Tuesday, June 26, 2007

Welcome to the gray market

One of the biggest advantages any brand has is the perception of quality. Brand owners spend huge amounts of money to convince consumers that their products are made better, designed better, and backed by a better customer service organization than lower priced, generically branded competition.

That's why the reports of quality issues associated with Chinese manufacturers should horrify any brand owner. One distributor spiked wheat gluten with plastic to increase the measured protein level, and killed who knows how many cats. Another replaced glycerin sweetener with diethylene glycol, also known as antifreeze. And now it turns out that the gum strip that helps prevent tread separation was simply left out of imported tires. All of these problems have in common a willingness to cut dangerous corners in order to cut costs, precisely the attitude that brand owners imply is rampant in off-brand products, and the attitude that consumer protection laws were written to punish.

The hard lesson is that government is not going to be much help. The US government has no jurisdiction. Foreign governments have no interest in slowing the flood of US capital, and often have inadequate consumer protection laws anyway. If you care about the quality of the products that carry your brand, you're going to have to monitor that quality yourself. Otherwise, you're only an unethical supplier on the other side of the world away from watching all your hard-earned brand equity go down the drain.

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