Professor Siah Hwee Ang sees the online route into China as holding much promise for exporters

Professor Siah Hwee Ang sees the online route into China as holding much promise for exporters

By Siah Hwee Ang*

The value of social media cannot be denied. Social media helps to get the word around and creates an impression.

Actual sales is another story.

The concept of online sales is not new. And it’s fast becoming a major vehicle for entry into the Chinese market.

Online sales

We can recall the days when Dell tested the limits by selling their computers online. At that time, computers were considered a relatively high value item to be sold online.

Generally speaking, it is easy for consumers to make a decision on a product that is pretty much standardised, even more so when this is not their first purchase. Even marginal customisation does not pose a problem.

So barring logistical costs that may deem a product not worth buying/selling through this platform, everything imaginable can now be sold online.

Over time, though, consumers start to feel that in some instances they have been shortchanged with items they have purchased.

In particular, the sales pitch of WYSIWYG (what you see is what you get) is no longer good enough. (The same happens to us often in restaurants where the picture of the food that we order does not look like the same dish that comes to the table.)

Consumers get savvier and thus would rather see the product that they are buying as opposed to seeing it on the computer screen.

In recent years, this trend is somewhat reversed as online dealers are making life easier for consumers, in particular the variety of choice and low shipping costs.

Online shopping is becoming a ‘cult’ in China and globally.

Online shopping market in China

Online shopping of groceries is becoming common in China. People can buy relatively few items each time as transaction costs are marginal.

This increase in online shopping consumers has made many companies set up online sales platforms just to cope with demand.

And now the products that Chinese consumers buy online range from expensive luxury branded goods to electronics to … food.

It is estimated that by 2018, the online fresh food sales market could reach 100 billion yuan (about NZ$22billion).

Major supermarket players in China are attracted to this potential, the latest being RT Mart, who has more than 300 relatively large physical stores across China.

There are many smaller independent vendors as well.

Due to logistical challenges—selling online means that you have to be in good control of your delivery as well, chances are high that only major players will survive in the mid-term.

Chinese importers and foreign exporters

Then there are Chinese importers that are selling foreign goods online to Chinese consumers.

These Chinese importers have reached out to foreign companies to supply good products to which they can add a big margin for selling them in China.

The Taobao.com website, for example, is selling quite a bit of US Angus beef. Yet, no questions have been asked about the origins of this beef.

Beef imports from many countries are banned. And in the case of American beef, this ban has not been lifted. (Earlier this year, Ireland became the first European Union country to have this ban lifted.)

In fact, it is estimated that more than 1 million tons of beef were smuggled into China through Hong Kong and Vietnam in 2014, more than three times the beef imports through legal channels.

Chinese consumers are being educated on asking for the sources of their consumables.

But the thirst of these consumers for foreign brand products is high, irrespective of the number of food scandals that have happened in the country. The general perception of foreign food imports continue to be perceived as good quality regardless.

There are always fakes as well—as in local productions that use foreign packaging, and this can be difficult to detect, as Alibaba learnt.

Finally, some companies just decide to take out the hassle of the middlemen and try to sell direct to the Chinese market using online platforms. Silver Fern Farms is one example. Yesshop is also now into the South Korean market.

If logistics are organised properly, this latter model of selling to the Chinese market will work out. It does not contain the authenticity issues with Chinese consumers buying from Chinese websites. It also does not contain the issues associated with engaging with local partners operating in the same space by just dealing with the logistics.

With this arrangement, an alternative legitimate business model of exporting may yet have arrived in the world of international business.

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Professor Siah Hwee Ang holds the BNZ Chair in Business in Asia at Victoria University. He writes a regular column here focused on understanding the challenges and opportunities for New Zealand in our trade with China. You can contact him here.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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淘宝 TaoBao www.taobao.com
天猫 Tmall www.tmall.com
一号店 No.1 Shop www.yhd.com
京东 JingDong www.jd.com
聚美优品 No.1 Cosmetic products online shopping http://bj.jumei.com/

Just add some context to Prof Ang's article.

You may also like to shop from these websites.

Hopefully fixed. And the reason for having no English translation is that they cater domestic customers or customers who can read Chinese, which are around 600 million, and growing.

So, learn some Chinese and happy shopping online.

... first 3 don't open , think it needs " http " in web address ... last one opens , nice site , but no English translation ...

Thankyou xingmowang : those websites are a lot of fun ....

... where's the Chinese gummy bear selection .... ahhhhhhh .....

Xingmowang give me the phonetic alphabet any day, learning to read Chinese is a different proposition to speaking it I'd guess. However I'm happy just to look at the photos :o).

Interesting that Dell was mentioned. Last year I didn't buy a Dell, because after going through all the site and the picks, getting offered all sorts of things like "no fault child protection insurance" and "free handheld tablet" upgrade... the price was about $3000. But it turned out that was the _US_ site. When I finally convinced my browser to go to the NZ site, Those options weren't even listed. the "free memory upgrade" was now a very expensive extra, and the few options that were offered were greatly crippled (2 year backwbase warranty, that cost more than the onsite same day 5 year warranty in the US). And the price? $5700 NZD. The dollar was around 85c US at the time.

So that told me just how seriously Dell took their online sales....

Some online stores are like mightyape.co.nz. They're just a shop front. Many things that you order online are just drop-shipped straight from the warehouse. No stock holding, No distributor. no much double handling - occasionally a delay if the foreign factory is out of product (Like the Acer brand laptop bag in that size) but that just means the range was unlimited.

But. Compare that to "GlobalSoundTrade". The site looked professional. The products were all good quality. And it was listed as a drop ship organisation that carried little stock to keep inventory costs low and fresh. The eBay reports were good. .... except it was 100% scam. From what I can tell not one person who ever ordered a product received anything - even through several of the forums did have "finally got my package, took a while, glad it's here".... turns out the owner of the online store, was also the admin for the forum board and if there were complaints he (or she) would just edit them and then block that user, same with their facebook account - full of sock puppet claims, and any complaints registered with facebook he just referred them to the eBay feedback and blamed the complainer. I don't recall facebook even apologising once it was discovered that the eBay accounts were fake (sold-to-self puppet feedbacks). The matter was referred to the NZ Police they have a lovely thick file on GlobalSoundTrade, and after 9 years the site was finally taken down but we've never heard of any money recovered or prosecutions filed.

Or the DVD site whose name slips my mind, was a .co.nz address but that just re-directed to their Australian site. Doing special rates on DVD's especially TV shows and Boxed sets. Turns out that the home office was in China, and the DVD's that turned up looked a little less glossy and some not quite so well printed as they should have been, the boxes were also poorly constructed and tended to fall apart, and to top it off some of the DVD's actually appeared to be blank (like the first season of Hogan's Heroes). Tried to contact the studios to check if they were legit but couldn't find how, nor were the NZ police interested unless I could prove the were fake (at which point they would have seized all of those Disks, not paid for them, and never been able to get my money back)