By: Brendan Fitzpatrick
- Manufacturers reside in China, India and beyond
- Historically, manufacturers would wholesale to U.S. retailers who would then retail those products to consumers
- As the internet grows, China, India and the likes are implanting their countrymen in the U.S. as “preferred sellers” who undercut American retailers or “sellers” (as called by Amazon and eBay)
The implanted “preferred sellers” in the U.S. are relatives, employees and in some cases simply “acquaintances” of the manufacturers – it’s a full blown monopoly. Herein lies the problem, those acquaintances get true wholesale prices and are able to sell at the narrowest profit margins (via Amazon and Ebay) while American retailers who sell the same products have to sell at a lower margin (ie. lose $billions in sales) because they’re paying more for the same products. The margin of difference is the control point on eBay and Amazon which catapults the “preferred resellers” (of the Manufacturer) to “Top Seller” status on these sites (BTW, Top Seller status spells success which snowballs over and over as the more they sell, the cheaper it is to ship more products in bulk).
Here’s a real life example, search for ‘watchbox’ on Amazon.com and see if you can find this product or similar:
This is a nice watchbox made in China. Now, before getting into the quality, shipping expenses (from China, to Amazon etc.) and Amazon service charges take a look at the price of this item, $6.17. This is not Alibaba.com or Aliexpress.com, this is direct to Consumer via Amazon. There is no way an American retailer is selling this product, this is purely a direct transaction from Manufacturer (via “preferred reseller”) to Consumer. The question becomes, is it even possible to prevent China from selling the bulk of it’s exports directly (or indirectly via “preferred reseller) to Consumers and how will that impact retailers in the U.S.? I do believe U.S. retailers are now on the path of being outsourced, the same as manufacturing jobs as well as with technology (India) and other markets.
Pretend you wanted to source the product above in bulk and retail it directly in the U.S., go to Alibaba.com (this is a direct Manufacturer to Retailer site) and see how much you can find the same product for.. 90% of the results will cost you $10 or more.. This is the evidence that proves this article. When Amazon (reseller price) is selling individual products cheaper than bulk pricing on Alibaba.com (wholesale price) it is proof that China, India and the like are creating a monopoly and cutting out the American retailer!
How does the American retailer compete directly with manufacturers from China when eBay and Amazon are in play? I don’t think it’s possible. How can an import tax solve this problem? It cannot when resellers and “preferred resellers” aka “implanted resellers” are being taxed the same. The only thing that the American retail market can hope for is to bring back manufacturing to the U.S. and the one thing China better be aware of is that Automation will wipe them out at some point.