Ex­perts: Min­i­mal risk in launch­ing an online busi­ness

China Daily (Canada) - - FRONT PAGE - By YANG YANG

yangyang@chi­nadaily.com.cn

US small and medium-sized en­ter­prises face con­sid­er­ably less risk en­ter­ing the Chi­nese mar­ket through e-com­merce than open­ing a brick-and-mor­tar store, ac­cord­ing to in­dus­try ex­perts.

Yingke Law Firm as­sists Chi­nese in­vestors with deals in the United States, Is­rael and Bri­tain, and has also spent years help­ing over­seas cap­i­tal to en­ter China.

Yang Lin, the firm’s di­rec­tor of in­ter­na­tional busi­ness, said few medium-sized US en­ter­prises are en­ter­ing China in the tra­di­tional way, which in­volves in­vest­ing heav­ily in prepa­ra­tions: Rent­ing of­fices, pur­chas­ing of­fice ap­pli­ances, pay­ing per­son­nel, and mar­ket­ing and brand­ing.

For these com­pa­nies, “whether you suc­ceed de­pends on your busi­ness and man­age­ment lev­els, and the mar­ket”, she said. “For any en­ter­prise that sets up a phys­i­cal branch over­seas, the risks are al­ways huge.”

But e-com­merce is dif­fer­ent. Rather than hav­ing to think about the cost of land, ma­te­ri­als and la­bor, for­eign in­vestors who en­ter the Chi­nese mar­ket through online shop­ping can sim­ply fo­cus on the spend­ing power of an ever-grow­ing mid­dle class.

“The mid­dle-class lifestyle re­quires good-qual­ity prod­ucts, which means there are huge busi­ness op­por­tu­ni­ties for good-qual­ity for­eign brands that Chi­nese shop­pers may never have heard of be­fore,” Yang said.

Online mar­ket­places such as Taobao and JD.com pro­vide in­ter­na­tional brands with smooth dis­tri­bu­tion chan­nels, and en­able con­sumers to quickly fa­mil­iar­ize them­selves with them, cre­at­ing the po­ten­tial for rapid ex­pan­sion, she said. The costs are far lower than open­ing a phys­i­cal store, as buy­ers can browse and buy online, while sellers can take or­ders and dis­patch goods from the other side of the world. And if there are du­ties, they are usu­ally paid by the cus­tomer. There is al­most no risk, Yang said, as en­ter­prises do not need to in­vest much to ex­plore the mar­ket.

Ex­port Now in the US has helped more than 50 over­seas busi­nesses en­ter the Chi­nese mar­ket via e-com­merce in the past five years. Ac­cord­ing to Alibaba, which owns busi­nessto-cus­tomer sites Taobao and Tmall, the com­pany is a lead­ing op­er­a­tor of online stores for for­eign brands.

Frank Lavin, its CEO, said the rise of online shop­ping and the rise of the Chi­nese con­sumer is “per­haps the two most pow­er­ful busi­ness trends in the world to­day”. There were two rea­sons why Ex­port Now chose e-com­merce as the best way for US brands to en­ter the China mar­ket: “First, it’s the most cost-ef­fec­tive chan­nel. Sec­ond, e-com­merce al­lows for real-time feed­back and adap­ta­tion, so a mer­chant can quickly ad­just prod­ucts.”

In Au­gust 2012, Lavin opened Mei­like, an online shop on Tmall that was in­tended to pave the road for US SMEs. The store, which sold US brands such as Osprey back­packs and Yummi Bears vi­ta­mins, even­tu­ally closed down. Since then, Ex­port Now has fo­cused on run­ning flag­ship stores on Tmall for brands, such as the NFL and the Guitar Cen­ter.

“The online depart­ment store model is not al­ways the best so­lu­tion for a com­pany,” he said. “In our view, strong brands do bet­ter with a flag­ship online store, as it al­lows them to present di­rectly to the con­sumer.

“It’s no sur­prise that lead­ing brands from Sam­sung to Nike have Tmall stores.”

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