Insights from Around the World: China

Despite the winter chill, China was red-hot at the close of 2009.The country’s manufacturing activity accelerated in December at its fastest pace in several years and foreign exports were up USD$130.7bn, up 17.7% year-on-year. J.P. Morgan said it expects China’s growth momentum to continue throughout 2010. All this at the same time as internet shopping in the UK grew at its fastest rate for 22 months in December, as millions of shoppers migrated online to buy their Christmas goods.

Controversy over Beijing’s policy of pegging its currency to the U.S. dollar may continue to concern economists, but for the time being the fixed exchange rate gives China’s factories a nearly unbeatable price advantage against manufacturers in other countries.

The price advantage has grown even larger after the U.S. dollar, and therefore the Chinese yuan, fell sharply against other major currencies last year. Combine this financial situation with the growth of an already mammoth manufacturing industry and you get a retail buyers market.

Retailers purchasing inventory in China via DHgate.com demonstrated some interesting trends in 2009. Although Apparel and Accessories remained strong, technology purchases ranked as the most popular, accounting for around a third of transactions and a rise of over 10% on the previous year. Strong growth was also seen in the Health and Beauty and Home and Gardens categories, both showing year-on-year increases of around 40%. And with total Christmas stock purchasing representing DHgate’s busiest in its five year history, Chinese manufacturers are expecting to see huge growth in 2010.

With an increasing number of Chinese businesses setting up wholesale and manufacturing operations online, those who source from China will have a distinct advantage.  Traditionally it has been the Big Box retailers who benefit from China sourcing. The new evolution of this industry online allows smaller business to also benefit and pass on savings to their customers – increasing profits.

As consumers resume normal spending habits, retailers capitalizing on the surge of quality goods provided by Chinese manufacturers have the potential to expand their market share.

To keep regular readers of this blog in the loop, I will repost my monthly entries here – So you will have a single hub for all my thoughts on entrepreneurship, running a business and the developing supplier and eCommerce situation here in China. And, if you have any areas you would particularly like me to cover, why not drop me an email or comment below? I’d love to hear form you.

“The View from China”

by DHgate.com Founder and CEO, Diane Wang

On the eve of the Year of the Tiger, I’m proud to present a new blog to readers which will give regular updates on the events and opportunities within the Chinese ecommerce scene. Here, I aim to give an insight into doing business in China and an insider’s eye into the world’s most exciting emerging market.

International ecommerce and ecommerce technology have been my passion for the last two decades. After leaving the security of senior management at Microsoft and Cisco I decided to go it alone. My first company, online consumer marketplace Joyo.com, was acquired by Amazon in 2004, and that same year I founded DHgate.com. My purpose was to create a platform which connects SMEs to the manufacturing hub which is China, and therefore level the playing field.

Despite the global financial crisis, 2009 was a great year for China. GDP growth for 2009 was 8.7% and the country’s manufacturing activity accelerated in December at its fastest pace in several years. Foreign exports rose to US$130.7billion, up 17.7% year-on-year, and analysts expect that the Chinese growth momentum will continue in 2010. Although the Chinese Government is playing it down, it has been confirmed that China has overtaken Germany as the world’s biggest exporter.

As an increasing number of Chinese businesses, large and small, are setting up wholesale and manufacturing operations online, I believe that there are now great opportunities for US retailers, particularly SME’s, to source products directly from China.

Recently, as part of its extensive stimulus packages, the Chinese government has implemented a policy to spur the growth of SME manufacturers and suppliers throughout China. In particular, it has directed local and provincial governments to encourage emerging industries through reform, assistance with market access and fostering local banks to provide finance to expanding businesses.

At DHgate.com, we have seen a surge in the number of Chinese SME manufacturers and suppliers who have migrated online. As these numbers grow, so do the opportunities for US retailers to be cost effective. I believe that there has never been a better time for US retailers to take advantage of the Chinese online sourcing market.

Because of this, I believe it is timely to introduce a blog on the Chinese ecommerce scene which will post regular updates on the ecommerce market in China with a particular emphasis on B2B sourcing.

The regular reports will focus on issues such as trends, new platform innovations, technological and other improvements and government initiatives and policy developments. I will also address pressing consumer issues such as product quality and safety.

