Go online to reap the harvest(2)

Trusty ally

MaryAnn Richardson, founder of Makeup By MaryAnn, a UK company that sells makeup brushes and other fashion items, says that having a presence on Alibaba, China's largest e-commerce platform, has helped several Western companies engage, converse and participate in business negotiations with entrepreneurs from diverse backgrounds. "Having access to so many companies under one platform, especially those who are able to produce bespoke items at affordable margins, is great for start-up businesses," she says adding that it also gives companies good brand exposure.

Building trust in China's marketplace has been the biggest contribution of Chinese e-commerce companies such as Alibaba Group and Tencent Holdings Ltd.

Online shopping in China is no longer just clicking the "buy" button and has more to do with interactions, discussions on the latest trends and rating of products and services. Such interactions and communications create trust and more importantly empower the buyers, rather than sellers, experts say.

Scotland-based Sumayyah Nasaruddin, founder of Love to Dress, a fashion company, says that the Chinese e-commerce platforms have been of great help to her fledgling business. "I design long sleeve Western maxi dresses for Muslim women and manufacture my products in China using suppliers identified through the Alibaba platform," she says.

"The products and services on platforms such as Alibaba are not only easy to use but also help us check the authenticity of the other party in China. E-commerce has made it possible for us to cross borders without wasting time and money."

Chinese companies are also equally vocal in their praise for such platforms.

"I initially started using Alibaba as an additional platform to sell my products to overseas clients. But that has changed. It is now my primary source of overseas business and accounts for more than 50 percent of my total profits and orders," says Zhou Mingwang, owner of Yiwu Mingwang Co Ltd, a small export-oriented company in Yiwu, Zhejiang province. In the past five years, Zhou has received more than 200 requests every year from foreign buyers through Alibaba, with nearly 50 of these customers becoming full-time and regular clients.

"Alibaba has provided a regulated platform for companies to expand abroad and is also a hallmark of trust for foreign buyers," Zhou says.

He, however, feels that Alibaba should lift the threshold for merchants to sell online. "I think they can set even higher standards for future entrants to ensure a fair playing field as well as a good reputation for the marketplace," he says.

Business push

To understand the power of e-commerce in China, one does not need to look further than the success of Jack Ma and his Alibaba Group. Alibaba currently accounts for more than 5 percent of the total retail market in China. According to Ma's estimates, more than 30 percent of all the retail trade in China will be conducted online over the next five years.

Taobao, the group's eBay-like marketplace, controls more than 90 percent of online transactions in China by transaction value, while TMall, the group's online mall, accounts for 51 percent of the business-to-consumer segment, according to industry estimates. The turnover of these two companies outstripped the combined sales of their foreign counterparts, Amazon and eBay, last year. Other key Chinese e-commerce players such as Tencent, led by Pony Ma, are banking on customized e-commerce solutions and applications to drive growth and attract more customers.

Despite the lackluster export and import situation, Alibaba is looking to take a bigger bite of the e-commerce pie by renovating its systems for better matchmaking between merchants and buyers. Alibaba will leverage the data it collects from overseas buyers to precisely locate relevant Chinese suppliers, something that will enhance transaction efficiency by 28 percent, says Wu Minzhi, president of the company's international business.

"Today we are seeing a changed export environment in which producing bulky orders is no longer a common practice. Instead what we are seeing is more smaller-cap foreign buyers who are seeking diversified products and want to find the appropriate suppliers in China as quickly as possible," she says.

It is this changing reality that is forcing companies such as Alibaba to move beyond playing a mere intermediary role, says Qi Junsheng, business director of the international department of the company's B2B unit. Alibaba is planning to launch a "direct procurement platform" by sharing key commercial information such as emerging business trends soon, he says.

Explaining the changes, Qi Junsheng says that earlier the companies would launch their products on the online Alibaba trading platform and wait for suitable buyers to browse through the thousands of shops before deciding whether or not to make a purchase. That also required a business transaction spread over three weeks, he says, adding that the whole process might be a drag on the business efficiency of small businesses struggling to offset the global economic slowdown.

"The model also fails to help buyers precisely locate the vendors. For instance, a customer can never be sure whether his specific requirements would be catered to. It may take at least one week for both sides to negotiate back and forth, only to find out that the deal cannot be clinched because of, for instance, lack of raw materials," he says.

Payment solutions

One of the biggest hurdles for foreign companies, who are keen to be a part of the Chinese e-commerce market, is the absence of uniform payment solutions. That looks set to change now as companies such as Tencent are now coming up with solutions that offer safety and ease in transactions.

Tencent has enabled online transactions for select merchants by linking payment services to its popular WeChat smartphone application that has more than 300 million users globally. The application lets users send voice messages, photos and other media the way they might send text messages, without charging any extra fees. Since early June, WeChat has empowered a select few of its registered corporate accounts with online shopping facilities. WeChat does all back-end technical integration and support for these vendors, including page design and payment linkups. Online transactions are made available through credit cards, online banking or TenPay, the company's third-party payment platform.

The application has already attracted foreign retailers such as fast-food chain McDonald's Corp. The retailer has opened an online channel on WeChat and offers several discounts to customers who complete transactions using the WeChat framework.