Venturing out

Businessman establishes e-commerce platform to explore overseas markets

After years of operating a website providing information on the small commodities markets in China, especially about the trade hub of Yiwu, Wu Hongbo decided last year to strike it out on his own.

But instead of delving into the innumerable free markets in the city, he is taking advantage of its products in an attempt to take on the biggest e-commerce platform in China: the Alibaba Group, operator of the online retailers Taobao.com and Tmall.com.

The 31-year-old founded his own business-to-customer platform in March last year to sell jewelry made in Yiwu to markets in North America and Europe.

Gofavor.com, which calls itself a one-stop jewelry shop, is an English-language website that sells earrings, bracelets and necklaces at wholesale prices.

Wu says the site's sales are growing at 30-50 percent a year. After less than a year, he says, Gofavor is starting to turn a profit, though he will not reveal how much he made. He is also expanding the site's product range to include women's apparel and health and beauty products to better appeal to women.

"Yiwu is not as famous as Hangzhou, which is the cradle of Alibaba as well as the e-commerce capital of China," says Wu, whose company recently opened an office in Shanghai.

"But I think Yiwu, the city that supplies to most merchants in China, can also support competitive e-commerce platforms. And nearly 60 to 70 percent of Yiwu's products are export-oriented, even though most of my suppliers don't do business directly with foreigners."

Total export volume was about $2.45 billion (1.87 billion euros), an increase of 19.8 percent, in the first seven months of this year, according to local officials. The figure is 12 percentage points higher than the national average in export volume.

Wu still operates his business-to-business information site that he established in 2009. It now primarily reports on Yiwu's businesses, and he says it covers about 90 percent of them. Most provide products for Gofavor, which allows Wu to buy more cheaply while offering Yiwu's business people a distinct channel to sell their products.

Many of his suppliers had tried other online channels, such as Alibaba, but in the end chose his platform, he says.

Xu Ruijing, who took over his father's 20-year-old business selling toys, is one of Wu's suppliers.

"I gave up Alibaba's platform because there are too many businessmen there, especially big factories and companies. I have to spend a lot in advance, such as marketing, if I want to stand out and get orders," Xu says. "Wu's site is focusing on the local market that provides more relevant information on factories, products and buyers."

Wu says domestic business-to-business websites, which do not aim to cover as much ground as Alibaba, and in any case lack the resource to do so, are wooing people such as Xu, who make up the majority of businessmen in Yiwu.

"(The small businessmen) products' quality and price are as good as those from big factories and companies," Wu says. "They just need to be organized and trained under the environment of e-commerce."

But difficulties in cross-border e-commerce loom, mostly in the form of securing warehouses, fine-tuning logistical issues and understanding consumer habits.

James Fong, vice-president for merchant services at Amazon China, recently said Chinese companies need to understand different markets and adopt more of a retail business model rather than a wholesale one.

Wu, who initially started his overseas business as a seller on eBay, received a lot of useful information from the e-commerce giant, such as how to manage a supply chain, how to promote his site and how to deploy after-sales services.

That knowledge, combined with the product resources in Yiwu, have Wu believing that his site will be a favorite of overseas consumers.

"Like Taobao in China which represents the trend of online shopping in China, eBay is helping me to learn about overseas shoppers' preferences," says Wu.

"We also adopted PayPal's global payment platform, which solves the problem of online transactions. Based in Yiwu, we have a mature industry chain which means we can find third-party partners instead of establishing our own delivery forces and fulfillment."

Gofavor has also timed promotional campaigns to Western seasonal trends and holidays, such as Thanksgiving and Christmas. Wu says he expects more business people in Yiwu to join his platform in the following months since Christmas is right around the corner.

"The core of competition is resources," Wu says. "In past years, we have tried to provide more information online to local businessmen and hosting e-commerce classes for them. They all trust us and want to offer good prices."

Yang Xiao, an analyst with Analysys International in Beijing, says many e-commerce platforms think Yiwu is full of potential, but added that the e-commerce industry in Yiwu is still developing.

Many business people, he says, are not interested in conducting business online.

"In the past, (business people in Yiwu) were too focused on domestic offline wholesale business, which means they didn't have much understanding of e-commerce, retail and crossborder business," Yang says.

"Sites focusing on local resources will face a conundrum in the future because the essence of e-commerce is to break down the limitation of regions. Websites such as Wu's need transactions," he adds.

"They also need to realize that e-commerce faces the same challenges as offline businesses, such as cost control, aftersale services and managing client relationships."

Contact the writers at suzhou@chinadaily.com.cn and linjingcd@chinadaily.com.cn

(China Daily 12/14/2012 page16)