You can read more about how the site works in the press release pasted below or by logging on to the site here, but what I wanted to talk about in this post is how the launch represents my attitude to business growth.

As frequent readers will know, when I started DHgate I did so to help small and medium business enjoy the same opportunities which had previously only been available to Big Box retailers. We were the first company to fully integrate all aspects of the cross-border wholesale trade with China on a single ecommerce platform, allowing cross-border trade to be conducted entirely online. This process involved (amongst many other things) designing proprietary technology, attracting the web best systems development professionals, securing investors, educating the market and doing everything we could to make it actually work. It hasn’t always been easy, and the work is far from over, but it has certainly been rewarding to watch it, and its users, flourish.

Creating a healthy, prosperous environment where SMEs have the tools they need to thrive fuels good business for everyone. And I know that that extends beyond transactions; SMEs face other challenges where help is also welcome.

I’m not claiming that one microsite will hold all the answers, but perhaps it is a step in the right direction and may inspire others to invest their time and expertise, too. Being open, proactive and supportive is win-win for all involved – and I’m prepared to put my money where my mouth is, so to speak.

So please log on to the site, offer your opinions or suggestions for improvement here and let me know if it helps. It was created to help you, and I want to make sure it does.

DHgate.com First in China to Launch Virtual Office

New Website is Geared to Help New and Growing Online Retailers

Navigate an Ever-Evolving Industry

China’s leading wholesale marketplace and champions of small businesses, DHgate.com, today launched IntroducingSuccess.com, a virtual office created exclusively to support America’s aspiring entrepreneurs and SME retailers.

The free site serves as a repository of information about starting and running a successful online business. IntroducingSuccess includes detailed guidance on all avenues from website tips to international product sourcing – including practical know-how on increasing profits through easy dealings with China-based suppliers.

The site, a first of its kind in this market, features a team of animated professionals all working for fictional start-up company, ‘SuccessCo’. Each team member has a specific area of expertise, such as Susan Oliviera in Accounting and Richard Cooke in Operations, all headed by CEO and Founder, Maggie Succesco. They share their insights and resources with visitors in an easy-to-navigate virtual office space.

Introducing Success is broken into three primary areas. The first is for ecommerce novices and provides a questionnaire for would-be-entrepreneurs and details on starting a business. The second section which provides content ranging from web design tricks to shipping options is geared towards those who might already be retailing, just not online using an international sourcing model. The last section includes marketing and sales tips that can be used by newcomers or experienced sellers. The site also features valuable information on doing business with China.

Ecommerce pioneer, DHgate.com, is the first Chinese company to specifically focus on helping western business owners get the most out of trade with China by addressing everything from “Chinese Business Practices” and “Choosing the Right Supplier”, to useful resources such as ““Taxes, Duties and Customs Considerations”.

This innovative thinking is typical of DHgate.com and Founder and CEO, Diane Wang.

Diane is an experienced entrepreneur who left senior management at Cisco and Microsoft to start Joyo.com, which she grew to China’s most successful B2C site and was subsequently acquired by Amazon in 2004. Having been an ambitious online retailer with little start-up capital, Diane learned the hard way that international trade with China could be made much easier. She launched DHgate.com that same year.

“DHgate.com takes the hassle out of cross-border trade with China, allowing safe transactions to take place in a few clicks of the mouse. 1.5 million small businesses have been able to grow their profits through purchasing from the 500,000 China suppliers on DHgate.com, and IntroducingSuccess.com has been created to take that further.”

IntroducingSuccess.com is a resource hub that helps with the other fundamentals, and is designed to save businesses time and money.

“It was also important to me that the site doesn’t just cater to those businesses which use DHgate.com to buy their inventory – we wanted it to be a place that ANYONE interested in starting an online shop could go for information. That’s why we used a virtual office and separate URL. “

As a market-maker, DHgate.com adopts a forward thinking business model, based on providing “freemium” (free and premium) services to business owners. IntroducingSuccess.com is a free, value-added service which complements the free membership model offered by the DHgate platform. On DHgate.com buyers pay nothing upfront; DHgate earns its revenue through commissions paid by the seller—only after a transaction is completed successfully.

