Margins High and Low
1. Your personal story (about your Dad) seem to contradict my personal experiences dealing in China, especially the insultive part. However, China is huge country, I am sure it could be true somewhere.
2. Margins high and low.
- Margins are extremely low in China's manufacturing sector for commodity type of goods. This is the area that your Dad was somewhat familiar with. There is one simple reason for the low margin: competition. There could be a second, called Wal mart pricing. Basically Walmart squeezes margins from each of its suppliers every year during the contract renewal.
- Margin in many other sectors, however, are different. Some are extremely high. For example, property developers enjoy such a nice margin that millionaires (and billionaires) are created overnight. I personally knew with a few of them. The high margin also extends to luxury goods, high end restaurants and spa, and almost anything "new" before the competitors crowd in.
3. CCME is in a almost "monopoly" spot. If you know about Chinese advertisement, you know it is a highly lucrative area. CCTV, the largest TV station in China, is basically a money printing machine. Its ad rate increases at 15-50% year over year for the same TV spot.
4. Interestingly, the margins in ads are high partly because the margins in manufacturing are low, and everyone with goods to sell tries to reach to the consumers.
AI
