DHgate CEO Wang Shutong on Cross-Border Ecommerce in China

by Matt Slater May 15, 2014

DHgate CEO Wang Shutong on Cross-Border Ecommerce in China

This article is a reworking of ‘eBay全球最大卖家在福州,跨境电商潜力大‘ by Wang Shutong (王树彤). Some parts have been redacted or re-arranged.

Were you aware that the largest eBay seller in the world is a Chinese company in Fuzhou? The company sells a staggering 1bn RMB worth of goods a year (around 160m USD).

But for those in the world of cross-border e-commerce, that figure isn’t particularly surprising. Last year DH Gate had a whole host of sellers who managed to achieve sales in the tens or hundreds of millions of US dollars.

In the last few years, this industry has not only caught the attention of the foreign trade world, but the support of all levels of government in China. The wealth accumulated by cross-border e-commerce is never obvious, because these sellers tend keep their heads down and aren’t willing to speak up; they’re too busy making money.

A few years ago, we would encounter endless problems when trying to persuade foreign trade companies to do e-commerce. There were always people who didn’t believe that this was a way to transform foreign trade. Even those who did believe in the idea still thought that it would be difficult.

But now, wherever we go we are surrounded by enthusiastic foreign trade merchants making all sorts of inquiries. Compared with the depression in traditional foreign trade, China’s cross-border e-commerce is entering a ‘spring of abundance’, ushering in a golden era.

Below, I’ve selected some excerpts of articles by Takung journalist He Dehua, which are at once comprehensive and brimming with detail. They paint a lively picture of the development of cross-border e-commerce over the last few years.

Has the Spring of Cross-Border E-commerce Arrived?

When the website of the Fuzhou Department of Commerce put out news of the department chief’s inspection of Zongteng Network Technology Company, many foreign trade merchants in Fuzhou felt an incredible boost in morale.

“It turns out that the biggest eBay merchant in the world is in Fuzhou – they have one billion RMB of international sales a year. It’s unbelievable,” said Deng Hai, a graduate in international trade who has worked with foreign trade enterprises for ten years at Huiyuan International Commerce Exhibition Company. “The industry is undergoing a quiet explosion of wealth.”

According to statistics published by the iResearch Consultancy Group, in 2011 China’s cross-border e-commerce sales reached 1.6 trillion RMB (~ 257 billion USD). In 2012, they reached 2 trillion RMB; in 2013, about 3.1 trillion RMB. That’s an average annual increase of around 30%, far higher than the growth in traditional offline foreign trade.

In the first quarter of this year, China’s foreign trade exports were down 6.1%. In March, exports were down 9.2% and imports down 13.8%. This continued after June last year, with both imports and exports seeing decline.

Mainland China Trade Volume Exceeds 3 Trillion RMB

On the 17th of April, the temperature in Quanzhou, Fujian went over 30°C. At the time, an “E-commerce Believers Summit” was being held, and every nook and cranny of the venue was filled with people. The summit opened with an event on “Cross-border E-commerce”, covering rapid sales channels, and class-leading cross-border merchants and service providers like DH Gate, eBay’s PayPal, 4PX Technologies and Russia’s VK (the largest social networking site in Russia).

Lin Jiayu, from Quanzhou, was giving out business cards to service providers. He said that this year, he had attended at least one such e-commerce conference almost every month.

“Quanzhou is a city with foreign trade DNA flowing in its veins,” he said. [China Checkup: an odd but memorable turn of phrase!] “People in Quanzhou hope to be able to draw on cross-border e-commerce to open up a new Silk Road.”

A child of the 80s, Lin got started with entrepreneurship after graduating from university. With his own clothes factory, he’s opened stores on Taobao and T-Mall, and since last year has began selling on cross-border e-commerce platforms.

