Shenzhen, once comprising of mainly fishing villages now with many high rise residential apartments and multi-story factories was located somewhere in China, very near to HongKong, She was once exporting almost everything for the Christmas session shopping spree, from Christmas tree to the decorations wasn’t doing very well this year, mainly due to the increase raw materials (including electricity) and labor cost which had kept many buyers away. Not too long ago, Shenzhen boasted as the production hub of all production activities and was now no more longer the darling to of many buyers. This is nothing new; the same shift of power was witnessed by Taiwanese and Hong Kong businessman few decades ago right at their doorsteps.
Being the lowest in cost is a tough battle, there were always some Tom and Henry could establish production facilities at even lower cost than yours and snatched away all the orders. Good news to buyers, right? Just 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 manufacturing models in China. They were Wenzhou model, Dongguan model and professionally managed companies. Together, they form the fundamental production engine which had been steering China to even greater export powerhouses.
1. Wenzhou model, the first time I came to know about Wenzhou was when the China Government implemented range of measures to curb the heating of properties in major cities in China to prevent bubbles forming which was destined to burst one day. I came to learn about Wenzhou group buying who formed by cash rich individual who organizes trip to explore new project development or launching all around China. Snatching almost 90% of the units in one single shot is not uncommon. OK, what meant by Wenzhou model was plain copycatting the hottest products launched and released by others, within months, identical products were made available and ignited the competition which in turns lower down the price and many time beyond cost values. This hit and run models didn’t have proper management planning and core technology.
2. Dongguan model, I was there once, many entertainment establishments in full range, I mean some were beyond your wildest dreams. In addition, there were many fanciful eatery and shopping malls just like you were in Taipei or downtown HongKong. As you probably had guessed right, this manufacturers were mainly managed by businessman across straits and many were good in exploiting China emerging market’s opportunities but they share the same fate as their Wenzhou model counterparts; having the weakest link in production among the R&D, production, marketing, distribution. They were easily subjected to have their throats cut by other competitors who can do it cheaper.
3. Professionally managed companies, this is normally managed by returning engineers and scientists mainly from the USA, some were SOEs (State Owned Enterprise) which had been reformed or so call liberated. They compete with other with competitive technologies and engage the market in a much larger scale; companies like Hair, TCL were categorized in this segment.
So, as a buyer, how could you make use of this information to take advantages of the manufacturing mighty power? Simple, always streamline your requirements into 3 main areas of competitiveness,
1. Product development
2. Marketing variations
3. Packaging innovations
For long term gains in cost and quality products which can sell well and fetch high profit margins, focus on this 3 aspects;
1. Product Development. Make use of Dongguan model to develop new products leveraging on their existing infrastructure on R&D, no matter how trivial, have them to develop products at a faster pace and lower cost. You will be surprise on their innovative strength to develop new products with production and manufacturing requirement already in mind which will drastically reduce your cycle time of product development to retail racks
2 Marketing Variations: This one is depending heavily one the budget resources,
Depending on the targeted customer groups, either domestics in China or international. Always developed 2 or more product with different features to cater to different market segment. For examples, certain features were turn off or disable for domestic customers of which the pricing must be lower to establish economic of scale. High end version for international buyers.
3 Packaging innovations: Ever wonder why does a box of chocolate can fetch much higher price in different country? I ever gotten a box of attractive, tempting chocolate from a friend who bought it in Japan. The sight alone was sufficient to appease my appetite. Upon breaking down layers of wrapping papers, ribbons, the chocolate tasted no different from the one I bought in Grocery shop’s glass containers. Yes, packaging can add the additional competitive advantages to your products, work with Wenzhou model on the packaging requirement as the cost will be minimum and no doubt the idea will be duplicated in less than 3 week time but it’s unavoidable and as long as you have your own niche market to go after, it’s the best advantage you can get
Author is the founding member of the of the [http://www.china-import-guide.com]