The U.S. Retail Access Program
A New Supply Chain Model for Chinese Manufacturers

FAQ'S

• OVERVIEW
• M BLOCK & SONS, INC
• ADVANTAGES FOR CHINESE MANUFACTURERS
• TYPES OF MANUFACTURERS SOUGHT
• PROGRAM SPECIFICS
• SALES
• BUSINESS RELATIONSHIP
• SUMMARY
• CONTACT

OVERVIEW

What is the U.S. Retail Access Program?
The U.S. Retail Access Program provides Chinese housewares manufacturers the opportunity to sell retail companies in the United States in a more direct manner, at better margins, develop corporate and brand awareness, and more control over their business, all through a partnership with one of America’s leading housewares specialists.

Who is our U.S. partner in the U.S. Retail Access Program?
If accepted as a qualified manufacturer your company will have the opportunity to partner with M. Block & Sons, Inc of Chicago, Illinois.  Known as a leader in sales, marketing and distribution of housewares in the U.S., M. Block has created the U.S. Retail Access Program exclusively for Chinese manufactures seeking better profits and direct access to the U.S. market.

What is the strategy behind the program?
The strategy behind the U.S. Retail Access Program is for Chinese manufacturers to use the established sales and distribution platform of M. Block to sell the U.S. retail market in a more direct manner.  As a partner of M. Block and Sons, your company will be participating fully in the strategy, cost analysis, risks and increased profits unavailable to manufacturers operating as OEMs.   M. Block will identify the current U.S. market for the manufacturer’s product (competition, sales channels, pricing, packaging, strengths, weaknesses, etc) and outline a strategy to bring its product to market. 

How long has this program existed?
This is a brand new business model that combines the strengths and capabilities of two successful divisions of M. Block and Sons; distribution logistics and sales and marketing.   The new model was formed as a result of numerous manufacturers who, within the last five years, have requested that M. Block manage completely the business of bringing their product to market.  These are manufacturers who either don’t have experience or expertise in the U.S. retail market, don’t have the resources necessary to manage sales and distribution, choose to concentrate resources on product development and outsource all other functions, or all of the these factors combined.  M. Block and Sons is one of the few companies capable of managing this “end-to-end” solution for manufactures.  

M BLOCK & SONS, INC

Who is M. Block & Sons, Inc.?
With a solid track record of nearly100 years of business, M. Block and Sons specializes in real-time, end-to-end distribution, sales, marketing and fulfillment solutions for manufacturers and consumer goods companies selling to America’s retail sector. M. Block provides extensive value-added services beyond a traditional wholesale distribution company with fulfillment solutions that present a compelling alternative to the costs, complexities, and risks associated with handling retail logistics.

What expertise does M. Block bring to the program?
M. Block has a long and established history of providing expertise in sales, marketing, warehousing, distribution, logistics, IT and retail compliance. Their industry knowledge and experience stretch back to the early 1900’s.  M. Block has a national footprint and relationships with nearly every major retailer in the U.S. as well as thousands of independent accounts.  Many of their relationships go back 50 years or more. Throughout its history, the company has remained completely focused on supply chain logistics for the housewares industry.  Selling and distributing into virtually every retail channel, M. Block has developed an expertise in processes and systems that are unique to each particular customer, in each retail channel. 
   
What is the reputation of M. Block & Sons in the U.S. housewares industry?
M. Block has an outstanding reputation with both the retail and manufacturing communities due to years of successful and trusting relationships with retail buyers and factories.  They have the continuity, strength and fortitude that come with a family run company, and have guided the business with the founders’ adage: “in the end, your reputation is all you have”.  Chinese manufacturers accepted by the program will gain a valued partner with first hand knowledge of housewares and the retailing industry in the United States.

ADVANTAGES FOR CHINESE MANUFACTURERS

What are the benefits of being selected as a U.S. Retail Access Program partner?
The U.S. Retail Access Program provides a new way for Chinese companies to look at manufacturing for the U.S. market.  Today, many manufacturers are caught in a low cost bidding war for their products.  The same item that cost $1.00 to manufacturer, might retail for $5.00 in the U.S.  The U.S. Retail Access Program helps Chinese companies move further down the supply chain, giving them more profit for their products, an identity for their company and ultimately greater control over their destiny.  Because this new platform is vertically integrated, covering all aspects of bringing product to market, there are inherent efficiencies if it were to be compared with outsourcing and managing the various parts of the operations separately.  Unlike retailers and marketing companies who have a pricing model solely for their gain and profit, the M. Block pricing model is designed to take some of the additional profits from the supply chain and return them back to the manufacturer.

What are the challenges involved in entering the American market?
One of the biggest challenges facing entry in the American market will be overcoming the business that has already been established.  This is either product currently sourced direct by the largest retailers or by large manufacturers or marketing companies.  Additionally, having the “right” product, pricing and programs able to meet market competition, will be another challenge.

