Shunde home appliances to do their own brand to get rid of OEM dependence

Shunde is one of the world's largest manufacturing bases for air conditioners, microwave ovens, water heaters, disinfection cabinets, and electric fans, among which microwave oven production accounts for 70 percent of the world's total. However, the economic crisis in Europe and the United States has shrunk overseas demand; with the rise in domestic labor costs and the appreciation of the renminbi, production bases in other emerging market countries have taken a lot of orders.

According to Cai Weibin, deputy director of the Economic and Technology Promotion Bureau of Shunde District, from January to August of this year, Shunde’s home appliance import and export volume was US$4.83 billion, which was basically the same as last year. Imports and exports of household appliances accounted for 41.7% of the total value of imports and exports in Shunde, a slight drop from the same period last year.

The grim situation has made this home appliance "world factory" seek to change the original export model that relies too much on OEM. Some large companies such as Midea, Galanz, and Hisense Kelon have started to try to promote their own brands overseas, and even set up factories overseas.

However, compared with multinational companies, home appliance brands in Shunde are still immature internationally. How to implement localized operations in foreign countries has become the biggest difficulty in going to sea.

Independent brands have "sea"

After this year, the United States Group has successively put into production overseas factories such as India and Brazil. It has set up an international marketing headquarters, merged with the operating areas of the Carrier joint venture company and its own brand regions, built a multinational control platform, and vigorously developed its own brands.

Recently, Gu Yanming, vice president of the United States Group’s export business, admitted to the reporter of the “First Financial Daily” that the appreciation of the RMB exchange rate is “warm boiled frogs”. Therefore, Midea needs to accelerate its overseas factories, channels, and brand layout.

He said that the renminbi exchange rate has risen by 5% in the last two years, while the exchange rate of many emerging market countries is decreasing. For example, the exchange rates of India, Brazil, Turkey, and Mexico have dropped by about 20%. They have been to China and these emerging markets. The difference in the exchange rate between countries amounts to 25%.

This year, the US Group’s exports amounted to about US$6 billion, which is basically the same as last year, but it is still mainly OEM (manufactured) exports.

"The United States has decided to step on its own brand." Gu Yanming said, can not control the market without leaving. Because the OEM decision is in the hands of the buyer. “Being a self-owned brand is based on reducing risk. With its own brand, the East is not bright in the West and does not depend on a certain market. Therefore, the United States needs to be globally deployed.”

Midea has begun to promote its own brands in the ASEAN market; in Egypt, India, Latin America, to promote Carrier and the United States brand; other regions are still mainly OEM. Gu Yanming said, "We have to put our brand out in a limited area."

Although exports of microwave ovens have increased by 10% this year, Galanz spokesman Lu Lanlie admitted that "we are missing brands in the international market." Trade protectionism in the United States and Europe has risen. "Low-end products say that we are dumping at a low price. Now we have to The foreign consumer market has ripped a hole in the past.” In the past, it was involved in industrial chain cooperation and now it is necessary to participate in the competition of international brands.

Lu Lanlie said that there is no premium, it is difficult to accumulate resources to invest in research and development, so this year Galanz also began to push its own brand. Previously, Galanz's brand in the United States was "5+1": 5 rental brands plus "Galanz." In the second half of this year, the company has highlighted the five rental brands and turned it into a prominent Galanz brand. It has also signed cooperation agreements with Wal-Mart and other supermarkets.

Hisense Kelon has also increased its investment in independent brands this year, and the international market has grown faster than the domestic market. Gan Yonghe, vice president of Hisense Kelon, said that even if the OEM orders also choose high value-added, and strive to go both sides of the smile curve to ensure that the profits increase.

Localization management problems

In July of this year, the executives of the three United States Carrier’s joint ventures met for the first time at the Group headquarters in the United States. Fang Hongbo, chairman of Midea Group, said at the time that moving from an OEM to a localized operation was one of the focuses of the transformation of Midea’s internationalization business.

"Overseas factory management has no problem." Gu Yanming said it is difficult to be an overseas brand. Because branding needs to deal with local communities, including sales channels, media, etc., it has to deal with a series of issues such as accounts receivable, warehousing logistics, and after-sales services.

Therefore, the United States must rely on Carrier. From 2010 to 2012, Midea gradually established joint ventures with Carrier in Egypt, Brazil, and India to acquire or build its own air-conditioning plants locally for local production and sales.

“It is imaginary to mention the proportion of self-owned brands, which is imaginary, and the key is the system. Overseas, we must improve localized R&D, product planning, and after-sales service systems, so we must build an international management and control platform to promote localized operations.” Yan Ming said.

Liu Guizhong, the vice president of Galanz responsible for foreign trade, also said that there are three difficulties in establishing an independent brand overseas. One is to build an after-sales service system, the other is to improve the logistics system, and the third is the level of international management, for example, to hire local people directly in the United States. Interconnect with Wal-Mart's sales executives. "We are investing more, and the mode of control has also changed step by step."

One thing in November this year also made Wanhe realize the importance of localizing the service system on the road to internationalization. Million and for the first time last year entered North America's second-largest household goods chain retailer Lowe's, for Lowe's OEM Master Forge brand oven. This year, due to improper operation by two consumers, the air intake pipe was not installed according to the instructions, so that the air pipe was melted and fractured. Fortunately, no personal accident occurred. After learning of this, Wanhe immediately issued a voluntary recall announcement with Lowe's and the US Consumer Product Safety Commission and Health Canada, reminding consumers again of the correct installation method and stated that they can contact the factory if in doubt.

Wan Rui International Marketing Manager Zhang Ruiquan said with deep feeling that although this oven is responsible for after-sales service by Lowe's, “If we know more about after-sales service, we will do better.” He disclosed that Wanhe is brewing The US market set up after-sales service agencies to pave the way for the promotion of independent brands in the future.

Of course, not every company is suitable for branding. SMEs can enhance product value and bargaining power through industrial design and product innovation. The exporter of coffee maker OEM Dongling and Yilong are all on this road. In the first half of this year, Dongling’s revenue increased by 15% and its profit increased by 30%. Pan Weidong, vice president of Dongling, said that Dongling tied the design service to the production order and stabilized the order price. Tan Guowei, director of Yilong's office, revealed that Yilong has cooperated with an Italian company this year to provide coffee capsules. They designed and produced capsule coffee machines. Because of product innovation, this year's export growth has increased by 30% to 40%.