Competing against Chinese Products

Over the years, China has grown very big, thanks to their simple living culture, and continuously investing in the infrastructure to sustain long term in-house industry development

Most multinationals have manufacturing setups across China to gain on the low production cost, however mid/small size general traders are getting quite a beating, as the game plan is not being researched on, infact its not entirely a case of R&D, instead its simple maths, how does an international buyer be able to make money on products being made in China? Knowing Chinese makers also sell directly to end business buyers

Due to massive Chinese production volumes, small-mid size buyers also manage to get products packed in their own brands. Now is it really fair to say these are branded products? Knowing the trader is merely going to top up his little margin and passes over to his business buyers, without spending a dime on products promotion and brand building, reason being he’s unable to do that in the absence of any significant profit margins. Besides thousands of traders buy the same product in each of their names, selling the same quality and packaging quality, so the price-war must be fought with all the might in respect of thin margins, with virtually no budget for marketing and putting up the logistics support in place

It is also critical to understand that such products come, stay in the market for a short time and they die eventually, as this has been the pattern of chinese product’s life cycle. So its fair to make this comment that traders must not bank too much on chinese products, they should also remain flexible to flow with the tide, so they remain alert when the time is there to change the overall presentation or simply move on with new products

Having said all, we can still create good sustainable business on “made in China labels” if we plan very well, if there’s vision and we position our brand much above the usual 9 to 5 Chinese products and significantly lower then the blue chip high end brands, with one change compared to other standard production: we enhance the quality and durability of our products, pay a little extra premium so we be at peace while creating a niche market for ourselves, yet mass market for mid tier business and retail buyers. In this scenario, we should be able to spend adequately on marketing and brand position from the incremental price benefit coming from better quality, yet affordable price incentives

Its therefore imperative for us to understand our mindset and market positioning because if we want to work only as a trader, we must not move beyond supplies to the first party on either FOB or CIF basis, the importer, but if we really want to think long-term, we must get prepared to be hammered fiercely before we expect significant returns once the product sits well on the shelf

Imran Mateen, Strategy Consultant – Posted with WordPress for BlackBerry

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