The reform attempt made by the traditional manufacturing enterprises fromoverseas sales to domestic sales may not make success soon, at least for the present. As early as three years ago, located in China’s Lighting Mecca, Guzhen Town, Zhongshan City, Guangdong Province, Lingli Home Lighting Factoryestablished two brands together, one for overseas sales and the other for domestic sales. Now, facts show that overseas sales are still doing better than domestic sales.
 
Despite that a company doesn’t represent the whole industry, judging from the reform and the attempt made by this old company in the Lighting Mecca, it’s not difficult to see the delicate situation of China’s traditional manufacturing industries in transition at present.
 
On October 18, on the four-day 11th International Lighting Fair held in Guzhen Town, Zhongshan City, Guangdong Province, among a large number of visitors and traders at home and abroad, our reporters made a series of interviews to traditional manufacturing enterprises, especially lighting enterprises, on the transition from overseas sales to domestic sales.
 
According to our reporters’ surveys, enterprises face more complex environment of the domestic market when reforming from overseas sales to domestic sales. In every economic transition, some enterprises are eliminated and the survived enterprises keep on upgrading unknowingly.        
                               
Ten-year of transition
 
We put the transition of the fixture enterprises in Guzhen Town in a longer time range. Actually, much earlier before the 2008 international financial crisis, the transition has begun.

In the late 1970s, when the first town-owned enterprises that produces lighting products made success, a rush of producing fixtures happened in the town. In just a few years, a large number of family stores and factories engaged in manufacturing lighting products emerged. They bought components in the surrounding areas and sold the products throughout the country after simple processing and assembly. In the early 1990s, a lighting street was formed in the town.
 
Later, the lighting industry in Taiwan also began to transfer to the Guzhen Town, along with the capital, technology and equipment, management experience and sales channels. The Town government also began to support the lighting industry as a key industry. A great quantity of businessmen in Wenzhou brought investments to the town, accelerating the cluster effect of the lighting industry in the town. Guzhen Town has gradually become the largest producer and sales center of lighting fixtures.

On November 8^th, 2002, China National Light Industry Council and China Association of Lighting Industry jointly awarded the honorary title of “Lighting Mecca in China" to Guzhen Town. In the second year after Guzhen Town was officially awarded the Lighting Mecca, Li Yuanjiang, now a marketing director of Lingli Home Lighting Factory, came to the town via the introduction of a friend.

"At that time, there was only a slightly busy street," said Li Yuanjiang who witnessed the ten years’ change of Guzhen Town. Benefitted from the development of the industry, today’s Guzhen Town holds tall buildings and spectacular hotels and squares. It is hard to occur to people that it was once a small town.

In 2011, the lighting industry of the town achieved output value of RMB 17.1 billion, accounting for more than 60% of the market share of the whole country. With exports to the USA, Japan, the Europe and other 130 countries and regions, its gross export totaled USD 500 million. The official data of Guzhen Town shows that the output value of lighting industry is 4.1 times more than 2001’s 3.35 billion. At present, enterprises registered in Guzhen Town exceeded 200,000.

Regarding the changes of the lighting industry in Guzhen Town, li Yuanjiang noted that the market was flooded with copies and non-standard products previously, which have impacted the normal manufactures greatly. Besides, the quality of the personnel was at different levels.

Over the ten years, there are also changes in customers. According to Li Yuanjiang, now the customers have been more aware of the product quality and paid much attention to the brand. It can be seen from their inquiries to the brand recognition, development potentials and the follow-up management thought on the exhibition.

The industry is growing day by day in size and the lamp expo is still thriving, but according to li YuanJiang, visitors are much less in recent years. “To tell you the truth, the present cannot compare with the past.”

li YuanJiang recollected that, from 2003 to 2006 is the golden time for lighting business in Guzhen Town. "At that time, the profit rate reaches as high as 50%, and now 30% is quite good."
 
Wang Gaoxiang, manager of Librite Lighting, told our reporters that they came to the expo as an exhibitor for many years and witnessed the changes in exhibitors. There are new-comers every year and some enterprises went bankruptcy every year. This year, there are much more enterprises going bankruptcy. “Those who have no brand and innovative products may die at any moment.”

Domestic sales are not as good as overseas sales

In 2009, the second year after the global financial crisis, Lingli Home Lighting Factory made an important decision to establish two new brands. One is called "Bo Lannuo" which is specialized in LED products mainly for overseas sales. The other is called "Mei Jiate", the ceramic lighting with original design mainly for domestic sales.

 LED and design are the two new ways that the lighting enterprises in Guzhen seek for upgrading and developing.

 As the marketing manager, li Yuanjiang revealed that Bo Lannuo sold unexpectedly “nice” in the Europe and the United States this year.

According to Li Yuanjiang, the key of the success lies in that the company invested a lot in R&D and marketing in Bo LanNuo. Every year, the company takes out 15% of sales revenue for design and R&D of Bo Lannuo, 20% in marketing, and 10% in marketing support. These aspects occupy almost half of the sales revenue.

