48 replies to this topic

[Chris Miller]

This is BIG news folks....I hope you are ready. Alibaba is a major threat and this is sickening news. I cannot believe ASI supports it at all, let alone gives it flipping PR!!!!!!!! :mad::mad::mad::mad::mad:

Holy smokes... I have held off talking about Alibaba for years. Was really hoping it would go away. Please save me all of your "We bring added value" stuff because when your customers see they can save 80%+ off what you are charging them.... they will toss your "value" right out the window.

They are going to change the industry as we know it. Hope we're all ready..... this is the day i've spoken about MANY of times here on DT. Heck - this is the reason i STARTED DT! All of the naysayers are about to get a wake up call. :(:(

Quote

Alibaba Launches U.S. Marketing Campaign

Alibaba.com, the Chinese e-commerce company that links Asian manufacturers with worldwide buyers, launched a $30 million marketing effort in the United States this week to introduce its service to American companies. Alibaba, which is lead by Counselor Power 50 member Jack Ma, is the largest business-to-business e-commerce company in China and is now looking to expand its presence in the United States.
"The world is on the cusp of a new model that shifts power away from big business and gives it to consumers, small manufacturers and e-retailers," said Ma at a recent online merchant fair in Guangzhou, China. Alibaba.com currently has about 32 million registered users in China, along with more than 400,000 registered suppliers. The site has another 9 million international users, including about 1.3 million currently from the U.S.
Alibaba, which essentially matches product suppliers with wholesalers, is targeting its new U.S.-based marketing campaign toward small businesses. It is now looking to offer its middleman-service to U.S. companies that want to purchase items directly from Asian manufacturers. The ad campaign began this week with spots in print magazines, on Web sites and on network and cable television. The company reported revenues of $439.2 million in 2008.

[Renee Caldwell]

Holy...................

[bigimpression]

Only time will tell if this will be a huge threat or just added competition for average orders. Frankly, I don't see Joe's Bar sourcing a 1000 imprinted matchbooks order overseas.

I can see this as a crushing blow to those who deal with high volume clients that haven't tried sourcing overseas themselves.

[biggerfish]

The Engrish barrier, as well as long, long lead times might save us Chris - but you should send your resume out anyway, just in case.

[jimknecht]

My first thought is why would this be a danger to a distributor? Aren't you folks supposed to be experts across many, many product categories? Aren't you in the idea business? Aren't you here to provide solutions to your clients?

Then I started thinking why some of you just might be worried. I notice many distributors have gotten out of the idea business, have gotten away from building relationships with your clients. If all you offer your clients is product or a way to source this product, then yep, you need to be worried. I have noticed many distributors no longer sell our product... they take orders for it. They take orders from folks that already know exactly what they want. Well it doesn't take a rocket scientist to realize your days are numbered. These foreign factories will soon cut out layers of excess expense as they start taking over what you now offer. These folks can build web sites as well as you can & soon will be able to communicate with your clients as well as you can. This is partially because their own folks are learning our language & culture but also because they are rapidly hiring Americans to handle this part of their business.

So here is what I see happening. I see some distributors failing, along with domestic "suppliers" that simply import their goods. Those that survive & thrive will be those that offer something the big boys can't offer. That means distributors that prove their value to the enduser. It also means suppliers that do more than bridge the gulf between America & the Far East. Anyone else wonder why it is called the far east? When you think of Asia, do you think in terms of heading west... not east? To me Europe is east, across the Atlantic... Asia is west, across the Pacific.

Edited by jimknecht, 14 August 2009 - 05:24 AM.

[jimknecht]

biggerfish said:

The Engrish barrier, as well as long, long lead times might save us Chris - but you should send your resume out anyway, just in case.

That language barrier will continue to deteriorate. Long lead times & inability to handle smaller orders will continue to hinder them.

[Murmur]

Disheartening news, but I do agree with Jim, this is something that weeds out distributors who just take an order and don't actually service a client. I am not sure how this will end up working out for either side - Alibaba could screw up a bunch of things with mis-communication, minimums, mistakes and end up making us a good bit more preferred, or they could do well.

Either way, I don't know how I will be affected personally, but I would like to think I have taken some steps towards proving our businesses worth. I meet with clients face to face, I have taken a big step in networking and passing on referrals, sending out thank you cards and checking in on clients throughout the year, to name a few. Also, like Jim has mentioned, we try to separate ourselves from the pack by coming up with ideas for our clients and trying to help them with their specific needs - not just selling a product.

From what I see reading through the boards here, there are many others that I think provide a significant value to their clients, and this is something that won't easily be dismissed.

Just my 2¢ worth.

[mpossoff]

To get some clarity on the announcement....

It doesn't say that Alibaba is necessarily going to target end users exclusively. It inlcludes e-retailers.

I do see the model changing though.

I see China Direct>distributor>end user model emerging.

Which will drive prices down maybe not margins and eventually cut out USA suppliers.

But what could happen is since distributors have ability to buy direct from China as USA suppliers you could see USA suppliers start selling direct because of this.

I don't think it's a bad thing per say. Profits will decrease but I think margins will stay the same.

