It’s the End of Western Civilization as We Know it (and I Feel Fine)

I was sitting at a stop light this morning. It was 9am, window down, cigarette in hand and yet to take the first soul-restoring sip of my coffee when I heard a noise that my brain connected as human language. It was the driver beside me. My brain reeled. He was talking to me. Was my gas cap hanging? Did my car have some unforeseen doom the kind motorist was trying to point out? Not at all. He was admonishing me. For smoking. In my car.

Welcome to Vancouver. Capital of the Social Justice belt.

While this amusing anecdote is by no means the cause of the fall of Western Civilization, it is a symptom of a greater disease. I had spent over a decade in China, away from Vancouver and its evolving sensibilities, so when I returned in 2013 the contrast was both stark and immediate. People expressed themselves in polite but overly dysfunctional ways. Friends I had considered intelligent and well reasoned obsessed over social faux pas like which side of the escalator to stand on. They complained about affordable housing while insisting that they would only work for an ethical employer with in office yoga. It had seemed that Vancouver, this once great bastion of commerce, had become infected with something other.

The other in question goes by (or rather has co-opted) many names; Social Justice, Social Welfare, Social Equality…you get the idea. These are all, on the surface, noble ideals. As we can see all around us, however, the consequences of the way they are being implemented is proving to be catastrophic and may well lead to the end of Western Civilization as we know it.

Enter the Social Justice Warrior

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The Social Justice Warrior has become a loaded term so before I continue let’s create a little background here. I am an unabashed Libertarian. I believe drugs should be decriminalized, I believe that you should be able to live any lifestyle you choose with anyone you choose to live it with so long as it doesn’t infringe on another persons free will or self determination. On the other hand it also means I believe you can’t legislate thoughts or ideas, no matter how backward, stupid and counterproductive. It’s that latter belief that puts me at odds with today’s Social Justice Warrior.

To give you a bit a anthropological background, the Social Justice Warrior evolved from the Keyboard Warrior and the Keyboard Warrior evolved as a defense for internet trolls to keep from being removed from threads. The issue with the Social Justice Warrior (and what separates them from your functional activists) is they don’t have a call to action. That’s the key word there; ACTION.

Let’s take an example; the day after Trumps inauguration, there were women’s rights rallies all over the world. As I was scrolling through my social media feeds, a trend became to form; there was no salient, actionable cause to which they were coming together and striving to achieve. Some wanted equal pay, others wanted to end discrimination for maternity leave. Madonna wanted to bomb the White House. Now let’s be clear, I am not in any way diminishing or disregarding those ideals. They are good ideals to have and we as a society should be striving to make those ideals a reality. The problem was this; what action would you like people to take to change the situation?

The purpose of a rally in a democratic society is to make the lack of action untenable for elected officials. Stop ‘x’ pipeline. Enact ‘x’ protection. Do away with ‘x’ law. You put elected officials in a position where they have to do something or they risk losing votes and thus their job. Women’s suffrage, ending segregation, LGBTQ marriage equality, these were actionable causes that could be implemented. The issue with those I talked to was that they didn’t want legal reform, they wanted thought reform. They wanted businesses to stop weighing the costs of potential pregnancy in key positions. They wanted men to change the way they see women. They wanted everyone to accept people and lifestyles they had no understanding or exposure to. And they demanded it. Right. Now. And therein lies symptom # 2…

Liberal Overreach

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A lot of amazing things happened while I was in China. The US had it’s first black president. The first black president then became the first president to acknowledge the need for marriage equality and then against all odds passed that through the Supreme Court. Just for a cherry on top he started the largest economy in the world down the path to universal health care. And he did it ending with some of the highest approval ratings in history. Everyone should be popping champagne and partying like its their team just won Superbowl. That, of course we know, is far from our current reality.

When the dust settled and laws were enacted, things started to get weird. It wasn’t enough that the conservative right had lost multiple, consecutive fights to their progressive opponents. They needed more. They wanted them to admit that their cause was evil. They wanted them to fall upon their swords in shame for their ideals. And they demanded it. Right. Now.

