The Taobao website was almost completed, and it would be launched in June. If the MP3 player could not be launched in time, the Taobao website would have to be delayed.
In fact, Taobao website could be launched first. However, Li Mu felt that he did not have a gimmick to launch Taobao website first. Taobao website would be difficult to promote in the early stages. It would take a lot of manpower and resources to invite small sellers. Instead of that, it would be better to use a landmark event to build up the reputation of Taobao website.
If Taobao were to be launched, he would use YY, Tieba, Easy Listening, Alipay, and other platforms to crudely guide traffic to Taobao. That would be meaningless. There would be no attraction, and the conversion rate of users would be too low. If he pushed the first user to come in and take a look, it would not be attractive, and it would be much more difficult to attract them again.
Therefore, Li Mu hoped that the launch of the MP3 player could coincide with the launch of Taobao website. That way, he could maximize the effect of the game.
Li Mu thought that the two OEM companies were not doing well. After much consideration, he decided to work with both companies.
Zhang Heng signed an OEM contract with both companies in the name of Easy Listening Technology. The first batch of 45,000 MP3 players would be ordered from the Taiwan OEM company and 55,000 units from the Shenzhen OEM company. Zhang Heng paid 30% of the cost in advance. When Easy Listening Technology was split, they did not have much money on their books. Therefore, they borrowed a sum of money from Makino Technology. They will repay the money after the MP3 players are produced and sold.
Both factories had a production schedule of 27 days. With a 30% + 30% + 40% delivery schedule, the 100,000 machines would be delivered in three stages. The fastest batch of 30,000 machines would be produced in two weeks, just in time for the beginning of June.
The first batch of MP3 players would be delivered in early June, and the second batch would be delivered every week. This way, Li Mu would have the confidence to launch a promotion on Taobao website in early June. At that time, he could set the delivery period to one week later. After all, he had the price advantage, and the netizens were not spoiled by Taobao's 24-hour delivery. The netizens should be happy to accept this condition.
He had already thought through all the important details. Just as he was about to sign the contract, Li Mu suddenly had an idea. He made a phone call in the middle of the night, telling his subordinates not to rush to sign the contract the next day. Then, he contacted Lin Qingya at the last minute to discuss something urgent and important with her.
The two agreed to meet at a 24-hour cafe in Zhongguancun. Li Mu ordered a latte for both of them and told Lin Ching-ah about his concerns.
"I suddenly thought of a problem. We are just a small customer in front of all the OEMs. Most of their production capacity is allocated to the big customers, and the big customers also contribute most of their profits. If we launch our MP3 players on Taobao website and follow the zero-profit sales strategy I set, it will have a huge impact on all the MP3 brands. We will definitely become the common enemy of all MP3 brands. What if they put pressure on the OEMs to stop producing for us?"
Li Mu's worry was not without reason. Once there was a disruptor in the industry, no matter how fierce the competition in the industry was, this disruptor would become the target of public criticism. Take the Shenzhou computer for example. Back then, when the Shenzhou computer broke out of the market, it was because of a price war. The advertising slogan, "4880 yuan, bring home the Benz 4 computer." Not only did it push the Shenzhou computer to the whole country overnight, it also made the Shenzhou computer the mortal enemy of the other brands in the industry. If not for the fact that the Shenzhou computer was self-produced, it would have been killed off by the OEM factory.
Li Mu did not mean to think that the domestic MP3 companies were that bad. However, he had to be wary of others. If he tried to mess with others, they would definitely fight with him.
Lin Ching-ah only realized the huge threat when she heard Li Mu mention this problem.
If what Li Mu said was true, they would anger the entire MP3 industry. It was very likely that many companies would unite to put pressure on the OEMs. At that time, it was very likely that the OEMs would give up manufacturing for Easy Listening because of the pressure from many parties.
Lin Ching-ah asked Li Mu, "Li Zong, if we don't talk about the OEMs, how many units do you think we can sell in a year if we launch our MP3 players on the market?"
Li Mu smiled and said, "A conservative estimate is that there will be close to ten million units in the MP3 market this year. If we use an unprofitable model to disrupt the market and have sufficient supply, it will definitely not be a problem to sell more than three million units."
Lin Ching-ah said, "Three million units would mean sales of almost one billion yuan. If the market is really that big, can we invest in a factory or buy one?"
Li Mu shook his head and said, "I don't want to get involved in hardware production. Once the production process is involved, it will be too troublesome."
