China's small household appliances have exploded in Africa, leading to the rise of a billion dollar industrial belt

From October 17 to 18, the third "the Belt and Road" International Cooperation Summit Forum was held in Beijing.

In the ten years of the "the Belt and Road" initiative, China signed more than 200 cooperation documents with more than 150 countries and 30 international organizations on five continents to jointly build the "the Belt and Road"; More than 3000 cooperation projects have been formed, driving trillions of dollars in investment and injecting strong momentum into the economic development along the route.

At the same time, Chinese private enterprises are also actively going abroad under the opportunity of the "the Belt and Road". From household appliances, auto parts to electronic products, to the current hot AI robots, Made in China has changed from "selling to the world to taking root in the world".

This is the first article in this series, focusing on the transformation of the Cixi Small Home Appliance Industry Belt in the past decade, and discussing the transformation of China's small home appliance industry.

This year, I received several foreigners from Yuyao North Station who went to Cixi to investigate the small home appliance industry, "a Didi driver told Xiaguang Society on the way to Cixi City for a visit.

Cixi's small household appliances are sold to Europe, North America, Southeast Asia, Africa, and other parts of the world. In terms of production, Cixi produces about 60% of the world's small household appliances, such as electric irons, with an annual output of nearly 30 million units, accounting for approximately 50% of the global market share.

Taking Africa as an example, with the deepening of cooperation between China and countries and regions along the "the Belt and Road", people have a deeper understanding of the African market: there are 54 countries, more than 1.4 billion people, and an underdeveloped industrial market with huge potential. According to Statista data, the revenue of the household appliance market in Africa is expected to be $61.36 billion in 2023. From 2023 to 2028, it is expected that the compound annual growth rate of this market will reach 7.53%.

The Road of Cixi Home Appliances. Source: On site shooting by Xiaguang Society

After ten years of continuous development, Cixi foreign trade enterprises have deeply rooted in the "the Belt and Road" market, and formed a 100 billion industrial belt in the local area.

Famous brands of household appliances such as Fangtai, Gongniu, Zhuoli, and Yueli all come from Cixi. According to official statistics, smart home appliances are the largest pillar advantage industry in Cixi. In 2021, the output value of the city's large-scale smart home appliance industry exceeded 100 billion yuan, reaching 104.26 billion yuan. In the three years since the epidemic, the home appliance industry in Cixi has flourished, with a 39.4% increase in output value in 2022 compared to 2019.

Cixi Customs data shows that Cixi's exports to countries along the "the Belt and Road" have increased from 13.64 billion yuan in 2013 to 21.54 billion yuan in 2022, an increase of 57.9%.

In 2022, Cixi's exports to countries along the "the Belt and Road" will account for 28.1% of the city's total exports. Among them, the export of household appliances reached 3.46 billion yuan, a year-on-year increase of 23.8%.

Cixi, Zhejiang, is equally famous with Shunde, Guangdong, Qingdao, Shandong, and Hefei, Anhui. It is one of the four major home appliance bases in China and the world's largest production base for small household appliances such as electric irons, heaters, and sockets. There are over 2000 complete appliance enterprises and over 10000 upstream and downstream enterprises in the appliance industry chain. Many of the best-selling small household appliances in Africa along the "the Belt and Road" are produced in Cixi.

This year, besides exporting to Europe and Southeast Asia, South Africa is the company's largest exporter of heaters produced by Ningbo Yunnuo Electric Company. Previously, in an interview with Red Star News, General Manager Huang Yun stated, "Our fixed thinking is that South Africa is very hot and does not require a heater. In fact, some parts of South Africa even have snow in winter, which happens to be the opposite of the northern hemisphere. They import from China and sell it in different places

Cixi home appliances are also ubiquitous in Southeast Asia. In Malaysia, Fontaine is one of the mid to high-end kitchen appliance brands with approximately 50 offline stores. As an important demonstration country of the "the Belt and Road" strategy, Malaysia has become a key market for Chinese kitchen electronics giants such as Fotile to accelerate their layout.

Fangtai and Gongniu are two major enterprises in the Cixi home appliance industry with revenue exceeding 10 billion yuan. In 2022, Fangtai's sales revenue reached 16.243 billion yuan, a year-on-year increase of 4.86%, and the group has accumulated a growth of 48% in the three years of the epidemic.

