First published on Hypebeast
Bob Sheard of FreshBritain continues to share his wisdom with regards to standing out in the industry in Part 6 of his blog series. In his latest commentary, titled “Made in China,” Sheard debunks misconceptions about the world’s manufacturing powerhouse before offering his thoughts on the future for Chinese manufacturers, which lies with the emergence of domestic brands.
In his insightful discussion of, he begins by tackling the image China has as a mass producer of cheap products of bad quality by taking the ubiquitous iPhone as an example before elaborating with a bit of history. In his 10-point outlining of opportunities for these brand creators, he mentions the particular absence of brands, that is to say brands that serve to directly link Chinese-manufactured goods with their foreign markets. Although we are seeing the increasing presence of recognized brands in apparel and sporting such as Li Ning, there is still much anticipation of a “world-class” brand to step forward.
When we read “Made in China,” what do we think?
Firstly, we probably think of “products” and then we probably think of “bad products.”
Now turn your iPhone over and read the back.
“Designed by Apple in California Assembled in China”
Now we still think “products,” but no longer do we think of “bad products.” To help see into the future what we need to be thinking is “craftsmanship”. China has an ancient heritage of craft. Dynasty after dynasty symbolised the best in global craftsmanship.
The West’s perception that “Made in China” represents poor product is a delusion. It is a delusion created by the protectionist trading policies of Western governments in the 60’s and 70’s. They only let the cheaper Chinese products into their countries in order to protect their own manufacturing industries. It is a delusion that obscures amazing opportunities for Brand Creators.
There are two consequences of China being the “Factory of the World:” Firstly, China has amassed huge wealth with foreign cash reserves measured in the Trillions. Secondly, Chinese youth is now greater educated and whilst they want brands, unlike their parents, they don’t want to work in the factories that manufacture for those brands.
It is these conditions that expose the opportunity for Brand Creators. Here are ten key points:
One. The growing labour shortage in Chinese factories will restrict Chinese manufacturing’s capacity to grow.
Two. Increased profitability will therefore have to come from within existing output. Simply put, instead of growing by making another product, China will have to grow by making more profit from the existing product.
Three. China currently makes one to two times margin by selling its product to Western brands. The Western brands then double the margin by selling to Western stores and in turn Western stores then double that margin by selling to Western consumers.
Four. Chinese manufacturers know that they can more than quadruple their margin if they cut out the Western brands and the Western retailers and then sell directly to the Western consumer.
Five. The Internet now makes selling direct possible. (China has the highest number of Internet users in the world, 513,000,000)
Six. The missing link for the Chinese manufacturer is a “Brand”. The “Brand” is the vehicle that will connect their product to the wants of the Western and Chinese consumer.
Seven. The opportunity is enhanced when we add to the mix the additional demands of the aspiring Chinese middle class. (Domestic Brands in China are now worth $320,000,000,000 USD)
Eight. The opportunity is intensified when we consider that China’s manufacturing wealth is at risk of stalling unless it is converted into brand wealth.
Nine. The expertise and creativity necessary for brand creation is ready and waiting.
Ten. Working with FreshBritain we have been pioneering this model with our partners in China. The pioneering Brand is UVU. UVU was created two years ago to enable a China-based manufacturer to connect their world-class performance apparel to a Western consumer. UVU is the super premium, Ultra Marathon Brand for the discerning global running consumer.
China is the second largest economy in the world. The largest market in the world for PC’s, Mobile Phones, Cars and Diamonds.
Today, Made in China stands for “Product Excellence.”
Tomorrow, it could stand for “Brand Creation.”