Category Archives: Know-How

Setting up your Business

May 17, 2010
Setting up your Business:
Structures and Regulations
Planning is critical to successfully starting and building a business. It is important to consider a variety of factors when choosing the best form of business ownership or structure. The choice you make can have an impact on multiple aspects of your business, including taxes, liability, ownership succession, and others.
Sole Proprietorship
A sole proprietorship is a simple and informal structure that is inexpensive to form. Usually owned by a single person or family members, the owner operates the business, is personally liable for all business debts, can freely transfer all or part of the business, and can report profit or loss on personal income tax returns.
Limited Liability Company (LLC)
An LLC combines the limited personal liability feature of a corporation with the tax advantages of a partnership and sole proprietorship. Profits and losses can be passed through the company to its members or the LLC can elect to be taxed like a corporation.
General Partnership
Partnerships are inexpensive to form, simply requiring an agreement between two or more individuals or entities to jointly own and operate a business. Profit, loss, and managerial duties are shared among the partners, and each partner is personally liable for partnership debts. Partnerships do not pay taxes, but must file an informational return; individual partners report their share of profits and losses on their personal return.
Resources
http://www.business.gov
The official business link to the US government, offering regulations state-by-state and tips on loans & grants, registering & finances, and a link to the small business community
http://www.business.gov/states
Choose your state of business to find links to State regulations and local governments
http://www.sba.gov
Small Business Administration site offering programs and services to help you start, grow and succeed including guidance for compliance and financing by locality
http://www.sba.gov/smallbusinessplanner/start/chooseastructure/index.html
SBA site helps you determine which company structure is right for you
http://smallbusiness.findlaw.com/business-laws-regulations/business-regulations
A directory of state and federal regulations, with links to more specific resource sites

Sometimes, when starting a new business, certain processes can be made to feel more complicated than they need to be. When it comes to getting the ball rolling, one of the first steps is finding out the particulars about company registration. I’ve included here an article from www.IntroducingSucess. com to bring a bit of clarity to the situation!

Structures and Regulations

Planning is critical to successfully starting and building a business. It is important to consider a variety of factors when choosing the best form of business ownership or structure. The choice you make can have an impact on multiple aspects of your business, including taxes, liability, ownership succession, and others.

Sole Proprietorship

A sole proprietorship is a simple and informal structure that is inexpensive to form. Usually owned by a single person or family members, the owner operates the business, is personally liable for all business debts, can freely transfer all or part of the business, and can report profit or loss on personal income tax returns.

Limited Liability Company (LLC)

An LLC combines the limited personal liability feature of a corporation with the tax advantages of a partnership and sole proprietorship. Profits and losses can be passed through the company to its members or the LLC can elect to be taxed like a corporation.

General Partnership

Partnerships are inexpensive to form, simply requiring an agreement between two or more individuals or entities to jointly own and operate a business. Profit, loss, and managerial duties are shared among the partners, and each partner is personally liable for partnership debts. Partnerships do not pay taxes, but must file an informational return; individual partners report their share of profits and losses on their personal return.

Resources

http://www.business.gov

The official business link to the US government, offering regulations state-by-state and tips on loans & grants, registering & finances, and a link to the small business community

http://www.business.gov/states

Choose your state of business to find links to State regulations and local governments

http://www.sba.gov

Small Business Administration site offering programs and services to help you start, grow and succeed including guidance for compliance and financing by locality

http://www.sba.gov/smallbusinessplanner/start/chooseastructure/index.html

SBA site helps you determine which company structure is right for you

http://smallbusiness.findlaw.com/business-laws-regulations/business-regulations

A directory of state and federal regulations, with links to more specific resource sites

0 Comments

Frictionless Ecommerce

May 12, 2010

Time magazine recently listed the 10 Tech Trends for 2010, that is, those issues and ideas that will shape the Web for this year and the immediate future. Amongst the references to cloud computing, the potential domination of the IPad and reliance on platforms rather than just websites, was the idea of ‘frictionless payments’. This is the ability of consumers or other web users to make money transfers immediately and at virtually no cost.

This is part of the latest ‘mantra’ of the ecommerce industry: ‘frictionless ecommerce’ which involves giving convenience, flexibility and options to a consumer.

