Extraordinary Genius - Chapter 640
Chapter 640 – Channels sharing
Feng Yu and Philips had different sales distributionchannels. Each of them has its own channels. In China. Feng Yu have betterdistribution channels, but Philips have their own retail stores and Wind, andRain doesn’t.
In overseas, Feng Yu have the Fu Family and AIWA saleschannels. AIWA also have quite a several retail stores. Philips also workedwith many partners and also have their own retail stores.
Feng Yu and Thomas decided to share their channels. Theywill join hands to bring the Super VCD players to the next level. However, bothof them had some differences in regular VCD players.
Thomas made it very clear that Philips will be at adisadvantage 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 haveother products. Why not we exchange sales channels for all our products?
Philips was also producing shavers, TVs, lamps, etc. Theyeven produced professional medical equipment. But the medical equipment was notincluded in this agreement. Wind and Rain and Aiwa still have humidifiers,bladeless fans, pagers, etc. The sales for these products should be good ifthey were sold in Philips’s retail stores.
Both parties managed to come to an agreement and sharedtheir distribution channels. Even their retail stores will set up a counter tosell the other parties’ products. This way, the retail stores had a widervariety of products, and consumers were able to purchase these products easier.
But the disadvantage was the consumers might think that bothcompanies had merged and all these products belong to the same company. Feng Yuwas 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 Rainbrand value will remain. When the market was opened entirely, the consumerswill know that both companies were in an alliance.
In the past, Sony owned the majority of AIWA’s shares, but theAIWA brand remained. Now, AIWA’s Walkman had already overtaken Sony.
Both parties were satisfied with this cooperation. Bothcompanies were working together on many technologies, and helping each otherwith their distribution channels were normal.
One week later, both parties’ retail stores saw an increaseof more than 50% in their sales.
But the Super VCD players’ retail prices were still veryhigh 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 VCDplayers sales had increased. There was a reduction in the selling prices, butthe 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 fromthese regular VCD players were much higher than before.
The other brands also realized that if they were to fightagainst Wind and Rain alone, they would lose. After all, Wind and Rainelectronics own the patent of the VCD players, and they were the ones whoinvented this VCD player.
Now, VCD players’ selling price had been reduced, and itlowered their profits. Philips, Wind, and Rain and AIWA had formed an alliance,and the other brands decided to collaborate to share their distributionchannels too.
These were world class consumer electronics brands. All ofthem have massive distribution networks. They have several dealers and their ownretail stores. Once they cooperate, they would be able to sell their productsin any city in the world.
Regardless of the channels or retail stores, these brandsgot the upper hand. They firmly believe this strategy will increase theirsales.
Most importantly, these brands have no other choices. Allthe brands have too many stocks piled up in their warehouses. If they could notget rid of them, they might not have the chance to do so in the future whenthere is an upgrade to the technology.
There is only a Super VCD player in the market now, and thefeatures are already more advanced. If the second generation of Super VCDplayer is launched next year, what can they do? What if Wind and RainElectronics decided to launch the DVD players?
If that really happens, these brands will not be able tosell off their existing goods even if they reduce the prices further. Theymight as well collaborate now and try to clear off their stocks. Although theywill not have any profits, at least they will be able to break even.
If the VCD players were to reduce its prices further, all ofthem would not be able to take it. They were all tricked by Wind and RainElectronics!
Wind and Rain Electronics, a small electronics company, dareto trick so many world’s top electronics brands? This was a slap to theirfaces!
All the brands wanted to retaliate and at the same time,work together to set the DVD encoding standards together. They want to teachWind and Rain Electronics and Philips a lesson!
If these brands were able to set the encoding standards forDVD, then the DVD players will have to use their formats. This way, they willlead the DVD player development.
“Manager Feng, those big companies have collaborated againstus. 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 moreretail points. What’s there to worry? They are still using our patentedtechnology and still have to pay us.
Furthermore, everyone can see the difference between SuperVCD and regular VCD players. In another two days, CCTV will air our newcommercials, and the advertisements for other countries will start soon. Thatwill be a killing blow to them.”
Jiang Wanmeng frowned. He felt that Feng Yu trusted theeffects of advertising too much. The other brands were some of the biggestbrands in the world. Their scales were several times bigger, and their brandswere more influential.
Just the loyal fans of those brands will increase sales.Furthermore, they had formed an alliance and will help each other. Wind andRain Electronics only have Philips and AIWA as their partners. The overallscale was too small, and it was no match for the other major brands.
“Manager Feng, although they are selling normal VCD playersand we are earning from them, but if the VCD players sold are our brands, wewill earn more. Also, we are expanding our factories, and our capabilities havebeen increased. If they can snatch the market share away from us, then ourstocks will pile up!” Jiang Wanmeng worrying said.
“How much is the production cost of our normal VCD playersnow?” Feng Yu calmly asked.
“Less than 700 RMB and we can still lower it further. Thelowest should be about 500 RMB a unit.” Jiang Wanmeng replied.
Feng Yu frowned. He was not satisfied with this progress. Heremembered in his past life, VCD players were selling slightly more than 300RMB before the year 2000. That means the production cost of one VCD player wasabout 300 RMB or lower. Now, Wind and Rain Electronics have the world’s top VCDengineers, and they could not lower the cost further?
“The lowest production cost is 500 RMB per unit? Can it belower than that?”
“That’s the lowest. The cost of many interior componentscannot be lower, and our manpower cost is also very high.”
Feng Yu finally understood. Those small factories in hispast life must have exploited their workers, and the interior parts must besubstandard parts. This was the only way they could control the production costto about 300 RMB. But that was when VCD players were almost obsolete.
“Ok. I know what to do. Those brands are just clowns, and wedo not need to worry about them. Come and watch these new commercials and youwill know why I am so confident.”
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