Republic of China: Ace Pilot

Chapter 580: Developing Commerce with Military Funds; Europe's Semiconductor Industry's Hunger for Marketing
Looking at the bewildered look on Manager Liu's face and the curiosity that Fang Shouxin showed, Fang Wen knew that he had to explain the "scarcity marketing" concept in detail. After all, in the eyes of people in this era, "not selling goods" and "intentionally raising prices" are simply "taboos" in doing business, which are completely contrary to the old rules of "small profits but quick turnover" and "treating customers with honesty".

"Manager Liu, tell me first, what's the secret to the success of our transistor radios in Europe?" Fang Wen didn't explain directly, but instead posed a question first.

Without hesitation, Manager Liu replied, "Of course! First, this radio is small and portable, so you can listen to the radio and get the news and music. There's nothing better in Europe. Second, our pricing is fair; it's more than half the price of their local desktop radios, so even the middle class can afford it."

“That’s right, but have you considered what ‘cheap’ and ‘always available’ will become in the long run?” Fang Wen leaned forward slightly. “Right now, Europeans think this radio is ‘novel’ and ‘practical,’ but if it’s readily available every day at a fixed price, in less than three months, they’ll consider it ‘ordinary’—like matches or soap that’s everywhere on the street, and will no longer see it as a ‘fashionable gadget.’ By then, the novelty will wear off, and unless someone actually needs it, others will gradually stop caring about it. At that point, no matter how cheap and good it is, it won’t achieve any significant sales growth.”

These words made Manager Liu frown: "But we clearly have plenty of goods. If we deliberately say 'insufficient inventory,' won't customers think we're dishonest? Besides, wouldn't it be stupid not to make money when we can?" He had spent his whole life working in the business and believed in the principle of "never turning away a customer who comes to the door." Even when selling fabrics or tea, he always thought, "Every sale counts." He had never seen anyone turn away business that was offered to them.

Fang Shouxin nodded in agreement: "Yes, General Manager. When I was a rice shop manager in Jiaxing, there was a distinction between new and old rice. New rice was more expensive, while old rice was cheaper. Whenever someone wanted to buy rice, we would rush to sell it, otherwise, if we couldn't sell it, the new rice would accumulate and become old rice, resulting in a loss on the books. This principle may be simple, but it is the same in every industry. Who would hold back their goods? If a customer came and said 'out of stock,' they would go to another shop next time."

Fang Wen smiled and said, "You two are right, but there are many sides to everything. We can't just look at sales; we also need to consider the value of our products. Our semiconductor radios have the best technology in the world. For a period of time, no other company in the world could imitate and manufacture products with the same technology. That's its technological advantage. The reason I initially sold them cheaply was to quickly stock the market with the first batch of goods and use the word-of-mouth effect from these early buyers to promote our products. Now that the product has been recognized in Europe, we can't sell it cheaply anymore."

At this point, he got up and walked to the map of Europe hanging on the wall, pointing to the locations of London, Paris, and Berlin:

“Look at the situation in Europe right now. The rumors of war are getting stronger and stronger, and everyone wants to know what’s going on outside. Our transistor radios are not just ‘toys,’ but ‘tools’ for getting information in a timely manner. At times like this, ‘difficult to buy’ is worse than ‘easy to buy,’ and ‘valuable’ is worse than ‘cheap.’”

He turned around, picked up the transistor radio on the table, and weighed it lightly in his hand: "What I want is not 'to sell a lot,' but to make this device something that 'everyone wants, but not everyone can buy immediately.' First, let's talk about 'limited edition'—only 100 units will be sold each day, and those who want to buy it will have to queue up early, or even use connections. In this way, those who buy it will feel 'I got a rare item,' and those who don't will want it even more, asking around 'when will it be available again?'"