Many colleagues and acquaintances of mine were suddenly getting harassed for their opinions on the various social debates that were raging. These weren’t racists or homophobes. These were people that, for whatever reason, didn’t agree with some specific change that was going on. Whether it was the bathroom debate, or minimum wage, they weren’t trying to stop the change. They weren’t going out and actively opposing the change. Their only crime was to disagree. Somewhere along the way it stopped being a debate. It’s started being a crusade against the infidels and those that would not convert would be put to the sword.

History teaches us that persecution does funny things to a society. During the Communist hold on Russia before the fall of the USSR, you certainly wouldn’t find a person waving a “Go Democracy” flag. What persecution of people’s beliefs does is force people to have a sort of double-life. Publicly, George is going to keep his mouth shut about the fact he thinks people on minimum wage should be striving to gain experience and find a better paying job instead of waiting for government intervention. But privately he’s sharing his thoughts with like minded people. Privately he’s looking for a way to throw a wrench into the liberal machine. To escape persecution. Privately, he’s voting for Trump.

What Rough Beast Slouches forth to Bethlehem to be Born…

103666044-RTX2AQXH.530x298.jpgEnter THIS guy. Look up the term “Black Swan Event”. It’s like the worst case scenario had a baby with the sum of all fears. Talking to my customers south of the boarder, it started to become clear to me that normal, everyday people were looking at Trump as an escape hatch from what they perceived as a zealous progressive left encroaching more and more into the mainstream. As one of my customers put it; “I am 100% pro gay marriage. I have employees from every culture and I pay them a living wage. But if Clinton or Sanders get in I’m really worried what will happen to me and my business.” There was enough fear of the far-left that reasonable, mild-mannered people thought THIS lunatic was preferable. The social justice wing of the left through their hubris drove throngs of Americans to the voting booth. It was just for the wrong person.

I will leave you with this, my final thoughts. You cannot legislate beliefs, no matter how distasteful. You cannot force a society at gunpoint to your worldview. This has been tried again and again throughout history. The USSR failed. The Russian Oligarchy before them. The Nazi’s and the Holy Roman Empire before them. Even the great civilization of Rome fell. The center cannot hold. Civilizations are fragile things and we must be united, even in disagreement, to avoid the perils that lay outside our gates, patiently waiting for the first disaffected warrior to throw open them open.

My 3 Cents: 6 Tips for Buying from China

For many distributors, the “micro OEM” craze going on now has been a modern day gold rush. And in our current economy pennies can mean the difference between living to fight another day and having the company that you have spent your blood sweat and tears building from the ground up sink, or at best sold to the highest bidder (Just ask any of the distributors going out of business or cashing out this year. I won’t name names). These tips are for businesses who are just starting to make the move to buying direct from the Chinese manufacturer. China is a different universe and many are dumbfounded when I explain that many manufactures are making around 30 points NET on their overseas orders. Chinese manufacturing is a bloodsport and the reality is you can never know the bottom price for what your buying, but you can take these steps to get as close to it as possible…

#1 Are you dealing with them in English? Rookie mistake #1

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This targets you as someone new to the game and a rube ripe for the picking. Spend 50 bucks and get a translator to talk FOR you. These factories pay a premium for bilingual sales staff and, believe me, they pass that premium off to you and then some. The prevailing opinion of many Mainland Chinese businesses is “Foreigners don’t know how much it should really cost, so charge them what you think they will pay.” and to their credit they are sometimes right, though far less so now than in the good ol’ days of pre-2008. By working through a native speaker, businesses will be less inclined try for the big margins.

PRO TIP: Many trade shows will have these kinds of people lurking about. Alternatively, you can find these kinds of people on wholesale forum boards like HKTDC and Global Sources, under “Sourcing Agents”. Avoid “Sourcing Companies”, as these can carry their own margins, often costing you more than contacting them directly.

#2 Do they know you? Ouch, big mistake #2  

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When I have advised companies looking to go into mainland China, in most cases I suggest they take it a step farther than just a translator. If you are in Mainland China for the long haul, for 500 bucks a month you can buy eyes on the ground to represent your company, semi-anonymously. Working through an intermediary that gets paid directly out of your pocket can cut the opening price significantly and shows that you are a real player. This person can also appraise the size and conditions of the factory, the competency of it’s management as well as offer insights into the situation that would be otherwise lost in cultural and lingual translation. After the groundwork has been laid and some rough price-points established, you can make formal introductions and build the groundwork for a more personal long term relationship.

