During the 119th Canton Fair, the picture of a Shenzhen trading company became an overnight hit in ceramics export groups on wechat because a banner read “USD 1.99/sq.m UP”, which was the extremely low price in the export sector, was shown on the photo.
Mr. CTW has been this fair. But before seeing this banner, Mr. CTW found one other banner that said USD 2.99/sq.m in another stand. Though the stand size only covered a small area of 9 sq.m, there were many visitors checking the products inside. It was more lively there than in some big stands with customized decoration. Low prices, like “USD 2.99/sq.m”and “USD 4.20/sq.m”,are the stunt to draw buyer’s attention to their stands.
According to some insiders, if the product was polished tile, with this relatively cheap price “FOB USD 2.99/sq.m”, it would only bring a tiny bit of profit to the seller. As for “USD 1.99/sq.m”, the insiders responded directly that this price were too low. They thought the seller either had peculiar purchasing channels, or were selling low-quality tiles, or set it as the stunt of company marketing。
In fact, this same stunt in small- & middle-sized companies can be found in every Canton Fair according to the news report in the past several fairs. However, only one thing is changing, that is different sellers use the same kind of the stunt. Or, you can see “USD 1.99/sq.m” in 119th Canton Fair, but probably it won’t show up next time.
These companies also aired their grievance and said, “For the buyers, there are different levels of their demands. We can offer the buyers from Africa and Southeast Asia tiles with low price but fine quality.
To be honest, it’s true to say the demands of customers are at different levels. It becomes a frequent sight in the international exhibitions that some foreign buyers go straight to the small stands or standard booths to check the price by using calculator, and ask the trader in (bad) Chinese with a smile, “pián yí diàn.(Could you make it cheaper?)” One Pakistani buyer told Mr. CTW that the market in Pakistan showed less requirement of high level ceramic tiles, so he just walked around the main venue and large stands with special decoration to check the general trend of design in the fair, then went to some smaller companies to find what his target tiles.
It’s fine for the sellers to promote their products with various ranges of prices according to different market demands. However, is it possible for those trading companies who said they could offer tiles with “USD 1.99/sq.m” to provide products with fine quality?
Here Mr. CTW summarized several kinds of situations how products with super low-price exsist in the market.
1.Trading companies have their own purchasing channels, which allow them to keep earning money by selling products with super low-price. Some trading companies in Dongguan and Shenzhen were the good example of this situation previously. At present, tiles in sales are flooding in the local market, and it leads the cheap tiles are more easy to get. But tiles sourced by this way are usually from many kinds of tiles with limited volume, and part of the products might exist some quality problems.
2. For destocking, some manufacturers work with trading companies to gain bigger space of growth by selling products with almost non-profit price. This operation is usually a “once-for-all” deal and it won’t last long.
3. It’s using low price to attract and make long term cooperation with foreign buyers. In the stagnant market, it’s the method that explores its own foreign channel.
4. Some traders like churning and selling tiles with low price for the particular purpose.
It was no doubt that those companies and the low price tile could attract publicity in a short time and became “famous” in wechat moment by using “super low price” stunt. However, it’s not the right way for long term benefit and also their future growth. In China, ceramics sector is eliminating backward production capacity and optimizing the industrial structure. During this period, if some blinders only strive for short term profit, they will die satisfied with their own short-live development. So far, in order to reach long term success, Chinese companies shall realize that they need to pay more efforts on quality control of production, design, service in export sales and so on.
It is worth mentioning that, from recent layouts of Canton Fair in these 2-3 years, the number of standard booths is decreasing from 3 rows in 2015 to 2 rows in the Spring 2016. It seems that the fair organizer tends to expand the scale of the booths with customized decoration and eliminate the standard booths.
Maybe, it’ time for the companies who only think about low price selling to reconsider their strategy again.