Lin Ching-ah asked curiously, "Most hardware companies have their own production lines, right? Some big brands will only hand over some small products that don't take up a large proportion of the market to the OEMs. "
Li Mu smiled and said, "If we produce it ourselves, we can't imagine how troublesome it will be. The factory needs hardware and manpower, and the production line needs to be designed, customized, maintained, and upgraded frequently. A large team of workers also needs a very complicated management system. There are too many shady deals in the procurement of spare parts and raw materials, and it is difficult to avoid cutting corners. If we produce it ourselves, it will be a headache to deal with all these things. In contrast, I'd rather raise the cost a little and let the OEMs take care of these problems for me. I only need to give them my requirements and money, and they will solve all the production, quality control, and after-sales issues for me. It is written in black and white on the contract. If you do well, I will pay. If you don't do well, I will settle the accounts at any time. How easy is that?"
Lin Ching-ah's beautiful eyes suddenly flashed with a different kind of light. She said in surprise, "Li Zong, I have an idea. Listen and see if it is useful."
Li Mu nodded and said, "Go ahead."
Lin Ching-ah immediately sat up straight and said excitedly, "You just said that it is written in black and white on the contract, so I suddenly think that we can sign a big contract with the OEMs in advance. Although we will order 100,000 units in the early stage, we can set the contract at 1.2 million units."
Li Mu was about to say that if they paid the deposit according to the normal procedure, the money would be gone.
At this time, Lin Ching-ah said again, "Let's split the big contract into two parts. One is the direct order agreement for 100,000 units. We will follow the normal procedure and pay them 30% of the price first, and then they will start the work. As for the remaining 1.1 million units, we will sign an agreement of intent with them. We promise to order 1.1 million units from them within this year. For this, we can pay 5 yuan or 10 yuan for each unit. If we breach the contract and give up the order, the intent will go to them for free. If they breach the contract and fail to deliver the goods on time, they will have to pay us five or ten times the liquidated damages."
Li Mu was stunned and asked, "Do you mean to set up a contract trap?"
Lin Ching-ah nodded repeatedly and said, "That's what I mean. The factory will definitely not resist the order. As long as they can get the production capacity, they will accept the order without hesitation. If they can't get the production capacity, I think they will take the order first and then subcontract it to others, because every order represents a real profit for them."
"Now the production quota of the two OEMs is about 100,000 units per month. We can sign an agreement of intent with them on the grounds that we are worried that they will adjust the quota distribution according to their production capacity. The factories will definitely agree without hesitation, because on the surface, the intended order of 1.1 million units will be beneficial to them. First, we will give them a deposit. Second, they can lock in the profit of 1.1 million units in advance. Moreover, it is impossible for the manufacturers to think about the situation they will face in the future, so they will be more than happy."
Hearing this, Li Mu was suddenly enlightened.
Lin Ching-ah wanted to set a trap for the manufacturers. Now the production capacity of the two OEMs was still a certain surplus, and the surplus of production capacity meant a reduction of profits for them. Therefore, they naturally hoped to produce at full capacity. They could get so many orders at once, and it was an order that they could completely absorb. Moreover, the other party had given them a deposit, which was almost no reason for them to refuse. Even if they had to pay ten times the deposit as compensation for breach of contract, they should not refuse, because they knew in their hearts that the possibility of paying ten times the compensation was almost zero, unless there was a natural or man-made disaster or other uncontrollable factors. Li Mu could even relieve their worries on this point by directly adding a clause on the contract: weather, disasters, and other uncontrollable factors are excluded.
However, this way, as long as the manufacturers signed the contract, under external pressure, they would not be considered uncontrollable factors if they didn't want to produce for me. At that time, if they dared to not produce for me, they would have to compensate me ten times the amount. Unless they burned down their own factory, there was absolutely no room for negotiation.
Thinking of this, Li Mu also became excited. He praised, "Qingya, this idea of yours is really great. How about this, this matter is very important. You can meet with the legal department tomorrow and draft a new contract with the OEMs according to your idea as soon as possible. But you must remember, in the one-year contract, it must be clearly stated that the OEM price will be adjusted once a month according to the market price of the storage chips. The manufacturers should also agree to this. Now that the hardware updates are so fast, when other brands sign contracts with manufacturers, they will definitely consider this problem. The price will definitely be adjusted frequently in a relatively short period of time."
Lin Ching-ah nodded and said, "Then I'll start working on this tomorrow at work."
Li Mu said, "It's best if we can entice them to sign more production capacity in the contract. It would be best if we can sign two million units."
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