History – During the early days of The Home Depot, [1983 – 1996] I was involved in the sourcing and managing of our direct purchasing – private label programs which were primarily sourced in China. This was a learning process of trial and error as we sought to achieve great values for our customers.

The Lesson – We quickly learned that the responsibility for developing product specifications, inspecting production facilities and testing, was on our shoulders. China has the finest production equipment and production expertise and can produce the best products in the world or the worse. The Chinese are happy to produce quality products or junk – all depends on what you ask for, what you really want, and what you will inspect and test.

The Failure – We labeled our first private label tool program ‘Ohio Forge’. This was a line of tools that varied in quality. We made the initial mistake of asking for lower prices and were always told – NO PROBLEM! New request for lower prices were offered and accepted. However, the specifications were subtlety changed so the tools appeared the same but certainly did not perform the same. Quality suffered and customers were disappointed. We ultimately had to eliminate this brand from our stores as our own salespeople would warn our customers of the quality problem. We later created the Husky brand with our own specifications that gave us the confidence to offer a ‘lifetime guarantee’. We learned the value of demanding quality over begging for lower prices.

New Strategy – The new rule for our Import Merchants was that they should never start a negotiation for a new product by asking how to obtain a lower price, but rather always start the negotiation asking how the improve and make the product better. We found that offen for a few pennies, we could often add dollars of value to our customers.

Today’s Application – The new tariffs on Chinese products are significant. Retailers have been told to ask the Chinese to ‘Eat the tariff costs’. The problem is that the answer will often be – ‘No Problem’. The resulting products may appear the same, but they will not perform as well or last as long. They will look the same but not be the same. You get what your pay for!

The Reality – Kevin O’Leary, Mr. Wonderful from Shark Tank, correctly pointed out recently that the new Trump administration tariffs are, in effect, a value added tax. This is the reality. If retailers are to provide their customers with products that are consistent in quality and performance, the value added tax will need to be imbedded into the selling price.

The Bottom Line – It will be a serious mistake retailers for retailers to duplicate the ‘Ohio Forge’ syndrome of making price the issue instead of quality. This always backfires.