'Squirting Hot Dogs On Ketchup And Mustard' : Products From The Chinese Cloud

This is a story I've told before, but I will tell it again here. More than a decade ago, I sat across a restaurant table from a gorgeous woman in her late twenties. She had weaponized her beauty for the corporate world, wrapping her luscious figure in a beige Ann-Taylor-ish suit and pulling her hair back into a demure ponytail that let her perfectly symmetrical face shine through its light touches of makeup that cost a small fortune because it didn't look like makeup. She was my handler/recruiter/counselor for technical assignments. Of the one hundred and ten dollars per hour paid by our client for my "engagement" onsite , forty-three and a half went to me in a grudging acknowledgement that there had to actually be a pair of boots on the ground after the post-coital euphoria of a successful sale had faded. The rest went to her and the despicable organization that she represented in much the same way that a fresh-faced and flawless carved goddess might adorn the bow of a rotting pirate ship.

As we listlessly chewed through a seventy-dollar lunch, I complained to her that the company had silently and seamlessly transitioned over the previous six years from gainfully employing two hundred four-eyed American citizen-nerds to ruthlessly exploiting a mix of approximately eighty percent overseas workers and twenty percent people like me who were still too stubborn to get the message and walk away. "It's not sustainable," I snapped. "What separates our company from any of the other body shops? What's to stop some of these people from starting their own companies and undercutting us?" She considered this for a long moment, then she smiled in a way that caused a passing waiter to stumble over his own feet.

"Oh, Jack," she laughed, the glass of sparkling water halfway to her perfect lips, "the company will be fine. You see, the talent in this business is... well, it's like a commodity. No offense meant."

"None taken," I replied through a clenched jaw.

"The quality of the product isn't that important. It's the connections, the human factor, the long-term relationships that we maintain with our clients. That's not something that a bunch of ... overseas resources... could ever duplicate." And I immediately thought of a bastardized couplet:

No matter what happens, we have got The perfect white corpo-hookers, and they have not

Shortly afterwards, the company made plans to go public and thus make its two founders ultra-rich rather than merely rich. But they waited just a moment too long. Their high-end clients were swept away by IBM Global Services, whose reps were even better-looking and also had the advantage of being able to seductively whisper the long-venerated industry phrase: "No one ever got fired for choosing IBM." On the low end, they were overwhelmed by a tide of Indian-owned-and-operated consulting firms that could speak the native language used by the "talent" and, increasingly, the managers of that talent. They are still in business today, but if you look at their website you will see that their "success stories" are old and their management team is tired and their "talent" consists of cast-offs. And the stunning young woman who told me that she was irreplaceable and I was not? Long gone.

The moral of the story here is simple: If your product is generic, you will not survive permanently on marketing alone. As you'll see below, however, nobody ever thinks that it applies to them --- until it's too late.

It's a long read, but it's worthwhile: The Strange Brands in Your Instagram Feed. I've excerpted the first few paragraphs below, so you can get the idea.

It all started with an Instagram ad for a coat, the West Louis (TM) Business-Man Windproof Long Coat to be specific. It looked like a decent camel coat, not fancy but fine. And I’d been looking for one just that color, so when the ad touting the coat popped up and the price was in the double-digits, I figured: hey, a deal!

The brand, West Louis, seemed like another one of the small clothing companies that has me tagged in the vast Facebook-advertising ecosystem as someone who likes buying clothes: Faherty, Birdwell Beach Britches, Life After Denim, some wool underwear brand that claims I only need two pairs per week, sundry bootmakers.

Perhaps the copy on the West Louis site was a little much, claiming “West Louis is the perfection of modern gentlemen clothing,” but in a world where an oil company can claim to “fuel connections,” who was I to fault a small entrepreneur for some purple prose?

Several weeks later, the coat showed up in a black plastic bag emblazoned with the markings of China Post, that nation’s postal service. I tore it open and pulled out the coat. The material has the softness of a Las Vegas carpet and the rich sheen of a velour jumpsuit. The fabric is so synthetic, it could probably be refined into bunker fuel for a ship. It was, technically, the item I ordered, only shabbier than I expected in every aspect.

