In recent years, due to the country's emphasis on LED development and the promotion of various favorable policies, a lot of money has poured into the LED industry. However, industry regulations are lacking and low-quality and low-price products are rampant. This company is not the only one that has gone bankrupt in Zhongshan. The following is the editor's analysis of the two reasons why this situation occurs:
Postdated checks become bad checks
In 2013, the "Xiong Kee bankruptcy incident" almost hurt several suppliers. According to one supplier, he borrowed hundreds of thousands to ship goods to Xiong Kee, and then took a check from Xiong Kee. Later, after learning that the boss of Xiong Kee ran away, the supplier almost jumped off the building that night. In the incident of "Xiongji boss ran away", the most injured ones were the parts suppliers and dealers. The surviving suppliers will have to pay for the failed companies to a certain extent. If low-price and low-quality products are rampant in ancient towns, the brand image of the "Lighting Capital" will also be affected.
Low prices lead to confusion in the industry
As the largest professional lighting production base and wholesale market in China, Zhongshan has tens of thousands of LED companies. In 2012, the total output value of the lighting industry reached 15.81 billion yuan, accounting for more than 60% of the national market share. The town's industrial facilities are quite mature. Many people rent a factory locally, buy a few soldering irons, purchase the necessary accessories in the town, and simply assemble them at home. Workshop-style enterprises like this are everywhere in the ancient town.
According to the official website of the ancient town, there are more than 10,000 individual business licenses registered in the town. In order to sell their products, these small workshops engage in vicious price competition. On the one hand, they want to keep prices low, and on the other hand, they want to make money, so these companies have made decisions on product costs. In addition to purchasing low-priced accessories, some factories will even further reduce costs by saving processes. According to a supplier, the factory’s lighting prices were relatively rational at first. Taking a 3W LED bulb as an example, it still made a profit when it was sold for more than 5 yuan, but later it was only sold for 3.8 yuan. This price is not even enough to cover the cost, and the quality of this kind of product, which is called "bad goods" in the industry, is not guaranteed at all. Some companies just take a shot and change places. Blindly pursuing the low-price development route will only lead the company into an abyss.
The problems mentioned above are actually shared by many LED companies. For long-term development, companies cannot blindly pursue profits. They must identify their company's market positioning and then position their products, plan their development route, improve the quality of their products, and control their own company's funds at the same time. Do not blindly expand the scale of the company's production, so that the company can grow healthily.
"Customers blindly demand low prices. In 2012, Kabon, in 2013 in Xiongji, companies with assets of over 100 million also closed down!" Today, I saw on the website a scene of a lighting factory in Henglan Town, Zhongshan closing down and the boss jumping off the building. It is really regrettable.
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