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Exporters see domestic opportunity post downturn

By Zhou Yan (China Daily)
Updated: 2009-07-17 08:03

The Export Goods for Domestic Market Trade Fair held in May in Shenzhen. Exporters started to look at the domestic market as overseas orders fell. [CFP]

In its 15-year-history, Shanghai MinGuang International Group, the country's largest bedding and other household fabrics exporter, had largely ignored the domestic market as overseas demand for its products just kept rising.

Not anymore. Since the outbreak of the global financial crisis, the company has been facing a problem it has never experienced before - dwindling foreign orders. For instance, sales of high-end blankets to Russia has plummeted 90 percent in less than a year.

"We need to find alternative markets to survive the hard times," Weng Hesheng, general manager of MinGuang said. That market, he said, lies right at the company's doorstep.

MinGuang has reached an agreement with Shanghai's retail giant Bailian Group to operate sales counters inside the various Bailian supermarkets and departments across the city.

"The more products we can sell in the home market, the better," Weng said. Its aggressive home sales strategy is paying off.

The company, which used to export 80 percent of its total production mainly to Europe and the US, is now counting on the domestic market for 60 percent of its total sales. "I expect the ratio (of domestic sales) will increase even further in coming months," Weng said.

More importantly, the profit margin of the domestic market is 25 percent compared with 5 percent for exports, Weng said.

MinGuang was not the only exporter in Shanghai and the neighboring industrial region to have woken up to the potential of China's market. After almost a year of export decline, many major exporters in the region have shifted their focus from overseas markets to domestic sales.

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Their enthusiasm was amply demonstrated in the two-day Export Goods for Domestic Market Trade Fair that began in Shanghai yesterday.

More than 170 exporters from around the region, together with 40 sourcing companies from home and aboard, took up all the 237 exhibition stands at the fair.

"We entered Carrefour's stores in China one year ago and discovered that the domestic purchasing power had exceeded our expectations," said Sun Qinghong, a sales representative at Shanghai Newest Luggage Co that used to export 100 percent of its products.

The company sold 1,000 lightweight trolley cases at 99 yuan within a month of its entry into Carrefour. "It was a remarkable result," Sun said.

The growing popularity of these for-export goods has also raised the interest of retailers. Carrefour, for instance, signed up with four manufacturers at the fair for a total of 150 million yuan worth of supply.

Sourcing from former exporters is "the beginning of a new way of doing business in China", said Pierre Bertholat, vice-president of Carrefour China, at the fair. The global financial crisis has greatly widened the network of domestic suppliers, he said.

Separately, Shanghai RT-Mart Ltd also entered into a 30-million yuan deal with Shanghai ZunGui Electrical yesterday.

"We'll get entry fee discount, and provide products at much lower prices in China than the overseas market," said Wang Chongzhi, general manager of the household electrical appliance maker, adding that more cooperation can be expected going forward.

However, not all exporters are as lucky as ZunGui and Newest Luggage. Liu Yongchang, a sales manager for a small-sized gift maker, has yet to find an ideal partner at the fair.

"We're not familiar with Chinese consumer's demands, and it's not easy for us to break into the department stores," Liu, who works for Shanghai Royal Gifts Co, said, adding that as an exporter, the company doesn't have a well-known brand domestically. "Retail chains are quite picky about suppliers; we're still striving for recognition."