PRO TIP: Whenever possible get someone who has an eye for quality. Getting someone with high quality standards and an eye for detail allows them to double as the vanguard of your quality control and saves valuable time. There is no sense in haggling out the best price with someone who can’t consistently measure up to your standards. 

#3  Relying on their quality control? That’s mistake #3

So when you have finally whittled down the price to somewhere close to bottom, the factory your dealing with is going to do everything in its power to keep those pennies. The first way they are going to do this is by letting QC slide. If a batch of 5000 pieces comes back with a small defect, believe me they are going to do whatever they can to cover that up and stick you with a truckload of defective product to protect their bottom line. For around 1500 bucks a month you can get your own foreign QC team to make sure that your getting exactly what you ordered, the way you ordered it. In fact, with the increase of trade between Brazil and Mainland China, there is a whole industry of Brazilian staffed QC teams that specialize in doing just this. If you’re planning on doing long term, big volume deals, having your own eyes in the factory is a necessity.

PRO TIP: If a QC company of full time staff are too steep for the volume you are doing, you can usually get away with getting your sourcing agent or an independent 3rd party to take detailed pictures and video, as well some some basic stress testing on site. However, whenever able, use professionals. Caveat emptor!   

Now that we have covered the most common mistakes, let’s take it up a level and talk how to REALLY get the best bang for your buck.

#4 Understand what the factory is actually doing and pay accordingly.

It’s vital when dealing with factories that you understand exactly what they are actually manufacturing. It is surprising to a lot of people that many factories are advertising whole products that they themselves don’t even make. Their part in the manufacturing process is merely a point of contact for those less in the know to buy from. Do your due diligence and make sure that if you are buying a pre-made product OEM. Check that they have the correct patents in both engineering and design. If they lack those patents, chances are they are getting that product from someone else, or worse, stealing the design from the actual patent holder which could get you into a heap of trouble.

PRO TIP: When you are sent promotional pictures of a product you want to pick up, throw the image into a reverse image search like Tineye. This will not only show you if other “manufacturers” are selling this product, it will give you a good idea of the current global saturation of the product. Your “brand new” patented Super-Power 5000 might already be sold by hundreds or thousands of other distributors. Either way, knowing this is another bullet in your gun come negotiation time! 

#5 NEVER get the manufacturer to arrange shipping

Even if you manufacturer is not marking up the shipping costs, manufacturers have literally no reason to get you the best price on shipping. Typically they will ship TNT or DHL air the day after the products are ready. Now the day after that could be 20% cheaper, however this isn’t going to factor into their thinking. Product out is money in the bank. Wash, rinse, repeat. I find arranging shipping independently translates into 20-30% savings on average and, in the current sink or swim market, those pennies count.

PRO TIP: Instead of going direct with a shipping company, hire a Mainland China forwarding company. They collect orders from multiple sources and arrange them together, buying bulk space on the plane. Provided you can correspond in Mandarin and you can be a little flexible with the landing time, a forwarding company can shave an additional 20-30% above and beyond direct shipping’s best rate.  

#6 Whenever possible, pretend to be from Mainland Chinese company

This is an uncomfortable truth. I have tested this time and time again at trade shows, in wholesale negotiations, at virtually every level. I have my sourcing agent contact the seller (even though I speak Mandarin) to enquire about pricing. Then I contact them independently. In most cases the initial price they quote me is 50-150% higher than the initial price my agent was quoted. Now after negotiation I can usually bring this down to the same final price, but there are enough times where the seller would outright refuse to even give me the same price they quoted my sourcing agent. The uncomfortable truth is there are in many cases two, or even more, price lists; one for domestic and one or more for international. This applies to supply, production, even shipping to the exact same location through the exact same forwarder. With larger or newer manufacturers this is less of a problem, but it never hurts to be prepared and make doubly sure you are getting the real price.

PRO TIP:  I know many companies that set up a small office or even a mailbox just to have a Mainland China address. In this way they maintain the image of being a domestic business. I’ve employed import/export companies to act on my behalf in the past and had shipments sent to their warehouses then forwarded to Canada or the US. It sounds like a lot of rigmarole but depending on who you are dealing with, the savings can be shocking.  

