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| Yueli Group, Xingdian Interconnection, TuCong Creative / Photo courtesy |
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Securities Times reporter Zhang Shuxian Tang Wei
Recently, the news that China’s heating “artifact” has become popular in Europe has brought the small home appliance production kingdom of Cixi, Zhejiang into the public eye. As one of my country’s heater production bases, Cixi’s export volume accounts for 30% of the country’s total. Since the second half of this year, a large number of heating “artifacts” have been sent from here to travel across the ocean to accompany Europeans through the long winter.
After the export of Cixi heaters to Europe exploded, how is the production and operation status of local manufacturers? Why does Cixi become a small home appliance export base? Compared with other home appliance production bases, what are the characteristics of Cixi? What are your long-term plans? In this issue of “New Geography” of the capital market, we entered Cixi, Zhejiang.
The heating “artifact” is on fire
According to Cixi Customs, from January to August this year, Cixi heaters exported 3.35 billion yuan, a year-on-year increase of 26.3%, of which 1.53 billion yuan was exported to the EU, a year-on-year increase of 55.2%. Compared with the same period of previous years, the sales season of heaters exported to the EU It is expected to be extended by about a month.
“In the past few days, there are indeed many customers who come to Cixi to find the electric blanket factory.” Yu Xuehui, the initiator of the home appliance ecosystem and general manager of Xingdian Internet, said in an interview with a reporter from the Securities Times. He also admitted frankly that it is basically too late to come to the factory for a seasonal product such as a heater.
“Now the order for the heater industry has been lined up to the end of the year. Even if the queue is cut and the delivery will take place a month later, it will be at the end of November. It will take a month to go by sea and arrive at Christmas. At this time, the sales season is over.” Yu Xuehui said that customers came to The factory will first ask if the factory has stock in the European warehouse so that they can sell it immediately; the second is to ask if the factory has stock in stock and whether it can be shipped immediately. However, the factories in Cixi basically follow the traditional foreign trade model, that is, they receive orders for reproduction, so there will be a cycle of arranging orders. “Everyone counts the time, it’s too late, so recently customers have asked a lot, but very few orders are actually placed.” Yu Xuehui said.
Yu Xuehui told reporters that the main increase in heaters now comes from the return of orders from European customers. These customers have placed orders in the first half of the year and will make more orders in the second half of the year. Now the sales situation is good. For example, the original plan to make up orders is 10%. It is possible to expand the size of supplementary orders to 30%.
The heads of several heater manufacturers told reporters that the company’s orders have been placed until next year. The reason is mainly because heaters belong to a category with strong planned production. For example, the production season for heaters exported to Europe is in June. By September, the shipping time will be about a month, and the sales will be basically completed around Christmas. Therefore, by the end of September in previous years, the production of orders for export to Europe has basically ended, and some domestic orders will be made in October, and orders in the southern hemisphere such as Australia and Brazil will be prepared.
This year, the peak season of major heater manufacturers has been delayed by a month or two. On the one hand, due to the shortage of energy this winter, consumers have a demand for hoarding heaters, which has caused the market to buy heaters from the retail side. , electric blankets and other small appliances to keep warm. On the other hand, because of the outbreak of the conflict between Russia and Ukraine at the end of February this year, European customers waited for nearly two months to place orders, which also led to a delay of one and a half to two months in the production cycle.
According to Yu Xuehui, due to the decline in global demand, orders from most foreign trade factories in Cixi have not increased significantly compared with previous years, while some products with low unit price have increased. The export volume of China’s products has increased significantly, but the ex-factory price is 10-20 US dollars, and the price in Europe is 30-60 US dollars, but the sales have declined. “In fact, this is a consumption downgrade, buying cheap products to temporarily use it for winter.”
Lu Ping, the financial director of Yueli Group, also confirmed in an interview with reporters that due to factors such as inflation and inventory increase, the demand for foreign orders has decreased significantly compared with 2021. The company is also facing the same situation. %, the demand for foreign orders has rebounded slightly since the fourth quarter.
“The demand for orders for Cixi heaters and electric blankets is expected to increase by 40% to 50%.” Lu Ping said, “For such incidents, the company has always kept calm thinking and does not blindly follow the trend. In recent years, there have been frequent occurrences of ‘outlet’ The small household electrical appliances in China are heaters and electric blankets this year, and under the epidemic in 2020, kitchen appliances such as electric clippers, air fryers and small refrigerators.”
Leading the Small Appliance Market
Birth of multiple individual champions
Recently, the “2020 China Census Sub-County Data” compiled by the Office of the Leading Group for the Seventh National Census of the State Council shows that Cixi, Zhejiang is defined as a Type II large city and is one of the four county-level cities on the list. This division is based on the size of the urban population. The reason why Cixi can break through and become a populous city is closely related to its developed industries and strong economic strength.
