Jiaweishi, a manufacturer of robot vacuum cleaners, decided to pivot to China’s domestic market with the help of e-commerce giant Pinduoduo (PDD) to reduce its dependence on export orders.
That decision is paying off as overseas orders plunged to “basically zero” in recent months due to the COVID-19 pandemic, according to Xue Jianlong, a manager at Jiaweishi.
“Covid is a big reason for the fall in external demand, but overseas orders have been declining even before the pandemic,” he said in an interview.
For a wide swathe of China’s export-dependent manufacturers, the coronavirus pandemic has “added frost on top of snow,” coming as it is in the midst of a trade war with the US.
Anecdotes of mass cancellations of orders from abroad due to COVID-19 abound, putting pressure on thousands of small and medium-sized businesses that were geared toward overseas demand.
With the evaporation of external orders, the same manufacturers that earned China the reputation as the “world’s factory” — making everything from Christmas decorations to toys to vacuum robots for consumers worldwide — are now banking on demand at home to make up for the shortfall.
To help these manufacturers, PDD recently launched a campaign to help showcase domestic quality and craftsmanship. The campaign will encompass more than 20 major manufacturing hubs, including Zhejiang, Jiangsu, Shandong, Hubei, Fujian and Guangdong.
The move also highlights the company’s push to help the country’s contract manufacturers build their own brands and reduce their reliance on export orders.
In December 2018, PDD launched its New Brand Initiative to support 1,000 factories across various industries to create and refine their own brands. PDD shared customer insights and consumption patterns from its e-commerce platform to help the factories fine-tune their products to meet consumer demand.
The direct-to-consumer model also removes layers of intermediaries, resulting in a virtuous circle of cost savings leading to lower prices, which in turn generates more demand and economies of scale.
Or as Xue, the Jiaweishi manager, put it: “Before C2M, we didn’t know what consumers liked or wanted, only what we thought they liked or wanted.”
Jiaweishi used to produce mainly for brands in the U.S. and overseas markets. The company signed on with PDD’s New Brand Initiative to jump-start its entry to the domestic Chinese market and diversify its export-led business.
Today, C2M makes up 55% of its sales in China, with traditional retail accounting for the rest. The company expects offline channels to become more experiential and online sales to become more mainstream.
By cutting out the layers of distributors and retailers, C2M has helped Jiaweishi reduce the risk of being saddled with excess inventory by producing “to demand” by consumers.
Working together with PDD, the company was able to pinpoint and produce a model with features that consumers valued — longer battery life and higher suction power — and price it competitively. The result: cumulative sales of more than 250,000 units to date, which surpassed their expectations.
Even after Covid subsides, Xue predicts that the pivot to the domestic market is here to stay, and that more companies will embrace C2M.
“We’re in (an) individualized age of consumption, C2M is the way to go,” he said.