June 16, 2008

If You Buy Chinese Made Goods

Well this title should grab the attention of 33M people here in Canada alone! This post from nowpublic reminded me of this story I just heard. In this case it's not the China price but the Walmart price and its profound impact on our buying habits as well as our economy.

Take a good old water sprinkler 20years ago, made of really durable parts, all metal. Well 20years later it still works. Now take the same water sprinkler you bought at Walmart last year, it's all plastic, and you're lucky to have two seasons out of it. You wonder well duh! it's all plastic no wonder, it's going to break sooner or later. My point exactly. An you will go buy another one at Walmart, because it's the best price.

I admire walmart for several things they do, not the point of this post though. The practice of lowest price has a profound impact on how we build things and what we ultimately buy. So the water sprinkler maker, they sign Walmart, they are happy and they have every right to be happy, their year is made.  Walmart says - we're going to be your biggest customer this year and for the years to come. This year we buy at $x, but next year if you want Walmart's business, you will sell the product to us for $x - 10%, figure a way to make it work. So you don't want to loose your biggest customer, so what do you do, you find a way to make it cheaper, you put plastic in it! Fast Forward 10years and it's all plastic, and your customers are now of the mindset that this sprinkler you just bought is meant to be replaced every couple of years, and Walmart is more than happy to sell you another one.

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