Why most factories refuse to give customer references

by Renaud Anjoran on 30 March 2011

Ideally, a manufacturer should be capable of giving legitimate customer references. It would be a strong sign of reliability, and a great marketing tool.

In my mind, they should show a list of foreign customers to their prospects and say “throw your dart three times at random on this list, and we will give you the full contact information of these customers” (the same way Fred Wilson does).

Unfortunately, it never happens this way. A reader just asked me why the Chinese factory he contacted only gave him a few company names, with no contact information. That made it impossible for him to check whether these importers really worked with that factory, and whether they were happy about it.

From my observations, it is common for buyers to ask for names of reference customers, but factories are always reluctant to give the full contact information.

There are different explanations.

In some cases the references are fake. They never worked for those big-name customers, and they hope you will not be able to check whether there really is a business relationship.

In some cases the references are real, but not positive. Maybe these importers are pissed off and are looking for another supplier right now!

In some cases the references are real and positive, but the factory is afraid of losing these customers. There are several reasons for this:

  • You might be an agent, a trader, or a competitor’s employee, trying to establish a relationship with those customers.
  • The manufacturer might have promised to your customers not to disclose any aspect of their business, including product design and pricing… But also the very fact that they are one of their suppliers.

And in some cases they just don’t know the contact information. The factory might not be the direct supplier of the oversea customer. There might be a trading company in the middle. In this case, you probably don’t want to do direct business with that manufacturer. If they are not used to dealing directly with importers, you are running high risks.

The only way to have an idea of who is producing for whom is to tour the factory’s packing department. You will see brandnames on labels and on shipping marks. But, once again, they might not be in a direct relationship.

Asking the salespeople or looking around in a showroom will not give you any reliable information.

We are touching an important point here. Why are importers sourcing in China and other developing countries running such high risks when they launch production in a new factory? Because of the lack of transparency.

Ironically, importers are the ones who want to keep their supply chain in the dark, for fear that their competitors copy their product and make their manufacturer too busy… It is part of the game!

  • http://jlmade.blogspot.com Jacob Yount

    Lots of variables here to consider, but one thing never changes and that is the lack of transparency. Communication and info only belongs to a “select few”. But having said that, you did equal analysis on mentioning the importers also hide info down the supply-chain. Another good post.

  • Renaud Anjoran

    Thanks Jacob… Yes, lack of transparency is a HUGE problem. It takes time to test different suppliers, eliminate the bad ones, and build a strong supply chain.
    On the other hand, if everyone knew all the good players, they would have to turn down 98% of the orders. And their prices would be much highher. There is a limited capacity if one looks for really reliable workshops in China, Vietnam, India, etc.

  • Not Stupid

    How stupid can you be? Why do you even bother asking for references? If they give you any they will only give you of happy customers who never had any issue. Which is completely pointless.

  • Renaud Anjoran

    Well, maybe I’m stupid but it does mean something if I get on the phone with a buyer from my country who has roughly the same quality standard as mine, and who tells me he’s been working for 5 years with this specific supplier with very few problems.
    Many factories are unable to give you any reference of long-term and happy customer.

  • Jorge

    Excellent post. There are no guarantees, and there is more art than science in this game. It’s just a matter of collecting as much info as you can from suppliers and then going with your gut feeling. Though you could still turn up a lousy supplier, at least it’s a forgivable mistake because “you did your homework.” Finding yourself with a lousy supplier is unforgivable, on the other hand, if you did no homework because of a “what’s the point” mind-set.

  • Renaud Anjoran

    Jorge,
    You are exactly right. Importers should do their homework!

  • http://www.bloomin.ch Thomas

    None of the chinese suppliers I initially made contact with were willing to provide references – and thats 100% of the suppliers I contacted. Its not stopping me from doing a factory visit and if all else still seems good, I may insist on a reference as a further test.

  • Renaud Anjoran

    Thomas,
    I think you are following the right process. Good job.

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