Just like Distributor Central as an example.... It makes a bit of sense for distributors to become 'Alibaba' reps for the Alibaba network or multi line reps.

Some of the China direct suppliers and agents I have done business with were educated in the USA and understand the necessity of having a distributor force.

Now if Alibaba was going to flat out start selling to end users and not provide or offer a distributor, reps and the like some kind of distributor offerings then it's a problem.

Marc

Edited by mpossoff, 14 August 2009 - 06:44 AM.

[mpossoff]

biggerfish said:

The Engrish barrier, as well as long, long lead times might save us Chris - but you should send your resume out anyway, just in case.

Alot of the agents speak English very well and are educated.

Marc

[royster13]

There has long been a Chinese school in our area.....The young folks come here to learn English and other things that help them go home and teach their family owned businesses to do business with North America....When the economy went south, they started looking to take market share away from others....

[ScottH]

Jim,
As far as being an 'order taker'...

It's more client driven for me than anything. 10 years ago, clients would call and say 'I'm having an event, here's my budget, here's my target audience. Whatcha got?" Now, they call and say "I'm having an event and here's a link to what I want." Everyone's a flippin' marketing genius anymore!

I try to talk to clients about it, about how they can come to me for ideas, but they don't listen. They want DIY marketing. I just had a $26,000 order for a promotion that was, quite honestly, horrible. I could have come up with tons of better ideas (at a lower cost). But their committee (not one of them has a background in marketing) thought they had the best idea ever. It's going to flop-I guarantee it. I carefully gave them some other ideas, but in the end, I have a choice to take a $26,000 order, or tick them off by saying it's a bad idea. I'll book the $26,000.

Business is changing - everyone has access to so much information that they feel they can get the same results as a professional themselves. It's happening in any and every industry. Just as an example, look at car detailing (one of my hobbies). 10 years ago, if you wanted your car polished-you took it to a detailer or tried to figure it out on your own. Now, you can go to YouTube and watch dozens of videos from professionals on how to do it yourself. Are the results the same? Probably not. But, if the person couldn't watch a video on how to do it, chances are they would have just gone to a pro.

[royster13]

Scott you hit the nail on the head......Many clients know what they want no matter what our advice is.....

[jimknecht]

Then Scott, I would bet all this is rather scary. Scary in that, at the point your clients know what they want & have researched the products themselves, then your value is greatly diminished. Granted, you still have developed the contacts & have obviously built trust & goodwill, but one must wonder at what point they will choose to do it all themselves.

IMO folks need to be concentrating on their strengths & understand the weaknesses of these newcomers. They will not be going away so best to know how to compete against them. I think many folks will end up like me... realizing some aspects of the business are not suitable but developing areas that the big boys can't touch. One huge advantage we have is that folks nowadays really love to procrastinate. In our situation, the vast majority of our orders ship within 3 days, so we have no fear of foreign manufacturers... or even domestic ones.

Edited by jimknecht, 14 August 2009 - 07:29 AM.

[royster13]

Jim your company and many others like yours are well placed to compete in a very competitive market place.....Limited product line, deep inventory, meat & potatoes, quick turnover.....

I think it is the ones that sell "sizzle" that will have more of a problem......How can you predict 4 to 8 months in advance what will become hot and how long it stays hot.....So better to leave inventory in China rather than putting it on a boat.....

The new Port of Prince Rupert is 10 days or less away from China, Japan and Korea.....Add 4 or 5 more days for the container train to Chicago....So off shore suppliers are no longer 3 months out.....Make that less than a month....

A lot of California suppliers have been bringing is stuff via Vancouver.....Vancouver is 2 days closer, the port is easier to get in and out of and there is lots of surplus trucks going south....BC buys lot is CA, AZ and Mexico produce so lots of empty trucks going south....

PS....I saw several containers being unloaded at Walmart yesterday.....When I asked, I was told it was school supplies and Hallo-ween goodies....The factories in China load the containers and they are not touched by human hands until the get to the stores....Our little store got over 200 direct containers last year....

[mpossoff]

Hi Jim if I were to take an educated guess on your product since it's plastic I would say that it's not even worth getting stadium cups overseas. I could be wrong.

If this is the case then suppliers like Evans, Hufferman, Baystate and the like are able to compete because of the situation and circumstances and logistics.

Now if we're talking about products like apparel, writing instruments, then a different story.

Royce it's also possible with magnets because of freight from China that this is the case? I once investigated for the heck of it about importing printed magnetic products such as business card mags and pricing was pretty much the same as USA factories such as TradeNet, Magnet LLC, etc when factoring in freight.

Marc

Edited by mpossoff, 14 August 2009 - 08:10 AM.

[jimknecht]

So is what is happening in our industry really any different than what happened to the small local hardware stores when Loews or Home Depot moved in? What about the small, local shops trying to compete when Wal Mart moves in?

Actually, truth be told, I think we all are in a lot better situation. First of all, we sell a decorated product. We are selling promotions & ideas... not just a t-bone steak. A client may know exactly what item they want but do they understand the different imprint methods & limitations/advantages of each? Big is better in some situations, but not always. Yes, you can get your chicken breasts cheaper at Sam's, but does everyone need 20 lbs at a time?

