Grappling with rising costs, small and medium-sized companies in China would have liked to be in a position to increase their prices.
However, that has become difficult as overseas buyers are reluctant to offer more in view of sluggish demand at home.
Now, how does one deal with such a situation?
Well, some SMEs are now exploring ways to bypass big foreign buyers and try alternative options with smaller importers using low-cost online channels.
Japanese TV broadcaster NHK followed Ren Ziyu around as he tried to take some photos for his new online store.
Yiwu has a so-called Christmas town that supplies 60 percent of the world’s demand for festive products.
A wholesaler and manufacturer of Christmas goods there, Ren’s customers are mostly buyers from overseas.
But rising wages, rentals and material costs have been eroding his firm’s competitiveness.
Ren is now planning to take advantage of a new rail line and the e-vending channel to shore up his business.
Built as part of China’s “One Belt, One Road” initiative, the 13,000 kilometer Yixinou Railway that opened last year connects Yiwu with Madrid and allows goods made locally to reach there in just 21 days, 10 days shorter than before.
The shorter transportation time now gives much more freight flexibility to makers like Ren, who used to rely on sea routes to fill the orders.
SME buyers in Europe don’t have the time and energy to come to China for sourcing, so they rely on their bigger counterparts, which put a markup on the price they pay Ren.
If Ren can reach these SME buyers directly, through online stores, he will still be fairly price competitive despite the surge in production costs. And this SME segment could be a very large market.
The rail freight option also makes it possible to ship in smaller quantities that fit the appetite of the smaller buyers.
As Chinese businessmen learn from each other very quickly, makers of other products will probably do something similar to Ren.
– Contact us at [email protected]