China suppliers have to hurdle various obstacles in their pursuit to market in-house labels internationally. Inadequate funds exacerbate the difficulty in implementing brand building and marketing strategies.
For many export manufacturers in China, being able to market their own brands in overseas destinations is an exciting prospect, one that comes with the promise of higher profits and less reliance on OEM orders. But while there are a few that have found success, most others are struggling to gain a foothold in the OBM arena.
|The PSW801SAT model from Loctec is a full-motion wall mount for 26 to 42in LED TVs.|
The majority of OEM-oriented suppliers in the country invest most of their time in improving production capability and capacity. Some of those that also have ODM lines may allocate resources to boosting R&D and design acumen. Few, however, have sufficient marketing experience that is needed to promote China brands in international markets.
"As we are new in OBM, we have so much to learn," said Zhong Honglu, sales manager at Loctek Visual Technology Corp., a supplier of mounting and furniture solutions for TVs and other consumer electronics. Even so, Loctek is determined to push through with its branding efforts. "Although OEM and ODM work is profitable," Zhong said, "It is not always stable. Buyers could choose other suppliers any time they want."
The company started exporting under the in-house Loctek brand just this year.
But sufficient marketing savvy does not necessarily come with the age of the label. Lianfeng Plastic Products Fty, for instance, has had its Akai brand since 1997. The toys and tableware manufacturer, however, attaches the label only to products that require no custom logos or brands. This is because the company does not have a specialized team handling brand marketing nor a comprehensive strategy for building awareness of the label. Even when the decision was made early this year to exert more effort on brand promotion, the only marketing activities being carried out so far are increasing the label's presence online and in trade shows.
Loctek, on the other hand, intends to expand its market reach by looking for overseas agents for the brand. "We do not have a competent workforce and a network to build our brand overseas," Zhong said. The company is hoping cooperation with such agents will bolster the Loctek brand's presence in international markets. Additionally, the supplier is offering lower prices, a smaller MOQ and prioritized delivery for OBM models.
Apart from marketing skills, competing with established international brands is a challenge makers have to overcome.
Firefly Lighting Co. Ltd is experiencing good sales for its OBM energy-saving lamps in the Philippines, a market where low prices trump famous brands. But the company is finding it difficult to penetrate countries such as the US, Germany and Japan because well-known brands such as Philips have monopolized the energy-saving lamp market there. Consequently, despite 10 years of OBM experience, the Firefly brand contributes only 5 percent to the company's total sales, with OEM accounting for the rest.
Loctek has been able to find agents in the Middle East and Africa. To cater to these markets, the company writes product specifications in 10 languages, including Arabic. But it is still working to gain some foothold in the US. The supplier has recently set up a company in the US where intensive marketing efforts will take place. It has also placed advertisements and advertorials in US magazines and newspapers.
A maker of transformers, power modules and other electronic components, Zettler China is advertising in online search engines and trade magazines to promote its in-house brand to the US and Europe.
Budget is an issue as well. Significant investment is required to beef up R&D capability, launch marketing campaigns, create sales channels and provide aftersales service. Comprehensive promotional strategies are difficult to implement without sufficient funding.
Money is, in fact, the biggest problem for Firefly. The company is planning to set up a website to promote its brand in the year ahead. It will also increase the visibility of the Firefly label in all of its trade show materials. But if the supplier had a bigger budget, it could do so much more to establish the reputation of the Firefly brand and associated products.
Foshan Yunying Paper Co. Ltd has a similar problem. As with toys and tableware supplier Lianfeng, the company is only able to use its in-house brand when buyers do not specify custom labels. The supplier is currently trying to raise more money to promote the brand via websites and trade shows, and boost OBM's share of exports from 50 to more than 70 percent.
Note: This article "Inexperience, low acceptance stall OBM growth" was originally published by Global Sources, a leading business-to-business media company and a primary facilitator of trade with China manufacturers and India suppliers, providing essential sourcing information to volume buyers through our e-magazines, trade shows and industry research.
All price quotes in this report are in US dollars unless otherwise specified. FOB prices were provided by the companies interviewed only as reference prices at the time of interview and may have changed.
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