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Custom Yiwu Small Commodity Markets essay paper sample
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Yiwu is a small town in the middle of Zhejiang province of China. It is the world’s well known small commodities market. Yiwu small commodities market deals with various types of small commodities. Yiwu market is distributed across the city of Yiwu and is thus seen as a big wholesale market in China. Over 20 markets are housed in one building. The market’s strategy on increasing sales by specializing on small commodities and spreading its branches throughout the town has made it famous and has managed to attract millions of tourists each year.
Majority of Yiwu traders deal directly with the factory that enables them enjoy low prices. The driving distance to the show rooms and factories are very near. The market has an area of approximately 2.6 million square meters together with 53000 booths and over 160000 people in business. This is a good size and a large number of people, which makes it a market of interest. The entire city in itself is a market and its factories are situated in the suburban areas. Goods are only transported from the industry to the market after they are fully manufactured and ready for export or sale to the local people.
The prices of various commodities in Yiwu market are extremely low as compared to those offered in other places. The low prices of these goods have made it a market for almost every person who uses such commodities.For example, the price of small pottery is 0.9 Yuan and the mirror costs 1.5 Yuan. This being the major market for small commodities; it is one of the China’s leading markets where goods are obtained cheaply. The main reason why products at Yiwu are cheap is the huge and less expensive supply base within the town. Most of the suppliers to Yiwu are just from the surrounding towns and farmlands; hence, the cost of obtaining goods is less compared to when the source of supply is far.
Another reason why Yiwu products are cheap is government support an intervention. Government has increasingly subsidized the prices meaning that the cost of goods will be cheap. Yiwu is also strategically located as it is just two hours drive from Shanghai, which is China’s outlet to the world. Its nearness to the seaport will ensure that it gets the exports to the harbor much faster and at limited cost.
Besides jewelry, Yiwu, market deals with car accessories, zipper market, foodstuffs, and entertainment equipment. The jewelry products, for example, have earned reputation worldwide for its dealings with high quality jewelry. Most of the jewelry available in Yiwu market are locally made, while others are imported. The commodities are exported to almost 170 countries world wide, but the top 10 major export destinations include-USA, Germany, UAE, Spain, and Britain. The total 2009 exports were almost $ 2.136 billion dollars.
Most jewelry in Yiwu market is cheap as compared to jewelry in other markets in China and even around the world. Jewelry, which could be costing hundreds or even thousands of dollars, could be costing less than hundred dollars in the Yiwu Small Commodity Market. A tea mug used by American president, costs hundreds of dollars in Washington, but could be sold for as low as 5 cents in Yiwu. All the jewelry, be it gold or diamondmade, are sold for one-half of the lowest prices found in the cheapest stores in America or Europe.
Besides, the quality of jewelry in Yiwu is no way inferior to the ones sold at Luxembourg. In many situations, they are just the same. The specific reasons why jewelry and other products in Yiwu are cheap are indicated below
Cheap supplier Base
With its neighborhood and rich hinterland, Yiwu can easily access the products or items at cheap prices. Around Yiwu markets, there are various manufacturers, which have established their production base, which produces commodities like zippers, straws, jewelry, accessories, and buttons. This not only provides the cheapest products but also the largest quantities.
Since there are many factories operating close together, the economies of scale are realized. These are the benefits, which arise due to large-scale production. The effect is that transportation costs and logistic costs are reduced, making the products being sold at Yiwu market to be cheap and affordable. The large number of factories situated around Yiwu, makes the Yiwu Small Commodity Market the cheapest source of products.
High competition for factories to establish their presence in Yiwu have led to the reduction of prices of various commodities. The large number of firms producing large number of commodities has lead to reduction of price at the Yiwu small commodity market. The stiff competition has resulted to profit margins on products being achieved, for example , a profit margin of 3 % on jewelry products (Ganne, et al,2009).
Strong Government Support
Government has been keen to support the growth of Yiwu commodity market. The government invested a lot of money in order to build the Yiwu market. The shops would then be rented to people at very low rates. The government also discouraged the private companies from establishing their base inside the buildings. The government ensures that individuals and not private companies operate all the markets inside the building.
Because of this, Yiwu Small Commodity Markets have attracted more vendor or vendors from different parts of China because of low shop rents. That is why factories from the neighboring cities like Ningbo, Wenzhou, Guangzhou, and even Shantou established their production plants at Yiwu in order to sell their products (Jiao, 2003).
Yiwu market provides a convenient place for different traders to carry out their businesses. More top national and global brands have been encouraged by government to establish their presence in Yiwu Small Commodity Markets. This ensures that Yiwu products maintain high quality at all times. With unwavering government support, Yiwu market has tried to keep its prices low for a long time.
One-cent profit money making
Most Yiwu businesspersons are well known for their industriousness and agility. They are very keen concerning the one-cent profit type of business opportunity. The Yiwu market principle holds that as long as there is a descent profit, the business should continue. That is, therefore, a contributing factor to the low price of most Yiwu products.
Yiwu Export Data
Yiwu exports to the African continent reached $ 190 million up by 80%. The establishment of businesspersons from Africa in Yiwu has lead to the strong business relations between businesspersons from the two continents. The Yiwu exports to the US have reached approximately $ 161 million, becoming the leading destination of Yiwu exports. Yiwu’s top 10 exports include office stationery, jewelry, shoes, crafts, textiles, and many others. Jewelry exports alone gave Yiwu $ 24 million in the last quarter of 2009. The jewelry sector also registered a 45 % increase in the exports last year, shoes, umbrellas represented an incremnent of 75%, and the highest was Christmas tree lighting, which registered a growth rate of 115% (Baile, 2008).
Yiwu commodity markets according to the research done, shows that over 80% of the household goods get new markets. The development of the jewel industry in Yiwu will encourage the use of environment friendly materials in order to strengthen their original designs and innovation, models, brand competitiveness, unique market model and integration of jewel industry.
In Yiwu market, nearly every day, many new accessories are made available and the whole year models total up to 300000.Most of them are exported to countries like Germany, USA, UK, and African continent. Last year’s financial problems however shook Yiwu’s jewel industry. The bad news again is that besides the adverse financial problems, the jewel brands are still weak and developing too means that the customer base is not well developed. It is also coupled by the fact that it does not employ the use of modern equipment. Most of the Yiwu jewelry is made by artisans, which makes the jewelry quality to be low. Therefore,, the export of jewelry has been low due to these problems.
Developments in the Jewelry sector
Innovation has been the main driving force of Yiwu jewel industry. The trends in progress of Research and Development have encouraged jewel industry to develop and grow at a fast rat. Most firms in Yiwu have embraced the production of high quality and durable jewelry. In 2009 alone, Yiwu jewel industry received 120 billion Yuan from exports. These firms employ about 3,800 skilled employees who make the best jewelry worldwide.
The domestic market of jewelry is also growing. The increasing Chinese taste to jewelry has boosted the demand of these products by almost 75% in China alone. Yiwu Market, therefore, has encouraged jewelry industry by allowing jewel firms, both national and foreign to establish their base Yiwu city. That is why the Jewel industry is experiencing growth despite the setbacks faced last year (Yao et al, 2008).
In conclusion, Yiwu small commodities market is a fast growing market due to the support from the government and the advantages it obtains from its locality and nearness to the industries among others.
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