My suggestion to you folks is to continue with the education. Learn all about all the offerings of this industry. Learn about all products... not just those you are comfortable with. Demonstrate to your clients that you serve a purpose. You are not there solely to provide a product but there to enhance their promotion & keep them from making mistakes.

[jimknecht]

mpossoff said:

Hi Jim if I were to take an educated guess on your product since it's plastic I would say that it's not even worth getting stadium cups overseas. I could be wrong. USA I believe is the biggest producer/manufacture of plastic goods.

Marc, here is my uneducated take on this situation. You are correct, almost all plastic drinkware is produced in the US... not even in Mexico. IMO, there is a reason for this. Foreigners produce certain product cheaper than us because they pay their employees so little and provide so little services. Also, their cost of living is much cheaper... doesn't cost much to survive on rice & live in a hut.

It costs them the same as a US manufacturer to buy the equipment needed to manufacture a cup (or similar). The resin costs them the same too. Where they win is when the process takes lots of man hours. So any product which needs assembly or hands on work can be made appreciably cheaper where the labor is cheap. Plastic drinkware is produced using very little manpower. The machines are automated & can use robotics to stack & pack the molded product. Foreigners just can't make a cup appreciably cheaper than a US manufacturer... at least not cheap enough to absorb the higher freight costs.

Like I have said, I have had to deal with competitive pressure from the big boys (manufacturers) all my life. This is not new to me. We learned how to compete with them. We can do things they can't dream of. They can produce large orders much cheaper than we could ever hope to. We have our market... they have theirs. Yes, there are areas we bump into each other. Sometimes we get the bigger orders because we can respond quicker. Sometimes they take orders from us. That is life.

[mpossoff]

jimknecht said:

Marc, here is my uneducated take on this situation. You are correct, almost all plastic drinkware is produced in the US... not even in Mexico. IMO, there is a reason for this. Foreigners produce certain product cheaper than us because they pay their employees so little and provide so little services. Also, their cost of living is much cheaper... doesn't cost much to survive on rice & live in a hut.

It also has to do with quantities too. Because freight from China is a big factor when it comes to net landed cost. I'm no expert but I have done and been doing direct purchases. How many end users would buy a container of stadium cups? Because you have to factor freight costs.

Efficiency also plays a big factor. Dooley is so efficient the savings might not be much.

Want to know what the biggest threat is in regards to this topic in my opinion?

I said in a previous post that I forsee the model changing to China>distributor>end user.

But alot of these Chinese companies in my opinion are not the factory they are agents or multy line reps who have started to create and break into the PPD industry. I just recently got an email from a company that is a member of ASI, PPAI, a digital catalogue that included ASI pricing. From talking with the gentleman it didn't sound like his company actually produced the products. In fact one of the companies that I buy from just sent an email announcing that they have found a factory that produces XYZ now at better pricing, better service and the like which means this company doesn't even produce this product. Alot of people here have posted and asked about Spot25, they are a trading company and don't produce a thing I believe.

This in my opinion is the biggest threat to the PPD industry because these 'agents, multy line reps' have the ability to offer more reasonable minimum quantity purchases that promotional products customers normally purchase. Not container or huge minimum quantities.

Marc

[Chris Miller]

Didn't get much further than Jim's reply yet but I can say that most end users have seen every idea in the book and many of them come up with their own ideas before you even have a chance to suggest anything. Sometimes drilling a new idea into their head is nearly impossible because them and their 10 co-workers have already sat around and formed their own opinions.

I figured the discussion would go in that direction... i think it's silly to think your ideas will protect you though.

[Chris Miller]

bigimpression said:

Only time will tell if this will be a huge threat or just added competition for average orders. Frankly, I don't see Joe's Bar sourcing a 1000 imprinted matchbooks order overseas.

I can see this as a crushing blow to those who deal with high volume clients that haven't tried sourcing overseas themselves.

I thought about this too, Ryan and I will tell you that it's pretty tough to stay afloat with only $300-$500 orders. I know from experience because we have had a few months where that size order made up the bulk of our business and it's no fun processing orders that size.

I just know it takes the same amount of time / energy to process a $10,000 order as it does a $500 order. I'd prefer a bunch of the bigger ones...

The other thing that really get me is the type of orders that the average distributor should be entitled to. I say entitled, because this seems to be dictated by the direct selling suppliers. First we couldn't touch orders that were considered "supplies". If its used as a supply, even with a logo, then some big supplier already had us beat out. Then all of a sudden we couldn't sell to college bookstores anymore. Again, suppliers were already selling to them on some type of program. Then I find out the biggest supplier in the industry has most funeral homes under lock and key, and the same goes for most car dealerships. Foodservice and hospitalities is all but out... those people have their own industries and our suppliers sell to them under a different cloak too. NOW some suppliers even have a policy of selling direct if the order is big enough. So ****.... we're not really entitled to much of anything anymore. With any luck, maybe Alibaba will only be a threat to those who already took the "meat" away from the distributor.

I'm not going to stick around just to be a bottom feeder that picks up the scraps for suppliers. Thanks but no thanks.