Exclusive interview with Pangu Chen Wenhui: Factories must learn to do cross-border e-commerce and earn the money they deserve

Time has passed the turning point, and it has been 18 years since China joined the WTO (World Trade Organization).

For Chen Wenhui, who has witnessed China's manufacturing for 20 years, Pangu's development is actually a microcosm of the development of many domestic manufacturing factories after China joined the WTO. "At present, China's manufacturing is becoming more and more difficult. Only a very small number of companies can make money through manufacturing, and the profit margins of most factories are getting smaller and smaller. Many people don't run factories anymore. I think the main reason is that the vast majority of China's manufacturing factories adopt the OEM model, and they lack core competitiveness in technology, production capacity, brand and sales."

(Pictured is Chen Wenhui, President of Pangu Group)

——How can we make Made in China return to the center of the historical stage?  

Chen Wenhui believes that China's manufacturing industry is facing the next huge opportunity for development:

Recently, Cross-border Knowledge interviewed Chen Wenhui, President of Pangu Group, on the topic of "How Chinese foreign trade factories can achieve transformation with the help of cross-border e-commerce."

In March 2005, Hong Kong Tsinghua Tongfang Company (the predecessor of Pangu Group), which specializes in the production and manufacturing of LCDTV (liquid crystal television), was launched; in 2009, the global sales of Pangoo LCD TV exceeded 5 million units. In the same year, while Pangu expanded its global market and acquired the German after-sales service company Teknihall, Chen Wenhui turned his attention back to China and began to lay out the information port (the predecessor of the industrial park) in China to incubate the industry. "In the process of manufacturing, I found that many companies are fighting alone, but in fact, the successful experience of predecessors can be learned and referenced, so we started to build the information port to help enterprises in the park avoid detours, share the experience and resources of the enterprise's growth process, and improve the efficiency of the enterprise. This is our original intention to do this. It has been like this since 2009, but there is a difference between 1.0 and 2.0. In recent years, our park has focused more on e-commerce and cross-border e-commerce."

Chen Wenhui: China's cross-border e-commerce is developing rapidly, and more and more people are entering this industry. However, I think that cross-border e-commerce is now in a state of "two groups of people". Those engaged in cross-border e-commerce are "one group of people", and those engaged in manufacturing are "another group of people", and these "two groups of people" are relatively isolated.

But what is behind cross-border e-commerce? All the products sold by sellers come from China's manufacturing industry. If only the cross-border e-commerce industry develops, but the factories remain the same, it is equivalent to the factory previously selling goods to overseas wholesalers, and now selling them to domestic cross-border e-commerce sellers. In fact, there is no essential difference for the factory.

If the factories do not become stronger and the products are not competitive, cross-border e-commerce will become a tree without roots and water without a source . Therefore, it is necessary to promote the deep integration of cross-border e-commerce and factories. This is also the purpose of our establishment of Fuyong Yiku Pangu Cross-border E-commerce Cluster.

Chen Wenhui: I think first of all, factories need to be aware of the situation and learn how to do cross-border e-commerce. This will help the entire industry form a healthy ecosystem.

Secondly, today’s mature sellers need to change their mindset and should not blindly worry about their suppliers/source factories. If they engage in cross-border e-commerce themselves, the competition will be formed. Instead, they should transform their accumulated understanding of the industry and practical experience into providing high-end services to factories engaged in cross-border e-commerce, and better help capable foreign trade factories to successfully transform.

In my opinion, in the first revolution of Made in China, factories learned to sell their products to the whole world, which contributed to China's prosperity. Now Made in China needs to complete the second revolution, which means that factories need to learn to sell their products directly to overseas end consumers, earn the profits they deserve, get rid of the genes of OEM, integrate their own innovations into products, and build their own brands.

Nowadays, there are very few high-quality companies like Huawei that can truly achieve successful overseas expansion with their brands. Therefore, we need to explore a path that can help a large number of domestic small and medium-sized manufacturing factories transform and upgrade and complete the second revolution. I believe that the cross-border e-commerce industry has an unshirkable mission in this regard.

(Pictured is a corner of Fukunaga Yiku)

For most domestic foreign trade factories, it is not an easy task to directly engage in cross-border e-commerce.

The traditional OEM model has left factories lacking R&D and sales capabilities, with factories being “only responsible for production and delivering the goods.”

Chen Wenhui: Now, if factories sell goods directly to overseas end consumers, they need to face many problems, such as sales channels/platforms, operations, logistics, payment, overseas warehouses, customs inspection and tax, etc. However, after the development of the cross-border e-commerce industry in recent years, there are all kinds of service providers on the market that can provide corresponding solutions, but in my opinion, these problems are relatively easy to solve.

When factories sell goods overseas, the real difficulties are building overseas brands, providing after-sales service, choosing better sales channels, and creating an atmosphere for factories to gather together to engage in cross-border e-commerce .

I think building a brand overseas is not something that can be achieved by just spending money in a short period of time. Cross-border e-commerce has already entered the competition for branding, but there has actually been no better solution for how to build a brand through cross-border e-commerce.

At the same time, if Chinese factories and sellers want to continue to operate their brands overseas, high-quality after-sales service is an indispensable link. This is even a very important support point for building a brand. Without good after-sales service, overseas end consumers will think that this is a simple product made in China, and they will just throw it away if there is a problem after buying it at a low price.

In addition, sales channels that are independent of mainstream platform restrictions and the atmosphere for factories to engage in cross-border e-commerce are equally important.

(Picture shows a corner of Fuyong Think Tank)

According to Chen Wenhui, Pangu Group has created a cross-border e-commerce empowerment system to address the difficulties of "brand, after-sales, sales channels and atmosphere".