The company is focused on providing easy access for buyers to learn more about making the most of China’s supplier base and making the most of the boom in ecommerce. They frequently update their Facebook page and Twitter accounts as well as running two popular blogs. Blog.dhgate.com focuses on wholesale trends and The Gateway Blog (www.thegatewayblog.com) shares Diane’s personal advice to entrepreneurs and retailers. With webinars, podcasts and even a YouTube Channel in store for 2010, buyers will find DHgate.com a hub for all their business needs. And starting this month, Diane will also host a regular blog entitled “The View from China” on PracticalEcommerce.com.

As Diane says, “It’s not just about transactions – It’s about leveling the playing field for businesses of all sizes and opening up China to the world.”

Below is an article I recently had published in Ecommerce Times - It’s a practical and quick introduction to establishing yourself in the marketplace. You can also read the article here.

The vast expanse of the Internet and the transition to digitally based commerce means that virtually anyone, anywhere in the world, can sell just about any product to anyone else. In this rapidly evolving and highly-competitive landscape, developing a passion for niche selling will allow you to differentiate yourself in the marketplace.

After an exceedingly tough year for businesses in virtually every sector, reports of online sales  from November 30, or “Cyber Monday,” as it’s often called, offer hope for the turnaround so many people have been waiting for.

Initial sales reports from e-commerce sites showed a 19.6 percent increase over last year. This is an incredible turnaround, given that last year was the first year that online sales for the Monday after Thanksgiving decreased. While online purchases represent only 10 percent of the anticipated volume of holiday sales, the savvy entrepreneur should be thinking about the best ways to capitalize on the one market segment that’s growing at a decent clip.

The Internet has been called by many “the great equalizer.” One of the best things about selling online is that virtually anyone can start a business on the Net with far fewer fixed costs than a brick-and-mortar approach. That has made e-tailing an incredibly popular form of self-employment, especially as more and more people find themselves looking to make a living in these difficult economic times.

However, the low barrier to entry is something of a double-edge sword. The relative ease of building an e-commerce business means that there is a constant stream of new competitors. For the small business owner or prospective Net-preneur, I have this very simple piece of advice: Specialize.

4 Kinds of E-Commerce

Simple advice it may be, but many new sites fail because business owners do not understand just how critical it is to be incredibly strategic about what inventory to stock. When I scan the e-commerce landscape, I see four kinds of businesses. The first are the online arms of the big box stores that everyone is familiar with. The second and third types are the kinds of online retail sites that don’t perform as well as they should. They’re either the modern day equivalent of an Old West general store, or they’re so incredibly focused that they only sell extremely niche items like Faberge Imperial Easter Eggs made in 1918. (Two were made, but neither was delivered.)

The fourth type of e-commerce Web site falls somewhere between the last two. It is the most likely of the independent sites to succeed in a convoluted market. The savvy entrepreneur who designs an online store that is focused but not pigeonholed knows the risks of doing otherwise. A store that’s too general in nature is hard to differentiate from the competition. It’s also harder to stock with goods — and finding the best prices for so many items makes sourcing a real challenge. Sites that have too narrow a focus may find they have an incredibly small target audience, and they also run the risk of becoming obsolete if consumer tastes change or a new product removes the demand entirely.

The Joys of Specialization

If those pitfalls aren’t reason enough to encourage the right balance of specialization, here are some of the upsides of a well-conceived product line:

1. Scalability — If your online store has a limited range of products that are similar in nature (e.g. leather goods ranging from wallets and purses to satchels and luggage), you might be able to source them all from a few dedicated vendors. By consolidating your spend, you can negotiate better rates and enjoy the same economies of scale that benefit larger stores.
2. Easier Market Research — To effectively market products on your site, you’ll need to know a lot about each item, who else offers the product, price ranges, consumer preferences, etc. For each distinct product you offer, the amount of time learning about the market will increase multiplicatively. With a narrower band of goods, you can more easily know the competitive landscape and stay on top, if not ahead, of emerging trends.
3. Loyalty — Another upside of specialization is increased customer loyalty. A shopper might buy a pair of gloves from you after reading positive reviews of their quality and your customer service. However, when that shopper comes across bulk tubs of holiday candy on a return visit, they might think twice about whether you’re the best place to make the purchase. If that same customer is looking for a new leather jacket to match the gloves she enjoys so much, specialization gives you a much better chance of earning that repeat business.

