The Impact of War and Pandemic on a Musical Instrument Company
Admit it or not, today's global economy operates as an integrated marketplace, and no one can escape the impact of crises.
A brief business case serves to illustrate how the current world economy can affect a company:
Today's case comes from a brand that may not be familiar to everyone, called Donner. Although not widely known in China, this company is renowned in the cross-border e-commerce community.
Donner is a vertical cross-border e-commerce company engaged in the design, production, and sale of musical instruments—a rare find in China. Their product line includes percussion instruments, string instruments, electronic audio equipment, with electronic pianos and guitars being their strongest categories.
Donner targets beginners in the field of music instruments and is widely recognized as one of the most cost-effective brands in the industry. Over the past few years, Donner has been a bestseller in countries like North America, France, and Spain, with annual sales exceeding 100 million US dollars.
However, even for this thriving musical instrument company, the world economic downturn in 2022 led to a severe crisis.
Describing Donner's situation in 2022 could be summed up as unfortunate: declining sales performance, extensive layoffs, obstacles in product research and development, drastic marketing budget cuts, substantial inventory buildup, and difficulties in securing financing. Each crisis posed a real threat of sudden collapse to this once successful company.
Disclaimer: The following analysis is compiled from information found online and verbal information provided by relevant industry professionals. I do not take responsibility for the accuracy of the content.
Inflation is an unavoidable factor that significantly influences consumer choices:
In 2022, around 90% of countries or economic regions worldwide were impacted by inflation, resulting in a direct increase in prices of everyday goods and food items. Objectively speaking, this global inflation is largely due to the United States exporting inflationary pressure through its dollar system, affecting regions like Europe, Southeast Asia, and Japan and South Korea with severe inflationary effects.
The impact of wars is also a contributing factor, a subject that has been previously addressed in my articles and will not be elaborated on this time.
China is also experiencing inflation, particularly evident in the sharp rise of upstream raw material costs, including energy prices. However, as businesses are reluctant to significantly increase prices for end consumers, the consequence is that companies are burdened with exceedingly high production costs while unable to raise the prices at the front end of sales. This leads to a drastic compression of profits and even losses.
Furthermore, when consumers have to spend more on essential items such as eggs, meat, tissues, and shower gel, who would have extra money to purchase a new piano for themselves?
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