Believe it or not, manufacturing in China is more popular than ever. In fact, despite expectations to the contrary, May 2018 marked the country’s highest Purchasing Managers’ Index (PMI) rating in several months, a result attributed to “strong supply-demand factors and gains in global commodity prices.”
China has long been a go-to resource for budding e-commerce entrepreneurs, and with the country’s ongoing economic prosperity, that seems unlikely to change anytime soon.
However, this doesn’t mean that China’s manufacturing environment will remain static. To the contrary, entrepreneurs can expect advancing technologies and shifting market trends to create many new opportunities in the years ahead.
The following are some of the top trends affecting Chinese manufacturing that e-commerce entrepreneurs should keep an eye on.
1) Automation
Though automation is still a somewhat controversial subject in the United States, it has rapidly taken hold in China. In fact, one-third of all robots purchased worldwide in 2016 went to China — almost as much as the United States and Europe combined.
In the country’s ammunition factories, a full 25 percent of workers have already been replaced by robots. Chinese manufacturers are leading the way while other countries continue to lag behind in this area.
Why is China becoming a leading adopter of automation?
There are many factors contributing to this trend, including a desire to improve workplace safety and efficiency, as well as concerns over maintaining a high production output as labor force demographics change. This offers great potential for those seeking a manufacturing partner.
Automation is poised to lower prices and better ensure consistent, quality results.
2) Greater Emphasis On Quality
In 2015, the Chinese government introduced its “Made in China 2025” initiative, a wide-reaching endeavor designed to help the country maintain its manufacturing dominance in an increasingly globalized world.
A key part of this involves setting and enforcing consistent standards for all manufacturing facilities, with special emphasis placed on improving manufacturing techniques, quality management and brand nurturing.
Though e-commerce entrepreneurs have generally been able to vet their manufacturing partners via product samples or factory tours, the enforcement of these new standards will undoubtedly increase overall production quality throughout the country.
As a result, product safety and compliance issues should also be expected to decline, helping e-commerce stores avoid the wasted expenditures that result when a shipment doesn’t meet local regulatory standards.
3) New Manufacturing Centers
Historically, Shanghai and Beijing have been considered top locations for manufacturing, but these are far from the only areas available to e-commerce entrepreneurs these days.
Shenzhen, in particular, has seen dramatic growth in technology manufacturing, and spillover effects have also resulted in productivity gains in neighboring industrial parks. Many cities in the country’s inner provinces are also opening new factories, giving domestic companies even more manufacturing options.
At the same time, China is being forced to deal with increased competition from countries such as India and Vietnam. Vietnam alone has experienced an average 11.45 percent growth in manufacturing production between 2014 and 2018.
Though factories in these countries don’t offer as wide a range of manufacturing capabilities, their low prices are helping them gain more domestic partners.
To avoid losing business, Chinese suppliers will be forced to find ways to innovate and keep prices low, leading to new adaptations that will undoubtedly benefit your brand.
4) Increased Accessibility
It used to be that Chinese manufacturing was limited to major corporations with the ability (and budget) to place massive product orders. This is no longer the case.
Here at Sourcify, we actively help smaller entrepreneurs connect with factories that are able to produce orders in lesser quantities — ideal for those launching a new e-commerce store.
This trend is expected to continue in the near future, as more factories with more varied production capabilities come into being. A rising number of manufacturers who can produce smaller orders and a wider array of products will result in increased flexibility and the opportunity for even more partnerships that will help even the playing field for smaller startups.
5) Chinese Consumption Habits
You’re already working with an overseas manufacturer to produce items for your e-commerce store — but have you ever considered the possibility of also targeting overseas consumers?
Consumer spending has seen a notable increase in China in recent years. In fact, continued growth in consumption is expected to contribute to “over 60 percent of GDP growth” in 2018.
This increase in consumer spending comes as income levels rise, helping fuel China’s transition as a middle-income economy. E-commerce offerings, in particular, seem to be a major contributor to consumer spending growth.
For entrepreneurs, this represents an important opportunity.
Though you shouldn’t ignore consumers in your own country, attempting to reach an overseas market could lead to significant sales growth. Manufacturing products in China and then shipping them to Chinese consumers could help remove logistical hurdles, import fees and other factors that impact your bottom line.
6) Online Management
The internet has completely revolutionized how we conduct business — particularly when dealing with international partners. The reality of today’s e-commerce world means that you can run a store without ever visiting a factory or storing inventory in your own facility.
At Sourcify, part of our goal is to make it so you can oversee almost everything related to your suppliers online — from reviewing bids to production management.
While such upgrades are already yielding amazing benefits for e-commerce entrepreneurs, this is also affecting factories in China. Online management results in increased transparency and competition.
When potential partners have easy access to multiple project bids, manufacturers have more incentive to find new ways to add extra value. Best of all, the use of online tools also results in cost savings for the manufacturer — savings that are often passed along to your business.
China and the Future
Succeeding in e-commerce isn’t always easy.
From managing customer expectations to ensuring a streamlined launch for your store, there are many factors that can make or break your chances for success.
Fortunately, worrying about the reliability of overseas manufacturing doesn’t have to be one of them. As you use these manufacturing trends to your advantage, you’ll be well equipped to maintain strong profit margins for long-term success.