OEM firms eye domestic market

17  January 2013

At a trade show meant to promote domestic sales of products, exhibitors from the processing industry expressed determination to succeed in their home market, although they had previously concentrated on exports.

At the same time, though, many acknowledged that they will have difficulty in building sales channels and making their brands better known in China.

The profits that can be made on exports have become slim, said Alice Wong from Hong Kong-based Peninsula Apparel Ltd.

The company had run plants in various Southeastern Asian countries before it opened an original equipment manufacturing, or OEM, plant in Dongguan, Guangdong province, in 2007. Three years later, it started producing children’s clothes under its own brand.

The company’s OEM business, which makes products that are sold under other companies’ brands, is still the source of 80 percent of Peninsula Apparel’s revenue. Wong, though, said she hopes she can rely less on foreign markets in the long run.

The company now only runs stores in Guangdong, Wong said. She said she is confident that Peninsula Apparel’s independent brand will succeed.

Dongguan Nan Sing Plastics Ltd, which has been in the OEM business since 1994, introduced its own brand in 2008. Wang Jiahua, marketing manager for the company, said the brand will take the company in a new direction.

In the OEM business, companies often follow the dictates of their clients when deciding what products they will make. It also tends to be difficult to raise the price of products that are to be sold in foreign markets, even though the cost of making those things continues to increase, he said.

Wang said he is cautiously optimistic about Dongguan Nan Sing Plastics’ prospects for selling products in China, even amid greater competition.

The biggest difficulty in selling products domestically is in the need to have a strong sales network, something that cannot be built without a huge outlay of capital, he said.

Having such a means of promoting domestic sales is perhaps the easiest way a company can inform domestic consumers about the brand and quality of an OEM producer.

Wang said that, at previous sessions of the Guangdong Foreign-invested Enterprises Commodities Fair, held in Dongguan, he had been happy to see consumers returning to his booth.

This year, the four-day fair, which has been renamed China Processing Trade Products Fair, opened in Dongguan on Sunday.

A total of 1,325 processing enterprises from across the country and more than 5,000 procuring firms are taking part in the event.

Because of the weak demand seen in other markets, China’s foreign trade has been increasing at a slower pace, said Chen Deming, minister of commerce, at the opening ceremony.

The fair plays an important role in helping processing enterprises explore the Chinese market, boosting internal demand and promoting stable economic growth, Chen said.

Amid weak demand from overseas markets and Chinese consumers’ greater willingness to buy things, processors are turning more and more to the domestic market to boost their sales, said Zou Yu, general manager of the public relations department of the southern head office of the supermarket chain Lotus.

Lotus became familiar with various suppliers at previous sessions of the fair and began to buy products from them.

Doing more business in China may force processors to adjust their production schedules, as Lotus and other retailers in the domestic market tend to place orders frequently.

They also should diversify their products to make sure they can meet the differing demands, Zou said.