"Let's talk about the 'price increase'," Fang Wen paused, looking at the two surprised expressions, and continued, "The reason for this price increase is 'increased costs of parts and transportation'—sea transportation is already unstable, and raw material prices are rising every day, so no one will doubt this reason. The price increase isn't about making money in the short term, but about gaining bargaining power. We can raise prices freely, thus controlling profits. Besides, think about it: if something is cheap and easy to buy, people will think it's 'worthless'; but if it's a bit expensive and people have to scramble to buy it, people will think, 'This thing must be good, otherwise why is it so popular?'"

Manager Liu's fingers unconsciously fiddled with the abacus, muttering to himself, "Intentionally letting people rob them? And raising prices... If this were a silk shop in a merchant guild outside the Great Wall, the manager would have already scolded him into a daze. But after hearing what the general manager said, I think it makes sense."

Fang Shouxin also pondered: "So, if everyone thinks this radio is 'rare,' they'd be willing to buy it even if it's a bit expensive? Just like those time-honored pastry shops in Beiping, where people have to queue up during holidays, yet no one complains about the price."

The two roughly understood the meaning behind Fang Wen's words and did not reject his idea.

More importantly, Fang Wen's decisions in the business field over the years have been mostly correct, so they naturally assumed that he would be right this time as well.

“That’s exactly the point,” Fang Wen continued. “It’s called ‘scarcity marketing’—making customers crave something but not giving it to them easily. You have to give it to them little by little, keeping them thinking about it and maintaining their attention. Our transistor radios are a unique and novel product right now. If we don’t hurry up and establish our brand, we’ll lose our advantage once Europeans make similar machines.”

He walked over to the two men, his tone softening: "Don't forget, we do these businesses not just to make money, but also to raise funds for the domestic military industry—to build rockets, military bicycles, airplanes, and tanks. Only by increasing the profits of these 'civilian goods' can we have more money to support the front lines. If we try to save time and operate on low profit margins and high volume now, we'll be left without even enough money to support the front lines when others try to take our market share. That would be truly foolish."

Manager Liu was silent for a moment, then finally nodded: "Manager Fang, I understand what you mean. In this world, you have to make a fortune to achieve great things. The world has changed, and business principles must also change. Let's try this 'limited-time price increase' method first."

Fang Shouxin echoed, "I think it's feasible too! If this radio can really become a 'rare item,' our business in Europe will be even more secure. When we make money, we can manufacture more bicycles and rockets and drive the Japanese out of Hebei as soon as possible!"

Fang Wen watched the two go from confusion to understanding and breathed a sigh of relief.

To persuade people from the 1930s with future business thinking requires patience, and even more so, it requires combining it with "old examples" that they can understand—after all, no matter how times change, the core of "making goods more valuable" and "making businesses last longer" remains the same.

He picked up a pen and wrote down the "Scarcity Marketing Execution Steps" on a piece of paper, explaining as he wrote: "We'll start in Paris by establishing a dedicated store specializing in transistor radios. Manager Liu will be in charge of this, organizing the Paris branch to operate it. They'll be required to open the store in the most bustling area of ​​Paris, with the best decor, advertising in major newspapers and on the radio, and hiring the best staff. This is called creating momentum, drawing the attention of all of Paris."

The scarcity marketing strategy was quickly put into practice, but in actual operation it was called the 'Zhongxing Electrical Appliances Exclusive Store Plan'.

Manager Liu personally traveled to the Paris branch on the company's plane to begin operations.

His first task, along with that of Paul Lin, the manager of the Paris branch, was to select a location for the boutique.

According to Fang Wen's requirements, "the storefront must be in the busiest location, so that passersby can see it at a glance."

Three days later, Paul Lin, the head of the Paris branch, stood outside the storefront at 32 Champs-Élysées with two employees.

This shop, originally an Italian leather goods store, is located in the middle of the avenue, next to a store of the century-old perfume brand Guerlain, and diagonally opposite the Paris Opera. Every day, it is frequented by well-dressed middle-class people and tourists.

DuPont paid 20% more than the market price to secure the remaining lease from the original owner and subsequently signed a long-term lease agreement with the landlord.

