are
the retailers that Gooze said are constantly trying to go direct.
the retailers that Gooze said are constantly trying to go direct.
The house brands and Wal-Mart's bargaining position its stores
represent a large volume of sales for many manufacturing companies
make it increasingly difficult for brand names to survive.
represent a large volume of sales for many manufacturing companies
make it increasingly difficult for brand names to survive.
Companies are relying on bigger and better products that
consumers will pay more for to keep business going and are
also trying to protect themselves by selling online and though
pecialty direct stores.
consumers will pay more for to keep business going and are
also trying to protect themselves by selling online and though
pecialty direct stores.
Wal-Mart's dedication to low prices led them to the cheaper
Asian market. The retailer's mastery of information technology
made ordering goods and supplying their stores more efficient.
Asian market. The retailer's mastery of information technology
made ordering goods and supplying their stores more efficient.
Thus, adhering to the values of efficiency and cost savings has
allowed Wal-Mart to create lucrative partnerships with Chinese
manufacturers. Gooze said.
allowed Wal-Mart to create lucrative partnerships with Chinese
manufacturers. Gooze said.
Geneb...Wenatchee,Washington-USA
All Things Northwest in BMX!
***** Gene`s BMX *****
http://www.genesbmx.com
All Things Northwest in BMX!
***** Gene`s BMX *****
http://www.genesbmx.com
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