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Yiwu, Zhejiang - a city of express delivery, a city of packaging boxes.

In 2020, 24.69 million parcels were sent from Yiwu to every corner of the country every day. In the past year alone, newly added production lines could turn out packaging boxes for 30 to 40 million small parcels a day. Since the start of this year, the low-price scramble in the express delivery industry has triggered warehouse pile-ups and has also driven capacity expansion at express packaging plants. But this has always been an industry with an extremely low level of digitalization.

In the early years, the owners of carton plants did business by faxing handwritten figures. For monthly business worth hundreds of thousands or millions, ordering, delivery and bill reconciliation all depended on handwriting. Digitalization came here slowly yet urgently, and it was not until 2021, with the introduction of new technologies, that traditional packaging companies finally began stumbling into internetization.

Master Tian, the oldest employee in the plant, has been in packaging for more than 20 years. More than two decades of factory life have given him rough, dark skin, a loud voice and a casual character. This is the "occupational disease" left by the factory: if you do not speak loudly, people cannot hear you.

In February 1998, after the Spring Festival, a fellow townsman introduced Master Tian to his first factory, and he stumbled into the packaging industry by accident. That was the first time he "properly joined a company", and it meant a great deal to him. In Fujian he had worked as a laborer on construction sites and as a gatekeeper at a plant, and he felt that neither job required much skill. This time, Master Tian decided to work hard.

This proper company actually had what could be called a harsh environment at the time. When the machines started running, the exhaust pipes blew toward the ground, and all the dust on the floor was thrown up into the air. After a day's shift, one wipe of the nose left a handful of black. In summer, when it was hot and the workers were packed close together, "it was unbearably stuffy". The machines were also very noisy, two people had to stand very close to talk, and some had to stuff tissue into their ears.

Master Tian cherished this job. When he first joined the plant, the leadership did not trust these young lads with machine operation, so he started as an apprentice, sweeping the floor, sorting materials, and volunteering to lend a hand wherever things needed to be moved. Whenever a master was operating a machine, he seized the chance to watch from the side. After watching for a year and a half, Master Tian had become thoroughly familiar with the operation, and only when the workshop foreman felt he was quite conscientious did he let him run a machine himself for the first time.

According to the supply order, "paper comes in thick and thin, in kraft paper or linerboard. According to the customer's needs, we put this paper on the machine, and after high temperature and compression, the paperboard softens and can be pressed into a fixed shape in the mold." From a paper roll half a person's height and weighing over a hundred jin, it finally became the corrugated board of a packaging box.

Starting as an apprentice, he then became a machine operator, a team leader and a shift foreman. In 2006, the plant had still never grown in scale. "That kind of old-established plant just had a few fixed customers, and never thought about how big I want to be or how many customers I want to expand to." He decided to leave the plant where he had worked for eight years and moved from Fujian to Zhejiang.

During these years, the packaging industry developed slowly but steadily. From the early 1990s, when Master Tian first entered the trade, it was also a period when the packaging industry was gradually rising. In the early days, factory machinery and equipment were not as advanced as today and were mostly semi-automated. A corrugated line needed dozens of people, market competition was not intense, and it was a money-making business. After 2000, as market competition intensified, equipment had to be updated, efficiency rose accordingly, and labor costs came down.

In 2006, when Master Tian moved from Fujian to Zhejiang, mechanized equipment had already begun to appear. Like Master Tian, most people who entered the trade came in through friends bringing friends and fellow townsmen bringing fellow townsmen. "Back then, it was the people without much ability who went into factories - you learned a craft so you could scrape together a meal."

In 2008, business was especially easy. You just waited in the plant and orders came to you. "We did not need salespeople going out to call on customers; customers called or came in person to place orders." Some companies had poor credit and insufficient funds, "people would not give you the business - they were picky about customers, because there were simply too many customers."

Even long-time customers of many years would not accept extended payment terms and insisted on cash on delivery. "His goods were already in short supply; if you were not a long-term customer, it was impossible for him to let you do the business."

The planning department handled orders. Normally, a production line had a daily capacity of around 80,000 square meters, yet the planning department could take in more than 200,000 in a single day. "Clearly, the orders received in one day could not be produced - we were already at full capacity." The boss at the time saw the business opportunity: with two production lines and tens of thousands of tonnes of paper stockpiled, all employees worked two shifts, running day and night with 24-hour nonstop production. "It was equivalent to doubling capacity at once."

