“Made in China”
Let’s debunk some misconceptions about the world’s manufacturing powerhouse and offer some thoughts on the future opportunity for Chinese manufacturers, which lie with the emergence of domestic brands.
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 60s and 70s. 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 more greatly 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:
The growing labour shortage in Chinese factories will restrict Chinese manufacturing’s capacity to grow.
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.
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.
Chinese manufacturers know that they can more than quadruple their margin if they cut out the Western brands and the Western retailers and sell directly to the Western consumer.
The Internet now makes selling direct possible (China has the highest number of Internet users in the world, 641,000,000).
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.
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).
The opportunity is intensified when we consider that China’s manufacturing wealth is at risk of stalling unless it is converted into brand wealth.
The expertise and creativity necessary for brand creation is ready and waiting.
At FreshBritain we have been pioneering this model with our partners in China. The pioneering Brand is UVU. UVU was created in 2011 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 PCs, mobile phones, cars and diamonds.
Today, “Made in China” stands for “product excellence”. Tomorrow, it could stand for “brand creation”.