---
title: "High Prices of Internet-Famous Products: The Tears of OEM Factories Behind Them"
description: "A recent hot search topic on Weibo highlighted that the same product can cost 14 times more when sold by an internet-famous brand compared to its OEM factory's own brand. While some argue that the same factory does not guarantee identical raw materials or quality, the issue of inflated prices driven by internet-famous products has drawn public attention."
author: "陈法善"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
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published: "2022-09-24"
language: "en"
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# High Prices of Internet-Famous Products: The Tears of OEM Factories Behind Them

> A recent hot search topic on Weibo highlighted that the same product can cost 14 times more when sold by an internet-famous brand compared to its OEM factory's own brand. While some argue that the same factory does not guarantee identical raw materials or quality, the issue of inflated prices driven by internet-famous products has drawn public attention.

> **The same product, 14 times the price difference? Recently, the topic of "OEM factory products sold at high prices by internet-famous brands" trended on Weibo. Some believe that the same OEM factory does not mean the same raw materials or quality, but in recent years, the price inflation caused by internet-famous products has become a focus of public attention.**
Are internet-famous products just "porters" for OEM factories? Recently, a perfume from Beast (野兽派) and one from MINISO (名创优品) were found to be produced by the same factory: Beast's Osmanthus Oolong perfume (30ML) priced at 420 yuan and MINISO's Peach Oolong perfume (30ML) priced at 29.9 yuan, both manufactured by Huzhou Yufan Cosmetics Technology Co., Ltd., yet the price difference is 14 times. This huge price gap pushed the topic "Beast perfume and MINISO share the same OEM factory" to the top of Weibo's hot search, with over 360 million views. Many netizens questioned the high "water content" in Beast's pricing, suggesting that through marketing and packaging, they sell Yiwu small commodities at international first-tier brand prices. However, others argue that **the same OEM factory does not mean the same raw materials or quality.** Besides the price complaints, on social platforms like Weibo and Xiaohongshu, some buyers complained that Beast's quality does not match its high price: silk pajamas unraveled within a month, 12 preserved flowers arrived as 11, and the Ecuadorian roses priced at 1314 yuan had uneven color spraying...
In recent years, many internet-famous products have rapidly gained popularity through social media "seeding" (种草), and issues such as inflated prices and product defects have also become a focus of public attention. Through interviews, "Leopard Change" (豹变) found that many internet-famous products, to adapt to the fast-paced promotion needs, often choose asset-light operations and produce through OEM models. **Behind the best-selling internet-famous brands is the decline of OEM factories' own brands, which are not only obscure but also have dismal sales.** Why can products with similar capabilities be sold at high prices after being operated by brands? Would it be better to directly buy the OEM factory's own products? **01**
#### **Big Brands Sell at High Prices, OEM Factories Are Ignored**
Leopard Change visited shopping malls in Wenzhou, Zhejiang, including Fortune Center, Wuyue Plaza, and MixC, and found that not only Beast perfume is OEM-produced, but also internet-famous products like MUJI and Li Ziqi's hot and sour noodles. At the perfume section of MINISO in Wenzhou Wuyue Plaza, there were over a dozen perfumes on sale. Compared to the exquisite, thick-paper, large-volume packaging of big-brand perfumes, these perfumes have softer packaging, only the size of a cigarette box, with light-colored, small-fresh-style patterns printed on the front. One Peach Oolong perfume is produced by Huzhou Yufan Cosmetics Technology Co., Ltd., with the same outer packaging as the perfume mentioned in the topic, but the capacity is 24ML (6ML*4), and the price is also 29.9 yuan. During the same period, Beast's official flagship store sold the Osmanthus Oolong perfume as a gift box set, priced at 420 yuan, containing a 25ML perfume and a sachet. This differs slightly from the topic content: the two products are indeed produced by the same OEM factory, with similar fragrance and net content, but Beast's packaging is clearly more exquisite and includes an extra sachet. In terms of ingredients, both mainly contain water, ethanol, and fragrance. Liang Xuan, who runs a cosmetics business in Zhejiang, told Leopard Change that **even for the same brand, to balance the interests of various channels, manufacturers may adjust product combinations to facilitate pricing in different channels.** Beast sells the perfume with a sachet, and with more exquisite packaging design, it is easy to sell at a high price. At the MUJI store in Fortune Center, the internet-famous aroma diffusers were placed prominently in the aisle, one priced at 388 yuan and another at 328 yuan, both produced by Guangdong Kego Electric Co., Ltd. On MUJI's Tmall flagship store, these two aroma diffusers have a combined monthly sales of over 1,400 units and over 9,000 reviews. The internet-famous aroma diffusers sold by MUJI are also produced by Kego Electric. Kego Electric's own brand "asiamist Home Flagship Store" has its top two best-selling aroma diffusers, which use the same plastic + PP material as the MUJI ones, with a combined monthly sales of about 500 units, but priced at only 130 yuan and 99 yuan, less than one-third of MUJI's price. The store's most premium aroma diffuser, with a solid wood base and glass lampshade, featuring music playback and touch sensing, is priced at 479 yuan, but monthly sales are zero. At the convenience food section of OLE supermarket in MixC, internet-famous snacks occupy prominent shelf positions. Among them, Li Ziqi's hot and sour noodles priced at 12.9 yuan and Xiaolongkan's hot and sour noodles priced at 9.9 yuan are both OEM-produced by A-Kuan Food, but the shelves do not sell A-Kuan brand convenience foods.