Another aspect of the program that might be new to some Chinese manufacturers is that ownership of product shipped into M. Block and Sons remains with the factory until M Block ships this product to the retailer. This is a common practice within the North American retail industry.  Called “third-party warehousing”, it is a decades-old practice in America supported by the United State Commercial Code.

What is the long-term prospect for my company in the program?
The U.S. Retail Access Program will follow a natural progression, starting small and building over time into a well established business. Together with M. Block, strategies will be designed outlining corporate objectives and goals in sales, profits, branding and market penetration.  The objectives and goals will be managed jointly through a clear timetable and review period. 

Throughout its nearly 100 year history, M. Block and Sons has built its business though long-term relationships with customers and suppliers.  Loyalty with trusted partners who perform has been central to the success of M. Block.  The U.S. Retail Access Program seeks manufacturers who are also interested in a long-term business relationship. 

TYPES OF MANUFACTURERS SOUGHT

What type of Chinese manufacturer works best with this program?
In general Chinese manufactures who would be considered good candidates for this program are financially capable of supporting the requirements of the program and understand the “vision” of the U.S. Retails Access business model and what it attempts to accomplish.  It will not be right for all companies.  Some of the “best fit” criteria for manufacturers are:

• Companies with a category dominate manufacturing position who produce as complete an assortment as possible
• Companies with unique, creative or well designed products
• Companies whose products are primarily shipped into other countries other than the U.S.
• Companies producing products that enjoy higher margins throughout the supply chain
• Companies with their own in-house product development and design staff
• Companies who products are not dominated by the largest U.S. retailers and marketing companies

What type of business relationship does M Block & Sons seek for the program?
The U.S. Retail Access Program is not intended to be a one-time transaction, but a joint partnership between the manufacturer and M. Block in establishing a long-term success through the program. As the program grows, market share and sales volumes will increase and new opportunities will be present for Chinese companies to invest further in the U.S. market.

PROGRAM SPECIFICS

How is our price determined?
As a partner-manufacturer, you will make a pre-determined margin over-and-above your current OEM price.  This range of additional profit might vary from product to product but will be determined jointly between your company and M. Block.  M. Block will first identify the current U.S. market for the manufacturer’s product (competition, sales channels, pricing, packaging, strengths, weaknesses, etc), determining the acceptable retail price range.  Next M. Block will analyze the operational costs associated with the manufacturer’s products (warehousing, distribution, sales, G&A, freight, retail support, etc.).  Combining these two components, a selling price from Block to the retailer is established. Within M. Block’s selling price to the retailer, is additional profit margin for the Chinese manufacturer. 

How will order initiation work differently than our current OEM model?
Once your company is identified as a manufacturer-partner, M. Block will conduct a three to six month market analysis and pre-selling period, at which time product will be shown into each retail channel.  Based on the measured feedback that occurs during this period, products will be selected and initial inventories will be placed.  There will be two types of inventories, a basic broader sku inventory covering the needs of the mid-level and smaller accounts, as well as customer specific / item specific inventories for larger accounts who have added product into their assortment.  Orders will be placed based on estimated demand and stored in M. Block facilities until they are delivered to retail buyers. Your company will own the product stored in M. Block facilities until it is sold to the retailer. Cash flows normally begin approximately thirty to sixty days after goods are received at M Block.

Is it common in the United States for manufacturers to ship product to a secure warehouse and receive payment once product is sold?
This is a very common practice in North American. It is safe, legal and secure. Manufacturers ship product to distribution centers and maintain insurance coverage on the product. The warehouse operator also buys special insurance covering any loss due to his negligence. Although your product is in M. Block’s warehouse, M. Block does not own your product. Your product is under the custody and care of M. Block very much like trucking and steamship lines that take possession, but not title to the goods.

What new costs will our company experience using this model?
Since your company will be storing inventory at M. Block you will bare the additional costs of financing these inventories prior to sales. M. Block’s knowledge of retail demand and its vast experience with inventory management and turnover will insure that the required inventory investment is the most prudent and economical necessary to meet the demands of the retailers.  Inbound freight and customs duty will also be paid by your company, but will be recovered along with the OEM cost of product 30 days after M. Block sells the retailer.  In summary, M. Block will pay you the OEM cost of product, including import freight and U.S. customs duties costs, along with an additional profit on the wholesale cost of product to the retailer, 30 days after M. Block sells the retailer. 

How does our company monitor progress and inventories?
M. Block’s sophisticated Oracle/PeopleSoft software is state-of-the-art in the industry and will provide you with constant access to your inventory levels at M. Block facilities.  You will have security level access to real-time internet-based information on inventory levels by item and sales by retail account.  A summary report will be provided monthly and quarterly, giving you a more detailed analysis of the program.  

