Why somebody so cheap

As a Chinese mobile phone supplier, we, Babiken, set our prices carefully: we try to strike a balance between our profit and the customers' perception.

Most of the businesses do research on competitors' prices, so do we. We got some price lists from those in the same business and surprisingly found that some of their prices are much lower than what we can do. We might go bankrupt soon if we sell at that kind prices. So I talked with my purchaser. Why? Is it possible that we get lower prices so that we can sell at lower prices? My purchaser said those who gave unreasonable lower prices might not really have those models available when you check with them. Secondly they can sell certain models with good prices indeed because they have considerable quantity orders and special contracts with the manufactures to average down the costs. I do not know if this is the real story but maybe partly yes.

But there are other reasons, including the possibility of the following story:

Two weeks again, I received a customer from Middle East. We did some deals but he thought that our prices were a little higher than others so he wanted to switch some orders and he did do that before he came to China. He asked us to guide him to talk with other suppliers. In order to find out why my competitors can outsell us, I agree that I accompany him to visit his another supplier.
After the talk with that supplier, I know the secret and know why some of our competitors can outsell us: my customer ordered 50 pieces LV2008 mobile phone with 256M memory card from those guys and paid full for the value on PI before my customer came to China. My customer did receive a pcakge from those guys but THOSE GUYS SHORTSHIPPED 1 PIECE OF THE PHONE AND 25 PIECES OF MEMORY CARD AND ALL EARPHONES. (Surely his supplier had an excuse, saying the shipping company might steal or lose those things.)

I begin to know WHY--Clearly SOMEBODY DO SHORTSHIPPING. I know not many people do this but at least this applies to some of our competitors.

If we shortshipped those things for an order, we could also sell at their price or even lower. The question for us is now that "How can we compete if somebody is doing things in this way?"

The most critical thing might be that buyers can detect the cheaters. It is easier said than done but it would benefit them if they can know the story that I present today.