Nielsen optimistically predicts that by 2018, the scale of global cross-border e-commerce will have grown at least 300% compared with today. This is backed up by figures from Morgan Stanley, which show that as a proportion of global retail sales, e-commerce rose from 4% in 2008 to 6.5% in 2012; they also predicted that the proportion would reach 9.3% by 2016.

At the same time, salespeople in every country are relying on online sales more and more. For example, 35% of people in Australia appreciate the lower prices of cross-border purchasing compared with domestic offerings. Brides in Canada spend an average of 4000 USD on their weddings, and 76% of them buy at least one item for their wedding online.

Everyone is Researching Supportive Policies

“Not long ago, we found that police organisations in Latin American countries were using DH Gate to purchase office goods.” [China Checkup: Wang’s article doesn’t seem to specify who this quote is from.]

DH Gate is currently ranked number one for online foreign trade sales volume. The company’s vice-president Zhang Yongjie estimates that in the future, more and more governmental organisations and company departments will continue to make individual purchases online, or move their offline trade online.

According to the Alibaba Group’s figures on high-speed purchasing channels, last year their platform saw an increase of 630% in outgoing goods.

Lin Jiayu believes the rapid development of China’s cross-border e-commerce not only presents advantages in terms of reducing middlemen and lowering trade costs, but also benefits from supportive government policies and the need for change in traditional foreign trade enterprises.

State support began in 2013, with 13 government departments bringing out policies to support e-commerce. After Li Keqiang raised the issue of expanding cross-border e-commerce in this year’s Two Conferences Government Work Report (两会政府工作报告) and encouraged e-commerce merchants to innovate and develop, news of this strong approval quickly spread all over China.

Currently, the whole of China is actively pursuing researching and formulating plans for implementing this, and a coherent national policy is being put forward. Xiacheng District in Hangzhou, for example, has established a cross-border e-commerce industry park, with streamlined customs declaration and inspection services.

“We Mustn’t Lose Ourselves in E-commerce Alone”

However, several problems have emerged with this rapid development. An experienced industry figure put it bluntly:

“The numbers make this market seem enormous, but foreign trade and e-commerce are very complex. If you want a system, data, a marketplace, sales and analysis, you’ve got to research the flow of goods and get experience abroad. Currently no-one’s really got the whole picture, but many are setting up cross-border e-commerce stores. You download some code and set some prices, but after a few years you realise that you’ve never even met one of your customers or spoken to them.”

Zheng Bang, General Manager of ZTEMall, also pays attention to this problem. In the shoe industry, for example, international and domestic shoe types are not the same. “When we ask suppliers for these types of shoes, the response is that they don’t have them.”

The reason is that for many years, Chinese manufacturing companies have done OEM, only receiving orders from abroad and doing substitute work.

“We’ve got to actively help companies to sell abroad now, but many companies don’t have any goods of their own to show. The goods they have are all products they’ve made on behalf of other people.”

Zheng Bang laments that the vast majority of companies are still thinking in terms of the manufacturing and processing industry when they approach the international market, and not in terms of branding and retail.

In reality, cross-border e-commerce is still very much in its infancy.

“This generation of foreign trade and e-commerce merchants are still just scrabbling around looking for a way to use websites to sell stuff. The global market is huge, so even 1% of that is 40 billion USD. In terms of expanding cross-border e-commerce, that’s like a flock of sparrows perched in front of an ocean wondering how to separate the waters. The road is long, and at the same time as we’re selling products, we also need to pay attention to our customers. We’ve can’t lose ourselves in doing e-commerce alone, because ultimately what we do is foreign trade.”




Matt Slater
Matt Slater

Author

Hi there, I'm a British-Australian Engineer and Entrepreneur, recently moved back to Brisbane, Australia after nearly 9 years living in Shanghai. I founded China Checkup in 2013 because I was frustrated by the scarcity of concise, high-quality and timely information about Chinese companies.
My team are proud that China Checkup's verification reports now help clients worldwide do business in China safely. Have any questions? Email me at info@chinacheckup.com

 


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