Air conditioning supremo Li Xinghao has a penchant for keeping things cool – the Foshan native started earning money as a young man in the early eighties selling popsicles. He went into retail after a curious encounter at a hardware shop: when another customer discovered that electric drills were out of stock, Li made a deal on the spot to supply the drills, which he sourced himself from Guangzhou. He then set up a hardware store of his own.
Li then opened a restaurant, which is where his business selling air conditioners was conceived. The restaurant’s air conditioner kept on breaking down, costing Rmb1,000 ($150) a month in maintenance. Rather than keep calling out for repairs, Li hired a maintenance man to do the work. But the handy man only worked a few days a month. So Li set up his own repair shop, which quickly became the largest in the region.
By 1993, Li had enough cash to invest Rmb6 million with a Taiwanese businessman to establish a joint venture producing air conditioners. A few years later, Li’s partner left the business, taking with him much of its resources. But Li issued an Rmb8 million IOU to his suppliers, getting the finance to survive. Under tough conditions, the Chigo brand was developed.
The air conditioning market was already well developed at the time. Chigo couldn’t compete on brand, so stuck to low cost. To assuage consumer worries about the cheapness of his units, Li sourced core components from manufacturers like Mitsubishi, and also offered generous after sales support.
Need to know
In 2010, Chigo’s revenue was Rmb 16 billion. Official data released this year shows that Chigo is China’s third largest air conditioning manufacturer in terms of sales, threatening companies like Haier and Midea, who have dominated the industry for more than 15 years.
Exports account for around 45% of Chigo’s profits, and the company has been selling abroad since it started distributing to Norway in 1999.
Since then, Chigo units have sold in more than 100 countries, with Europe an important market. In fact, the strong presence in foreign markets helped Chigo offset some of the downturn at home during the financial crisis, when a slump in domestic sales in 2008 was offset by export sales growth of 50%.
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