 

China has always been, and quite possible will be for the foreseeable future, a double-edged sword. It’s really up to each business to weigh the pros and cons before making the leap across the pond. With crashing MOQs and rock bottom pricing,  even the smallest business can afford to do it. Just make sure the dullest side of the sword is facing you.

My 3 Cents: Guarantees in Marketing

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I’ve worked with a lot of marketing and “strategy” companies in my time. There are 31 flavors of businesses who swear they have the answer that will take your business to the next level. And to their credit, many of them do exactly as they say. Marketing and brand strategy are actually vital pieces to the successful business puzzle. If your business doesn’t have the funds for a dedicated internal department, hiring these companies are essential, especially in the early stages before launch.

What is at issue is with the fundamental lack of understanding about what marketing does and how it works. I’ve listened to and given innumerable variations of the “what we do” speech. They have run the full range from helpful to “WTF?”. Recently, I was tasked to defend why a company should invest a significant amount of money into various brand building actions for a line that was preparing to launch. Their point of view as a manufacture was “If I give you ‘x’ amount of money, what can you guarantee me?”

It was a fair question. We were talking hundreds of thousands of dollars. As a manufacturer, they were used to money for product. You put in a dollar, you get a rubber duck. You put in 10 dollars, you get 9 rubber ducks (quality control being a tenacious mistress). I needed a way I could help them understand how marketing works. So I sat in front of my trusty laptop, I figured I could pump this out in about an hour and go grab an early lunch.

Two hours and several scrapped drafts later, the text cursor blinked on my empty page, taunting me. The short of it is that marketing works, except when it doesn’t. It’s really helpful, unless it isn’t. The only absolute truth I could muster was “Marketing and branding doesn’t always work, but if you don’t do it, you’re doomed.” That isn’t much of an optimistic answer and more than a little short of making you want to throw a house worth of money at something.

It occurred to me that in all the time I had dealt in marketing, no one had ever given me a K.I.S.S. explanation to how and why branding and marketing were essential. It has always been one of those things that you take for granted. Brand awareness, marketing, advertising, these were all assumptive ‘must-haves’ for success. People need to know what your about. People need to feel trust in your product through the polish of your marketing. You have to justify your price point with brand value. This company had been told this a million times but those aren’t ‘dollars and cents’ answer. They weren’t biting. I was getting frustrated.

We all know why, I just couldn’t put it into the way that they wanted, a way that could convince a company that had never spent a penny on marketing in its life to get behind a six-figure plan. I let the whole thing sit on the queue for a few days. I busied myself we other projects. But it kept gnawing at the back of my brain, that little text cursor blinking behind my eyes. I finally sat down in front of the indignant text cursor and started cheekily asking myself questions and answering them;

If I spend that kind of money can you GUARANTEE I will be successful?”

“Of course not.”

“Well why not?”

If I could I wouldn’t be working on this, I would be a billionaire sipping cocktails on my own personal island because I could guarantee 100% success to anyone with the money to invest.” Touche, me. If I couldn’t come up with a decent explanation I could at least vent my anger on myself through a good tongue lashing. “Then why should I invest all this money?”

The text cursor began to blink at me again, defiantly. I was reminded of my son who has a talent for asking questions that can’t be answered to his satisfaction. And then it hit me.

“What do you do when your son starts asking questions and demanding specific answers?”

“I tell him a story to explain.”

“So tell them a story, stupid.”

Me had a good point. I began to write down a story about launching a brand, talking in percentages. What follows below is exactly what I wrote to them;

I launch a brand right now in my head. I have no product or logo or anything. I have a 0% chance of success.

Well that is useless, so I decide to get some product made. I still have no marketing, press, advertising and no way for people to know about my product other than me telling people one by one how awesome I am. I now have a 1% chance of success.

I don’t like those odds so I throw some money into packaging, design, throw together my cool ideas into a fancy name and slogan. But I have no idea what customers think of my ideas. Plus I still don’t have a way of letting people know about me and maybe those who do hear about me do not understand correctly. I now have a 3% chance of success.  

Well I love Vegas, so I invest in a few trade shows. Now people are seeing my product but maybe my ideas are still not being understood correctly or not attractive to the public. I’m still living in a vacuum. I now have a 10% chance of success.