Cixi neither relies on mountains nor water, and has no mineral resources. During the reform and opening up, Cixi only had access to agricultural and sideline products, such as cotton. However, Cixi people had the courage and brains to go south early. "Zhu Dongjie, the head of the home appliance ecosystem and the deputy general manager of Ningbo Xingdian Interconnection Technology Co., Ltd. (hereinafter referred to as" Xingdian Interconnection "), told Xiaguang Society that the development of the Guangdong home appliance industry belt was earlier in the mid-1980s, Cixi people take orders from enterprises from other regions such as Guangdong and Shanghai, starting from the production of raw materials and spare parts, and gradually delving into the home appliance industry.

In the early stage, Cixi produced products from the upstream and downstream of the home appliance industry, and the industrial chain gradually improved. Later, some factories began to produce complete sets with their brains, and the industry developed. "Fangtai is a good example. The earliest production was the igniter for stoves, and then the complete set of kitchen utensils. The factory owned by Mr. Yu (founder of the home appliance ecosystem and general manager of Star Electric Interconnect, Yu Xuehui) initially made the heating key for the heater, and now it is the heater for the entire set." Zhu Dongjie explained.

With China's accession to the WTO in 2001, many home appliance enterprises in Cixi contracted for international brands. Through the window of the annual Canton Fair, small home appliances manufactured in Cixi were sold to markets around the world, such as Europe, North America, Southeast Asia, Africa, etc. Foreign trade developed rapidly and enterprise scale expanded.

In order to improve the home appliance industry, Cixi Zhouxiang Town has planned a small home appliance intelligent manufacturing town with an area of approximately 3.38 square kilometers. It has built five major blocks, including a vibrant business district (including the town's living room), a home appliance Silicon Valley area, a smart home appliance industry area, a fashion home electronics industry area, and an entrepreneurship and innovation incubation area. Representative enterprises of Cixi home appliances, Zhuoli and Yueli, are located here.

Cixi Small Home Appliances Intelligent Manufacturing Town Exhibition Hall. Source: On site shooting by Xiaguang Society

Zhuoli and Yueli both started producing electric irons and are representative categories of household appliances in Zhouxiang Town.

Since 2006, Zhuoli Electric Iron has achieved the world's top production and sales, and has maintained records for more than ten consecutive years. In 2023, during the Chicago exhibition in the United States, two intelligent multifunctional electric irons of Zhuoli were signed over 100 million orders by multiple customers for North American exclusive sales.

Lu Ping, the CFO of Yueli Group, stated in an interview with Securities Times that Yueli Group also started with electric irons and gradually focused its product development on hairdressing appliances with hair dryers as the core. Currently, hairdressing appliances account for over 60% of the company's main products.

Since its establishment in 1996, Yueli Group has collaborated with foreign first tier brands such as Philips for more than 20 years to produce small home appliance products such as hair dryers. It is one of the world's largest manufacturers of hair dryers, with an annual production of 32 million small home appliance products, including 12 million hair dryers.

OEM processing has always been the main business of Yueli, with a sales proportion of over 80% in the European and American markets and over 40% in the US market. Since 2016, in order to reduce the risks brought by a single market, Yueli has focused on the Asian and domestic markets. In 2019, Yueli officially launched the brand Xiaoshi. At present, Yueli's sales share in countries along the "the Belt and Road" has increased, and its sales in the US market is less than 20%.

In February 2021, the Cixi Youpin Museum was officially launched, focusing on production and sales docking services. It is a platform for the integrated development of domestic and foreign trade in the home appliance industry created by the Cixi Municipal Government. It is now operated by Star Electric Interconnection and provides services such as production and sales docking and full industry chain factor resource docking around the Cixi home appliance industry belt.

According to data obtained by Xiaguang Society, the total construction area of the Cixi Excellent Products Museum is about 6000 square meters, including an exhibition hall area of about 1500 square meters. It gathers over 1000 home appliance products from more than 300 complete machine factories across the country. Currently, the number of registered enterprises on the production and sales docking service platform has reached more than 15000, achieving effective docking between production and sales for more than 5000 times, with a total transaction amount of about 2 billion yuan. In addition, offline premium stores have opened branches in Italy and New Zealand overseas, and branches in Shenzhen and Butuo in China.

