Why is the label so "hot"?

In the flooring industry, the issue of counterfeit labels has sparked widespread concern and debate. On January 14, 2014, the Tongzhou District People’s Court in Nantong City, Jiangsu Province, made a landmark ruling by sentencing a local flooring operator, Youmou, to three years in prison with a four-year probation period and a fine of 540,000 RMB for trademark infringement. This case not only highlighted the legal consequences of counterfeiting but also triggered deep reflections across the entire industry. The term “OEM economy” has become a common phrase in the sector, reflecting an unspoken norm where many companies rely on third-party production without building their own brand identity. Some floor manufacturers survive by producing under well-known labels, which raises important questions about the sustainability and integrity of the market. Why is the label so “hot”? The answer lies in the massive profit margins that come with branding. For instance, a small factory might purchase composite wood flooring at a wholesale price of 50–70 yuan per square meter, then attach a well-known brand's label and sell it for as high as 90–120 yuan per square meter. When these products reach consumers through branded stores, the final price can easily exceed 150 yuan per square meter. Simply affixing a label can multiply profits several times, making this practice highly attractive to unscrupulous businesses. As competition intensifies, many small and medium-sized flooring companies have turned to OEM production as a shortcut to gain market share. Their dealers often amplify the effect, creating a cycle of profiteering. However, the quality of such products is often questionable. These branded floors are not real, yet they carry the name of established brands, misleading consumers and damaging the reputation of genuine manufacturers. Recent national inspections conducted by the General Administration of Quality Supervision, Inspection and Quarantine revealed concerning results. While large and medium-sized enterprises generally met quality standards, smaller companies—especially those involved in OEM production—were found to have substandard products. This highlights the risks associated with relying on third-party manufacturing without proper oversight. The term “OEM economy” is no longer unfamiliar. In this system, OEM companies act like foxes, exploiting the prestige of well-known brands, while the original manufacturers, or “tigers,” may remain unaware of the damage being done. As one industry insider put it, “It’s a well-known secret that some domestic flooring products are labeled with foreign trademarks or other provincial licenses.” Despite the maturity of the industry and the development of various standards, the phenomenon of “branding” remains prevalent. This practice not only harms consumer rights but also damages the image of the brands being used. In the long run, it can lead to the decline of those very brands. A CEO of a flooring company once stated that many brands today are selling products under the guise of foreign imports. Although some have built their own production bases, they still rely on small factories for OEM production due to limited capacity. The difference between them and true OEM producers is minimal, yet the impact on the market is significant. Why do some companies struggle in the market? Why is it hard for small and medium-sized firms to gain a foothold? It’s because many are content with short-term profits from OEM deals, without investing in their own brand. Companies focused only on immediate gains lack long-term vision and ultimately fall behind competitors. To succeed in the future, major flooring companies must move away from OEM and invest in building their own strong brand presence.

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