Revealing The Chinese Foundries Behind The Big Names

Guo Zhengjin has been making shoes for nearly 50 years. Qiao Hong, Dongguan, Guangdong footwear industry Chairman, more than 300 workers on his production line are internationally renowned. Beach shoes brand Do foundry production.

He recalled that more than ten years ago, the profit of OEM foundry was very high, almost "selling a pair to earn a pair", but now it is "selling one pair to earn one yuan".

"Factories like ours have to produce more than one hundred thousand pairs of shoes a month to keep balance." Guo Zhengjin told reporters.

As a big developed country, China has a large number of OEM generation factories in clothing, shoes and caps, bags, 3C digital appliances and other consumer goods.

With the sharp decline in the number of international orders and the rise in domestic production costs, OEM generation processing enterprises are in a difficult position.

Some OEM generation factories have to reduce their production scale in order to maintain their balance of payments. Some enterprises are moving farther and farther on the road of finding cheaper productivity, moving factories to Vietnam and other Southeast Asian countries, and others are starting to build their own brands to try to get rid of the hat of the factory.

In June 14, 2016, Ma told Alibaba investor conference: "big brands usually use a lot of OEM. China has the largest number of OEM in the world. They have no channels, but suddenly they find that they can sell products through the Internet. The production of genuine and imitation products may be the same factory. Their products are not necessarily inferior to the genuine products, and they have better prices. They are not facing intellectual property rights. They are facing new business models. "

How to achieve OEM's business model renewal? How to upgrade the "made in China" to "made in China"?

From OEM (raw material processing and manufacturing) to ODM (own design and manufacture) to OBM (private brand manufacturing marketing), the Internet transformation of the foundries is just beginning.

60% luxury brands choose Chinese factories.

Zhejiang Tongxiang hundred pure cashmere products Co., Ltd. is a small factory with a scale of only 50 people. Wang Zhenbo, general manager, told reporters that although the factory is small, it relies on excellent quality to provide OEM orders for many domestic and foreign brands.

"Domestic brands include YOUNGOR, Ordos, brother Zhuang Ji, foreign luxury Armani and Versace. We only do middle and high end orders. " Wang Zhenbo said.

Although luxury brands are usually reluctant to acknowledge the existence of OEM in China, the scale of OEM OEM is very large in many consumer goods, such as clothing, shoes and caps, bags and so on.

It is reported that as early as 2009, 60% of international luxury brands had been subcontracted in China. Some produce finished products in China, others do most of the operations in China, and then go to the brand countries to complete the final process.

There are many foundry factories like 100 cashmere in Dongguan, Shenzhen, Hangzhou, Wenzhou, Qingdao and so on.

"Before making foreign orders, not making money, mainly rely on tax rebate, and the account period is also very long. But doing domestic orders may also be faced with all kinds of hidden rules of debt and human relations. Wang Zhenbo said.

　 In the home appliance industry, OEM OEM is also widespread.

According to media reports, the Swedish appliance brand Electrolux has shut down several production bases in China in recent years, instead of seeking OEM cooperation with domestic appliance manufacturers. Among them, Omar electric appliances and MeiLing electric appliances were the main foundry cooperation partners of Electrolux refrigerator, and the microwave ovens were produced by the foundry of the United States.

For example, Whirlpool, the US appliance brand, has completed its production of refrigerators, air conditioners and washing machines by Hisense.

From another perspective, even the famous household appliance brands in China, OEM revenues still occupy a large share of the total income.

The annual report of Midea Group in 2015 shows that its foreign business income accounts for 38.44%. "Through long-term ODM and OEM for foreign brands, the company has an in-depth understanding of the product characteristics and needs of overseas markets." Its main work in 2015 included "promoting the export business mode based on OEM to OBM."

Yang Zhili, director of Taobao's "China made" project, observed that there are nearly 2000 small household electrical appliances factories, nearly 8000 supporting factories, and 90% of them are OEM, such as Cixi and Zhejiang.

"In recent years, with the weakening of external demand and the rising cost of land, environment and labor, the development of OEM mode is getting smaller and smaller. A lot of OEM manufacturers are facing a crisis of survival. Yang Zhili said.

　　 "Authentic fake"

Everyone knows that transformation is needed, but there are few OEM makers who have successfully transformed.

In 2008, Guo Zhengjin began to transform himself to the direction of his own brand. In 2013, Guo Junhong, his son, took the baton and registered his own brand "Rock bear". He designed nearly 100 kinds of beach shoes with different colors.

Such an attempt is profitable for Guo Zhengjin. He explained to reporters: "our retail price abroad is 6 times more than the factory price. We make ourselves a brand and sell it ourselves. If the business is good, the profit is good."

In Yang Zhili's view, the advantages of China's OEM factory are very obvious. "Most of the OEM factories already have the system of design, R & D, production and quality control. It is actually not a traditional simple OEM, but it has risen to the role of ODM."

Such a view is not uncommon. China's OEM enterprises have made considerable progress in the production process, management level and R & D capability through the foundry.

"Our products can meet or exceed international standards. Compared with foreign products, they lack brand awareness." Xu Junyi, general manager of Guangzhou famous travel bags Co., Ltd., told reporters.

However, OEM enterprises have made few success in their own brand under the traditional mode.

The famous OEM enterprise, Guangdong Yida Textile Co., Ltd., has long been the foundry of international top clothing brands such as CK and HugoBoss.

As early as 2000, Yida launched its own brand "PYE", which is exactly the same as the international brand and the same production line. The price positioning is only 52~107 dollars. But so far, the "pie" brand has not been well known to the public.

