Fifteen years ago, a pair of NIKE Air Jordan shoes cost about NT$3,000 to NT$4,000, while an LCD screen cost about NT$20,000. However, today, a pair of NIKE Air Jordan shoes costs about NT$4,000 to 5,000, while an LCD screen costs only about NT$2,000 or 3,000. What's the story behind this?
"Uncompromising on quality" behind the exquisite products
When I was working on a project for a sneaker OEM company, NIKE strictly required that all shoes with defects, even those that were not noticeable to the customer, had to be discarded. This regulation is so strict that many OEM companies have lost customers due to their failure to comply.
Just like LV, GUCCI and Prada, NIKE doesn't care about manufacturing costs because these costs are much lower than the costs of design and marketing (including branding). But they will never allow any product to be pointed out as defective by customers.
Boutique is boutique not because it's handmade; it's because there's no compromise on quality.
From high-precision panels to electronic products with “5% net profit”
In my previous job, I was involved in the manufacturing of LCD panels. Compared to shoemaking, the panel manufacturing process and required equipment are hundreds of times more complex. In addition, Japan's Sharp Company invested a lot of research and development costs to develop this product. Japan set the price of LCD panels very high and sold them like high-quality products.
However, since South Korea "obtained" panel technology, it has forced Japan to cooperate with Taiwan in technology. Due to the large increase in supply, the price of panels has plummeted, all the way down to the more than NT$20,000 I mentioned at the beginning.
However, after a major Taiwanese electronics group intervened, the company directly reduced the sales price to 5% higher than the cost, regardless of market prices, R&D costs (Taiwanese companies have almost no R&D), and brand costs. Therefore, today everyone can buy such cheap panels.
"Cheap experience" of all-you-can-eat high-end Japanese food
Everyone knows that I love Japanese food. Recently, many Japanese restaurants in Taiwan claim to provide all-you-can-eat high-end ingredients, and reservations must be made two months in advance. After our family finally made a reservation at this all-you-can-eat restaurant, I went there with great expectations.
However, the results were disappointing: I queued up like a homeless person waiting for the food I wanted; someone jumped the queue on the way; someone spilled the soy sauce; someone piled the food on the plate; the chef responsible for distributing the food also had a bad look on his face (because there were too many people). By the time I got the food to the table, I was no longer in the mood to eat.
Growing up eating Japanese food, I am very sensitive to ingredients. The ingredients are really high quality and fresh. But in the past, when I ate these high-end ingredients, they were brought to me by the waiter, and each different plate contained a different dish. The portions of the dishes are small, but they fully express the preciousness of the ingredients. Although expensive, every bite is cherished.
The temptation of downgrade and brand backlash
Countries in Asia (except Japan and South Korea) are reluctant to throw away things because of chronic poverty. Therefore, they sell downgraded products at lower prices.
From the customer's perspective, they believe that if they can buy a slightly flawed product for 105% of the cost, then the value of your product is there. No one will ever pay 5 times the cost (take Air Jordans as an example) from you for a flawless product.
Therefore, you have no extra profit to enhance the brand; no profit to improve quality; no profit to build the company's image. Just because you once sold your defective product for 105% of the cost.
From a customer's perspective, the reason why I trust this brand is because its quality has always been stable. I feel safe spending a little more money on this product. If one day the brand of bag I spend a lot of money on is exactly the same as that used by a poor relative, he will buy it for half of my price. I would console myself by saying that he bought the Downgrade product so is it different? When his handle breaks after a while, will I still tell myself that mine won’t break because his is Downgrade?
I’m not saying that it’s not good to cheapen your own brand. At least for consumers, I can buy something with a high CP value at a low price. But those who have been sacrificed are our manufacturing employees in Asia who work hard to make products.
Saving costs and not wasting are definitely virtues, but everything has its pros and cons. We need to know more about these pros and cons in order to strike this balance. At least understand why we try so hard but still can’t let people see our value.