Asian factories for U.S. firms deal out product on the side

A story in the Wall Street Journal Dec. 19 explained how Asian factories for American manufacturers are turning into competitors for that very company: “For New Balance, a Surprise: China Partner Became Rival,” the article was titled. Turns out that once a factory becomes a legit supplier, it sometimes starts churning out extras on the side and sells those products into other markets. Since the factory sells them for less, it then undercuts the company that hired it. This is the case New Balance is dealing with regarding its factory in Yangjiang City in southern China, which is sending deeply discounted New Balance-branded shoes to stores from England to Australia. “The rush to manufacture in China is backfiring on many U.S. brands in an insidious new way: Sometimes their own suppliers flood the market with their goods, stealing sales and damaging the brands’ cachet,” the article reported. “As more companies move to take advantage of China’s low-cost labor and high-quality manufacturing, many are finding that they pay a steep price for doing so.” WSJ subscribers can access the story at www.wsj.com.

SNEWS View: Shoes and apparel are perhaps easier to churn out and dish out to markets on the side. But who’s to say that can’t happen with the likes of weight plates, stretch ropes, even home gyms and treadmills? As more fitness equipment manufacturers move toward Asia, they will have to keep sentry.