Friday, January 9, 2015

The Tea Market Series (In China) – Article 2

The Reality of China’s Tea Market – A Big Business Perspective
What does the Chinese Tea Market and all these businesses have in common? It is maximizing profits. The process and behind the scenes operation isn't always pretty but in summary it is buy low and sell high.

The Chinese shopkeepers, especially the middle age aunties and uncles with pleasant and friendly smiles are some of the most able business people I have come across when it comes to their ability to buy low and sell high or to simply pass on a dud to an unsuspecting customer. These people have Wall Street and Big Corporation genes that would make the top executives in those industries proud. Forget the market price, if you forget, they will also gladly forget. The asking price changes often and more so as the customer change. It is business but also a bit of a game.

In China the ancient art of haggling is prevalent just about everywhere outside the modern shopping malls and that is not excluding all shopping malls. Most teashops will haggle with you and would not expect you to pay the first asking price. It is a game of wits, a duel in knowledge, experience and will. The bigger the winning margin, the more shopkeepers earn. Customers rarely win, unless the shop is about to close and there is a frantic clearance sale. The reality for customers is when you enter into a haggling situation, it is damage control. Achieving a discount of 50% or even 70% off from the first asking price doesn’t mean anything because the final price from Shop A may still be five times higher than Shop B down the street. This is the reality of China’s essentially unregulated market. It is free trade in its most basic form and there is no concept for “consumer protection”.

The Chinese Tea Market abides by the law of the wild. The strong devour the weak.

Regardless China’s tea market is great fun and prices are generally substantially lower than in Western countries. The reasons are cheap labor, tea leaves are grown and processed locally and the lack of regulations and checks do have their advantages in keeping overheads low. However for those very reasons in order to get a good deal you really need expertise to judge quality, reject fakes, and be on your game to haggle for a fair price. Otherwise it is a very predatory arena where the weak and naïve gets exposed and devoured. It is a market that prioritizes maximum profits and often times will overlook proper moral conduct. Tourists are prime targets and locals are also fair game if they don’t know any better. 

The Big Picture 
China bashing has become quite a popular pastime and with the way some local businesses are operating the theme is not about to change soon. I am not above contributing a heavy blow myself when the situation warrants it. Remember the melamine milk scandal, the glow in the dark pork, sewer oil, etc. (Oops, I got carried away that was more than one.)

However in fairness to China (but not to condone China’s bad practice) and possibly all developing nations, these emerging economies are undergoing big transitions and finding the right balance for everything and to please everyone is easier said than done. This difficulty can be noted by comparatively looking at the business practices in developed nations. These countries have been trying for a much longer time and are not exactly operating on a clean slate. Wall Street and Big Corporations have over the years competed with China on who should be receiving the heavier blows. Flashbacks to the 2008 Bailout, the Maydoff ponzi scheme, LIBOR, Enron, WorldCom and so many more.

My humble observation is that the aspiration to prioritize maximum profits in business whilst overlooking proper moral conduct appears to be a prevalent trait on both sides. This comes despite differences in government policies and regulation, trade methodology and price control, technological advancement, financial income, race, nationality, culture, religion, living environment, lifestyle.

What is the answer?
I believe that the first and most important step to ensure consumer protection is by ensuring that we have educated consumers. Obviously great minds think alike and I know that you know that I know this is the reason you are here and I am here, reading and writing this blog - The Guide to Puerh Tea !

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