Li Ziqi's hot and sour noodles and Xiaolongkan's hot and sour noodles
On Li Ziqi's Tmall flagship store, the same hot and sour noodles sell over 7,000 units per month, while on A-Kuan Food's flagship store, the same weight hot and sour noodles are priced at 6.6 yuan, with monthly sales of only 54 units. **02**
#### **Why Do They Prefer OEM?**
Why do internet-famous products, which are so popular, consistently turn to OEM factories? Several industry veterans told Leopard Change that **the key lies in the high cost-effectiveness and low trial-and-error cost of the OEM model.** Taking the beauty industry as an example, domestic OEM factories have achieved economies of scale and relatively mature production techniques, which is conducive to cost control for common平价 cosmetics brands. Therefore, most beauty brands in China are mainly responsible for branding, marketing, and channels, while production mostly adopts the OEM model.
Top 50 cosmetics OEM enterprises as counted by the Beauty Industry Research Institute
In addition to cosmetics, internet-famous snacks have also become popular in recent years. Lin Shuai, who has been in the food and beverage FMCG industry in Zhejiang for many years, believes that the cost of building a new factory is very high, while outsourcing to OEM does not require building a factory; you just need to do well in channels. **Many internet-famous products are sold online, producing as many as sold, then white-labeling. If they fail, the cost is low.** "Taking internet-famous food as an example, usually a studio is set up to first handle branding and UI design, then find an OEM factory with food production qualifications. During this period, the main cost is the studio's operational expenses. On the production side, it's mainly pre-sale: first place orders, then produce according to the number of orders, which better controls costs," Lin Shuai said. "If you want to produce yourself, you have to buy land, production lines, and pass national standard certification, which is a huge investment that few companies can afford." In Lin Shuai's view, **many first-tier manufacturers master the formulas and raw materials, and have the ability for product development and taste changes, which many internet-famous brands do not possess.** "Internet-famous brands are more about packaging what the factory can produce." For manufacturers, OEM is a job where others eat meat and they drink soup, but it can also earn some extra income to subsidize the family. Usually, once the factory's premises, production lines, and employees are in place, production capacity is determined. If there is spare capacity, taking orders from internet-famous products is natural. **"If OEM is done well, they may set up their own brand, just like JDB and Wanglaoji split."** Lin Shuai said. A-Kuan Food, which OEMs for Li Ziqi's hot and sour noodles, also provides OEM services for internet-famous brands like NetEase Yanxuan, Baicaowei, and Three Squirrels. In the IPO prospectus disclosed in May this year, A-Kuan Food revealed that in 2021, its OEM revenue for internet-famous brands was 136 million yuan, accounting for 11.56% of the company's revenue, while this income was only 68.3 million yuan in 2019. In 2021, among the top five customers in A-Kuan Food's direct sales model, three internet-famous brands—Three Squirrels, Li Ziqi, and Baicaowei—occupied three seats. **However, the profit margin for "working" for internet-famous brands is less than half of that for self-owned brands:** the gross margin for custom sales was 17.59%, far lower than the 35.51% gross margin for direct supply sales. In the eyes of some industry insiders, A-Kuan Food's situation is already much better than many OEM factories. "The beverage industry only recognizes big brands; it's hard for OEM factories' own miscellaneous brands to survive. Because big brands squeeze costs very low, terminal prices are basically around 5 yuan, and they rely heavily on marketing channels. Due to heavy weight and huge distribution system maintenance costs, new entrants have little chance," an industry insider said. "Internet-famous products are lighter and can be delivered via express, with high profit margins. For example, 100 grams of dried meat can sell for over ten yuan, with relatively low costs. Such OEM factories' own brands are more likely to survive." **03**