The leather goods shop owner jokingly asked, "What do Chinese people want to sell here? Silk or porcelain?"

Paul Lin just smiled mysteriously and didn't explain. According to the plan, this matter had to be kept secret during its implementation.

Subsequently, the entire exterior of the leather goods store was covered with tarpaulin, and renovations began.

According to Fang Wen's requirements for the boutique: "The decoration should resemble the most prestigious jewelry stores in Paris, without piling up merchandise, but only showcasing exquisiteness."

The renovation team spent a full ten days transforming the storefront.

The original dark brown wooden shop window has been replaced with a single piece of curved glass, with warm yellow wall lamps installed on the inside. When lit up at night, it looks like a piece of glowing amber.

There is no long signboard above the store, only a line of silver French letters above the glass – “Appareilslectriques Zhongxing”, with “Magasin Exclusif” (exclusive store) written in smaller font below.

The store's layout is more like a luxury store than an electronics store: the floor is covered with a light gray wool carpet that makes no sound when you step on it; the walls are painted a soft off-white, with only a huge poster hanging in the center—on the poster, a man in a French trench coat has his hands in his pockets, his fingertips peeking out the black edge of a transistor radio, with the Eiffel Tower in the background, and the caption "Le son du monde dans votre poche" (The sound of the world in your pocket).

Below the poster, there were only three black leather sofas, and in the glass display case in front of the sofas were different models of transistor radios.

"This isn't selling radios, it looks more like selling diamonds to me," the foreman of the renovation team muttered to Paul Lin after finishing the work.

Paul Lin recalled Fang Wen's telegram: "The customer is not buying a 'box that can make sounds,' but a 'distinctive identity.'"

This identity is not only reflected in the store's decor, but also in the corresponding services.

Therefore, the quality of the store staff is also very important.

When recruiting store clerks, DuPont followed Fang Wen's requirements exactly: "Don't just hire people who can sell goods; hire people who can chat, know etiquette, and preferably speak English and German."

Of the five employees ultimately selected, three were poached from the long-established Parisian department store Lafayette. One of them, a saleswoman named Marie, had previously served members of the British royal family.

Before they started working, DuPont gave them three days of training, with only one core principle: "Don't actively sell, just actively answer questions."

For example, if a customer asks, "How much is this?", you can't just quote a price. You should first smile and say, "Sir/Madam, this is a limited edition Taishan Semiconductor Radio. We only supply 100 units per day. The price is 3000 francs. You need to register and make a reservation first." If the customer asks, "Why is it so expensive?", you should offer them a cup of coffee and slowly explain, "Look at the body. It's made of aerospace-grade aluminum, which is lightweight and wear-resistant. The internal parts are all specially made by Zhongxing Electric, using world-unique technology. We are the only ones in all of Europe who have it."

Once the store and staff were secured, a commercial promotion campaign began.

For the first three days after the opening, the Parisian newspapers Le Figaro and Le Soir published half-page advertisements for each day—without product pictures, only a line of large black text: "May 30, 32 Champs-Élysées, a new way of hearing the world."

Below the advertisement was no company information, only a small phone number. Those who called would only hear a gentle female voice: "Thank you for your interest. The exclusive store for Zhongxing Electric Semiconductor Radios will open on May 30th. Please visit the store to purchase if needed." The day before the opening, Parisian radio stations repeatedly aired a 15-second advertisement during news breaks: "Want to hear news from the front lines immediately? Want to listen to music anywhere, without being bound by wires? May 20th, 32 Champs-Élysées, will give you the answer."

This "only telling half the story" approach to advertising successfully attracted the attention of Parisians.

In a letter to the newspaper, someone asked, "What exactly is this 'new way of hearing the world'? Is it a new phonograph?"

Some people were familiar with transistor radios, and through their explanations, more people learned about this new technology.

On the morning of May 30, the day of the opening, the usually quiet streets suddenly became lively.

