Published on China Today, by staff reporter ZHU HONG, January 2010.
Being one of the three major engines of the economic growth in China, exports are suffering a setback in the global financial crisis. Most export-oriented enterprises are facing sluggish sales and overcapacity. This situation has forced them to look for alternatives, and many are discovering a huge and previously neglected domestic market.
Export-oriented Manufacturers Turning Inward:… //
… Risks of the Domestic Market:
The domestic market is an unknown territory for export-oriented businesses. Some don’t dare to step into it because they are so accustomed to a routine of “attend fairs, receive orders and ship products.”
According to Zhang Jiankang, president of Beijing Jiading Carpet Company, operation in a domestic market is totally different from foreign trade. “Take our company for example. The production line, operation mode and core team are export-oriented. In foreign trade, the key to obtaining more orders is to take the upper hand in negotiation, especially on the issue of price. The processes of manufacturing and exporting are rather systematic. While in the domestic market it is much more complicated. We have to take market demand and customer preferences into consideration, not to mention knotty problems such as brand promotion and fierce market competition.”
Zhao Yongdong, general manager of Beijing Shangpin Houseware Co., Ltd., feels the same way: “Foreign trade companies lack marketing channels and staff familiar with the domestic market. What’s worse, we don’t have an original brand, which is a requirement to enter supermarkets and franchised stores in China. Even if we did, our products are designed to meet the needs of overseas customers and are not suitable for home markets.
The challenges don’t stop there. The long settlement period is a problem that has always plagued these companies. Lin Min of Best Power Company worries about this issue: most domestic retailers often settle the account only after the goods are sold, meaning the money does not reach companies for more than 90 days. It is just one disaster after another for cash-strapped foreign trade companies. Such problems do not exist in overseas markets, where retailers settle for goods on receipt from the company.
Helping Hands: … (full 2 pages text).