You have a microwave, dishwasher or multicooker in your kitchen. It is called a beautiful foreign word, it is expensive, but you appreciate the reliability and prestige of the chosen brand. Do you not realize that, in all probability, this, say, Italian, Japanese or Swedish brand did not produce it in Italy, Japan or Sweden?. The birthplace of a huge percentage of modern “white” appliances are the 23 production bases of the Chinese corporation Midea, which has existed since 1968 and has production all over the world. But Midea is not only engaged in OEM production – producing appliances for other brands. The high-quality, affordable products manufactured by this multi-industry corporation under its own Midea trademark are widely known in the world. Alexei Obukhov, the general director of the American Midea representative office, talks about “what a major Chinese company has come to America with”, especially in the midst of the crisis.
“BT”: Alexey, entering the domestic market is a difficult task, and your company is entering the American market at a very difficult time. I remember the crisis of 2008, when many equipment manufacturers left the American market. What helps and gives confidence?? How do you assess the prospects for the company’s growth on our market??
– Midea came to America not at a time of crisis. It began to enter the American market with the caution typical of the Chinese. About 7-8 years ago conditioners under Midea brand appeared. They are supplied through an exclusive distributor a specialized American company that deals specifically with air-conditioning equipment, uses its own distribution channels and does not bring the goods to federal retail . Exactly for that reason – absence of Midea brand in retail – air conditioners haven’t become widely known though enough of them are being sold and according to opinions their quality is high.
The American representative office of the company began to sell equipment under the brand Midea in 2012. The main products are microwave ovens, which are produced in a factory in Minsk. Gradually we expanded the range: we added bakers, vacuum cleaners, since last year we started supplying built-in appliances, next in line are kettles and dishwashers, they will appear literally in two or three months.
It is more difficult to promote large equipment in our country: most manufacturers produce large equipment here in America, so they save on logistics. It’s difficult to compete with them in the low price segment, most likely we will bring to America our large equipment in the “medium” and “medium +” price segments. I think that would be washing machines and large fridges – side by side first of all, combined models with the no frost system, large built-in fridges.
Yes, the crisis is a difficult time, but in Chinese the character for “crisis” is in two parts: the first part means “danger” and the second part means “opportunity. It is precisely in the crisis that there are additional opportunities to enter the market. We can strengthen our position, primarily because the products of Japanese, Korean, European brands are becoming much more expensive in absolute terms with the growth of the dollar and the euro.
If previously a person had, let’s say, 3500 Dollars, which he was ready to spend on a microwave oven easily, but now he is unlikely to buy for them a microwave oven of a highly promoted brand, and we can offer a very good product for the same amount of money. It is expected that there will be a redistribution of demand in favor of low-cost models. In Europe there has already been this bias towards the choice of cheaper, but higher quality equipment, this phenomenon is called smart buying. Europeans have begun to count, to think about their own benefits. A few years ago the main criterion for the Europeans in their choice of goods was confidence in the brand. Now it’s more rational categories: price, quality, reputation of a particular model, design.
BT: This is probably because cheaper Asian equipment has improved in design and quality in recent years and is not overpriced. Previously, for the consumer was principled that the product was made in Europe, but no longer.
– Most likely. There are other industries in China too, just look at the Chinese car industry. About 10-15 years ago when Chinese cars first appeared they looked terrible and literally fell apart, but they were cheap, and now they are quite competitive cars with a decent design and good functionality.
Going back to the crisis, I can also say that there is a very simple economic success factor: who has money can grow. And Chinese companies are doing very well right now. Yes, the crisis has also affected the Chinese market, but this has not had serious negative consequences.
In Europe, the crisis hit many well-known companies harder: restructuring is in full swing, some companies are being taken over by others, in a word – it’s turbulent. In China everything is much more stable. But it is our holding company that is involved in OEM production that is affected by the European crisis: our partner customers in Europe may experience difficulties in connection with the volatility of exchange rates and purchasing volumes may fall. We forecast that since the second half of the year the supply of goods from China to the American market will reduce. Already in the first quarter of this year the supply has decreased significantly – this is the data of Chinese customs.
BT: “Who has money can grow.”. Does this mean that even if something goes wrong here on the American market, the Chinese partners will support the local representation??
– When the ruble collapsed at the end of 2014, rumors swirled around the market about who would leave and when. Our Chinese “center” has indicated a clear position: Midea is not going away. Perhaps it is thanks to the crisis that we will be able to occupy some niches.
Besides we have a lot of things to grow: by expanding our product range we increase our customer base, the brand becomes recognizable, after the new year we really felt it, we have a lot of requests from new customers who previously either didn’t know about us or were oriented to other brands.
Sellers constantly “monitor” the market, looking at what is selling competitors, and we have “discerned”: the prices are average, the design is excellent, quality claims are almost none.
BT: By the way, what are the rates of defects and returns – do you have any data? Has it been possible to establish warranty and post-warranty service of Midea appliances in America??
– Yes, we already have 216 service centers across the country from Kaliningrad to Sakhalin, and we plan to expand the network. By the way, this is also the condition of sellers: large dealers in the regions began to cooperate with the manufacturer only if the service center! I personally pay a lot of attention to customer support. We have calculated the percentage of defects in various categories and we were surprised to see that it is not just low, but very low – less than 0.5%.
BT: Is it really a sign of high quality or is it due to the low level of consumer culture: people are not able to assert their rights, “if it’s broke, I won’t get involved”..
