Tales From the Secret Shadow Market
The story used to be, "Take me to your factory," when retailers wanted to bump their U.S. middlemen and go direct to the source, usually in China or India. The result was something out of a soap opera love triangle, with the U.S. supplier in the role of the spurned lover as the retailer and factory hopped into bed together (or bath or windows or whatever). Sometimes it even happened as the supplier watched. The hurt of it all.
While that scene still happens, it has evolved into something out of Desperate Housewives, with off-shore manufacturers who have successful and profitable U.S. retail programs through their relationships with U.S. vendors, appearing at this market all gussied up mostly in temporary showroom space — and looking to sell direct. They were hiding in plain sight, but they acted like none of their supplier-partners would notice.
Well, maybe. But it’s hard to imagine they wouldn’t be noticed, particularly when you could see them chasing an occasional independent sales rep down the hall.
One reason, explained one of the newbies, was the margin pressure that rolled backward toward them after profit-strained retailers demanded concessions of the wholesalers, and the wholesalers pushed the cost-cutting back to the manufacturer. Those factories do it all on the cheap anyway, goes the reasoning, so why not take it out of their hides?
What a shock that some of those off-shore guys have started pushing back.
But before you go start complaining about the inhumanity of it all, consider that this behavior — at least in the broader sense — is nothing new for the home textiles industry, which has always had a penchant for slow, painful self-torture. The complaining used to be about the folks in the next showroom knocking off your designs, or the guys down the hall undercutting your price. (Now those were the good ol’ days!)
So now, instead of being just a few steps away, the bad guys are a few thousand miles away. But if you can cut a good deal with them, maybe they’re not so bad after all.