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A Chinese invasion again
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A planned marketing strategy and a wide choice of products at cheap prices make shoppers in the city throng China Bazaars.
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NALIMA HAS just bought herself a hair-dryer, a small transistor radio and a telephone with a caller ID. Nothing that deserves mention in a newspaper except that she paid just around Rs.1,800 for the lot!
Before you rush out with your wallet, you might like to know that along with the price, the gadgets carry the legend "Made in China". Yes, Nalima has been shopping at one of those `Chinese bazaars' you could not have missed in the city.
A retailer rents a huge basement area in a busy shopping centre, hires a few assistants and spreads out the shipped stuff on easily accessible tables. And he has a flourishing Oriental business just before the gift season! What can a shopper choose for his cherished ones? Cameras, clocks, cosmetics, cutlery and crockery, calculators and keyboards, bicycles and battery cells, electronic goods and toys... At costs that would leave him enough for a New Year bash on the ECR.
A pair of heavy-duty electric shears is Rs.279, a talking calculator and alarm clock Rs. 274 and a VCD anything between Rs.3,990 and Rs. 8,000. The cost of a glass item will not fetch you a cup of coffee at Qwiky's.
"The prices are even lower at Kasi Chetty Street," say Michael (electrician) and Tanigaivelu (marketing manager), who have bargain-hunted in all the 13 Chinese goods outlets. They have just lost a video cassette player to a more agile shopper. "There are new items in every store. Shoppers throng them because of the good marketing strategy. There are ads in area newspapers but 60 per cent of the publicity is through the tele-shopping network. In a TV crazed society, it works." Call it a second Chinese invasion. A price war fought on the market plains of India.
Mahaveer Jain, a dealer in imported goods gives us a peep into the behind-the-sales activity. The 20,000 importers in the city push these goods to wholesale shops through seven distributors. The retailer is the fourth link in the Chinese checkers. "If I am able to sell a set of six dolls for Rs.100 the original cost could not have been more than 30 bucks. My profit margin is only five per cent." It is around toys that the considerable weekend crowd is congregated. "Toys are the best moving items," says Jain. What he doesn't say is that toys are also items with the shortest lifespan.
TSN is the only franchise that offers a guarantee — for a year — and later charges for repairs. "The rates are higher," points out Jain. Is the Chennai buyer so easily taken on a dragon ride? "We buy because it is there and cheap," smiles Joshua on a shopping spree. "Where else can you get a phone for Rs. 165? Four cells for Rs.10? Rice lights for a pittance? I am getting two items for the price of one."
"I do look for durability," insists Geetha Ganapathy. "That's why I have picked up knives and nail cutters. They cannot go wrong and the prices are laughable." Nilema (TSN patron) explains her preference. "No electronic item comes with a life-time warranty. At this price if it works for a year, why not? Repair shops are not reliable anyway." The advent of the use-and-throw culture? "More like buy-and-throw," she laughs.
The FAQ in the China syndrome is `How do the Chinese manage a basement bargain?' Prof. Jayashankar, a China expert, puts it down to the Chinese reforms process. In 1980, farm communes were converted to co-operatives, which branched off to light industries. The agriculture sector was taxed to pay for building up surplus capacity. "There is a major strategy in cost reduction," he spells out. "Good roads, uninterrupted power, cheap labour, low overheads and you reap the benefits of large scale manufacture. Government control of physical assets and information coupled with cost leadership strategy ensure smooth production. Even poor Chinese enjoy a fair standard of living. In that sense, they are highly civilised," he chuckles. "The Chinese are adept at creative copying. They can produce anything that has appeared elsewhere." No R&D, no patent laws. Well, we know why overheads are low.
"There is no bureaucratic interference," adds the vice-president of an import-export company. "The Chinese follow a three-tier system of production — an expensive top level exclusively for the West, a middle level for internal markets and a low level for dumping."
"We cannot compete with Chinese production," rails the VP. "We lack focus and a plan and our small-scale industries work under severe limitations. Quality is the only hole we can pick with the Chinese."
Sreejata Banerjee, Fellow, Madras School of Economics, finds the quality question debatable. "Even five years ago Indian toys were shabby, had sharp edges and toxic paints. The consumer couldn't complain because of the monopoly. China is a major trading partner to the U.S. Its standards ought to be good — at least as good as comparable ones."
Banerjee puts the whole question in perspective. "Look at the groups impacted by this phenomenon. For the consumer staggering behind a load of goods it is a dream come true - wider choice at a lower price. This is in line with the current thought that free trade will make the consumer king."
Quite. But while the importers roll out the red carpet, can manufacturers stay afloat in the Mekong River of merchandise?
"Well, some of the manufacturers at least will be forced to close down if they are unable to cope with the cheap Chinese good. But the Indian industrial policy has gradually withdrawn the protection given to a number of goods in the small-scale industry. Indian manufacturers were already facing competition from large and medium firms within the country."
"If people are losing jobs and firms are closing down we have to do something about it. We can take this problem of dumping to the dispute resolution body of the WTO. But proving the injury caused by dumping is not easy. The relevant trade associations must take up the matter with the government for redressal," says Banerjee.
Where does the government stand in the Indo-Chini `Buy-Sell'? "Since the government liberalised the external import sector (March 2001), very few items require licence or customs duty," clarifies Muthuraj, ITS, deputy director, General and Foreign Trade. "We need to adopt a two-pronged approach to face this reality. As educated customers we can refuse to buy sub-standard commodities. We can produce quality products and export them to the 143 countries in the WTO." However, he admits to a fall in exports.
Other officials do not find it so simple. "There is no regulatory body for consumer goods," they warn. "When local industries are not supported the government loses sales tax, octroi, water tax, etc. There is the question of unemployment. What about advertisement license? EPG? Do you know ITC pays Rs. 5 crores a day in central excise duty? Besides will our policy allow this graded export?" Adds Desikan, consumer activist, "Every foreign item starting with a safety pin must have the MRP printed on it. It should also have the local importer/distributor's name.
If not, please call up the Controller of Metrology, Department of Labour, DMS Compound, Chennai - 600018."
GEETA PADMANABHAN
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