Step by Step

So, if you’re considering establishing an online store, remember to keep your focus narrow. In addition the benefits listed above, it’s also a good idea to start with a few less-expensive items in product line you want to sell. If you’re a handbag enthusiast and want to share your love of leather goods with the rest of the world, start by selling gloves, wallets and key chains.

Start small, and expose yourself to less risk. Build your customer base, marketing lists, and industry knowledge while your procurement, IT and shipping practices are put in place.

When you’ve earned a tidy profit and feel comfortable with the operations of your e-commerce business, reinvest in those luxury bags you enjoy so much, and reach out to your established customers to show them what’s new on offer.

And don’t forget to email me a link to your site. I’m in the market for a new satchel.

Subscribers to Retail Week can read the whole article here; I’ve also pasted it below:

Despite economic growth signaling the end of recession, UK retail sales have frequently been flat over the same periods last year, indicating that a proper recovery will take more time.

While larger retailers like B&Q and Tesco have turned to China as they expand into new markets, small and medium retailers and e-commerce sites should also be focused on Chinese supply chains.

In this economic climate, lower-priced options will be retailers’ key to success. By engaging with emerging manufacturers in China, any retailer can benefit from the products on offer from the world’s workshop.

As the founder of a business specializing in helping retailers and manufacturers make these kinds of connections, I’ve witnessed just how big an impact good sourcing can have on bottom lines.

After selling my first business, Joyo.com, to Amazon, I founded DHgate.com in 2004 to connect international buyers to Chinese supply chains by combining and streamlining the entire cross-border trade process.

Although this had not been done before, we knew that by leveling the playing field for retailers around the world, consumers would see better goods at lower prices and innovative new businesses would thrive. And new policy developments indicate that international decision makers agree.

Recently, recommendations have been made to encourage the growth of SME suppliers throughout China. Policy makers suggest that local governments can spur more growth by reforming emerging industries, assisting with market access, and encouraging the development of local banks to help finance expanding businesses.

Many of these recommendations mirror the objectives that my company has championed since we began. We’ve seen the success stories of our customers who have been able to compete on a broad scale.

Chinese initiatives are now encouraging the same type of opportunities to be created on the supply side. As the number of manufacturers grows, so too do the opportunities for retailers in Europe to increase margins and be cost-competitive.

The best way to take advantage of these changes in China is to get familiar with the market as soon as possible. By resolving obstacles such as language barrier, time difference and shipping challenges, platforms like DHgate.com enable Western buyers to securely conduct cross-border transactions with sellers in China.

Retailers that want to take full advantage of Chinese goods as the markets start to rebound should begin engaging with overseas manufacturers now. Try placing a test order to familiarize yourself with shipping and customs requirements as well as to start building positive relationships with merchants.

As it becomes easier for Chinese businesses to set up wholesale and manufacturing operations, those who source from China will surely benefit.  We’ve already witnessed how sourcing products from China has allowed larger retailers throughout Europe and North America to pass on savings to their customers and increase profits – now is the time for this trend to boom.

By capitalizing on the surge of quality goods provided by Chinese manufacturers, retailers can position themselves to expand their market share as buyers resume normal spending habits.

I’m planning to write in more detail about some of these people in the near future, but firstly I wanted to talk about differentiating your company – something the nets leaders have cornered. The most successful etailers are those who look toward the future and plan to make it more dynamic from the beginning. I believe in having progressive core values from the start is vital to ensuring your business will last the test of time. There are plenty of examples that prove this theory.

Amongst the competitive online marketplace, one way to measure whether or not your tactics are working is to pay attention to what people are saying around you and about you. If your company is raising eyebrows, spurring conversations and inspiring others, then you are on the right track.

When Australia’s Ecommerce Report editor, Stewart Carter, wrote this week that retailers would “be mad to ignore” my company, DHgate.com, I was reminded that recognition from peers is reassuring! Although we are still working to overcome many challenges faced by young companies and a rapidly changing marketplace, we are feeling positive. I must admit, it’s an exciting time.

You can check out Stewart’s full report here.

It is offline trade that has seen the real impact of weakened export markets in China. My company, DHgate.com, has seen GMV increase by an average of 20% per month for the last 5 months, indicating that manufacturing companies in China are embracing new technology to reach international markets

Live interview on "Asia Business Tonight"

With more than 30 years experience in international export, technology-wise China, via companies like my own, can provide mature solutions for suppliers allowing them to increase their capabilities and competitive advantage for global buyers.