I went to the West Louis Instagram account and found 20 total posts, all made between June and October of 2017. Most are just pictures of clothes. Doing a reverse image search, it’s clear that the Business-Man Windproof Long Coat is sold throughout the world on a variety of retail websites. Another sweatshirt I purchased through Instagram—I tracked down no less than 15 shops selling the identical item. I bought mine from Thecuttedge.life, but I could have gotten it from Gonthwid, Hzijue, Romwe, HypeClothing, Manvestment, Ladae Picassa, or Kovfee. Each very lightly brands the sweatshirt as its own, but features identical pictures of a mustachioed, tattooed model. That a decent percentage of the brands are unpronounceable in English just adds to the covfefe of it all.

All these sites use a platform called Shopify, which is like the Wordpress or Blogger of e-commerce, enabling completely turnkey online stores. Now, it has over 500,000 merchants, a number that’s grown 74 percent per year over the last five years. On the big shopping days around Thanksgiving, they were doing $1 million in transactions per minute. And the “vast majority” of the stores on the service are small to medium-sized businesses, the company told me.

Shopify serves as the base layer for an emerging ecosystem that solders digital advertising through Facebook onto the world of Asian manufacturers and wholesalers who rep their companies on Alibaba and its foreigner-friendly counterpart, AliExpress.

It’s a fascinating new retail world, a mutation of globalized capitalism that’s been growing in the cracks of mainstream commerce.

Here’s how it works.

The short version is this: Over the past thirty years, a bunch of "fast fashion" brands like H&M and Zara and whatnot have grown to massive sizes by purchasing from thousands of anonymous Chinese factories, marking up the product many times over, and keeping the profits. At the same time, brands like Ralph Lauren and Tommy Hilfiger and Kenneth Cole were moving virtually all of their production to China. Because these retailers owned major "channels", so to speak, they assumed that they would never face any serious competition from anybody outside the exclusive club of retailers who pay $5 for a dress and sell it for $99. I won't call it collusion, because it operated on a more instinctive level. Everybody understood that the margins would be high for everyone as long as nobody drastically undercut anyone else.

Thanks to Shopify, Aliexpress, and a variety of other online sources, it's now possible for pretty much anybody to sell those same products through their own marketing channel. You can pay "influencers" on Instagram. You can buy Facebook ads. You can put a "skin" on an existing e-commerce website. It takes very little time and very little effort. You never handle "your" products. You don't quality-control them. You don't design them. Hell, you never even see them yourself. You're just another marketing avenue for the thousands of anonymous Chinese factories. If you do it right, it's profitable.

My old pal Melisa Mae was an early adopter of this business practice, opening Kitten Lingerie four years ago. It hasn't made her rich but it's helped her walk away from her old desk job. To her credit, she's rejected every wacky idea I've ever suggested about expanding the business, from designing an exclusive line to appearing in the photos herself. She treats it as a hands-off operation and she doesn't spend a moment more on it than is absolutely necessary. Most critically, she recognizes that the whole thing is no more permanent than a Snapchat story, because she doesn't own anything but a domain name.

I'm going to go out on a limb here and say that this kind of stone-soup meta-business will be the death of most garbage-fashion retailers. The brands that can afford to have bespoke Chinese junk made for them --- Nike, Under Armour --- will still make money because there's a level of perceived prestige to wearing that stuff, particularly among lower-class consumers. All of the fast-fashion brands, however... they're screwed. They will be replaced by independent operators who have close ties to a given community, be it virtual or physical. This is particularly true when it comes to the growing immigrant communities in America. I had my eyes opened to this when I saw some Indian fellows selling food out of the trunk of their cars at work. It wasn't particularly cheap, but it was tailored for Indian tastes and desires. Those dudes all have wives who can go through the Aliexpress site and pick out stuff that they know their friends will want. They can sell it locally, and they can sell it via targeted social media.