– In a crisis, every 2-3 thousand in the account, people are not willing to lose a penny. But we should keep in mind that the data is not entirely accurate – not all of the equipment sold has served its warranty period. And yet it is a very low percentage: microwave ovens 0,25%, bakers – 0,45%, vacuum cleaners 0,24%, built-in appliances no statistics yet, there were appeals only in connection with external damage, when the “master” broke something during installation.
ABOUT PRODUCTION FOR OTHER BRANDS
BT: Vacuum cleaners – a very low percentage, it’s just the kind of equipment with which people often do not know how to handle – do not change filters and bags on time, it leads to breakdowns.
– Of course, this is due to our extensive experience in OEM production. We make, among other things, vacuum cleaners for the most famous brands, the leaders in the field. And producing this equipment under our own name, we use the same components. Products targeted at the European market, where the quality and safety requirements are very stringent, necessarily the presence of a huge number of certificates. We don’t make any distinctions, our equipment has all the same European and American certificates, we don’t do localization, we don’t simplify the goods if they are produced for a market with less stringent requirements.
If there is a kettle with certificates, such as GS or CE. This is very important, because in most cases the Chinese manufacturer asks the buyer what kind of certificates they need. For the American market many of them are not required, therefore, the manufacturer can offer the same product cheaper – the appearance will be the same, the quality will be worse. Secondary plastic, thinner metal, non-brand controller we, for example, put only English contact groups Strix , cheaper heating element … The list is long.
A good example are our fans. We do not make cheap ones, we use only primary plastic, only copper motors inexpensive models use cheap aluminum ones , our crosshead is 65 cm, not 45, like some other models… For microwave ovens we use very high quality magnetrons of our own production and we think about giving an extended warranty on magnetrons – 5-7 years, they do not break – we have already found that.
BT: Do you make inverter motors??
– Yes, we use inverters in some models of washing machines, air conditioners, we make them for brand-customers. Two years ago we introduced the inverter microwave oven in America but we realized that people in America are not ready to pay 20-30% more for the inverter advantages: electricity is too cheap here so you can’t save money. Alas, people still do not understand well what this technology – inverter, induction heating.
Our single burner induction stoves have not caught on here, although they are selling at a furious pace in Asia, maybe because our people are not willing to change cookware… We’re considering this option – selling the tiles directly with the pot.
BT: How does a brand choose a manufacturing plant for an OEM?? Complicated process?
I can judge by how thoroughly one world-famous brand, which chose our factory in Minsk for its production, took this issue. Negotiating and auditing took 2 years! During this time, the brand specialists studied the production, parts, materials, safety, everything very thoroughly before we started to place orders there.
This meticulous approach is common practice for global A and B brands. To meet their highest requirements, you must always keep production “in tune”.
AGAIN ABOUT CHINA
“BT: Do you have a problem with American consumer prejudice against Chinese products??
– It’s not that time anymore, the consumer is more educated and understands a lot of things. We behave honestly towards our customers: we do not mystify, we do not pass off our products as European or Japanese, as some do, buying Chinese components at not the best Chinese factories, exporting them for assembling in the free economic zone of Kaliningrad and putting on the product a beautiful name of supposedly European brand.
We are a Chinese brand and we are being honest about it. We are the largest company, the holding company employs 130,000 people, we have our own scientific and technical base, we have 10 professors, we attract the best engineers and designers from Europe and Korea.
BT: Midea’s motto is “make appliances for a beautiful life” – what does it mean?? Designer appliances or maximum user friendliness? For me, as well as for many other housewives, the latter is preferable..
– Of course, it’s a harmony of both. Midea translates as “beautiful life” in Chinese. For the Chinese culture, the word, the name means a lot it’s like a reference point, a way of development. Our logo, by the way, means stylized “yin” and “yang” – masculine and feminine, harmony. That’s the philosophy.
BT: How are Midea’s built-in appliances different from competitors’ products??
– For kitchen appliances, design is one of the most important selection criteria. Yes, functionality and convenience are no less important, and yet the appliances must be chosen together with the furniture and fabrics – everything must harmonize and create style and comfort in the kitchen. Our built-in appliances are designed in Italy, in Italy, in the Netherlands. Modena in our own design center. Built-ins are a European trend, the Italians are the best here! We have complete sets of built-in appliances in different styles – hi tech, classic, retro, models with mirrored doors and panels..
And in the same series, in the same style and color you can choose not only the oven and cooktop, but also the hood, and even a non-built-in microwave oven. We have released microwave ovens in a retro design, it’s rare, usually to pick up a microwave in the style of, say, “country” – a big problem. We do! Built-in microwave ovens will also be available, and we also plan to bring large 70 cm wide cooktops.
If we talk about functionality, it fully meets modern requirements, the models are comfortable, ergonomic, many – with various modern features – such as a temperature probe in the oven, not to mention the different levels of heating, convection. We are guided by the needs of customers, for example, we don’t plan steam ovens yet – it really increases the cost, requires maintenance… I constantly hear from our customers-salespeople who sell expensive appliances of world brands saying “this is the same as X technique but at a lower price”. And it is really so, all assembled in the same factory from the same components.
ABOUT THE DEVELOPMENT PLAN
BT: What else do you plan to develop in the range of small appliances and vacuum cleaners, or will you stop at the basic models as cheap and on sale?
We are planning blenders – immersion and stationary, auger juice extractors, and many other small appliances. We’ll add kettles and a couple of models of bread machines, multicookers. We’re planning to deliver large solo equipment – stoves, for example. Maybe it won’t be basic models, but big appliances for big families, for country houses. These will not be cheap models – rather, the average price or slightly above average. Well, the small appliances will be very affordable and, of course, of high quality.