Tariffs Opening An OEM Can Of Worms

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I am sure many of you have seen the tik tok videos on X today with Chinese factories directly marketing "their" goods to consumers. The OEM Original Equipment Manufacturers where the branded goods are made is going to be the biggest problem for many of the companies using their services. They have the manufacturing rights being sub contracted to make the goods, but the only stipulation is they cannot use the registered brand name. The brad name is what justifies these companies to add zero's to the purchase price.

The sad part is the items can be manufactured in China and repackaged in the US or assembled in the US to qualify for a made in the USA stamp. Do you honestly believe your Gucci had bag was made in Italy? Made in China shipped to Italy repackged and exported via Italy to the final destination is the truth.

A company considering returning to the US or EU to manufacture locally has basically set up a competitor who can make the identical goods. The brand name will be different or it will be considered counterfeit goods even though the item is identical.

I know this because I used to hunt for OEM manufacturers looking for business opportunities. If you know the quality of the product then you know there is an opportunity as the price is way less because everyone pays for the brand.

Many years ago back in 2007 I was looking to buy a Samsung LED television and the retail prices were astronomically high. The rule of thumb working out the real price is to divide by 3 so a $2.5K television would be in the region of $800. is turned out to be far cheaper and why the divide by 3 is not an exact science, but more of a guide. I would say with the inflated prices of today that this would be closer to a divide by 4 or 5 to find the cost.

Televisions is actually a good example as there are only 3 screen manufacturers world wide so once you find the factory that supplies the screens you will find the OEM manufacturers. This takes time doing the research, but I got lucky finding one of the Samsung LED TV OEM factories.

I paid for 3 sample televisions that were flow in via air freight with Cathay Pacific and custom duties were paid. The televisions were sent to an electronic company to test the products (Teltron) who would be the company handling the service and warranty of the products. If you are supplying retailers you need to prove you offer all the back up services. Teltron would have their price built into every television sale so this is not an additional expense.

The testing reports came back and the internal components were all genuine Samsung branded parts. The television itself was not the same being offered for sale in South Africa at the time and it turned out was what the country would be importing 3 years later. I had a Samsung television 3 years ahead of were the country was and the 3 combined with airfreight costs and duties was still cheaper than purchasing one television locally. The only difference was there would be no Samsung badge externally other wise it would be a counterfeit product.

Thinking back I should have jumped all over this and imported container loads, but I did not have the capital to invest. I had a major retailer who would do a month end managers special as branches could do their own independent deals. Using another brand name Samsung could not prevent this from happening and what I feel is the biggest danger to the many brands that have outsourced their manufacturing. The investment would have been in the region of $200k with a 25% return and a turn around time of roughly 3 months. This is why money makes money as I never had the capital.

Yes there are many cheap counterfeit knock offs that call themselves mirror image, but amongst all the counterfeits there are the real deal genuine OEM factories. The many top brand names that use China for OEM services they have so much to lose even if they return manufacturing to the West and cancel the OEM contracts. Those factories will continue to manufacture using a different brand name and you will know via the similar name which brand it is.

Posted Using INLEO