Cixi is a county-level city hosted by Ningbo, and its economic aggregate has long ranked first among the counties in Zhejiang, surpassing more than half of the prefecture-level cities in the country. The strength of Cixi mainly comes from its secondary industry, more specifically from the home appliance industry. It is also known as China’s three major home appliance production bases with Qingdao and Shunde. It has Bull, Fangtai, Pioneer, Hengkang, Cixing, Handian, etc. A large number of well-known brands.
At present, the home appliance industry has become the largest pillar industry in Cixi. There are more than 2,000 home appliance enterprises and nearly 10,000 supporting enterprises. The products involve more than 20 series and thousands of varieties. In Cixi’s small household appliance industry, there have been national “single champions” in many sub-sectors such as irons, heaters, and hair dryers. Among them, the annual output of electric irons reaches more than 60 million units, accounting for more than 60% of the national export volume; the annual output of heaters exceeds 25 million units, accounting for more than 30% of the country’s total output.
Yueli Group, located in Zhouxiang Town, the northwest corner of Cixi, is one of the largest manufacturers of hair dryers in the world, with an annual output of 32 million small household appliances, including 12 million hair dryers. In 2020, in the ranking of China Chamber of Commerce for Import and Export of Machinery and Electronic Products, Yueli Group ranked first in the country in terms of export of personal care electrical products, and ranked fifth in the country in terms of export of electric iron products.
Looking back on the company’s development history, Lu Ping told reporters that the main reason for the company’s development and growth is that, first of all, it benefits from the location advantage and complete industrial chain of Cixi’s small household appliance industry. The stability and competitiveness of the industrial chain have considerable advantages. Cixi home appliance industry has complete facilities in mold design and manufacturing, injection molding and spraying, key components, product packaging materials, and cargo transportation. Zhouxiang Town’s traditional small household appliance advantage is electric irons. Yueli Group also started with electric irons, and then gradually concentrated its product development on hair dryers as the core of Meifa electrical products. At present, Meifa electrical products account for 60% of the company’s main products. %above.
Lu Ping said, “The developed private economy is the economic advantage of Zhejiang, and it is also the advantage of Cixi home appliance enterprises. Almost all home appliance enterprises in Cixi are private enterprises. Private enterprises have a high degree of marketization, are sensitive to market needs, and have a short product development cycle. The management efficiency is high, and the manufacturing cost is strictly controlled.”
Under such a background of economic development, on the one hand, small household appliances in Cixi are cost-effective and rich in categories. Except for a few Chinese-style small household appliances such as televisions, microwave ovens, induction cookers, rice cookers, and electric pressure cookers, there are basically factories in Cixi for other products. In doing, the category is relatively rich.
“In Cixi, if you want to make a small home appliance, you can find at least 99% of the components within half an hour (chip companies may not be able to find it), and within half an hour, you can find multiple manufacturers for each component, complete with complete equipment. , has formed agglomeration effect.” Yu Xuehui said.
While the supporting facilities are complete, Cixi’s small household appliance industry also presents a pattern of “multiple points and wide areas, many but not big”. At present, there are more than 2,000 household appliances enterprises in Cixi, but there are more than 1,500 small and medium-sized enterprises with an annual output value of less than 20 million yuan. In terms of products, Cixi’s product advantages lie in electric heating products. Electric irons, air fryers, electric heaters, sandwich makers, bread makers, garment ironers and other products have formed a competitive industrial chain. The world‘s largest electric heating category The product factories are all located in Cixi, and there was a saying in the industry that “if you need an electric fan, look for Guangdong, and if you need a heater, look for Cixi”. At the same time, Cixi’s small appliances are mainly exported, and there are many Western-style kitchen appliances.
How to make small household appliances into a big industry
How did Cixi develop into a world-renowned small home appliance industry base from a poor and white place in the past?
Since the mid-1980s, Cixi’s small household appliance industry started out as a production facility for foreign enterprises, and began to establish injection molding enterprises in Fuhai, Zhouxiang and other places.
Yu Xuehui recalled that at that time, Cixi mainly undertook spillover orders from Shanghai’s small home appliance industry, and industries such as electric fans that were not very encouraging in Shanghai gradually spilled over to surrounding cities. A considerable part of Shanghainese came from Ningbo, and they more or less had relatives and friends there. Shanghai, “My own factory is like this. When I saw a friend in Shanghai doing this, we started to do it too.”
In order to solve technical problems, “Shanghai Sunday Engineers” appeared in Cixi. On Sunday, Shanghai engineers were invited to guide product development. In this way, Cixi’s small home appliance industry completed its initial development.
