Saturday, December 7, 2013

How Chinese employees bypass their employers!

There is an important and growing trend in China:

Employees bypass their employers!
Rather than selling to customers and earning some commission, some employees would rather sell by themselves. They develop their own customers and sell them their products directly as they get out of the factory... Rather than earning some commission, the employee earns a bigger margin!

I have witnessed this several times in China.
For instance when buying a washing machine, and even though I was discussing the price, the salesman offered me a very important discount. But in this case, the washing machine won't be under guarantee.
In fact the salesman gets the product directly from the factory without going through the big brand for which he works! He has developped a parallel circuit and "steal" his employers customers!

This mechanism exists also by distributors, franchises.
A distributor can willingly lower its price on some brand products. It allows him to attract and win some customers who will then buy the brand products but also some other products.
For instance, Nestlé in China faces this problem... Some distributor lower its price on Nestlé products and thus win some customers. He then sells some products from various brands to his customers and this time keeps its margin!

Brand defense.
To protect themselves, big brands emphasize on after sales guarantees.
In fact if you buy directly from the factory, it is not possible to benefit from a after sale guarantee.
Furthermore brands control regularly their employees, franchises, distributors.

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