The expanding use of China’s labor force beyond low-cost manufacturing and into areas like customer service, sales and marketing will have profound effects on the global lighting industry
This past week I was invited by the Messe Frankfurt/Hong Kong team to speak at the THINKLIGHT conference as part of the Guangzhou International Lighting Exhibition. I accepted the offer as I was fascinated to see China’s lighting industry up close and personally.
The ferocious desire to win
Walking through the halls of the Guangzhou fair, the intensity, the ambition on display from the staff manning the booths is amazing. You are confronted with a ferocious desire to win your business, booth after booth, hall after hall. It is almost difficult to cope with for Westerners used to placid, meek shows like Lightfair.
From copy cats to fast followers to leaders?
The Guangzhou show vividly demonstrates that the Chinese lighting industry consists of, to put it nicely, “fast followers”: Manufacturers leveraging their cheap labor advantage and fast time to market to drive down the cost of product formats and technologies established by the Western brands. Compounding the copying problem, the majority of companies at the show have clear ambitions to field a complete lighting offering, resulting in rampant cross-sourcing and acute commoditization. I estimate that 80% of the booths at the Guangzhou show display a nearly identical range of commodity products – flat panels, downlights, track fixtures, industrials, etc. This fierce commodity war is reaching far into the Western markets and simply sucking all the profit out of many product categories. And quality is a total crapshoot from complete junk to best-in-class.
But still, I would say that 15% of the product I saw on display was at least competitive, and maybe 5% was actually novel. Just like the European brands, most companies have their high volume runners yet still try new offerings at the edges – interesting product derivatives, tweaks to style, new fashions, etc. Even just 5% of the massive Chinese lighting industry can really add up to a lot of innovation launched to market.
Looking beyond the copycat players, what I also saw were companies starting to copy the product marketing, the sales strategies and the brand positioning of the leading western players. Of course the Chinese lighting market is still eons away from the innovation and marketing leaders at Light + Building in Frankfurt. But they are catching up faster than the western brands are innovating.
Service will win
The overwhelming labor advantage the Chinese have enjoyed will move to more competitive, higher-level differentiating factors.
For the past century, Western business culture has been routed firmly in one mantra: Use technology to reduce labor costs. Anything else – like customer experience – has been tossed aside in the single-minded pursuit of lower process costs. Yet labor in China has been relatively cheap and plentiful. How can companies use cheap labor to create extraordinary customer experiences? Will this labor advantage allow Chinese and Asian lighting companies to break through traditional market or geographic barriers?
From my first-hand experience in Guangzhou, the potential impact of using cheap labor for overall customer experience is extraordinary.
The Messe Frankfurt Hong Kong team graciously hosted me at the Langham Guangzhou. Langham is a top-tier global luxury hotel chain, but the service standards at the Langham in Guangzhou are night-and-day above service standards I’ve seen in comparable Western hotels. For example, let’s just review my arrival:
- 3 bellhops waiting at the curb – they had my bag unloaded from the taxi before even I exited the cab
- 3 hosts were positioned inside at the lower elevator lobby, eagerly waiting to help diffuse the confusion as to which elevator arrived next
- 2 hosts at the main lobby level directing me to the front desk
- 5 hosts waiting at the front desk
- 3 hosts manning the porter station
- 1 host attended the elevator lobby
And they were all fully fluent in English, extremely polite and professional, and clearly well trained. Let’s compare that to my recent stay at the Ritz Carlton in Philadelphia – 1 bellhop, 1 greeter, only 2 front desk staff. That’s a 4:17 staff ratio difference between two “luxury hotels” just during the arrival experience. I won’t even talk about the difference in bartenders!
Recovering from a guest experience issue
Another astonishing example of service: One morning, I realized my air conditioning must have failed in the night. I told the front desk and before I got back to my room, a maintenance guy was already waiting outside. I went to the gym (where I counted 5 staff members just in the fitness center!) and returned a bit early, to see 3 maintenance guys tearing apart the air-con unit in the room (clearly, it had a major failure). I went back to the gym to kill time, where a front desk staff member personally sought me out merely to update me that they needed another 30 minutes to finish the fix.
This is “5 star” customer service. Nothing compares in the US or Europe to what I’ve experienced here in Guangzhou.
In the west, “clever” managers are trying to minimize service costs via technology solutions. They think they can substitute human beings with apps, AI, IoT and various other buzzwords. Imagine a $250/hour MBA consultant telling lighting manufacturers “…you should add feet-on-the-street, more inside sales staff, more application engineering staff, more fast-response production capacity, more service staff to create a better customer experience…” This is not going to go over well.
Those who build the customer relationships take the profit margins…
Maybe this is why in the Western markets, its the “middlemen”, the rep agencies, value-added-partners, distributors, showrooms, etc. that gobble up the profit pie? They’re the ones investing in staff and building person-to-person customer relationships. And from my experience as a lighting designer, most of the market channels in lighting seem unimpressed by product technology gimmicks (with the exception of “systems integrators” that are exclusively focused on new tech).
The challenge for the Western lighting players?
After spending 4 days experiencing the fierce intensity of the show floor and the luxurious service standards of the hotel, I came to this question: Are the Chinese going to start directing their unparalleled labor advantage towards higher-level business strategies?
Already, sales staff from “unknown” Chinese companies are reaching me on Linked In, desperately trying to get my attention for their products. They are slowly refining their brand presentation, figuring out the right things to show, say and do.
I believe the winning lighting companies of the future are going to be the ones that invest heavily in customer service. They will use a combination of low product pricing, smart technology AND 5-star customer service to win. Savvy customers will demand all three.
Establishing sales staff (either directly or through channels) to build personal local relationships costs the same in a respective market for any company. But in this modern digital world, low cost labor can be used for marketing staff building intimate social media channels, development staff responding to customer requests, or service staff remotely commissioning lighting systems. Service will be the next “killer app.” From what I saw in Guangzhou, the Chinese know how to play the service game. Can they press this advantage globally? Or are they stuck as “fast followers” forever?