Because of the good days of 2008, more and more people entered the packaging industry. The current owner of Fengshou Packaging Plant, Zhou Ran (pseudonym), used to do business in the construction industry. On a trip home for the Chinese New Year, his nephew Huang Binbin, who had already been in the packaging industry for several years, strongly urged him on, saying the packaging industry had good prospects: "This boss made so much money, and that one is growing so fast."

In that era, starting a business did not require all the fuss of today, such as market research and feasibility analysis. At the time, the first thing Zhou Ran considered was the biggest risk of the matter, and he found that the "only and greatest advantage" of the packaging industry was its low risk factor. Although it was a traditional industry, it had huge market potential. "Even waste paper can be sold for money. The scraps of waste paper swept off the floor are all money. Losses are also limited." And so Fengshou Packaging Plant was born.

The packaging market is large enough. From the perspective of end customers, it is a market worth two trillion yuan. Food, clothing, housing and transport - anything that involves transportation cannot do without packaging. Packaging is an industry closely tied to people's lives. "No matter how things change in the future, packaging will certainly exist."

Considering transportation costs, Fengshou Packaging's business covers a radius of about 100 kilometers around it. Packaging is closely related to the level of local economic development, and the economically developed regions of Guangdong and Fujian are also where the packaging industry is most developed.

In the past five years, Jinhua has added over a hundred packaging companies. Master Tian also shops online himself, and when a purchase arrives, the first thing he does is check the quality of the packaging box. "Everything we buy online now is basically packaged in cartons. We have never been without this thing."

Now the factory is modern enough, and machines have replaced most people's work. You only need to sit in a chair and operate the huge mechanical arm to place the paper roll on the machine; then it is heated, shaped, and finally turned into paperboard. The machine cuts it to size, ten to a group, and workers carry them to the truck. Shipping can be completed the same day.

Compared with the past, the physical work is much easier. What used to be carried on the shoulder and by hand now only needs the press of a machine button, and there is no longer any need to work in a room full of dust. More and more people have entered the packaging industry, and the apprenticeship system is no longer stressed: as long as you are willing to learn, you are welcome at any time.

In 2014, smartphones had gradually become widespread and the internet had become the main channel for obtaining information, yet at that time Huang Binbin, the sales manager of Fengshou Packaging, still relied on phone calls and in-person visits to connect with customers. Most customers were scattered in the surrounding villages. To see one customer, he drove two hours there, talked for an hour, and then drove two hours back. All the time was spent on the road, and in a whole day he could visit at most two or three.

Huang Binbin was on the road every day. Many third-tier manufacturers were scattered in villages and industrial parks, so developing new customers could only be done by squeezing in time. Some customers with small order volumes, or those simply too far away, had to be given up.

In August last year, after Tencent Qidian reached a partnership with Yunyin, it began visiting third-tier plants in the packaging industry. After uncovering the digitalization needs of the packaging industry, the two sides built Juhaodan based on Tencent Qidian's open capabilities such as social IM, NLP (natural language processing) and OCR (optical character recognition). Liu Hang, director of Tencent Qidian's B2B ecosystem industry, said that many owners of third-tier plants still use QQ to place orders. "You probably cannot imagine that even now their delivery notes are still handwritten. Reconciliation is also calculated by hand. It is in fact very traditional."

Imagine that today, many factories still follow the most traditional way: placing orders via QQ.

Write the order by hand on white paper and take a photo of it to send over. Fengshou Packaging Plant has 6 employees who specifically check the length, width and height data in these photos and manually enter them into the machine. "A hundred people have a hundred handwriting styles," Huang Binbin said. There is always someone whose handwriting is scrawled: a 1 written at the time is later read as a 7 in production, 1 becomes 7, 2 becomes 8, and when it comes time for delivery the two sides argue over it. An order worth tens of thousands of yuan is often lost this way.

This is the time gap between traditional factories and modern technology: they are still stuck in 2010, in the fax era before the mobile internet became widespread.

Even by 2019, this was still a very traditional company. Chen Lu joined Fengshou Packaging, and at that time the most important task of his day was shipping. Every customer had an order plan, and a day's order volume, when printed out, was as thick as three copies of the Xinhua Dictionary. Just tearing them off one by one took three hours and used hundreds of clips.