The idea of moving money from one person to another, both quickly and cheaply is a relatively new concept. For decades, the banks had a stranglehold on the process. Checks took up to a week to clear, and transferring money from one bank account to another took days, and fees were levied at every step. The introduction of credit cards and EFTPOS made it easier and quicker but provided the credit card companies and banks more opportunities to deduct fees.

There’s no doubt that this will be one of the more interesting areas of development in the ecommerce industry in the future. However, I believe that a ‘frictionless ecommerce’ payments system is still a long way off.

In the current international product sourcing business world, the reliance on safe, cost-effective and seamless payment systems is still of prime importance to buyers particularly those who are sourcing goods from China.

As I discussed in my last post, although China is enjoying exponential growth in its ecommerce sector and the credit card industry is on the verge of major expansion over the next few years, the country is still a cash-based society. There is also a lingering distrust of anything that doesn’t involve cash.

This is particularly so in the millions of small to medium size businesses that power the Chinese private sector. Many SME’s do not have the ecommerce platforms or sophisticated banking systems to handle domestic cyber payments. The same is true for international transactions. A US buyer can’t simply send or wire money to a Chinese supplier if the supplier doesn’t have a foreign currency account held at a Chinese bank. Even if it does, the supplier requires approval from the Government to convert that payment into RMB that can be transferred to its local account. In many cases, such complexity and cost is beyond the reach of most Chinese suppliers.

Even in the area of direct sourcing of Chinese products, the available payment options like T/T or Letter of Credit become problematic because they are simply too expensive for smaller companies and purchase orders.

The ability to simplify the payment options and systems between Chinese suppliers and overseas buyers was one of the major driving forces of the establishment of the B2B intermediary websites like the one I established, www.dhgate.com. Rather than have to make a payment directly to a Chinese supplier which may have limited, unsafe and expensive payment options,( if any at all), sites like mine provide a range of payment options which bridge the gap between overseas and Chinese banking systems and make the process seamless, transparent, cost-effective and safe.

For example, www.dhgate.com currently provides the following payment options:

  1. Pay Pal, the world’s leading and most reliable online payments service. Pay Pal have recently announced a partnership with ChinaUnionPay, China’s biggest inter-bank payment and settlement system which will enable more and more Chinese companies to participate in international ecommerce transactions. This is the most popular and preferred method as you don’t need to use your credit card online, payments are traceable and Pay Pal offers its Buyer Protection service.
  2. Credits cards like American Express Visa, MasterCard and Discover card.
  3. Real time bank transfers.
  4. Offline payments like Western Union and other bank transfers.

The difference between my B2B site and others is that we recommend overseas buyers do not deal directly with a Chinese supplier but pay any amounts via the above options directly to www.dhgate.com. The site also offers overseas buyers an Escrow Service which is a licensed buyer protection service. Under this service, DHgate receives and holds the buyer’s payment until the transaction is successfully completed. Only after the buyer approves the products received will DHgate release the payment to the Chinese supplier.

This highly innovative service has been very successful with overseas buyers with numerous cases of money being returned to overseas buyers who were not completely satisfied with the quality or standard of what they had purchased. In fact, it has been so successful that it has now been copied by other B2B sourcing sites and has become the standard for Chinese product sourcing sites.

