China's hardware industry's foreign trade to domestic sales
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In recent years, a growing number of Chinese hardware companies have started shifting their focus from foreign trade to domestic sales. Some are small manufacturers who have been forced to make quick adjustments, while others are larger firms using this transition as an opportunity to refine their market strategies and build stronger brands. Regardless of the reason, the shift from export-oriented operations to domestic sales is far from simple, especially for the hardware industry.
The path to domestic success is filled with challenges. The Canton Fair has long been seen as a key indicator of China’s foreign trade performance. Historical data show that the fair's transaction volume often reflects broader export trends. However, the latest figures from the 105th session of the Canton Fair reveal a concerning trend: exports are continuing to decline, and the outlook for foreign trade remains uncertain. In the first phase of this year, cumulative export turnover reached $13 billion, a drop of 20.8% compared to the previous year. The European Union and Japan saw even steeper declines—over 35%—while exports to Australia and the U.S. fell by 11.2% and 4.9%, respectively.
At the same time, while exports to developed markets have dropped sharply, attention must also be paid to the risks in emerging markets. Although some regions like Argentina, India, and ASEAN showed growth during the first phase of the Canton Fair, others such as Russia and Brazil experienced sharp declines—42% and 35%, respectively. These drops surpassed those seen in Europe and Japan. Since the fourth quarter of last year, the ongoing financial crisis has hit emerging markets more gradually, but the impact is now becoming more visible. This has contributed significantly to the decline in China’s exports to these regions. With no signs of improvement in the economic conditions of these markets, the risks for Chinese exporters remain high.
For companies looking to enter the domestic market, starting from scratch is a major challenge. Many lack brand recognition and face intense competition. The transition from export to domestic sales is not just about selling products domestically—it involves building an entirely new market presence. Brand development, channel expansion, and customer engagement all require significant investment and effort. Companies that previously focused on foreign trade often find themselves at a disadvantage when entering the domestic space, lacking product differentiation, brand identity, distribution networks, and the necessary expertise. As a result, many foreign trade companies find the process exhausting. For example, they may need to hire additional staff to manage branding and retail channels, which can be both time-consuming and costly.
Overall, while the move toward domestic sales offers new opportunities, it also comes with its own set of hurdles that require careful planning and execution.