People gathered at the entrance of 32 Champs-Élysées.

Some of the people in the group were hired by Paul Lin to create hype.

The others, however, were all genuinely interested in transistor radios.

At 10 a.m. sharp, the shop assistants opened the store on time. They stood at the door, smiling and welcoming each customer, handing each customer a beautifully printed instruction manual—the manual did not contain a price, but only the radio's parameters and functions.

Customers enter the store to browse.

A French gentleman in a tuxedo picked up a portable transistor radio from the display case, frowned, and said, "It looks small."

In this era, machinery and various products are all about size, so his words were not meant as a compliment.

The shop assistant, Marie, did not object. Instead, she took the radio, gently pressed the switch, tuned it to a local Parisian radio frequency, and the sound came through clearly.

"Listen, even on a noisy street, its sound won't be muffled. And when you go out, it's more convenient to put it in your pocket than to carry a book—you wouldn't take out a stage radio to listen to the news outside the opera house, would you?"

"It can be taken out and listened to on the radio anywhere?!" the gentleman with an aristocratic air exclaimed in surprise.

"Of course, not everywhere, but within radio station coverage areas. At least in Paris, you can take out your portable transistor radio and listen to the radio anytime, anywhere until its battery runs out."

After hearing this, the gentleman immediately decided to buy it: "This is exactly what I want. It's very useful. How much?"

"This is a limited edition of Taishan Semiconductor Radio. Currently, only 100 units are available each day, and the price is 3000 francs."

3000 francs is equivalent to 75 US dollars, which is about half a month's income for a middle-class person in Paris.

The price is not cheap.

The gentleman frowned, hesitating whether or not to pay the money.

He remained silent out of consideration for his pride, but others spoke up, saying, "It's too expensive."

In response, Mary smiled and said, "We also have other models of semiconductor radios, such as this one. It's about the same size as a regular tube radio, but the sound quality and reception are better. At Zhongxing Electric, value isn't measured by the size of the product, but by the difficulty of its manufacture. Like this 3000 franc radio, it can be carried in your hand or in your pocket. To achieve this, the internal components have to be made very small, which is extremely difficult. Manufacturing one of these radios is equivalent to manufacturing 10 large radios."

She explained the value of technology to her customers.

He successfully persuaded the gentleman, who then took out his wallet, pulled out 30 hundred-franc notes, and became the first person to buy the product.

The first transaction was completed, which successfully aroused the purchasing desire of other customers, and more and more people paid for and inquired about the product.

While not everyone would buy the 3000 franc model, they did buy other, lower-priced radios.

When a customer received the radio and turned it on to listen to the news, a reporter squeezed to the front, took a picture of him holding the radio, and conducted an interview.

On its first day of opening, more and more customers entered, and many left carrying beautifully crafted boxes containing transistor radios.

This spectacle lasted for three days.

On the fourth day, Zhongxing Electrical Appliances suddenly posted a notice outside the store.

"Due to insufficient production of parts and transportation issues, there is currently a shortage of inventory in stores, and sales of small portable radios are temporarily suspended."

The radio that costs 3000 francs is out of stock.

But it is the most attractive.

Those who had already purchased portable radios were showing them off within their respective circles.

On the seventh day, when the store put this radio back on the shelves.

It was all snatched up.

The effects of scarcity marketing began to show, with more and more middle-class and above consumers wanting to own a product that was only available at Zhongxing Electrical Appliances specialty stores.

This has also created a new profession.

Every morning, people line up outside the store very early.

They were hired to buy portable radios.

These people realized that this was a profitable business after buying radios for their employer.

Thus, in Paris in 39, the new profession of scalper emerged.

This trend has also successfully spread to London and Berlin, with two more boutiques about to open.

Meanwhile, in Yangon, Fang Wen, who was setting up a military-grade overhead crane production line, also welcomed a military technology inspection team from the Soviet Union.

(End of this chapter)