The torn-off orders were sorted by region and hung together with old orders from the same company, so as to arrange the production plan for the line. He had to carry a pile of orders with him, and only after shipping the goods and issuing the invoice could he take one down and move on to the next. When there were many orders, if one went missing, he had to worry that it meant a large loss.

Fengshou Packaging Plant has several hundred customers. A young woman was busy every day distributing receipt information. Every receipt carried a customer signature, and some customers' names were very similar, so misassignment happened often, Huang Binbin said,

"If our customers grow to 1,000, the girl sorting the orders will fall apart."

On one side are traditional "handicraft workshop-style" enterprises; on the other, the packaging industry is growing almost exponentially.

Around 2012, Huang Binbin found that the number of customers on the market had not decreased, but the average order value had fallen. "The whole market is expanding, market demand is increasing, and it is basically still in a state of shortage." However, third-tier plants had more choices: a third-tier plant often worked with more than two second-tier plants, so when salespeople went to negotiate prices at a third-tier plant, the other side would say your quote was too high and another company had given a different price. When chatting with customers, they often mentioned that someone had opened a new plant or expanded capacity.

Jinhua's capacity has been rising all along, especially in 2020, when the entire Jinhua region expanded by 12 production lines. A production line produces around 300,000 square meters a day, which, counting small parcels, is enough to make packaging boxes for 3 million small parcels. That is equivalent to,

the production lines added in the past year alone being able to create packaging boxes for 30 to 40 million small parcels a day.

Huang Binbin feels that the Jinhua region now has overcapacity. When going out to negotiate orders, the order volume from a single customer is getting smaller, split among several second-tier plants. One customer used to place 500,000 yuan of orders a month at Fengshou, and now only 200,000, with the rest of the demand spread across two other packaging plants. "It has already greatly exceeded demand, and what comes next is a process of reshuffling."

Around 2011, Jinhua also organized an industry association. When competition in the industry intensified for a period and market prices fell below cost, the industry association organized an exchange meeting. Representatives of a dozen companies sat together, and the scene was once quite awkward. At the start,

several large companies confronted each other head-on, asking: how can you allow such a low price on the market? You have thrown the market into disorder.

The meeting ended without any result; everyone had a quarrel and went their separate ways. People from the association said not to engage in vicious competition, "but in private everyone was still competing there." That is how the market is: when interests are involved, no one is willing to compromise.

Amid the lively yet chaotic atmosphere of the industry, the plants where Master Tian worked a few years ago are now all doing poorly. "The previous boss seemed rather conservative and kept marking time, so efficiency and other aspects could not match the level of competition in the industry today - it is a bit on the decline." Investment in automation, equipment upgrades, and the philosophy of a sales network - "they went for regular customers, and no one thought of developing a new customer. There was no such innovative philosophy."

In 2019, Zhou Ran also felt that the company had reached a bottleneck. "We previously had three production lines, but if we want to grow to five or six, where do the orders come from? How do I manage it?" Opening up more production lines meant greater financial pressure, and factories mostly ship first and get paid later. "If the company keeps expanding and even ends up with hundreds of millions in receivables, that would be terrible." Once a payment cannot be collected and the capital chain breaks, it is a devastating blow to the company. Huang Binbin was also considering a digitalization system. The packaging industry as a whole is more developed in Guangdong and Fujian, and he heard that Guangdong had already begun to have dedicated ordering software.

At the end of last year, Huang Binbin went to Dongyang to visit a customer. In the customer's office, he heard for the first time about the digital solution for the packaging industry jointly developed by Tencent Qidian and Yunyin, and he also got a brochure introducing a special service: online ordering. A mobile phone number was printed on the brochure. That same day, Huang Binbin dialed the number, and a week later four staff members came to the factory.

In the meeting room, the staff introduced their product in detail. That same day, the two sides signed a contract on the spot, "making the decision very quickly." He even felt that this meeting had already come too late. "We, Fengshou Packaging, are the last partner in the entire Jinhua region, and no more downstream partners will be recruited in the whole East China region." He wished he had done this back in 2019.

