Author/Yimou
Source | Mantis Finance (ID: TanglangFin)
OEM and Chuangbao, who is the right path for the vicissitudes of life?
In China, the pros and cons of OEM and OEM can not be determined for a long time. After all, the investment of OEM is low and the return is fast. It is a shortcut for many small and medium-sized enterprises and going overseas, and even some large domestic enterprises have also chosen OEM export trade.
However, if you stretch the timeline, you will find that brand creation is the future of brand development.
1. The advantages of brand creation are emerging, and independent brand creation has become a trend of manufacturing overseas
Since the 1980s, affected by factors such as cheap labor and raw materials, GE, LG, Panasonic, Toshiba, Siemens, Philips, Sharp, Samsung, etc. have all sought OEM factories in China. According to incomplete statistics, nearly 95% of the world's top 500 home appliance companies have established OEM partnerships with China's home appliance industry.
Generally speaking, the cost of doing an OEM business is lower, the scale can be increased rapidly, and the profit is relatively stable, but it also has obvious shortcomings. For example, it only acts as a brand supplier, without a brand, and lacks pricing power. It needs to cooperate with the brand. The strategy, the future and destiny of being pinched in the hands of others, is a kind of "work mode."
As a result, its ceiling has become lower, and it lacks sufficient ability to fight industry cycles. Living in "warm water" for a long time loses the motivation for R&D and innovation, and actually pays a greater "opportunity cost."
In contrast, although self-created brands have to invest in manufacturing, R&D, and operating expenses in the early stage, it is difficult to obtain huge profits in the short term. If the company does not make trade-offs, it is difficult to make such a decision, let alone persist for decades. . At the same time, this process can also achieve long-term competitiveness in terms of technology accumulation, user stickiness, and self-controllability, which is a typical "compensate first, earn later" model.
Professor Lu Feng, Ph.D. supervisor of Peking University, put forward a concept of "technical track", which means that the innovation of enterprises is a continuous process. Only by doing brand and technology research and development and accumulating innovation capabilities can you have the opportunity to upgrade in industry and technology. To have a role to play.
Take Haier Zhijia as an example. It has won the title of Euromonitor International for 12 consecutive years. Its annual profit has steadily increased. In the third quarter of 2020, overseas revenue increased by 17.5% and operating profit increased by 58%, especially after the opening of exports in June. The month set a year-on-year growth rate of 20%, showing strong growth against the trend.
2. Independent brand creation + scenario ecology, Haier Zhijia’s profit margins are promising
At present, the three major industries of Haier Zhijia's refrigeration, washing, and air have entered the top 3 ranks in more than 20 countries, and some markets have entered the top 1, showing signs of overall leadership.
This kind of benchmarking role has also attracted many original OEM manufacturers to imitate, such as TCL, Konka, Hisense, Boss Electric, etc. The former OEM companies have transformed.
On the one hand, in addition to the superiority of independent brand creation, many domestic OEMs have gradually realized that China’s home appliance industry has passed the era of “foreign exchange earning” and “scale”, especially in today’s multi-level overseas market. The profit of foundry is getting thinner and thinner, but the competition is getting fiercer.
Take the electronics industry in Taiwan, China as an example. Among the six Fortune 500 companies, in addition to TSMC’s special status, Hon Hai, Quanta, Pegatron, Wistron, and Compal OEMs have profit margins. Hovering around 1% for a long time.
On the other hand, the importance of "technical track" in the competition in the home appliance industry is also increasing. Innovation is the accumulation of capability rather than capital accumulation. The premium and independent control brought by the brand make home appliance companies face complex changes. Ballast stone in the market.
For example, in recent years, Japanese electrical appliance manufacturers such as Toshiba, Hewlett-Packard, and Panasonic have been transforming. Chinese manufacturers that OEM for their OEMs have experienced a cliff-like decline in business and orders, and are struggling to survive the day, while manufacturers with brands have risen.
At the same time, the case of Haier Zhijia also shows that independent brand creation can better match corporate strategy and embrace trends more flexibly.
For example, Haier Zhijia’s multi-brand strategy and the three-in-one strategy of research, production, and sales enable it to quickly and decisively transform towards scenario and ecologicalization in the Internet of Things era. If it is replaced by an OEM, First of all, the data acquisition will be stuck, and the research, production, sales, data, etc. cannot be coordinated, which will cause serious obstacles to competition.
In 2020, Haier Zhijia launched the "Triwing Bird" scene brand. The unit price of 001 customers in the Shanghai Experience Center reached 220,000 yuan. The sales scene is comparable to selling cars, which greatly improves the company's profit margin. In addition, in the first three quarters, the company sold 687,000 sets of scenario plans, a year-on-year increase of 24.5%, and ecological revenue reached 3.4 billion yuan, a year-on-year increase of 138%.
A large part of this achievement is due to the strong penetration of the Haier brand in the Chinese market. If this experience is spread overseas in the future, the advantage of action brought by independent brand creation will also be revealed, which will be more competitive for products. Power and profit margins are a great boost.
In the first month of the beginning of 2021, Haier Zhijia continued to maintain rapid growth in many overseas countries. In the UK, Haier Smart Home’s overall revenue increased by 285% year-on-year; in Thailand, Haier Smart Home increased by 44% year-on-year; in India, Haier Smart Home increased by 30% year-on-year; in the Philippines, Haier Kitchen Appliances increased by 74%.
On the whole, the ease of Haier Zhijia’s today was actually decided at the moment when it chose to create its own brand to go overseas. It is precisely because of the abandonment of the “quick time” that the “interlocking” of today’s strategy implementation can be achieved. It seems accidental, but in fact it is a necessity under long-termism.
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