Global demand is also improving, as DHgate’s figures will attest, with order increases recorded from international retailers in markets such as the US, Europe and Australia. Further, the Chinese customs agency said September exports fell 15.2 per cent to $115.9 billion US from the same period a year earlier, but that was the least in nine months, another sign that global demand is rebounding

In spite of what is happening in the global economy, I believe that if businesses can keep cost competitive, if they can differentiate, if they can provide a valuable and reliable service and/or product and if they can innovate, then there is a very good chance of success.

So when Bloomberg’s “Asia Business Tonight” show asked me to appear and discuss the results from my business’ perspective, I felt confident I could communicate these economic results from a real point of view – a business owner who wants to grow.

Has your business seen signs of the recovering economy? I’d love to hear your story, here.

Being open about how your company, the market and the environment you operate in works, I hope my customers will be able to not only develop trust in our service, but also become savvy and successful users.

I was recently interviewed by Practical Ecommerce about some of issues involved in sourcing from China. You can read my responses below and view the article here.

What other concerns do you think buyers might have when dealing with products made in China? I’d be more than happy to address them here on my blog.

DHGate.com Sources China-made Products

DHGate.com is an online markeplace of wholesale products from China. The company is located in Beijing and Diane Wang is its founder and CEO. Prior to launching DHGate, she founded Joyo.com, a consumer-shopping site that Amazon purchased in 2004.

She says that over a million customers use DHGate for sourcing China-made products. We asked her about DHGate and why non-China companies should buy inventory from there.

PeC: Why should smaller companies, from the U.S. or elsewhere, look to source inventory directly from Chinese suppliers?

Wang: “In the past, small businesses were left out [of importing products from China] because of the complexity of an outdated world trading system.

“Online platforms that streamline China-sourcing help revive and rejuvenate small retailers and wholesalers, leveling the playing field between the smallest businesses and the largest. The goal of such online marketplaces is simple: Make it as easy for a small business to buy products overseas as it is for a consumer to buy a book from Amazon.

“We’re seeing that now is the right time for this. The technologies are well developed and the markets are mature. Buying direct from manufacturers overseas is now safe, efficient, and can be even easier than ordering from a local distributor.”

PeC: How can a U.S.-based merchant know the quality of a China-made product?

Wang: “As with all industries in all countries around the world, there are always cases of poor management or lack of total oversight when it comes to quality. And just like in the U.S. or Europe, when serious quality issues arise in Chinese manufacturing, regulators step to assess the situation and put appropriate safeguards in place to protect consumers.

“One of the great things about the Chinese manufacturing sector is its size. That means there is a lot of choice for consumers. Buyers should always take the time to choose their suppliers carefully. The most important step buyers take in the process of selecting a source should be to check feedback about sellers. All reputable online platforms have built in review systems. You should also check open-ended comments posted by other buyers. The comments will tell a story about attitude, credibility, and the extent to which that seller is really focused on building a good reputation.”

PeC: What are the best items to import from China?

Wang: “I always recommend that merchants buy products that they know well and have an interest in. Since the goal is to resell items, it’s best to stick to what you know, even if those products won’t have the biggest margins. By focusing on products you’re really familiar with, marketing and managing your business will be much easier.”

PeC: How can it be cheaper to buy things from halfway around the world?

Wang: “One of the best things about the global economy is that it allows different countries, cities, businesses and individuals do what they do best. If you can imagine how much time and energy it would take if each household or individual had to produce all of the things they use each day—light bulbs, clothing, maybe an automobile or bicycle, the electricity to run appliances or a computer, it would be impossible for us to enjoy the quality of life we currently have. So different people do different work that they specialize in, and because they make more of the same things, they become more efficient making each item less costly to produce.

“Now if you take that example of a household that tries to be entirely self-sufficient and blow it up onto the global scale, you can see that some regions might be better suited to produce certain goods. For example, countries in arid regions import foodstuff and even water. In colder areas, roses from the southern hemisphere are delivered on Valentine’s Day. Because of a large workforce and major investments by both Chinese and international sources, China has become the world’s manufacturing plant.

