Not long ago, Mr. Wu, a sales representative from an auto parts manufacturing company in Rui'an, purchased an oil pump sample from a local auto parts store for 800 yuan. He was surprised to find out that his own company produced the same type of oil pump for just 180 yuan, and the quality was even better than the one he bought. This made him question why auto parts were so expensive on the market.
The issue stems largely from the role of middlemen in the supply chain. For Wenzhou's automotive and motorcycle industry, the market is crucial to their survival. Traditionally, the industry has focused on three main markets: the supporting market, the export market, and the after-sales maintenance market. The distribution of these markets is roughly 20%, 10%, and 70% respectively, meaning most products are sold into the after-sales market. However, due to multiple layers of intermediaries, the final price paid by consumers can be several times or even ten times higher than the factory price. This has been the standard model for years.
In recent years, however, the Wenzhou Automobile and Motorcycle Industry Association has been working to change this. Companies are trying new sales strategies to cut down on middlemen, improve brand image, and offer more competitive pricing to end users.
Despite these efforts, the industry still faces challenges. For example, during inspections by the SAIC Market Office, many auto parts shops were found to be closed. According to officials from the Wenzhou Association, this reflects the difficulty of maintaining compliance in the current market structure. Many companies struggle with unregulated sales practices, such as counterfeit products being sold under legitimate brands, which harms both consumer trust and business growth.
Another major problem is the lack of direct sales channels. Most Wenzhou-based companies rely on multi-level wholesale networks to reach the retail market. This leads to high markups, and some dealers even misrepresent other companies' products as their own. Additionally, some companies face delayed payments from larger manufacturers, further straining their finances.
With limited resources, it's hard for small and medium-sized enterprises to establish nationwide direct sales operations. Opening a single direct sales company requires at least 1 million yuan, and setting up 10 such outlets would cost 10 million. These costs are too high for most Wenzhou-based firms, leaving them stuck with traditional models despite the challenges.
To address these issues, the Wenzhou Automobile and Motorcycle Industry Association has partnered with Xuzhou Auto Parts City in Jiangsu. This collaboration allows Wenzhou companies to showcase their products in a centralized marketplace, reducing the number of middlemen and improving efficiency. Xuzhou, a key city in the Huaihai Economic Zone, has a large network of repair shops and parts suppliers, making it an ideal platform for expanding sales.
According to He Hongxin, Secretary General of the association, this initiative represents a significant shift in how Wenzhou companies sell their products. It not only helps protect their interests but also enhances competitiveness by lowering prices. If successful, this model could be expanded nationwide, offering a promising future for the industry.
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