Traders in Yiwu cashing in on e-commerce shops

Traders in Yiwu cashing in on e-commerce shops

Updated: 2013-10-25 02:19

By YU RAN in Yiwu, Zhejiang ( China Daily)FTZ’s new policies offer platform for neighboring regions to do more business

The launch of the China (Shanghai) Pilot Free Trade Zone will bring improved logistics andbetter business opportunities to regions like Yiwu, Zhejiang province, home to the world’slargest trading market for small commodities.

New laws associated with the trade zone are likely to transform the way companies do businessin Yiwu, according to the FTZ’s preliminary plan.

Although the city’s trading firms have struggled in the wake of the global recession, many arebanking on burgeoning online sales both at home and abroad.

The explosive growth of the Internet, which transcends regional and national boundaries, is aboon to the thousands of Yiwu manufacturers and traders who have been hit by rising costsand dwindling overseas demand from importers and wholesalers.

Now, in the sprawling small-commodity bazaars about three hours’ drive from Shanghai, shoptenants are busy taking online orders from customers around the world. For most of them, it’s acompletely new business model.

To be sure, online sales account for only a small portion of their revenue. But that share isgrowing fast, even as bulk export sales continue to shrink.

By the end of 2012, more than 120,000 companies in the city had applied for an e-commerceplatform to do business overseas. And a total of 150,000 parcels a day, on average, were sentoverseas in the first quarter of 2013, up 50 percent from the same period last year.

For 42-year-old Ai Shengming, quitting his job at a Yiwu company that made fashion jewelryaccessories to start his own business at the end of 2009 was the hardest decision he had evermade. It also was the bravest, as it necessitated using his life savings of 200,000 yuan($32,800).

For 18 years, Ai had worked as a designer for jewelry companies in Guangzhou, Guangdongprovince, and Yiwu.

“I obtained enough experience to run my own accessory business,” he said, so he registeredhis company with an online international trading platform via Alibaba to get orders directly fromabroad.

His company is called Zhejiang Moon Jewelry Co Ltd.

Ai put drawings instead of photos of his products online as a unique way of promoting them.The items are made at factories he knows to be reliable.

After losing almost all of his savings in the first eight months, he was fortunate to get an orderworth $100,000 from a Russian client in 2010.

“There was a period when a great many overseas buyers were logging on to Alibaba to look forChinese companies to produce cheap items for them instead of coming to China,” he said.

Alibaba’s online international trading market logs close to 1,000 orders a day on average, withtotal deals valued at about $30 million. That figure has grown more than sevenfold in the pastthree years.

As for Zhejiang Moon, Ai’s company posted sales revenue of 21 million yuan in 2011 and 24million yuan last year.

“Those two years probably were the peak period of e-commerce trading in China, ascompetition was not very tough in the rapidly expanding overseas market,” Ai said.

But it got harder to turn a profit as the market became saturated and labor costs rose.

In 2011 and 2012, Ai could make a simple piece of jewelry for about 5 yuan, and he could sell itto overseas clients for 7 yuan. But now, despite his own costs rising due to wage hikes, he can’traise his selling prices due to stiff competition.

As a result, “I’ve paid more attention to design and drawn a wider variety of products for theclients to choose from,” said Ai, adding that “what gives me my edge is the quality andstylishness of my products.”

He expects his sales revenue to reach 16 million yuan this year.

Ai said the FTZ should benefit trading companies in the Yangtze River Delta area as moreoverseas orders flood in and new measures stimulate trade.

As Yiwu is the world’s largest market for small commodities like accessories, toys andhousehold gadgets, its exports mainly consist of small items purchased by foreign visitors at thecity’s shopping malls.

Zeng Hongqi switched roles two years ago from being a jewelry shop owner and manufacturerto becoming an online global jewelry seller.

He believes he was wise to shut down his shop and factory.

“Export trading fell sharply in 2011 from its peak in 2008, with orders down by about 40percent,” said Zeng, who founded Zhejiang Duoying Jewelry Co Ltd.

After two years of declining profits, he opened two online stores and began selling productsdirectly to clients.

“I used to sell pieces of jewelry for 13 yuan each to the trading companies that introducedoverseas buyers to us, but I can now sell the same items directly for 14 yuan,” said Zeng,noting that each item costs about 10 yuan to make.

As a result of his e-commerce business, Zeng’s annual gross profit doubled to 30 million yuanin 2012 from a year earlier.

“Selling products overseas online has enabled me to get closer to the market and see whichproducts are popular with potential clients, who seem to be very interested in things made inChina,” he said.

At the moment, Zeng has most of his orders built at reliable family workshops. He retained 50former employees to piece small orders at his three-story headquarters, which is located in aresidential building.

E-commerce, he said, “has helped us keep in touch with dozens of regular clients, mostly fromEurope and the US. Hopefully, we’ll get to work with more foreign clients as a result of the FTZin Shanghai,” he said.

Zeng is targeting an annual output of 300 million yuan by 2018 and hopes to reposition hisbrand from mid-market to high-end customers.

In 2012, Yiwu International Trade Mart saw online sales and shipments via its 230,000outbound e-commerce sellers on Alibaba gain an astonishing 400 percent.

“The e-commerce business in Yiwu has expanded rapidly in the past three or four years, andlocal small business owners have found that selling products online is the quickest andcheapest way to make money,” said Liu Wengao, chairman of the Yiwu Electronic CommerceAssociation.

Liu said the FTZ should create more opportunities for small and medium enterprises in Yiwu toexport more goods more easily in the coming years.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: