Made in China

Font Size

Print

Feedback

Email

Discuss

: As an economist who does work on “quality” in China the results of a survey by William Loft into the cost of buying mattresses from China with and without quality inspection is fascinating.

This survey as also been covered by China Law Blog [hyperlink] and The China Game [hyperlink].

Basically, William Loft contacted 12 companies and asked for quotes and then went back later asking for quotes but making it clear that an independent quality inspector would be employed to check the quality of the goods produced.

So what happened to the quotes? In 10 out of 12 cases they increased.

The question is why? Clearly, it costs more to produce higher quality but given the request was for identical products, quality should have been equal and hence price should not change.Possible answers include: 1. These companies usually cut corners allowing them to undercut rivals - an example of quality fade. Because the buyer is signalling its serious attitude to quality the firm provides the “real price” for a given level of quality: 2. The firm, by signalling its intention to employ independent inspectors, that it can afford to pay more and thus the price is hiked up on them. and : 3. The sellers increase their quotes as they see the buyer as “trouble” that will induce additional internal costs of monitoring and the potential for damage to its reputation from any returns or failed inspections. Thus the price rises to compensate for the extra hassle.

On average, Chinese manufacturers increased pricing 20% when told a 3 part inspection process was required. Williams Loft president, Will Robertson, reacts “It’s surprising, but not unexpected. We know that very fine products can come from China; we just need to have a system in place to guarantee quality.”