Luckily, all of this was in my head and I haven’t started yet so I decide to test all my designs and ideas before they go to market. I hire focus groups to use my product and report their feelings. I find out that there are some changes that need to be made and I make them before launch. I now have a 25% chance of success.

But I don’t stop there. I hire a company to investigate the market and they find that there is this gap in the market for mid-range priced products in my category. Less competition means a better chance of being noticed! I now have a 40% chance of success at launch.

I’m still not liking my odds. I need to do some more to hedge my investment, so I put the whole model into focus testing. I find out that my name needs changing. It’s confusing and no one gets it. I throw out some alternatives and all the test groups agree on 1 name. I also tweak my logo, company colors and slogan. My message is tight and test customers are really liking what they see. I now have a 60% chance of success.

So now I’m ready for the trade show but I still would like better odds. I decide to send all of my target distributors a “Launch package” that has examples of all the marketing support and benefits they will receive by picking up my brand. I also include samples of my products, knowing that after all the focus testing, they are going to like what they see. I include a copy of our upcoming shows and our booth locations so they can find us when they come. Now I have a 75% chance of success.

So you see, marketing is a form of RISK MANAGEMENT. The more you invest in marketing, the greater chance that your product will be successful both at and after launch. At the time of writing this I’m still waiting to see how they respond. In any event, I am happy with the answer I came up with. And should my son ever ask me “Daddy, what is the value of marketing?” I’ll have another bedtime story in my pocket for him.

My 3 Cents: The House Brand Trap

 

There is a trend going on in the electronics industry that troubles me; the increasing  pervasiveness of big box house brands. It isn’t just that it works against what I do for a living, though I am sure that plays a part in it. House brands have spread into every aisle and shelf in your average big box store.

Acquiring product and slapping your name on it isn’t anything new. Department stores have been doing it for years. But house brands have always been firmly planted in bland categories like socks and pot noodles. Now virtually any product is up for grabs. Some retailers don’t hide this fact, labelling them after themselves or simply “No name”. Then trend now has been to choose a more “brand” sounding name in an attempt to blend in more naturally with surrounding products. Best Buy even has multiple house brands (which they cheekily refer to as “Exclusive Brands”) hiding under aliases like Rocketfish, Insignia and Dynex.

“So what’s the big deal?” You might ask. Retailers are just providing additional options at competitive prices. There is no harm in that right? Well if that was the whole of what they are doing then you would be correct. However, the reality of what they are doing is a little more complex and a lot more insidious, especially when viewed in the long term.

Let’s get right down to exactly how they are hurting not just the market and branded products, but even themselves;

OEM doesn’t Innovate, They Replicate

When you go down the road of OEM, you are essentially buying second-hand, what I call “Trickle Down”, tech. Many factories who do OEM exclusively grab anything and everything that isn’t nailed down with an iron clad patent. Indeed, much of the tech may even be patented, with the actual patent holders furiously playing Whack-a-mole with these copycats. Much like what is going on the entertainment industry with piracy, the support of these kinds of factories stifles the growth of companies who do the actual innovating.

Retailers are Stacking the Deck

Big box retail chains are already INFAMOUS for their one-sided contracts. Payment clauses such as “Pay per Scan”, where the manufacturer only gets paid for items that have been purchased, as high as 20%  back-end rebates on the purchase price and numerous other draconian clauses make it a superhuman feat for a brand to be profitable. Of course none of this applies to the house brands. Even large brands like Samsung and Sony are feeling the sting as house brands quality inches closer to leading products. While no one would argue that Insignia would stand up against Sony, with a price point around 2 times that of Insignia, the house brand is going to dig into the market share of every consumer tribe save the most hard core Prosumers or videophiles. Normally I would end it here but I want to point out one VERY key detail; Sony is one of the 500 ton gorillas of the electronics jungle. What about everyone else, the up-and-coming brands, the ones trying to innovate their way into the hearts of consumers? Too bad, says the retailer, so long as they get their massive margins the house brands are here to stay. Which brings us to the last point…

