Once mainly made up of fishing villages, now home to many high-rise residential apartments and multi-story factories, Shenzhen was located somewhere in China, very close to Hong Kong. She once exported almost everything for the Christmas shopping session, from the Christmas tree to the decorations. it was not doing very well this year, mainly due to rising raw materials (including electricity) and labor costs that had kept many buyers away. Not so long ago, Shenzhen boasted of being the production center of all production activities and now it was no longer the favorite of many buyers. This is nothing new; The same shift in power was witnessed by Taiwanese and Hong Kong businessmen a few decades ago right on their doorstep.
Being the lowest cost is an uphill battle, there were always some Tom and Henry who could set up production facilities at even less cost than theirs and snatch all the orders from them. Good news for buyers, right? Simply keep looking for lower cost manufacturers to enjoy higher profit margins? The answer was yes and no…
Therefore, as buyers, it is important to distinguish the three main categories of models made in China. They were the Wenzhou model, the Dongguan model, and professionally managed enterprises. Together, they form the fundamental production engine that had been driving China to even greater export powerhouses.
1. Wenzhou model, I first heard about Wenzhou when the Chinese government implemented a series of measures to curb the heating of properties in major Chinese cities to prevent the formation of bubbles that would one day burst. I came to learn about the purchase from the Wenzhou group, made up of a cash-rich person who organizes a trip to explore the development or launch of new projects throughout China. Taking almost 90% of units in one shot is not uncommon. Granted, what the Wenzhou model meant was simply copying the most popular products launched and launched by others, in a matter of months, identical products were made available and fired up the competition, which in turn lowered the price and many times beyond cost values. These hit-and-run models did not have proper management planning or core technology.
2. Dongguan model, I was there once, many entertainment establishments in full range, I mean, some were beyond your wildest dreams. Also, there were many upscale restaurants and shopping malls as if you were in Taipei or downtown Hong Kong. As you have probably guessed right, these manufacturers were primarily managed by entrepreneurs across straits and many were good at exploiting China’s emerging market opportunities, but they share the same fate as their Wenzhou model counterparts; having the weakest link in production between R&D, production, marketing, distribution. They were easily subject to being slaughtered by other competitors who can do it cheaper.
3. Professionally managed companies, these are normally managed by returning engineers and scientists, mainly from the US, some were state-owned enterprises (SOEs) that had been reformed or, so to speak, liberated. They compete with others with competitive technologies and participate in the market on a much larger scale; companies like Hair, TCL were classified in this segment.
So, as a buyer, how could you make use of this information to take advantage of the great manufacturing power? Simple, always optimize your requirements in 3 main areas of competitiveness,
1. Product development
2. Marketing Variation
3. Packaging innovations
For long-term cost profits and quality products that can sell well and earn high profit margins, focus on these 3 things;
1.Product development. Use the Dongguan model to develop new products by leveraging your existing R&D infrastructure, no matter how trivial, get them to develop products at a faster rate and at a lower cost. You will be amazed at its innovative strength to develop new products with production and manufacturing requirements in mind, dramatically reducing product development cycle time for retail shelves.
2 Marketing variations: this depends largely on budget resources,
Depending on the target customer groups, whether domestic in China or international. It has always developed 2 or more products with different characteristics to serve different market segments. For example, certain features have been turned off or disabled for home customers whose price must be lower to establish economies of scale. High-end version for international buyers.
3 Packaging Innovations: Ever wonder why a box of chocolate can command a much higher price in a different country? I once received a box of attractive and tempting chocolates from a friend who bought it in Japan. The sight alone was enough to appease my appetite. Breaking through layers of wrapping paper, ribbons, the chocolate tasted no different than what I bought in glass containers at the grocery store. Yes, packaging can add additional competitive advantages to your products, work with the Wenzhou model on packaging requirement as the cost will be minimal and no doubt the idea will double in less than 3 weeks, but it is unavoidable and as long as you have your own market niche to go to, is the best advantage you can get
The author is a founding member of the [http://www.china-import-guide.com]
