Business Models You've Never Even Heard Of
These are places where you can purchase seemingly everything, and also where you can get hopelessly lost. These are places where you can look, touch, negotiate prices and place orders.|
The largest market consists of 7 or 8 5-story buildings, each containing thousands of shops, and each shop owned by one of the small regional factories.
These market buildings are so large and contain so many shops that the aisles in each building have street names and maps are normally required for navigation. There are more than twenty of these markets in the city, forming a huge concentration of products for interested international buyers.
The largest wholesale factory market in YiWu, the International Trade Center, contains about 50,000 shops. To save you the math, if you had 8 hours per day, 5 days per week, and spent only 1 minute in each shop, you would need well over 5 months to visit all of them. And that's only one market.
Some of the other markets are: Arts and crafts market; DIY and gardening market; Umbrellas market; artificial flowers market; Stationery, Sport and leisure; Clocks and watches; Eyeglasses and sunglasses; Kitchen and bathroom hardware; Toys; Candles; Cosmetics; Fashion jewellery; Mobile phone accessories; Small home appliances; small electronic products; Bags and leather products; Shoes; Tissue, cloth; Socks; lingerie, toys.
Today, the different markets of Yiwu cover an area of more than 1 million square meters, with more than 320,000 items classified in 1502 different categories. It is the largest supermarket in the world, and every day more than 1000 shpping containers leave the city, destined for foreign ports.
The factory owners met repeatedly to discuss their overall situation and eventually agreed to cooperate and specialise.|
After that, some factories produced components for a wide range of brands and styles while others produced other components, and finally others focused on assembly and packaging. And marketing, which was centralised to some extent.
Each factory in this existing network will play its part in the system and produce sufficient volume to fill all existing orders. However, it is free to manufacture its own brands of lighters and worry about its own marketing, or to produce entirely different products in addition to lighters. So long as the basic cooperative requirements are met, I am aware of no restrictions on activity.
This cooperative functions in a practical sense as a large manufacturer and exporter with tens of thousands of employees and 700 manufacturing locations - but with no board of directors, no executive-level management, no middle management, no policy manual, no bureaucracy and no corporate overhead.
Due to the decentralised structure and specialised, tight product focus, the group can move swiftly to meet any challenges. Sometimes the development process from product conception to produced sample can take less than 24 hours. The group can accept and fill orders of any size, the production often being done by whichever location has unused capacity.
Because the capital investment load is distributed so widely, financing is not an issue, modernisation or the addition of capacity is done in small increments according to the ability and ambition of each manufacturing unit, and of course each person in the entire plan has a vested personal interest in ensuring that costs are kept to a minimum.
The group does have two other huge advantages. One is the existence of perhaps 10,000 marketers, all of whom can fill any spare time to search the internet for more customers for this cooperative enterprise. The second is that all members have much to gain from this effort, since all revenue goes directly into their own pockets.
It was this loosely-structured but tightly-knit cooperative that permitted the myriad small companies to function as a much larger and more powerful entity. The workability and the strength of this business model has proven itself quite well. As mentioned earlier, the small lighter industry surrounding YiWu has increased its share of the worldwide market from around 30% to over 70% in only a few years.
This was possible partly because the concept of family, and of extended family, is one of the fundamentals of Chinese culture that is understood dimly if at all by Westerners. It is unlikely that such an entity would long survive in the West, because the Chinese concepts of family, cooperation, harmony, either do not exist in the West at all, or not in the same way or to the same extent.
It is worth noting too that, aside from some of the newly-graduated children joining the family business, there are no MBAs here. The entire business model was invented mostly by the older parental generation, who may well not have completed their high school education.
This is only one story of innovation in China. There are countless millions of others, in ways and places we might never imagine.
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