The Emperor has No Clothes

Purchasers will swear up and down about the margins on house brand products. They will spout margins of 70% or more like they are gospel. Well when everything works right, they are absolutely right. From experience, however, “everything works right” is a fantasy island off the coast of Lollipop land. Launching product is a very complicated game, especially so in the fast paced world of electronics. Let’s assume that the 70% is the actual margin. Now you manufacture 20,000 pieces of a product and you sell 10,000 at full price. Because you did OEM the whole lot is final sale, you’re stuck with them sink or swim. You have 10,000 left. So you discount them, of course, probably 50% of the total margin. Now your margin is 70% on the front end and 35% on the back end. But wait, what about that last 1,000 pieces you can barely even give away? Well you probably sell those at cost, or even a loss just to be rid of them. Let’s do some basic math; the average margin on the whole lot is 52.5% IF you can sell the whole lot without ANY left overs or further reducing the sale price (which rarely happens). Now if you had purchased branded products you can call up the manufacturer and squeeze a discount, swap leftovers for new stock or any use number of other tactics to maintain your bottom line. House brands look great on paper for the bean counters but once you put the product into the wild it’s an entirely different matter.

Ultimately, however, house brands are going to continue growing so long as the house thinks their a good bet, Truth be told there may be some intrinsic benefit I am missing. I believe when used as a cheap alternative to more expensive options, house brands serve a great function picking up stragglers that may have otherwise avoided the purchase. But if retail chains start treading on the true brands’ customer base, it’s going to hurt everyone, retail included.

 

 

 

Products that hit the “Win Button”

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Every company is searching for it. That it product that rockets them from spunky competitor into channel master. The kind of product that makes retailers bend over backwards and rewrite contracts for you. In the tech business, Apple is the 500 ton gorilla that has redefined a generation. People even forget that not so long ago it was the biggest ape on the mountain at the time, Microsoft, that had to sweep in and rescue the near insolvent underdog. And they only did this to stave off anti-trust. My how things change…

You can go crazy trying to figure out the secret ingredient in Apple’s rise to mobile overlord. I still get a chuckle and shake my head a little every time I see a brand putting a lower case “i” in front of a noun in a desperate attempt to bottle just a little bit of the iPhone thunder. But let’s put that puzzle aside. The truth of the matter is that while I am confident that there will be many more Apples and Moto Razrs (That’s right, you had one and that was a thing.), creating the next “it” handheld is a million if not billion dollar enterprise and I seriously doubt that any of those opinion leaders are going to take advice from little old me. Instead, I’m going to go out into left field and talk about what I believe to be the great unsung “Win Button” product I have seen in recent years; The Dyson Airblade.

I love this thing. And that says something because I have never even once in my life consciously noticed anything in a public bathroom. But the first time I put my hands into this machine, it was love. And I’m not the only one. I bet when you used this thing it blew your mind. And if you haven’t used one, leave right now, drink a litre of Gatorade and get down to your nearest half decent shopping mall. You will not be disappointed. Now this is all from the consumer or end-user point of view.

From the purchaser’s perspective the Airblade just keeps on winning. It’s a huge energy saver, beating its conventional cousins, which translates to dollars in the pocket over time. The price point of $1,500 dollars while definitely on the high side is by no means exorbitant (A standard modern dryer is going to run you around $600 to $1,200) and did I mention the thing looks gorgeous. The industrial designers for the Airblade get a serious tip of the hat for giving it that slick Star Trek reboot look (cue lens flare). Dyson’s final coup de grace was getting the whole thing certified as the ONLY hygienic commercial hand dryer in the world by the NSF (National Sanitation Foundation).

At this point, if you are still reading, you must be wondering why I would talk about a hand dryer like it’s the second coming. I mean this is probably the least sexy product in an industry of less-than-sexy products. That is exactly why I chose it. Once you strip away all the “buzz” and “rockstar” from a product, you get down to what really makes a product a winner; a superior, innovative product at a justified price point. Apple took the “Gucci” road to success and won. Many people do buy Apple products just because they are Apple. Yes, Apple did innovate A LOT and pretty much reinvented the wheel for handhelds but that was 2007. since then the universe has caught up and Apple has been pretty much riding the hype train ever since. Motorola took a very similar road with their own reinventions and, when the hype ran out, nearly lost their company. Dyson, on the other hand, looked at a ubiquitous generic product and took it to another level. Around half of the malls I’ve been in recently have Dyson Airblades and I’m sure that translates into a windfall for Dyson.

So when it comes time to design your new “it” product, bring up the Dyson Airblade. In my opinion, there is no finer litmus test.