Cixi Youpin Museum

Behind the establishment of Cixi Youpin Museum is the problem of "generally small scale, fewer independent brands, high dependence on foreign trade, and low transformation rate of digital intelligence" in the home appliance industry. In fact, except for the top few large enterprises, factories along the Cixi Industrial Belt are all seeking more markets and opportunities. Zhu Dongjie introduced that Cixi Youpin Museum has formed a home appliance ecosystem, mainly focusing on home appliance enterprises with a value of over 5 million yuan and less than 1 billion yuan.

After the 2008 financial crisis, factories were searching for various sales channels. When the domestic e-commerce boom began, Cixi home appliance factories also entered the domestic market. In 2015, the country began supply side reform, and 'supply exceeds demand' became a problem. With overcapacity, factories also wanted to transform, In the past, those who made factories did factories, while those who made e-commerce did e-commerce separately. After the environment changed, this situation also changed. Factories began to integrate e-commerce, and pure e-commerce built their own factories

From 2020 to 2022, during the special period of the epidemic, it brought a turning point to the traditional foreign trade business of Cixi household appliances. Under the "homestead economy", it has driven people's consumption of home appliance products and promoted a wave of dividends in the home appliance industry. This year's epidemic has passed, orders have suddenly decreased, and the previous transformation problems have reappeared

In the second half of the year, foreign trade orders have recovered. According to customs data, in August, Ningbo achieved a total import and export volume of 115.44 billion yuan, a year-on-year increase of 7.3%, reversing the two consecutive months of year-on-year decline in single month import and export volume since June. Among them, the export value was 76.94 billion yuan, an increase of 8.4% year-on-year.

But the recovery of the home appliance industry is not as expected. Yu Xuehui, the initiator of the home appliance ecosystem and the general manager of Star Electric Interconnection, is facing a situation where the total foreign trade orders of his own factory were greater than the sales of cross-border e-commerce companies last year and before. However, this year, this has seen a rise and fall, and the share of cross-border e-commerce companies has exceeded that of factories.

In order to open up more sales channels, Cixi Youpin Museum has also built a live streaming base. From the construction of live streaming rooms, talent training, and operation of live streaming rooms to brand live streaming sales, the platform can help home appliance enterprises open up live streaming e-commerce channels. In addition to the domestic Tiktok live video delivery, the platform is also promoting TikTok short video delivery business, mainly targeting the Southeast Asian market.

It is worth mentioning that Xiaguang Society visited Cixi Small Home Appliance Intelligent Manufacturing Town in Zhouxiang Town and found that the Cixi small home appliance industry is also developing towards "research, production, and sales integration".

Originally, at the entrance of Cixi Small Home Appliance Intelligent Manufacturing Town, it was the first sub campus of Nanjing University of Sciences (School of Science and Technology, Ningbo University) - Zhouxiang Campus.

Cixi Small Home Appliance Intelligent Manufacturing Town. Source: On site shooting by Xiaguang Society

It is reported that the Zhouxiang Campus of Nanjing University of Science and Technology is planned to be officially put into use in 2023, with the first batch of about 500 teachers and students enrolled. According to the enrollment information, Nanjing University of Sciences has explored the development model of integrating industry and education, and has successively established industry colleges such as "Bull College", "Cixing Intelligent Industry College", "Xinhai College", and "Small Home Appliance New E-commerce College".

In mid September, Xiaguang Society visited the Zhouxiang Campus of Nanjing University of Science and Technology. It was on the opening day of campus enrollment, and many students came to the small home appliance intelligent manufacturing town. The student volunteers on the campus told Xiaguang Society that students from relevant colleges can directly visit and learn from internal enterprises in Zhizao Town.

In Cixi's foreign trade exports of over ten billion US dollars, the home appliance industry accounts for about 40%. Traditionally, Cixi's industry and factory oriented economy (foreign trade) have been the main focus. In terms of domestic market sales, Cixi cannot compare with Shunde and Foshan, "Zhu Dongjie told Xiaguang Society.