SALES

Who sells my company’s product?
This is another unique element about the U.S. Retail Access Program.  M. Block not only handles the logistics and transactional aspects of your product, but it also markets and sells the product, as well.  M. Bock and Sons has relationships with many of the largest U.S. retail accounts through either direct sales employees or independent representatives.  It also manages thousands of smaller independent accounts with sophisticated telemarketing services. 

Who handles the retail credit risk and accounts receivable from the U.S. retailer?
M. Block will handle all credit risks and accounts receivable functions on all sales to the U.S. retailers.  Any bad debt that might occur from a retail sale will be the financial responsibility of M. Block’s, not the Chinese manufacturer. 

What occurs if products shipped to M Block are not sold?
As with any product based business, there will be, from time to time, the need to move through discontinued or poor performing product.  M. Block together with the Chinese manufacturer will determine the proper course of action required to manage this distressed inventory.  Product will never be returned to the manufacturer, rather sold though specialize closeout retail channels.  The financial disposition of any product that requires liquidation will be contractually discussed up front and managed with consent from the Chinese manufacturer.

BUSINESS RELATIONSHIP

How does M Block conduct business with manufacturing partners?
M Block conducts business in an open and honest way. Their desire is to work with business partners who share their vision and excitement about the potential in the housewares industry. Communications and mutual respect is very important to M Block. Although today they are a large company M. Block is a privately held family owned business started just nearly one hundred years ago. M. Block values its reputation as a fair, honorable and first-class business in America.

Will M. Block sell competing product as part of the U.S. Retail Access Program?
If your product is selected, it will be the only product of its kind sold by M. Block in the U.S. Retail Access Program. This creates an exclusive and trusting relationship for your company, unlike selling to agents and brokers.  The Retail Access Program will not be offered to Chinese manufacturers on competing product.

How will I communicate with M Block once business begins?

The U.S. Retail Access Program not only includes real-time access to inventories and sales, it also includes quarterly reviews of sales, profits, customer updates, retail product listings and new sales and marketing initiatives. M. Block desires a constant exchange of ideas and regular communication with its manufacturer-partners. Hong Kong native, Mr. James Chen, is the Managing Director, Asia Pacific, for M Block and Sons.  Peter Levy, grandson of the company’s founder, is President of M Block and Sons, Inc.  Mr. Levy is located in the company headquarters in Bedford Park, Illinois (outside Chicago).

SUMMARY

Program Overview
Changing market environments force companies to re-think their organizational design and their basis for competing in a market.  As the U.S. retail community changes, new supply chain solutions by Chinese suppliers are required to offset or compensate for these changes.

Chinese manufacturers seeking better margins and more control over their destiny can achieve this through the U.S. Retail Access Program from M. Block and Sons.  In order for manufacturers to penetrate the U.S. retail market on their own, major investments in time and money would be required to organize, manage, implement and develop a complete supply chain organization.  Using the U.S. Retail Access Program, you are able at once to make use of M. Block’s existing infrastructure; providing you with sales, marketing, warehousing, distribution, IT, and logistics, together with 100 years of relationships, market knowledge and experience, all integrated into one comprehensive business solution.

M. Block’s U.S. Retail Access Program provides Chinese manufacturers with a means of addressing the changes that are occurring in the U.S. retail market.  It offers a compelling alternative to establishing a direct business model and provides a perfect adjunct to the current OEM business employed by most Chinese suppliers.

Working with a proven partner, M. Block and Sons will guide you through a very complex and sophisticated U.S. retail supply chain model.  In the end, the U.S. Retail Access Program provides a reasonable and inexpensive alternative for Chinese manufacturers to sell directly into the U.S. retail market, helping grow sales and profits, while diversifying away from the current low cost OEM model, and gaining more control over their future. 

What will make the program successful?
No success is 100% guaranteed, but with the spirit of cooperation, open communication and trust and willingness to work as a true partner, we are confident that your special company and M. Block’s unique business model will together; provide the best chance of success possible. 

What are the long term prospects for the U.S. Retail Access Program?
M. Block and Sons is confident that a large number of Chinese manufacturers who manufacturer different products will participate in the program. Plans are already being developed to provide a Chinese exclusive warehouse facility in Chicago for you and the other Chinese partners participating in the program.

CONTACT
Companies with interest in the M. Block and Sons U.S. Retail Access Program should contact Mr. James Chen at:

M Block and Sons
Asia-Pacific Office
Unit A, 10/F
China Harbour Building
370 King's Road
North Point, Hong Kong

Phone: (852) 2570 9823
Fax:     (852) 2510 0575
Email:  james@kmcglobalonline.com

Those companies that share the same goals, objectives and criteria of the M. Block U.S. Retail Access Program will have the opportunity to visit the company during the International Housewares Show in Chicago, Illinois in March 2007.  At this time M. Block will conduct a more extensive review on the particulars and specifics of the program

A second follow-up meeting will take place at the Canton Fair in April 2007.