From the start of undertaking the supporting of small home appliance industries from other places, to the gradual development of complete machine manufacturing, after the 1990s, especially since 2000, Cixi home appliance enterprises started the second wave of rapid development. Yu Xuehui told reporters that at this stage, Cixi home appliance industry took samples and orders from Guangdong and other places. At the same time, the business model changed from focusing on the domestic market to focusing on foreign trade exports. “The government encourages foreign trade, and proposes ‘thousands of troops and horses to do foreign trade’. .”
Based on two waves of agglomeration development, Cixi has gradually developed into one of the three major home appliance industry bases in my country, and has formed a complete industrial chain.
Since 2010, some leading enterprises have begun to build their own brands, and Cixi’s home appliance industry has embarked on the road of integrated development of domestic and foreign trade. Cixi has become an important base for domestic and foreign small home appliance procurement.
“The integrated development of domestic and foreign trade is not a simple transfer of the product market: it is not simply to take export products for domestic sales, or to sell domestic products to foreign countries, but to concentrate professional strength from product development, production and manufacturing according to different market needs. , quality control, after-sales service, etc., deeply tap the market potential and consumer demand, and reconfigure and upgrade resources.” Lu Ping said that at present, Yueli’s business model has shifted from “export sales to drive domestic sales” to “domestic sales.” Promote foreign sales”.
According to reports, OEM processing has always been the main business of Yueli. The sales in the European and American markets once exceeded 80%, and the sales in the US market accounted for more than 40%. Since 2016, in order to effectively resolve the risks brought by the single market, the company Increase market development, focus on the Asian market and the domestic market, and increase the proportion of sales in RCEP (Regional Comprehensive Economic Partnership) countries and countries along the “Belt and Road”. Currently, domestic sales account for 30%, and sales in the US market are less than 20% , effectively defuse the adverse effects brought about by changes in the external situation.
Why does Cixi become a well-known small home appliance manufacturing base? Industry insiders first attribute the pioneering spirit of Yongshang.
“Before the opening of the Hangzhou Bay Bridge, Cixi was located at the end of the traffic. It can be said to be poor and poor. The reason why it has formed a national and even world-renowned manufacturing base for small household appliances is that Yong has a solid and pioneering spirit.” Yu Xuehui said, “Perhaps it is the “One poor and two white” will seize all the opportunities to become rich that can be seized.”
The local government’s active guidance over the years has achieved the agglomeration effect and competitive advantage of Cixi’s small household appliance industry today. Lu Ping said that the Cixi government attaches great importance to foreign trade, and takes various measures to encourage the development of foreign trade enterprises of home appliances. Taking the offline autumn Canton Fair in 2019 as an example, the number of exhibitors of Cixi home appliance enterprises reached 600, and this number of exhibitors even exceeded some The number of exhibitors in the province.
Exploring the road of “wisdom” in the foundry mode
After more than 30 years of development, the foreign trade model of Cixi’s small household appliance OEM has encountered a development bottleneck. As early as 2020, the OEM model of small household appliances in Cixi encountered market saturation and excess capacity, but the sudden epidemic has played a role in promoting the sales of small household appliances and temporarily stranded the problem of excess capacity.
“The demand for overdraft orders during the epidemic, coupled with the current decline in global consumer demand, the slowdown in production capacity replacement, and the difficulty in expanding new customers under the epidemic, have made the current problem of overcapacity in the small household appliance industry in Cixi even more prominent.” Yu Xuehui said.
Difficulty in expanding new channels and developing new products are considered to be the two big mountains currently pressing on small and medium-sized household appliances in Cixi.
For a long time, the development model of small household appliances in Cixi has been mainly based on follow-up and imitation. When the demand for production capacity is strong, when the cake becomes bigger and bigger, it is not a big problem, but when the cake becomes smaller, the market products are similar, and the price war is fierce. The current market recognizes data analysis and user-driven new product development models. Since Cixi’s home appliance industry has long been dominated by OEMs and has not reached end users, it is difficult to innovate new products.
Wang Weiding, secretary-general of Ningbo Household Appliances Association, also said in an interview with reporters that the OEM (OEM) model has put the development of traditional small household appliances in Cixi into a bottleneck period. We must seek new growth space through R&D innovation and continuous development of new markets.
Seeing the development bottleneck faced by Cixi’s small home appliance industry, “the second generation of the factory” Yu Xuehui returned the factory to his parents, built the home appliance production and sales docking service platform Xingdian Interconnection, and launched a selection exhibition hall in the industry belt – Cixi Youpin Pavilion, 1500 square meters There are products from more than 300 factories in the selection exhibition hall. Since February 3 last year, it has attracted more than 6,000 batches of buyers to select products, and the accumulated business has reached more than 2 billion yuan.