Also posted in DHgate, Personal Insights – 0 Comments

The Competitive Situation in China

April 22, 2010
In recent posts, I have been discussing payment systems in China. Before I continue on that in my next post, today, I would like to talk about Alibaba’s recently developed hacker-technology and how this relates to another important aspect of the business environment here: the competitive situation in China.
One of the key challenges facing China is moving away from low-quality imitation of products and services to more innovative, high-quality equivalents. In fact, this is a key area of investment for my company, DHgate, as we development support and education systems for Chinese manufacturers. Previously, Chinese businesses could create value by lowering production overheads; however, in the twenty-first century, being ‘cheap’ is not enough. I believe the goal should be for Chinese businesses to create value in a totally different way: by innovating beyond the competition.
In recent years, what we have seen is the emergence of a vanguard of dynamic new Chinese businesses that are capable of this. Through DHgate.com, I have found that fostering this attitude internally has allowed us to achieve rapid expansion in international markets. In the West, audiences respond to originality and not, as has been the case in China, to replication.
This has been at the forefront of my mind recently, as one of our key competitors Alibaba, developed and introduced a mechanism which allows its suppliers to access rival backend system and pull content over to their site. This competitive imitation is the hallmark of the old way of doing business in China, and it is a worrying sign that a recognized company such as Alibaba has resorted to these tactics.  This is not the environment in which Chinese business will thrive and become true international market-share contenders.
The philosophy we espouse at my own company, DHgate, is that to be the best you have to be able to innovate beyond the competition. First-mover advantage has proven to be key in online industries, but by the time a new feature has been widely replicated, a truly innovative company will already have developed another improvement.
The competitive situation is improving in China. Government regulations are slowly being rolled back, industries are becoming more diverse and dynamic, and a growing number of Chinese businesses have shown they have what it takes to be global leaders in their field.
China’s future lies in developing high-tech, fast-paced, competitive new industries, and I believe fostering a inventive business atmosphere, not competitive imitation, is the quickest and  way to get there.

In recent posts, I have been discussing payment systems in China. Before I continue on that in my next post, today, I would like to talk about Alibaba’s recently developed hacker-technology and how this relates to another important aspect of the business environment here: the competitive situation in China.

One of the key challenges facing China is moving away from low-quality imitation of products and services to more innovative, high-quality equivalents. In fact, this is a key area of investment for my company, DHgate, as we development support and education systems for Chinese manufacturers. Previously, Chinese businesses could create value by lowering production overheads; however, in the twenty-first century, being ‘cheap’ is not enough. I believe the goal should be for Chinese businesses to create value in a totally different way: by innovating beyond the competition.

In recent years, what we have seen is the emergence of a vanguard of dynamic new Chinese businesses that are capable of this. Through DHgate.com, I have found that fostering this attitude internally has allowed us to achieve rapid expansion in international markets. In the West, audiences respond to originality and not, as has been the case in China, to replication.

This has been at the forefront of my mind recently, as one of our key competitors Alibaba, developed and introduced a mechanism which allows its suppliers to access rival backend system and pull content over to their site. This competitive imitation is the hallmark of the old way of doing business in China, and it is a worrying sign that a recognized company such as Alibaba has resorted to these tactics. This is not the environment in which Chinese business will thrive and become true international market-share contenders.

The philosophy we espouse at my own company, DHgate, is that to be the best you have to be able to innovate beyond the competition. First-mover advantage has proven to be key in online industries, but by the time a new feature has been widely replicated, a truly innovative company will already have developed another improvement.

The competitive situation is improving in China. Government regulations are slowly being rolled back, industries are becoming more diverse and dynamic, and a growing number of Chinese businesses have shown they have what it takes to be global leaders in their field.

China’s future lies in developing high-tech, fast-paced, competitive new industries, and I believe fostering a inventive business atmosphere, not competitive imitation, is the quickest and way to get there.

Also posted in Business News, DHgate, Personal Insights – 5 Comments

Maturing eCommerce Means Web Retailers Must Think Differently

April 14, 2010

I saw a very interesting article on the Financial Times online today and thought I would share it here.  Entitled “Maturing ecommerce means web retailers must think differently” Michael Ross, director at eCommera, put some interesting points forward for small businesses.

Read highlights below or the full article here

...But the indicators of ecommerce’s problems are not so obvious as long queues or a tired looking store front are to a physical high street retailer.

For online retailers, store layout means optimising the position of their most popular and most profitable products; check-out queues equate to the ease and speed of completing an order and the time from order to delivery. For the friendliness of the affable village butcher, online retailers must think about their after sales care and the tone and tailoring of their outreach.

Online, a company with a compelling and competitive service has an almost infinite catchment area, and it is often the big names who are investing most in understanding the science of effective retail and will prevail in the land grab.

So to avoid going the way of local stores, squeezed out by the major players – the supermarkets of the physical world – online retailers of all sizes must monitor and understand the importance of several key metrics.

First comes the number of visits and orders, and the source of traffic. This allows more sophisticated analysis than physical in-store footfall as it not only reveals total consumer number but also how they are finding the site – whether driven by direct marketing, banner ads, affiliates, search or other means…

And finally, the most obvious KPI for businesses to monitor – customer satisfaction. Many say they do so but their methodology is often based on the wrong metrics.

