Western retailers turning the screw on eastern suppliers do so at their peril. As recession bites and the balance of power shifts, the answer lies in forging fairer and stronger trade ties

The apparent sophistication of High Street retailers, with their continually updated lines and conspicuous commitment to ethical and environmental practices, comes at no small price. But most of that cost is incurred by their suppliers, not least in low-cost manufacturing nations such as China, Vietnam, Cambodia and India.

Profit margins for most companies in these countries are wafer-thin, yet they are being shaved continuously by western customers calling for ever-cheaper goods, more and more quickly, and produced in a way that doesn't tarnish their own carefully crafted ethical reputations.

The British managing director of a state-of-the-art clothing factory in the Far East, which has been supplying one of our top High Street retailers for 40 years, tells me that such pressures from his customers are taking him "to the edge". The factory is a showcase of ethical employment and high technology-enabled productivity, but even that, it seems, is not good enough. "What I'm hearing more and more is 'get it made and get it made quick'. They pay no account of the human issues involved in running a factory here," he says.

Such concerns include ensuring employees have time off to help elderly relatives plant rice so that they won't starve the following year, or people being unable to come to work because heavy rains have washed away the roads. This ignorance of—or disregard for—real life in such countries is married with a bullying approach by customers that borders on the abusive.

The managing director says that his customers do things such as changing the specification for a garment halfway through production, but also insist suppliers fly the goods over, at great expense, to make up lost time. "People are not performing monkeys," he argues. "They need to be taught new skills for new requirements, and they need more time sometimes to do things properly."

The picture he describes—of western customers effectively imposing the kind of sweatshop conditions that they profess to abhor, and that the suppliers are trying so hard to move away from—is all too common in low-cost manufacturing economies. And the primary cause is the unreasonable expectations of western firms about what "low cost" really means.

Many seem to equate the concept with "cheap" and, therefore, "easy". The reality could not be further from the truth. Buying goods successfully from distant countries, with different languages and cultures, requires a bigger investment of time, effort and money than purchasing from more local sources. Success rests on nurturing strong relationships—a practice eastern companies set greater store by than their counterparts in the west—and then underpinning those ties with meticulous documentation.
Getting to understand the suppliers' business, visiting the factories, talking to the employees, and helping them develop the capability to produce the right quality of goods in the best conditions, is more important in far-flung locations than it is at home. But most western companies fail on all counts, yet are outraged when they receive sub-standard goods.

Another common mistake is to assume that those running businesses in low-cost countries are rather backward. But westerners who underestimate eastern suppliers are playing a risky game. Most businessmen in the east are savvy, with strong networks, and while they may smile serenely and be unfailingly polite, they know when customers are trying to pull a fast one and won't hesitate to communicate the fact to others.

They may be smiling in anticipation of having the last laugh. Western firms may be "using" suppliers in the Far East now, but, unless they nurture mutually beneficial and sustainable partnerships, they could find themselves being used by them as part of a longer-term game plan to weaken the manufacturing prowess of large tracts of the west to the point where prices can be raised without challenge.

That day of reckoning may be nearer than we think, precipitated by recession. Expecting western quality and ethical and environmental standards at eastern prices, indefinitely, was always an unrealistic aim. But embattled retailers piling unnecessary pressure on their eastern suppliers to try to regain some of their own dwindling margins might find the balance of power has already shifted.