Chapter 640 – Channels sharing
Feng Yu and Philips had different sales distribution channels. Each of them has its own channels. In China. Feng Yu have better distribution channels, but Philips have their own retail stores and Wind, and Rain doesn’t.
In overseas, Feng Yu have the Fu Family and AIWA sales channels. AIWA also have quite a several retail stores. Philips also worked with many partners and also have their own retail stores.
Feng Yu and Thomas decided to share their channels. They will join hands to bring the Super VCD players to the next level. However, both of them had some differences in regular VCD players.
Thomas made it very clear that Philips will be at a disadvantage if only Wind and Rain Electronics is selling the VCD players. Philips is not producing regular VCD players.
But Feng Yu thought of a simple solution. Philips still have other products. Why not we exchange sales channels for all our products?
Philips was also producing shavers, TVs, lamps, etc. They even produced professional medical equipment. But the medical equipment was not included in this agreement. Wind and Rain and Aiwa still have humidifiers, bladeless fans, pagers, etc. The sales for these products should be good if they were sold in Philips’s retail stores.
Both parties managed to come to an agreement and shared their distribution channels. Even their retail stores will set up a counter to sell the other parties’ products. This way, the retail stores had a wider variety of products, and consumers were able to purchase these products easier.
But the disadvantage was the consumers might think that both companies had merged and all these products belong to the same company. Feng Yu was actually at the losing end for this.
But Feng Yu does not mind. What he wanted was the market. Wind and Rain Electronics’ reputation might be affected, but Wind and Rain brand value will remain. When the market was opened entirely, the consumers will know that both companies were in an alliance.
In the past, Sony owned the majority of AIWA’s shares, but the AIWA brand remained. Now, AIWA’s Walkman had already overtaken Sony.
Both parties were satisfied with this cooperation. Both companies were working together on many technologies, and helping each other with their distribution channels were normal.
One week later, both parties’ retail stores saw an increase of more than 50% in their sales.
But the Super VCD players’ retail prices were still very high and not many people were willing to buy. However, the profit margin was high, and Feng Yu was still satisfied with the result.
Feng Yu was also pleased to know that his regular VCD players sales had increased. There was a reduction in the selling prices, but the quality of the products was still the same. There were also many promotions, and customers could compare the VCD players with other brands. The profits from these regular VCD players were much higher than before.
The other brands also realized that if they were to fight against Wind and Rain alone, they would lose. After all, Wind and Rain electronics own the patent of the VCD players, and they were the ones who invented this VCD player.
Now, VCD players’ selling price had been reduced, and it lowered their profits. Philips, Wind, and Rain and AIWA had formed an alliance, and the other brands decided to collaborate to share their distribution channels too.
These were world class consumer electronics brands. All of them have massive distribution networks. They have several dealers and their own retail stores. Once they cooperate, they would be able to sell their products in any city in the world.
Regardless of the channels or retail stores, these brands got the upper hand. They firmly believe this strategy will increase their sales.
Most importantly, these brands have no other choices. All the brands have too many stocks piled up in their warehouses. If they could not get rid of them, they might not have the chance to do so in the future when there is an upgrade to the technology.
There is only a Super VCD player in the market now, and the features are already more advanced. If the second generation of Super VCD player is launched next year, what can they do? What if Wind and Rain Electronics decided to launch the DVD players?
If that really happens, these brands will not be able to sell off their existing goods even if they reduce the prices further. They might as well collaborate now and try to clear off their stocks. Although they will not have any profits, at least they will be able to break even.
If the VCD players were to reduce its prices further, all of them would not be able to take it. They were all tricked by Wind and Rain Electronics!
Wind and Rain Electronics, a small electronics company, dare to trick so many world’s top electronics brands? This was a slap to their faces!
All the brands wanted to retaliate and at the same time, work together to set the DVD encoding standards together. They want to teach Wind and Rain Electronics and Philips a lesson!
If these brands were able to set the encoding standards for DVD, then the DVD players will have to use their formats. This way, they will lead the DVD player development.
……
“Manager Feng, those big companies have collaborated against us. They are sharing their channels, and overall, they are stronger than us!” Jiang Wanmeng saw Feng Yu and told him this anxiously.
Feng Yu laughed. “No need to panic. They only have more retail points. What’s there to worry? They are still using our patented technology and still have to pay us.
Furthermore, everyone can see the difference between Super VCD and regular VCD players. In another two days, CCTV will air our new commercials, and the advertisements for other countries will start soon. That will be a killing blow to them.”
Jiang Wanmeng frowned. He felt that Feng Yu trusted the effects of advertising too much. The other brands were some of the biggest brands in the world. Their scales were several times bigger, and their brands were more influential.
Just the loyal fans of those brands will increase sales. Furthermore, they had formed an alliance and will help each other. Wind and Rain Electronics only have Philips and AIWA as their partners. The overall scale was too small, and it was no match for the other major brands.
“Manager Feng, although they are selling normal VCD players and we are earning from them, but if the VCD players sold are our brands, we will earn more. Also, we are expanding our factories, and our capabilities have been increased. If they can snatch the market share away from us, then our stocks will pile up!” Jiang Wanmeng worrying said.
“How much is the production cost of our normal VCD players now?” Feng Yu calmly asked.
“Less than 700 RMB and we can still lower it further. The lowest should be about 500 RMB a unit.” Jiang Wanmeng replied.
Feng Yu frowned. He was not satisfied with this progress. He remembered in his past life, VCD players were selling slightly more than 300 RMB before the year 2000. That means the production cost of one VCD player was about 300 RMB or lower. Now, Wind and Rain Electronics have the world’s top VCD engineers, and they could not lower the cost further?
“The lowest production cost is 500 RMB per unit? Can it be lower than that?”
“That’s the lowest. The cost of many interior components cannot be lower, and our manpower cost is also very high.”
Feng Yu finally understood. Those small factories in his past life must have exploited their workers, and the interior parts must be substandard parts. This was the only way they could control the production cost to about 300 RMB. But that was when VCD players were almost obsolete.
“Ok. I know what to do. Those brands are just clowns, and we do not need to worry about them. Come and watch these new commercials and you will know why I am so confident.”