Since she saw the report that domestic electric kettles had excessive manganese, Ms. Wang has become an overseas "purchasing expert" for electric kettles - she bought a German WMF online, asked a friend to bring back an Italian SMEG from Europe, and brought back a Platinum Fu from a business trip to Australia...

Ms. Wang may not know that the three high-end foreign electric kettles she bought were actually made in China. Among them, two were from Guangzhou Tuopu Electric Appliance Development Co., Ltd. This company located in Huadu, Guangzhou, not only produces all the WMF and Platinum Fu electric kettles on the market, 80% of the Italian Delonghi electric kettles, but is also an ODM (original design manufacturing) supplier for many brands.

However, a company with such excellent manufacturing quality and design capabilities also has "unsolvable" problems - in 2015, Tuopu electric kettles shipped more than 4 million units, but the company's "Tuopu Creation" brand electric kettles, which focus on the high-end market, only sold 160,000 units in China, and have been losing money for three consecutive years, relying entirely on overseas markets to fill the gap. Why has making high-end electric kettles become a losing business?

"Quality Expert" Made by Compensation

The shoddy workmanship of Chinese supporting products has caused the company to pay compensation to overseas customers three times

"When Tuopu was just founded at the end of 1998, it was just a small OEM manufacturer." Li Weizhong, chairman and president of Tuopu Electric Appliances, told reporters that it was three overseas compensations that made the company a "quality expert" in electric kettles.

"The first time I lost all my "first pot of gold." Li Weizhong said that in early 2000, Tuopu delivered 60,000 electric kettles to British customers, and the heating tubes had problems one after another. "The supplier is a company in Taizhou. The sample quality is very good and the life test is also fine. Who would have thought that in order to save two cents per unit, they secretly reduced the magnesium powder content in the finished product, resulting in a significant reduction in durability!" Speaking of this, Li Weizhong is still a little angry. Faced with customer claims, the two shareholders opposed compensation, but Li Weizhong insisted on compensation. In the end, Tuopu paid more than 3 million yuan in exchange for the trust of British customers.

Afterwards, Tuopu invested in its own heating tube factory and purchased testing equipment to strengthen the quality testing of raw materials. But not long after, Li Weizhong fell into trouble with silicone rings again. This time it was a supplier in Shunde. The samples were also fine, and the first few batches of goods passed the inspection, but the formula of the later goods was secretly changed, resulting in a batch of electric kettles exported to Germany having a smell after boiling water. "A silicone ring only saves a few cents, but it caused us to lose millions of yuan again." Li Weizhong had to open another silicone factory.

The third compensation was because of the PDCA circuit board. Like the second time, the supplier secretly replaced the resistors that cost a few cents with inferior products that cost a few cents. The result was still compensation, and Tuopu had to open another electronics factory.

"We must work hard on the supply chain, technology, standards, and processes." Li Weizhong said that Toppu quickly built 7 key parts factories, including plastics, intelligent controllers, electronic control boards, power cords and plugs, silicone rubber parts, heating plates, and electric heating tubes, and formulated strict quality standards and system processes to strictly control quality. Once, due to the injection molding process of the plastic branch being 10 seconds less, a batch of products exported to Arabia were slightly deformed after heating. Under the insistence of the quality supervision department, 4,000 products were eventually scrapped. It is this insistence on "not letting a single defective product enter the market" that has given customers such as Philips the "green light" for exemption from inspection.

Forced to go high-end

To eliminate potential safety hazards, the cost of the simplest product is 6 yuan higher than the mainstream brands in the market

In a high-end supermarket in Beijing, the "Topu Creation" brand electric kettle is placed together with the Italian Delonghi electric kettle made by the company. Although it is 20% cheaper, the starting price of more than 300 yuan is still much higher than the 99 yuan electric kettle in ordinary supermarkets.

"The uncompromising quality has forced the company to take the high-end route." Li Weizhong recalled that after joining the WTO, the low-cost vicious competition of export companies has risen. The price of plastic electric kettles at the Canton Fair quickly fell from US$12 per unit to US$2.5! The lowest price of stainless steel electric kettles in China has also been pulled down to 40 yuan per unit.

After repeated calculations, without turning over warehouse materials (recycled materials) and without lowering the safety standards of components, the lowest cost of a stainless steel electric kettle with the simplest function is 55 yuan for Topu. Not only is it far higher than the low-end products of 40 yuan, but the cost per unit is also 6 yuan higher than that of mainstream brands in the market.

"Don't underestimate this 6 yuan. With a production and sales volume of 10 million units, it means a net profit of 60 million yuan a year. But for consumers, 6 yuan means a safety hazard!" Tang Qiliang, director of the R&D center of Tuopu Electric, told reporters that in order to reduce costs, some companies use stainless steel billets remelted from recycled materials, or even completely unqualified 202 stainless steel, without considering the risk of precipitation of harmful substances such as manganese; some use low-level capacitors that are not explosion-proof; and some reduce the power cord from the national standard 0.75 square millimeters to 0.6 or even 0.3, and the risk of causing fire increases exponentially...

"Tuopu will never cut corners to reduce costs." Li Weizhong said that many companies are used to doing subtraction, but they can't help but do addition. Every time a problem is found in the test, the R&D personnel will always raise the standard, add protective measures, or use better materials.

As product quality gets better and better, Toppu's cost becomes more and more expensive. Some foreign orders even began to transfer to companies with low quotations, but a few years later, these orders came back. In the words of customers, "Toppu's high price makes sense." Today, Toppu not only manufactures electric kettles for high-end brands such as WMF, Bofu, Delonghi, and SEB, but also manufactures small household appliances such as coffee machines, toasters, and milk frothers for many international brands.

Expecting "gardeners" to pull out "weeds"

The repeated counterfeit and shoddy products have made many high-end consumers lose confidence in domestic products

Although it has been recognized in the export market, when Li Weizhong decided to make his own brand "Toppu Creation" in 2012, he was still a little embarrassed - Toppu would not make low-end products of 30 or 40 yuan; Toppu could not compete in the mid-end market of 80 or 90 yuan. "The mainstream product in the supermarket sells for 99 yuan, and a new brand sells for 110 yuan. Will you buy it?" Li Weizhong said that using the same or even higher materials, craftsmanship and standards as WMF and Delonghi to create a high-end independent brand has become the only way out.

"The word creation is in the brand, which shows the importance of innovation." Li Weizhong said that in order to enhance the brand's value, Tuopu has formed a professional R&D team of more than 400 people and established a "BlackBox" to specialize in cutting-edge technology. In recent years, Tuopu's R&D investment has accounted for more than 10%, and it has 282 authorized patents. New products with exclusive patented technologies such as WIFI electric kettles, steam cooking machines, and "magnetic levitation" milk frothers have been launched one after another.

However, the high-end market has limited capacity and consumers lack confidence in domestic brands, making Tuopu's attempt to conquer the high-end market full of hardships. Li Weizhong said that in recent years, China's electric kettle market has grown rapidly. The market size was 20 million three years ago, soared to 50 million two years ago, and is expected to reach 100 million this year. However, the annual sales volume of high-end products priced at several hundred yuan is only more than 3 million units, of which foreign brands account for more than 2/3.

"The repeated ban on counterfeit and shoddy products has made many high-end consumers lose confidence in domestic products. They would rather spend a high price to buy foreign brand products produced by Topu than choose domestic products of the same quality, the same standards or even higher standards." Li Weizhong suggested that relevant departments should take strong measures to crack down on illegal businesses. After all, only when the gardener removes the "weeds" can the "flowers" bloom in the garden.

Chart: Zhang Fangman