Shoes and LCD Screens
Fifteen years ago, a pair of NIKE Air Jordan shoes cost about three to four thousand Taiwan dollars, while one LCD screen cost around twenty thousand Taiwan dollars. However, today, a pair of NIKE Air Jordan shoes costs about four to five thousand Taiwan dollars, while one LCD screen costs only about two to three thousand Taiwan dollars. What is the story behind this?
When I was once responsible for projects at an OEM company, NIKE strictly required that all defective shoes be discarded, even if customers could not detect the defects. This regulation was very strict, so much so that many OEM companies lost customers due to non-compliance. Like LV, GUCI and Prada, NIKE did not care about manufacturing costs because these costs were far lower than design and marketing (including branding) costs. But they absolutely would not allow any product to be pointed out by customers as defective. The reason for premium quality is not that it is handmade; rather, it is because of uncompromising quality.
In my previous work, I was involved in panel manufacturing. Compared to shoe making, the process and equipment required for panels were a hundred times more complex. Additionally, at the beginning, the Japanese Sharp company invested heavily in R&D costs to develop this product, so Japan set very high pricing for LCD screens, selling them like premium products.
However, since Korean stole panel technology, forcing cooperation between Japanese and Taiwanese technology. Due to the large increase in supply, panel prices dropped linearly, all the way down to the twenty thousand plus Taiwan dollars I mentioned at the beginning.
But after a major electronic group in Taiwan intervened, this company disregarded market price and R&D costs (Taiwanese companies had almost no R&D) and brand costs, directly reducing sales prices by 5% below cost. Therefore, today everyone can buy such cheap panels.
Everyone knows I like Japanese cuisine. Recently, many Taiwanese shops claiming to provide high-quality ingredients for full consumption have emerged, with reservations required two months in advance. After my family finally made a reservation at this full-consumption shop, I was filled with anticipation when eating. However, the result was disappointing: I queued up waiting for desired items like an aimless wanderer; people were interrupted on the way; someone flipped the oil; someone piled too many items on one plate; the face of the responsible chef was also ugly (because there were too many people). By the time I got the item to my table, I had no mood left to eat. Having grown up eating Japanese cuisine, I am very sensitive to ingredients. These ingredients are indeed high-quality and fresh. But when I ate these premium items before, they were always sent over by service staff, with each different plate fixedly containing different items. The quantity of items was small, but fully expressed the preciousness of the ingredients. Although prices were expensive, every bite was cherished.
Asian countries (excluding Japan and Korea) have long been poor, so they do not like to discard things. Therefore, they sell down-grade products at low prices. From the customer's perspective, if you can buy a slightly defective product with 105% of cost, then your product value is there; afterward, no one will ever use five times the cost (using Air Jordan as an example) to purchase defect-free products from you. Therefore, you have no extra profit to improve branding; no profit to enhance quality; no profit to build company image. Only because you sold defective products at 105% of cost before.
From the customer's standpoint, I trust this brand because its quality has always been very stable. Spending a bit more money to buy this product is guaranteed. If one day I spend large amounts buying a bag brand and a poor relative uses exactly the same model, he only buys it with half my price. Would I reassure myself that what he bought was down-grade so different? When he breaks after not long using hands, would I still tell myself mine won't break because his is down-grade?
I am not saying degrading one's brand is bad; at least for consumers, I can buy high CP-value things at low prices. But what gets sacrificed is the manufacturing industry workers in Asia who have worked hard to produce products.
Saving costs and avoiding waste are certainly virtues, but everything has pros and cons. We need to understand these advantages and disadvantages better to grasp this balance. At least we should know why we work so hard yet still cannot make people see our value.