"At the beginning, the company is not willing to invest so much in the design and marketing," recollected li Yuanjiang. In the initial development of 2009, the company planned to take out 10% of sales revenue for design and R&D, and finally 15%. "This was an unusually difficult decision."

Unveiled in the same year with Bo Lannuo, Mei Jiate’s main products are ceramic lamps of neoclassical style. Lin Kezhao, the marketing director of Mei Jiate insists on that it’s very important to create their own characteristics with ceramic lamp and neoclassical style. They cannot deviate from this track, but at the same time they can design some other styles and make their products more diversified.
 
Even so, comparing with the popular LED lighting, the traditional lighting products have a harder way to go. Lin Kezhao revealed that the sales of Mei Jiate dropped by sixty percent and profits sank by thirty percent this year, while the price of ceramic, metal and other raw materials has increased by twenty percent, not to mention the rise of labor and rent.

According to Lin Kezhao, the lighting industry is a labor intensive industry. Threading, assembly, welding and other processes have to be done by labors and are irreplaceable by the machine. And even done by skilled workers, it is impossible to achieve a breakthrough in the output value.

This year's economic situation is not good, so Lin Kezhao dare not to invest too much in brand marketing. From January to now, they just made investments in promo printing, signboard of dealers and decoration of franchised shops. "I think the investment on marketing is not enough, but under this scenario, we dare not to invest too much."

Another thing that makes Lin Kezhao annoyed is plagiarizing. An award-winning product of Mei Jiate was plagiarized by another lighting enterprise in Guzhen Town. He negotiated with the counterpart for three times to ask them for taking the products off, but failed. Now, he turned to the Bureau of Intellectual Property. “It it doesn’t work, either, we have to settle it through the legal way.”

Yuan Songhua, vice chief of Guzhen Town, said that China has been a major manufacture and exporter of luminaire products in the world, however, for many years, the luminaire production at home is in large part imitation and lacks of independent intellectual property rights, so there isn’t world-class leading enterprise emerged.

Decision-making: which way to take��

Keeping on overseas sales or expanding domestic market? Holding on to traditional lighting or trying the popular LED?

Wang Gaoxiang said, Librite focused on exporting before 2008, and then turned to domestic sales. Speaking of domestic sales, Zheng Xiaohong, the regional manager shook his head:"The environment in the domestic market is too bad and the price war is too fierce." Librite saw the domestic sales fall 20% to 30%, on the contrary, its overseas sales increased by 15%. “Domestic sales are small in volume and high in price, while overseas sales are low in profit rate but large in volume.”

 Lin Kezhao noted that it’s imperative to expand the domestic market, otherwise they will lag behind. “However, it’s annoying to expand the domestic market, too. The customers are instable and the order is small in volume.”

Yihua Lighting is one of the few manufactures that are only engaged in overseas sales in Guzhen Town. Li Gang, deputy manager of Yihua Lighting, said that it hasn’t occurred to the company to expand the domestic market. Since the founding in 1985, Yihua has a stable customer base in Germany and 80% of its products are sold there. “Germany has the largest demand among EU countries.”

However, Yihua saw a significant drop in the sales volume this year, 30% at least, according to Li Gang. Judging from the current situation, the expectation for the second half year is not good, not to mention the next year.

According to the market survey, European customers replace lighting fixtures every two years, said Li Gang. “In response to the bad economic environment, people may do with the old one for another year. Anyway, the lighting fixture is not luxury goods, people will replace them at last.” As a result, Li Gang doesn’t worry too much on the future development of the company.
 
What trouble Li Gang the most are the surging cost and the squeezed customer price, which result in the drop in profit rate. In this year, the labor cost which accounts for 30% of total cost rose 20%. On the other side, customers are demanding markdown for 3% to 5% every year. “The profit margin is pressed to only 15% now.”

 Besides, facing the fast and strong wave of LED, what measures will Guzhen Town adopt?
 
Actually, many lighting enterprises in Guzhen Town have given up the wait-and-see attitude and entered into the LED industry. Wei Jiajun, general manager of Dengdu Exhibition Company, noted that they didn’t arrange so much LED booths at the beginning and all booths were booked up unexpectedly in advance. As a result, the Lighting Expo specially expanded the LED booths to more than 800. This year’s LED booths are 200 more than that of last year and many exhibitors are local enterprises of Guzhen Town.
 
There are all kinds of ideas on the development direction of LED lighting. An insider believes that the distinctive advantage of Guzhen Town lies in lighting decoration which focuses on space decorating firstly and lighting secondly. Nevertheless, some believe that LED’s superior performance in energy saving will enhance the sales of the decorative lantern.
 
It’s no doubt that the disputes will go on. And there is a long way for the manufacturing industry to explore on its upgrading.