“The branch of Cixi Youpin Museum has been opened overseas, including Italy and New Zealand. Under the epidemic, it doesn’t matter if buyers can’t come in. We prepare the products and put them at the door of buyers.” Yu Xuehui said.
Aiming at the difficulty of developing new products, Xingdian Interconnection has cooperated with Tmall to jointly promote the “super new brand plan”. “Tmall provides user needs, industrial design companies create product definitions, and factories turn definitions into products. We then sell products through new e-commerce and other channels, and at the same time graft on the factory’s traditional foreign trade business.” Yu Xuehui told reporters that he hoped Cixi The small household appliance industry produces differentiated products in more subdivided tracks, instead of the market swarming once the tuyere products appear, and finally chicken feathers.
As an important town for the production of small household appliances, Cixi will inevitably be compared with Shunde. Yu Xuehui believes that “the gap between the two is not small. The output value of household appliances in Shunde has exceeded 500 billion yuan, and Cixi is only more than 100 billion yuan.”
Compared with Cixi, Shunde has many large enterprises. Home appliance enterprises with over 100 billion yuan include Midea, Galanz, etc. There are also many enterprises with more than 10 billion yuan. The brand effect is obvious, and the domestic sales results are relatively good. However, Cixi products are mainly small and medium-sized enterprises. And foreign trade is the main business; Shunde has a very strong industrial design industry, with more than 100,000 talents related to industrial design innovation, and hundreds of industrial design companies, but Cixi is relatively short in industrial design.
In Lu Ping’s view, Cixi small household appliances have room for further improvement in the following areas: First, the level of industrial structure is unreasonable, the household appliance industry is still dominated by small and medium-sized enterprises, generally small in scale, and the product quality and added value are not high. The products are positioned in the domestic and international low-end markets, the brand advantage is weak, the homogenization competition is serious, the profitability of small and medium-sized enterprises is not strong, and they lack product bargaining power; second, the concentration of innovation elements is not high, the technological innovation ability is insufficient, and the creative design The level needs to be strengthened, and there is a shortage of high-end home appliance design and R&D talents; third, the intelligent level of production and manufacturing is low, the transformation process of digital workshops and smart factories is relatively low, and the use of new generation information technology is obviously insufficient; fourth, new sales models and formats exist Insufficient, the local comprehensive e-commerce platform has insufficient support for the home appliance industry, and the innovation and leadership of sales formats are obviously insufficient.
To make up for shortcomings, guide enterprises to attach importance to innovation, and become bigger and stronger, Cixi has gradually deployed and exerted its strength. At present, the Cixi government has proposed to accelerate the pace of innovation in small household appliances, focus on building a global innovation center for small household appliances, and study and implement the project to improve the innovation capability of the traditional household appliance industry.
“Cixi encourages enterprises to develop new technologies and new materials and pay more attention to industrial design. From 2023 to 2025, the government will spend 24 million yuan to encourage enterprises to purchase industrial design services. As a county-level city, 24 million yuan is not a small effort.” Yu Xuehui Say.
By cultivating famous enterprises, famous products, and famous homeowners, the economic advantages of local household appliance brands will be enhanced; relevant enterprises will be encouraged to apply high-tech to improve product quality and product quality; formulate a three-year action plan for the global small household appliance innovation center, and build a technology transfer and transformation center, The Technology Incubation Center and the Technology Innovation Service Center are the important supporting industrial innovation service platforms… One after another, measures aimed at promoting the transformation and upgrading of Cixi’s small household appliance industry have been launched.
Cixi Economic and Information Bureau said in response to the CPPCC proposal in June this year that the next step will be to actively build and play various platforms, introduce multi-level incentive policies to help enterprises develop, strive to create a good environment for the development of home appliance enterprises, and promote the acceleration of the small home appliance industry in Cixi. Transform to intelligent and high-end.
To this end, the local area invites professional institutions to provide “one-to-one” services for home appliance companies, and supports powerful leading companies in launching their listing work. At present, many leading enterprises of small household appliances in Cixi have started the listing work. At the same time, strengthen the cultivation of large enterprises, formulate the “Cixi City Promoting the “Four-Up” Action Plan for Enterprises”, and promote the implementation of the cultivation plan for enterprises with more than 100 million yuan. Handian, Kaibo, Yueli and Zhuoli were shortlisted.
Over the past 30 years, Cixi’s small household appliance industry has continued to grow and has produced national “single champions” in many sub-sectors such as electric irons and heaters. Looking forward to the future, how small household appliances can win with “intelligence” and how relevant enterprises can achieve “intelligent change” in their development ideas are the keys to the re-emergence of Cixi’s small household appliance industry.