#### **What Is the Way Out for OEM Factories?**
Through interviews, Leopard Change found that OEM factories lacking brand endorsement generally face the dilemma of "having price but no market" or "having market but no price." From Kego Electric's sales, it can be seen that for OEM factories' own brands to sell well, they can only exchange low prices for market share; similar products are usually priced at only a fraction of big brands. If they want to sell at high prices, even if the product capability is a notch above big brands at the same price point, they still face the problem of not selling well; good products do not bring sales. From the perspective of division of labor, OEM factories focus on production, while brand operation and marketing are not their strengths. Upgrading brand influence and increasing product pricing face many difficulties. The most obvious is the need for substantial additional investment, but without a stable sales system, achieving breakthroughs is not easy. **"Many OEM factories' own brands have sales in their local counties and cities, but sales are average. If they can't even break through the local market, it's even harder to expand nationwide,"** Lin Shuai said. However, in recent years, with the rise of live-streaming e-commerce, some white-label products have quickly become popular through top streamers' live rooms, providing ideas for OEM factories' transformation. For example, after Florasis became popular through cooperation with Li Jiaqi, it has become a regular on many top streamers' shows and variety programs. White-label cosmetics like Kelaini, Hailando, and Betty Bonnie, leveraging live-streaming platform traffic and price advantages, have gained popularity among female users in lower-tier cities, gradually overtaking some international first-tier brands in sales. A-Kuan Food has also frequently appeared in Viya and Luo Yonghao's live rooms. **But behind this is the high cost of marketing and promotion.** In 2021, A-Kuan Food's sales expenses were 164 million yuan, of which promotion service fees were 96.83 million yuan, accounting for 59% of sales expenses. Obviously, such high costs are not affordable for ordinary OEM factories. Even so, for OEM factories' own brands that do not have advantages in offline channels, leveraging online traffic remains a key direction for breaking out. This point seems to have formed a consensus between some top streamers and OEM factories. Previously, top streamer Xinba established a strategic investment department to incubate new brands. The connection point for cooperation is: streamers not only earn slot fees and commission from带货, but also gain capital appreciation; OEM factories may, through top streamers' live rooms, transform overnight from a sparrow to a phoenix. Of course, **the disadvantages of over-reliance on online channels are also obvious: intensified competition, increasingly expensive traffic fees; high marketing costs, and once traffic is lost, internet-famous products easily lose their voice; and the price system is difficult to maintain.** "You can't rely on just one or two live rooms. To achieve brand breakthroughs, you need to expand coverage, with manufacturers giving up some profit and middlemen giving up some profit. A difference of a few yuan per box in beverage terminal prices can cause price chaos, let alone products with higher profit margins," Lin Shuai said. "Every price cut in live rooms is a blow to offline channels. Of course, capitalists are an exception; they can afford to lose money offline to build the brand first." **Compared to the wealthy OEM factories mentioned above, some small factories are not so lucky; they can only secretly sell "same as mall" products on e-commerce platforms.** Leopard Change searched for "MUJI" on e-commerce platforms and found many stores selling MUJI's popular jute bags and bed-in-a-bag sets. One seller of jute bags put "MUJI" in the store name and avatar, but the products sold did not carry the brand logo. Customer service explained that they are directly supplied by MUJI's factory, with the same quality, but because they are factory goods, the bags cannot have brand logos or tags. Another seller from Jiangsu selling bedding also said their goods are factory-direct at wholesale prices, even including original tags. A 1.5-meter bed-in-a-bag set is priced at 229.8 yuan, about half the price at MUJI's offline stores. Becoming a brand's laborer or an appendage of traffic platforms are pitfalls that many OEM factories inevitably encounter during transformation and upgrading. Nevertheless, these are treatments only for a few top OEM factories; more OEM factories are at the bottom of the industry chain, quietly playing "edge ball" in some corner. Note: At the request of the interviewees, Lin Shuai and Liang Xuan are pseudonyms. Source: Leopard Change (ID: baobiannews) Author: Chen Fashan


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