Meeting the same day and signing the contract the same day - that is rare boldness. Some factories take months of negotiation, with every step of the process consuming time. The Yunyin system would choose only one partner within a 40-kilometer radius, which is also a protection mechanism for the enterprise. So it was a two-way assessment process. During the communication, Yunyin realized that this traditional packaging company had a young mindset, was willing to invest funds in transformation, and "acted very decisively, with great boldness."

"Digital transformation requires the determination of the top leader. If he only has a try-it-and-see attitude, he will probably stop using it as soon as he hits a little difficulty." The staff found that after switching to ordering via the APP, many people were unwilling to accept it and could only become lost customers. Some companies gave up because of this. "They clearly bought the service, but in the end still did not keep it going. If the boss is not resolute, it is very hard to succeed."

Fengshou Packaging Plant is built on the outskirts of Jinhua, surrounded mostly by factory areas: crystal plants, carton plants, garment plants. From time to time a delivery truck drives past the gate. From the outside, this company looks no different from the factories around it. The change began from the inside.

Huang Binbin is a post-80s generation, dresses young, and is very familiar with the internet way of doing things. He acts as soon as he decides. Fengshou Packaging has more than 400 customers. The salespeople went to the plants to discuss, offering two choices: keep the old ordering method, or download the APP, which offers an online-exclusive price. "100% of customers will choose to install this system right away." It is like doing e-commerce or promotion: "in the traditional model your cost is 1 yuan, so you cannot sell for 0.9 yuan, but now we may be able to sell for 0.8 yuan and pull this customer in first." Huang Binbin, sales manager of Fengshou Packaging, summed it up as "getting the customer first, then slowly making money from him."

"Traditional enterprises are slowly becoming internet enterprises."

The data seen in the backend is like a Taobao store. Besides sales, you also have to learn to do operations. Huang Binbin said, "For example, if a customer's monthly output value is 1 million yuan and he places 300,000 yuan of orders here, then there is still 70% that can be penetrated. You have to raise the penetration rate and get him to place more orders here."

The backend also provides a map showing nearby customer data, all collectively referred to as "third-tier plants". How large is this plant's production scale? What materials does it like to buy? As customers keep placing orders through the system, an increasingly precise customer profile takes shape. What orders does the customer often place this month? How many times has he placed orders? Based on the precise customer profile, information can be pushed in a targeted way. "If a customer needs three-layer corrugated board, then promotional information for five-layer corrugated board will not be sent to him."

For a traditional enterprise, this counts as a huge change. Other tactics include learning from the internet's recharge-and-get-a-discount, setting customers who order a lot as VIPs individually, and giving out coupons through activities on specific dates... Everything Pinduoduo and Taobao can do is possible in this Jinhua factory.

Changes are already happening. What the internet brings first is accuracy and efficiency. In the past, price adjustments lagged, and the company had six employees dedicated to sending faxes to customers one by one. With hundreds of customers, it took at least a day. The hardest problem was that the customer's money had already been transferred before you learned the price had changed, and disputes easily arose at such times. Huang Binbin said a very good function of the APP is that it "blocks" this: "Orders can only be placed after the payment is deposited. Previously everything went through fax and WeChat, and there was no way to block it."

If we use fish in the sea as a metaphor, "

some are very dumb, very silly fish, while we are very nimble and very lively,"

Zhou Ran said the APP gives them a more flexible pricing system. "When others are about to raise prices and put out a price, they may suddenly take a lot of orders, and these orders are all at one price. But if we want to adjust the price, with platform ordering we stop taking orders once we have roughly enough for tomorrow, and when we take orders for the day after tomorrow tomorrow, it may be another price. This is very flexible."

A thousand customers, a thousand faces; one customer, one price. Big volumes and small volumes, long payment terms and prepayment, good cooperation credit and newly developed - different customers have different prices. "It will become a very active model for controlling this market." He is prepared for losses in the early stage of reform, losses of hundreds of thousands or millions, and he believes "the returns it gives us later will be far more than such a small matter."

In the past year, these factories in Jinhua have undergone earth-shaking changes. What else can technology accomplish? Huang Binbin has not figured it out yet either. But he believes that digitalization is an important market trend, and those who move fast can be the first to eat the crab.

——This article is reprinted from China Packaging Network (pack.cn). Original link: http://news.pack.cn/show-377457.html