Eventually, some of those people may develop their own "brands" and their own styles of clothing. They'll work exclusive deals with Chinese factories. And that's where your next Tommy Hilfiger or FUBU will come from.

The brands that actually own and operate their own means of production won't be affected at all --- I don't give a flying fuck how much a Chinese topcoat costs, regardless of source, because I wouldn't wear it. I have a Brioni topcoat, thank you. (I'm about to leave my day job and enjoy some unemployment, so if you're the same size as I am you might want to check your local pawnshop to see if it's available.) Furthermore, the swelling presence of Chinese-junk resellers will eventually educate customers as to where to find a truly decent product. The Atlantic writer who was disappointed with his topcoat might be inspired to learn a little more about what makes decent clothing and where to get it. In a world where the vast majority of people are wearing generic Asian-factory rags, there might be a genuine renaissance in men's style. (Don't bet on it.) It is safe to say, however, that Hickey Freeman and Giorgio Armani won't find themselves competing directly with the "West Louis" brand from the Atlantic story.

We know who benefits from this new paradigm: the Chinese factories, the Internet middlemen, the Instagram marketers. Who suffers? Why, it's all of the people who thought they were indispensable: the white-collar staff of places like Abercromie&Fitch or H&M. Those people have no place in an economy where the proles get their clothing via Instagram or some Mary-Kay-style local community kingpin. In a world where the Internet serves as the middleman between China and Ohio, we don't need an office full of New Yorkers wetting their beaks in the flow of profit. Nor do we need retail salespeople or floor space or sales flyers. All of that stuff will disappear the same way that your local milk delivery did.

A few weeks ago, I took my son to the mall. I don't want to sound like George H.W. Bush or Marie Antoinette here, but I never go to a mall. Almost never, anyway. Twice a year, tops. But we needed shoes for a weekend race and we didn't have time to get them shipped, so we went to the Vans Store which happens to be in the mall.

To John's immense displeasure, I insisted on walking into five or six randomly chosen clothing stores to see where their products were made. No prizes for guessing that it was all lowest-bidder production. China, Vietnam, Honduras. And I'm not talking about $15 T-shirts here. I'm talking about $250 jeans, $499 dresses. Expensive, aspirational stuff, at least by the standards of people who don't (temporarily) own a Brioni topcoat. None of it could have cost more than five or ten bucks at the source. The rest of the money went to the mall, to the New York offices, to the sadly unimaginative marketing campaigns, to the social-justice causes, to the event sponsorships. Five percent product, ninety-five percent fluff.

It made me think of that lunchtime conversation from before the Obama administration, with a woman who lived in a $500,000 house and drove a $75,000 Lexus SUV and took trips to Italy --- and it was all on the back of the profit margin from my work. The funny thing was that $110/hour for $43.50/hour computer scientists was semi-sustainable, the way it was semi-sustainable for Florsheim to charge $300/pair for American-made shoes. What killed Florsheim was trying to get $300/pair for Chinese shoes. Because other people sold Chinese shoes for less, so Florsheim had to lower their prices, which caused the competition to lower prices, and pretty soon you have the $99 Kenneth Cole shoe at Men's Wearhouse that probably costs six bucks a pair to make. That was the end of Florsheim. And with LOISWORD shoes at seventy bucks from AliExpress, the Men's Wearhouse is next on the extinction list.

My old employer cut it's own throat when it tried to sell $20/hour semi-skilled labor for $110/hour. Because IBM could sell it for $60/hour and the local shops could sell it for $45. That was the future. They just couldn't see it. They thought that they could set a limit to globalization and that the limit would be exactly where it was most profitable for them. Unfortunately for them, that idea had no place in reality. You've heard me say it before, and here it is again: Reality is not interested in your opinion. If you want to sell overseas labor, be prepared to be replaced by overseas labor yourself. If you want to sell Chinese clothes, don't be surprised when the Chinese realize they can do your job, too. Are you having trouble figuring out where Americans fit into the future picture, other than as consumers? Me too. Oh well.

Whatever happens, we have got The B-52 Stratofortess, and they have not