Businesses need a holistic view of end-to-end customer service and the efficiency of the website and back-end in delivering what those consumers want, when they want it…

Also posted in Business News, Trend Insights – 1 Comment

Payment Systems in China

April 11, 2010

A couple of recent news items regarding ecommerce payment systems got me thinking about the current state of electronic and ‘cashless’ payment options and methods in China. It’s a market that has changed dramatically over the last decade and transformed Chinese society.

It’s also highly relevant to US retailers and wholesalers who are currently sourcing their products from China, and also to those who are planning to do it in the future, because as the Chinese ecommerce market gets more sophisticated, secure and multi-faceted, the ease of doing business with Chinese suppliers becomes less of a headache, particularly for small to medium businesses and new players.

The first item was that MasterCard was entering the booming online marketplace by launching its own web shopping mall called’ MasterCard Market Place’. Clearly the move is an attempt by the company to boost its revenue in the face of cutthroat competition from its rivals like Visa and American Express and also form alternative, cheaper and newer (and hence more attractive in many ways) ecommerce payment systems like PayPal. I think this is the first time a giant global credit card company like Visa or American Express has entered this market in a substantial way. Whether consumers will flock to a shopping site run by a payment systems company rather than a retailer or a B2B intermediary site like my own company, www.dhgate.com, remains to be seen.

The second item was a recent report that for the first time in living memory US consumer credit debt fell for the 13th month in a row. Clearly as a result of the recession and faltering labor market, Americans are curtailing their addiction to credit card and other consumer debt…for the moment. Maybe the days of credit-fuelled spending in the US are over. We will see.

‘Plastic money’ was invented in the US and its rise together with the benefits to the US economy, most notably for the banks, finance houses and retailers, and the resulting personal debt mountain and heartache for consumers has been well-documented. From a Chinese point of view, though, the situation could not be more different.

Credit cards and other forms of consumer credit are a relatively new concept in China. China is still a cash society. It is not unusual to see an ATM (also a new relatively new concept) user   withdrawing thousands of RMB at increments of 2000rmb ($285) per transaction to pay their monthly rent. The highest denomination is a lowly 100rmb, about $14. Consumers will often make major purchases like cars, high-end electronic goods and even apartments with suitcases and bags of cash, literally.

The Chinese are generally fiscally very conservative. They are the greatest savers in the world. Although estimates are difficult, it is thought that the Chinese save between 30-50% of their disposable whereas the US rate is close to 0%. Also Chinese are much less leveraged than their counterparts in emerging and developed countries. Total consumer debt as a percentage of disposable income is estimated to be about 30% compared with 94% in the US.

The situation is, however, changing dramatically. As the Chinese economy booms and the level of disposable income of its people has increased, the rise in popularity of credit cards, online ecommerce payment systems and other forms of personal consumer credit has exponentially increased. I’ve talked in previous columns about the extraordinary rise in online shopping. This is largely been brought about by the rise of the credit card and other ecommerce payment options.

China is encouraging non-cash payment options, and the banks are aggressively marketing these avenues to boost revenue. Although the area is still relatively small, (for example, only 5% of Chinese have a credit card compared to 60% in the US), the industry is expected to boom in the future. According to a recent report by McKinsey & Co, China has issued only about 50 million credit cards. By 2013, it is estimated that the figure will surpass 300 million. The increasing comfort and ease in using non-cash payment options means that there will be increasing innovation and sophistication, particularly for online buying and selling and the B2B market.

My own company, www.dhgate.com, has been at the forefront in the B2B field through our innovative partnership with one of the leaders in the online payments market, PayPal which has give our overseas clients and Chinese suppliers a safe, reliable and fast payment system.

Which leads me to my third item of interest: PayPal have recently announced a partnership with China UnionPay, the national bankcard association of China which has to date issued over 2 billion ATM, debit and credit cards. The partnership means that China UnionPay card holders can use PayPal to shop online domestically and internationally. I believe it has the potential to position PayPal and its Chinese partners like my company as the number one online payment option in the future.

In my next post I will talk more about how US small to medium online retailers and wholesalers can now take advantage of the using innovative, safe and reliable B2B online payment systems.

Also posted in Business News – 8 Comments
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