On the other hand, the Cixi home appliance industry has a strong dependence on foreign trade and is also facing difficulties this year. Zhu Dongjie said, "At this time in previous years, the factory's order arrangement (production) plan was all scheduled for next year. But in the first half of this year, orders decreased, and the situation is different and uncontrollable

Nowadays, the cross-border e-commerce industry is developing rapidly, and major e-commerce platforms in China dominate overseas. Traditional Chinese foreign trade factories are also seeking to transform into cross-border e-commerce.

Yu Xuehui is a factory seller in the early transformation of cross-border e-commerce in the Cixi home appliance industry. He told Xiaguang News that the Cixi home appliance industry is currently at a critical stage of transformation, and factories are taking steps to find more sales channels to obtain sustained growth in the market.

But specifically regarding the Cixi home appliance industry belt, Yu Xuehui bluntly stated that there are too few factories willing to transform into cross-border e-commerce. "Even providing suppliers to fully managed platforms like Temu, these foreign trade factories are not very acceptable

The reason for this is that compared to categories such as clothing, shoes, hats, and home furnishings, the transformation of the home appliance industry into cross-border e-commerce faces more diverse and complex challenges.

Under the original model (traditional foreign trade), people used the OEM OEM OEM order model to sell whole containers and large quantities to large customers, while in B2C cross-border e-commerce or full custody mode, the first batch of stock was usually 10 to 50 units. "Yu Xuehui said that recently, his cross-border e-commerce company was looking for a friend's factory to develop a small home appliance product, hoping to produce 50 or 100 units, but the factory stated that the minimum order quantity was 3000 units.

Unlike making clothes, shoes, and hats, home appliances require molds and involve many accessories. The production process and workload are the same for 100, 1000, or 10000 units, and factories are not very willing to do (cross-border e-commerce). "He said that even if they own factories, they only consider their cross-border e-commerce companies as" small customers ", When arranging orders, it is possible to stagger large orders and not pay attention to (cross-border e-commerce orders). We only produce them when we have time

The spot mode of cross-border e-commerce is also difficult for foreign trade factories to adapt to, as they are known for their "come to order production" approach. Zhu Dongjie analyzed that in order to engage in cross-border e-commerce, there is stock preparation, but there are inventory pressures and unsold risks involved. "If goods go overseas and cannot be sold, they become liabilities, as overseas warehousing is expensive." In addition, home appliances are different from general categories, due to their certain risks, many industry standards, strict platform control, and even more difficult to put on the platform.

It is difficult for the Cixi home appliance industry to transform from traditional foreign trade to cross-border e-commerce in terms of logic and mode, and there are many barriers that need to be broken through. And the overall manufacturing environment in the local area is also difficult to attract cross-border e-commerce talents.

Yu Xuehui's cross-border e-commerce company has a scale of nearly 200 million yuan, but he believes it is still not a successful example. In the Cixi home appliance industry belt, many cross-border e-commerce companies are still in the early stages of exploration. For example, through the Cixi Youpin Museum, several companies' cross-border e-commerce stores have "increased" their sales volume, with a sales volume of about tens of millions of yuan.

Yu Xuehui pointed out that foreign trade factories do not need to rush to cater to cross-border e-commerce models. They can specialize in the production and related links they excel in. When laying out new channels for cross-border e-commerce, they should first try spot production and small order trial sales models. "However, shortening production lines and flexible production are the trend." In order to explore new sales channels for cross-border e-commerce, Cixi Youpin Museum is exploring new models overseas, including Malaysia, Thailand The Philippine Youpin Museum will adopt a model of "front exhibition hall and back warehouse" to "move overseas" the Cixi home appliance industry. Yu Xuehui explained that the platform selects products and encourages factories to stock up to overseas warehouses, integrate them into an overseas supplier, and then collaborate with overseas "small B" customers and e-commerce sellers, such as Shopee and Lazada sellers.

We believe there is an opportunity for this attempt. With the development of new e-commerce models, the demand for 'big B' customers will become smaller and smaller, and small and medium-sized customers who were originally unable to purchase directly from China are also the targets of our expansion orders, "he said.

In addition to Southeast Asian countries, the new model of Cixi Fine Goods Museum will also be tried in Russia, Central Asia, East Africa and other countries along the "the Belt and Road". Of course, Yu Xuehui