Word: middleman
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...fastidious Princeton grad, likes the environment, it will probably be because it is very different from the one his father--and new boss--inherited. Founded a century ago to hawk Canton-made goods such as porcelain, silk and fireworks to the U.S., Li & Fung is the leader among middleman companies, fashioning the world into a smooth-running assembly line in which buttons produced in Sri Lanka and velvet milled in Italy are sewn into a vest at a Shenzhen factory and shipped on time to a store near you. Leading an army of 7,162 workers in nearly 40 countries...
...winds are shifting, and the middleman is becoming obsolete. "Traditional trading firms are dying off," says Victor Lo, an industrial and manufacturing lecturer at the University of Hong Kong. "They have to transform." Brands and retailers have been consolidating, liposuctioning off layers to better battle Goliaths Wal-Mart and Target--which mostly do their own sourcing. A developing China and the Internet have made it simpler and more reliable for buyers to communicate directly with low-cost factories. Li & Fung has been able to achieve an average annual growth rate of more than 20% over the past decade. But going...
...tops and Disney plush toys--a business many analysts expect to grow to $1 billion by 2007. In August it paid $124 million for the U.S.-based Briefly Stated, which produces pajamas, underwear and T shirts for such diverse brands as Professional Bull Riders Inc. and Catwoman. Eradicating the middleman role for some products could open up other opportunities for the firm too. "This will help us do business with certain retailers in the world which we haven't been able to before--like Wal-Mart," says Bruce Rockowitz, president of Li & Fung's trading division. The Fungs "tend...
...Still, being China's middleman can be both a blessing and a curse. The current low prices for pearls may also be a product of cheap labor. Japan's pearl farmers are organized into an umbrella association that sets prices and offers welfare to those who fall on hard times. By contrast, the Chinese producers are more vulnerable to exploitation: "Chinese farmers might as well be selling fruit or cattle," Cheng says. "Their only hope is to cover expenses. They have no idea how valuable their product can be and don't ask for higher prices...
...guys on the retail end of the business don't like this at all. As more and more people have piled into the business, their margins have come down. After paying his "middleman" for a new supply of DVDs about once every two weeks - he has about 1000 titles for sale at any one time - Zhou says he earns less than one RMB per disc sold. "It's definitely a volume business," he says wearily. When I press him on where his middleman gets his product - that is, who's actually making these pirated DVDs - Zhou smiles and plays dumb...