Shandong Lu Tai textile Limited by Share Ltd, the top brand of domestic brand "gray" shirt, is still being pursued by small groups.

Shandong Ruyi group, a luxury Armani foundry, is also struggling to build its own brand "Ruyi Western-style clothes".

"The success rate of independent brands is not very high. I have done some investigations, probably in the Guangdong area, which is also 5/1000." Xu Junyi explained that making a brand is not an overnight effort. It requires long-term adherence, persistence and persistence.

The ability to make up is not a day's work, and in this case, some OEM manufacturers prefer to make quick money, so the "authentic fake" appears.

"Authentic fake" is the Fujian Putian footwear industry insider. This annual export shoes account for more than 50% of the demand for global sports shoes, and do OEM for Nike, Adidas, Puma, Converse and other international famous brands.

With the large number of international orders transferred to Vietnam, Bangladesh and Putian, these export oriented OEM factories have overcapacity and are in trouble. To see the high profits between genuine products and imitation shoes, some illegal businessmen gave these foundries factories to produce imitation shoes. In order to maintain production, some OEM manufacturers also began using the international OEM production line to produce high imitation shoes.

"Authentic fake" came into being, that is, imitation goods with the same quality and different price difference from the same production line.

Zhou Ziheng, an Associate Research Fellow of the Financial Research Institute of the Chinese Academy of Social Sciences, told reporters that the problem of OEM transformation is not just a question of genuine goods. "I think OEM is not a product problem, nor is it a problem of genuine goods, but a format problem, which is determined by a deeper market system and market characteristics. We should pay more attention to the role that the Internet can play in changing and advancing in the market system. "

4 days to sell 160 million yuan Putian shoes

A typical OEM transformation success case also comes from Putian, Fujian.

In April 2015, Taobao's "China made" event was first settled in Putian, Fujian. After screening more than 300 independent brands in Putian, 17 "super GB" independent brands were finally identified.

During the 4 day event, more than 10 million people were concerned about Putian shoes through various channels such as Taobao. 170 thousand pairs of Putian sneakers sold out on Alibaba retail platform, totaling nearly 300 thousand pairs of shoes, which led Putian's own brand sales to nearly 160 million yuan.

Zhang Qin, vice president of Taobao, told reporters that Chinese consumers did not have the ability to distinguish good shoes, but because they ignored the needs of consumers in the past, so that their demand for commodities was suppressed.

Li Yuanfang, a researcher at the Institute of world economics and politics of the Chinese Academy of Social Sciences, observed that the Internet provided an opportunity for the transformation of traditional OEM enterprises.

"Transformation requires insight into the ultimate needs, and who can have the best insight into the market, he will take the lead. This insight can be obtained from the Internet big data. " Li Yuanfang told reporters.

In the Internet era, relying on the efficient interaction between enterprises and customers and fans, customer participation and SNS word of mouth communication can achieve the brand effect of traditional mass advertising and media input. At the same time, enterprises can quickly establish channels to cover consumers through self-reliance and network distribution.

All these have opened up new space for the transformation and upgrading of small and medium-sized enterprises and Chinese OEM enterprises.

On the Taobao platform, hundreds of "Amoy brands" have been transformed from OEM factories, Lins wood, Yin men dress, ODO lamps, bear appliances, SKG appliances and so on.

Pure cashmere is now focused on the Internet.

"At present, we mainly serve Taobao, Tmall customers, there are more than 100 stores. We started from pure imitation, to imitation and innovation, and now to set up a design department, step by step. Wang Zhenbo said.

"China made" far exceeds international standards

From "made in China" to "made in China", Guo Zhengjin feels deeply.

"Before I went abroad, foreigners shook their heads when they saw something made in China. In recent years, what has been made in China has been recognized all over the world. We need to have a foothold in the world. Quality is very important. Guo Zhengjin said.

Taobao's "China made" project has put forward higher standards. All the "Putian made shoes" made in China have far higher manufacturing standards than international standards. An example is that the shoe sole must be higher than the 20 thousand bending standard compared with the national standard, and the Putian product can be folded 100 thousand times.

The "Qiao xiang Ge" brand in Nantong, Jiangsu, has long been a Japanese brand OEM. The monitoring results of color fastness and abrasion resistance of products such as "made in China" are higher than those of the industry standard, and the safety grade is at a level. However, the color fastness of a famous Japanese brand of its OEM is only kept with the national standard, and its safety grade is B.

"Our goal is to cooperate with 100 of China's most capable manufacturing industries, focusing on 1000 excellent private brands, and at the same time, we hope to promote the transformation of 10000 excellent local manufacturing enterprises." Zhang Qin told reporters that "100, 000, 000" is the goal of Taobao's entire "China made" big project.

In June 2016, the AQSIQ linkage Alibaba group launched "China made" to settle in Guangdong, and the activity will cooperate with the local government and quality supervision related units. Zhang Qin observed that in the past, e-commerce was mostly running online. In the future, Taobao hopes to build an integrated online and offline operation.

"Relying solely on online information, it is difficult for us to grasp the quality or operation of commodities. We hope to cooperate with industry associations around the country, for example, and to conduct quality sampling and endorsement of corresponding products together with geological supervisors to ensure product quality." Zhang Qin said.

Guo Zhengjin is now giving Qiao Hong shoes to his two sons, making independent brands on Taobao. He feels that the profit margin is still very large. He also endorsed Zhang Qin's point of view, for customers, the price is reasonable, can get excellent quality products, loyalty, independent brand can be done.

"We do business with integrity as the principle and business ethics. I have been making shoes for 50 years, and my experience is to do well in quality. Guo Zhengjin said.