Selling "Made in China"
Tainted pet food, toothpaste containing antifreeze, and Thomas the Tank Engine
present some challenges to reps selling Chinese-made products
First it was melamine (a chemical used to make plastic products) in pet food, reportedly leading to kidney failure among American cats and dogs. Then it was toothpaste containing traces of the poisonous chemical diethylene glycol, also used in antifreeze and as a solvent. Then it was Thomas the Tank Engine, recalled after it was discovered that the red and yellow paint used to decorate the toy contained lead.
All in all, 2007 was a bad year for Chinese imports. The word "inexpensive," when applied to Chinese-made goods morphed to "cheap," "inferior" and even "dangerous." That fact, combined with hard feelings about trade imbalances, news reports of wretched working conditions in Chinese factories, and concerns about the pollution that is choking the country and threatening the world, conspired to tarnish the "Made in China" label.
Dental products distributors aren’t immune from the fallout, according to those with whom First Impressions spoke. China, after all, is a recognized source for cotton-based products, including sponges and gauze, as well as a variety of single-use dental products. And if the pet food and Thomas the Tank Engine debacles didn’t affect dental products reps in the field, the toothpaste alert certainly did. In the face of all this, reps can’t afford to avoid the issue. Rather, they need to squarely face their customers’ questions about the quality of products made in China and elsewhere.
Dentists are talking
"Our members are bringing it up," says Melissa Pearson, manager, dental merchandise programs, National Distribution & Contracting (NDC), referring to customers’ questions about the quality of Chinese-made products. NDC is the parent corporation of American Dental Cooperative (ADC) and United Dental Dealers (UDD). Pearson has managed ADC’s Quala® private-label brand since 1999, the same year ADC became part of Nashville, Tenn.-based NDC. Since then, ADC has been sourcing a larger percentage of its private-label products overseas. (As it turns out, ADC doesn’t source many products from China. Vinyl gloves are an exception.) That’s because ADC can now stock products in NDC’s 460,000-square-foot warehouse in nearby La Vergne, Tenn. Prior to the warehouse, many Quala products were vendor-direct. "Because we can inventory products here, the warehouse opens up a lot of opportunities to do sourcing from overseas companies," she says.
Quala has enjoyed much success in the market, says Pearson. But ADC member companies haven’t built the franchise by emphasizing low cost. That’s a good thing, given everything that has happened in the Chinese market. "We position [Quala] as offering quality products at an affordable price," she says. "You can find cheaper products. But we take pride in working with quality manufacturers to produce quality products. And that’s how we want the sales reps to position them. These are not bottom-of-the-barrel products."
Quality, quality, quality
Indeed, just as the proverbial realtor sells location, location, location, so too must the dental products rep sell quality, quality, quality - regardless of where those products are made. That’s particularly true given the rap that Chinese products are taking today, according to those with whom First Impressions spoke. It’s dangerous to sell on low price alone.
"We focus on quality, value and service" says Andy Whitehead, vice president of sales and marketing, Crosstex International, Hauppauge, N.Y. "While Crosstex imports some products from China, the vast majority of our sales are generated from U.S. made products."
Whitehead says that Chinese manufacturers have improved their quality, but there is still a need to be concerned with how the Chinese monitor their quality.
"It’s true that there are concerns about Chinese made products, especially from an infection control perspective. However, companies that source products from China need to monitor and maintain the quality of their products, just as we do at Crosstex. Chinese manufacturing facilities of medical devices should be ISO certified; FDA registered and follow Good Manufacturing Practices (GMP). While products may appear similar in appearance, there can differ greatly in quality (materials). We make sure that any product with the Crosstex name conform to our high quality standards," he says.
Whitehead says that it is up to the field reps then,
to carry that message forward and address their customers’ concerns.
"They should be promoting high quality products regardless of the manufacturing source," he says. "Don’t tell your customer not to buy a product because it is Chinese made. Tell them why to buy your product."
Whitehead offers this as a statement reps can use: "‘We know the manufacturer, we know their quality, we know their reputation. When you buy this product you have the peace of mind of knowing the product will perform to the highest level.’ That’s the way you should be looking at it."
Hoopla?
It’s true that "Made in the U.S.A." still means a lot to many dentists around the country. But "Made in China" isn’t going to go away. And why should it, ask some dental products executives.
A marketing executive with one U.S. dental products company blames "hoopla in the press" for many of the fears of Chinese-made goods. "I visited 12 to 14 factories in China last January, and they’re not all that different from here," he says. "There are factories that need some work to be cleaner, just as there are here. And I saw factories where I could eat off the floor.
"There’s this perception that they’re working on dirt floors, with open windows and birds flying around. But that is totally false. You’re talking about some very modern factories. I saw cotton products produced in a clean-room environment. Workers have clean suits on; they go through sanitizers to get onto the plant floor.
"I realize that the average hygienist or dentist is reading stories about lead in Thomas the Tank Engine. That’s why we prepare a response for field reps should they get questions." That response, at least for this company, is that its U.S. facilities are ISO-certified and FDA-registered, and that the company makes sure its suppliers meet certain criteria as well. "A lot of Chinese suppliers are ISO-certified too," he adds.
Outlook
Although China will no doubt continue to provide many products - including dental products - for the American market for the foreseeable future, certain economic and political factors could change the picture somewhat. Not the least of those factors is Americans’ resentment of the huge trade imbalance that exists between China and the United States today. According to the China Daily, China’s exports to the United States climbed 212 percent between 2000 ($52.1 billion) and 2005 ($162.9 billion). Meanwhile, U.S. exports to China were a relatively meager $16.2 billion in 2000 and $41.8 billion in 2005. Other sources estimate the annual trade imbalance to exceed $200 billion today.
Aware of Americans’ fears about a runaway trade imbalance, the Chinese government has begun to cut back on some of its subsidies it gives to exporters. Effective July 1, 2007, for example, the government reduced or totally cancelled the rebates on value-added tax (VAT) to Chinese suppliers of 2,800 products and product categories, which account for roughly 37 percent of total product and material classifications, according to Ernst & Young, the accounting and auditing firm. The expected outcome is that Chinese suppliers will raise prices in order to recoup some of the tax savings they have lost. If that occurs, then some of the price disparity between Chinese-made products and their U.S.-made counterparts may disappear.
The Chinese government also appears to be responding - although slower than some in the United States would like - to U.S. demands that China allow its currency, the yuan, to rise against the dollar. A stronger yuan would make Chinese exports more expensive to American consumers, and American goods more competitive in China.
But other forces are at work that will increase the cost of Chinese made products and reduce some of the pricing disparity between them and US made products. There is an emerging "middle-class" in China. They want for their families what we take for granted with ours, which will result in higher wages. The VAT has recently been reduced from 17 to 5 percent and the Chinese Yuan now fluctuates with world markets - reduced 8 percent over the last year alone.
Of course, the disparity between Chinese- and U.S.-made goods isn’t so great in all product areas, particularly those that are highly capital-equipment-intensive (e.g., the manufacture of paper-based products), as opposed to labor-intensive. And, as international pressure mounts for the Chinese to install pollution-abatement equipment in their factories, prices of products from that country may rise further still. [FI]
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