“The amount of goods produced in China is astonishingly high. And with all that production, comes incredible economies of scale. So even if it costs more money to ship from Beijing to Boston, the items are available for purchase as such a low rate it becomes economically viable.”

PeC: How can a merchant know what, if any, products he or she should import from China?

Wang: “The first thing to do is plan how you’ll run your business and understand the time and money that will need to be invested. Second, do some research on the products you’d sell and find out what competition is already offering those goods. Decide how you’ll differentiate yourself. Finally, look into the different online platforms that streamline buying products from China. Important things to look for include the number of products and sellers, customer feedback and reviews, and any charges or fees that may be associated with a transaction. It’s also a good idea to see which platforms help ensure your satisfaction by having escrow or arbitration services.”

Ecommerce stood out and I was humbled to be among some impressive market-makers. With hard copy distribution to 150 countries throughout the world and 12 million hits a day on the China Daily site (http://www.chinadaily.com.cn), 2/3 of which are from outside of China – I hope that entrepreneurs and small business owners around the globe will not just learn more about my company, but also understand more about the opportunities ecommerce with China can offer them.

I’ve included the article below; you can read the whole feature here. Let me know what you think!

*Online Help*

After Diane Wang sold her online store to Internet giant Amazon.com for $75 million in 2004, an investor offered her $50 million to “build another Joyo”.

But Wang said “no”.

“It wouldn’t have been exciting for me to do something I had already accomplished,” says the 41-year-old Wang, who left Joyo.com in a management reshuffle.

She now heads online trade website DHGate.com, which connects small- and medium sized cross-border traders. Founded in 2004, her business has grown by more than 25 times in the past few years.

While China’s foreign trade has been hit hard by the financial crisis, Wang believes these are the most exciting times for Chinese online businesses.

“The financial crisis changed how foreign trade is conducted,” Wang says.

“Small-and medium-sized enterprises (SMEs) are going to play a bigger role with the help of e-commerce.”

Affected by the financial crisis and economic downturn, China’s foreign trade dropped to $946 billion in the first half of the year, 23.5 percent lower than the same period last year. In Dongguan, the center of the world’s workshop, thousands of export companies closed last year amid the slowdown.

But for small-and medium-sized trade companies, e-commerce has become a helping hand in surviving the crisis – and beyond.

David Wei, CEO of online giant Alibaba.com, which has Yahoo as its largest stakeholder and is listed on the Hong Kong Stock Exchange, quotes third-party figures as saying that SMEs trading online are five times more likely to survive the crisis than those that do not.

Statistics from the Internet research company iResearch Consulting Group show China’s e-commerce transactions reached 2.97 trillion yuan in 2008, 42 percent higher year-on-year.

SMEs accounted for 38 percent of all transaction volume in 2008, but the ratio is forecast to reach 46 percent in 2012.

Sun Chonghui, an analyst with Shanghai-based iResearch, says SME’s desperate needs to reduce costs and the emergence of second-generation online trading platforms contributed to the growth amid the difficulties.

While the first e-commerce platforms like Alibaba are mainly information platforms to connect buyers and sellers, second-generation websites like DHGate focus on transactions.

On DHGate, users can finish all processes from displaying products, quoting, signing contracts, securing letters of credit and finding a delivery company, aside from production and transportation. When the transactions are done, DHGate then charges buyers commissions of between 3 to 10 percent.

“Our model is ‘pay for performance’,” DHGate’s Wang says.

Despite the financial crisis, she says transactions on DHGate hit 1 billion yuan in the first half.

The transactions on the website in 2008 were $200 million.

With these one-stop services, SMEs can start their online shops without even knowing English, because there are three translation companies, more than 20 logistics firms and a dozen means of payment including PayPal.

Li Meng, a 25-year-old Beijinger who lost his job in the summer of 2007 only one year after graduating from college, now runs a fishing lure shop on DHGate.

“I was really scared around August last year. There was not a single new buyer for several months; I knew the financial crisis had really come,” says Li, who now makes more than $5,000 a month.

At that time, he just had one US-based customer, whose continuous purchases kept Li’s business alive.

“I think it was because my timely delivery and reputation in the online community,” Li says.

“Those factors made him trust me.”

You can read it here.

If you have your own thoughts on any of these issues, I’d love to hear them. Why not post a comment?