China looks upmarket

On a recent Sunday evening, Mike LaPonsie and his friend Aarika Wells wandered into Wal-Mart in Hudson, N.H., to buy a cheap DVD player for Ms. Wells's mother.

In the electronics department, they shuffle from right to left, inspecting the names and prices of the DVD players arranged from most to least expensive: Sony, Phillips, Pioneer, Sanyo ... Apex.

"Apex? I've never heard of these guys," Mr. LaPonsie says as he flips through the booklet detailing the machine's specifications and price. "But for $50, how can you go wrong?"

Millions of American consumers have probably been asking this same question. Last year, Apex sold more DVD players and recorders in the United States than any other company but Sony, according to the NPD Group, a market-research firm in Port Washington, N.Y.

Apex's success illustrates the emergence of ultracheap electronics brands, which began to appear on shelves at Wal-Mart, Target, and even the drugstore Walgreens just a few years ago.

Indeed, Apex didn't exist five years ago. More recently, other electronics companies, with names including Haier and Norcent, have begun selling televisions, refrigerators, and air conditioners in the United States - all priced for less than $100.

Almost all these new entrants have strong ties to China: They either are Chinese-owned or own factories in China. (Nearly all of the world's electronics firms contract at least some production to Chinese manufacturers.)

While these Chinese companies are forcing competitors to slash prices of their lower-end products - a boon to consumers - doubts linger about the quality of Chinese "no-name" brands.

Yet millions of shoppers find the low prices hard to ignore, buying brands they've never heard of.

"Brand loyalties are somewhat up for grabs right now," says Sean Wargo, an analyst at the Consumer Electronics Association (CEA) in Arlington, Va. "New brands are coming in and customers are willing to try them out."

To be sure, electronics are becoming more affordable overall: The price of DVD players has plunged by 75 percent over the past six years, according to the CEA.

As Sony and other big names shift more production to China, where labor is cheap and plentiful, the price gap between "names" and "no names" will narrow further, analysts say.

A confluence of consumer trends in the 1990s enabled unknown electronics brands like Apex to successfully elbow their way onto the crowded shelves of US retailers and sell millions of units.

Most significant, big-box retailers, including Wal-Mart, have become one-stop commercial centers in towns across America. These stores flex their marketing muscle, promoting lesser-known brands (and their own labels) in Sunday papers and on websites.

Analysts say consumers are more inclined to buy Apex or Haier once they appear in such stores, knowing that these retailers generally stand behind the quality of their merchandise.

"Consumers identify retailers as someone that takes care of them," says Tom Edwards, a technology analyst at the NPD Group. "Retailers give them a sense of security."

The low-price items also satisfy a quest for value held by many of today's consumers.

"It's considered chic for [a shopper] to find a bargain at Target even when he buys his suits at Brooks Brothers," says Amanda Nicholson, a retailing and consumer-affairs professor at Syracuse University.

Page: 1 | 2