E-commerce brings new business to Commodities City

Yiwu market to set up online sales sites in 11 countries

If China is the world's factory, then Yiwu, about three hours' drive from Shanghai, is its wholesale market. Even those who have never heard of Yiwu might own a few items - handbags, shoes, some accessories - from there.

The small city in East China's Zhejiang province is home to China Commodities City, a sprawling place with as many as 75,000 vendors, which has been named by the United Nations, the World Bank and others as "the largest small commodity wholesale market" in the world.

Like many other cities in eastern China whose economies are highly dependent on exports, the China Commodities City, with about 70 percent of its 68 billion yuan ($10.91 billion) in sales coming from abroad last year, has been hit by rising costs and dwindling overseas demand.

Moreover, the brick-and-mortar market, which is made up of five malls covering 5.5 million square meters, has been challenged by the rapid rise of e-commerce.

But instead of looking at its online rivals as a threat, China Commodities City has decided to turn the situation into an opportunity to upgrade its business model and strengthen Yiwu's leading position as a trade city in China.

In mid-April, the market, which launched its e-commerce site, yiwugou, in October 2012 to help vendors sell their products inside China, stepped up to expand its e-commerce territory to countries outside China.

The market signed deals to launch websites to facilitate trade between Yiwu and importers in 11 countries: Australia, Spain, Poland, Japan, Brazil, Russia, Germany, the United States, Malaysia, Ukraine and Kazakhstan.

"By setting up the e-commerce websites in the 11 countries, we are going to save importers there a lot of time and money because they will no longer need to come to Yiwu to check the latest products and place orders in person," says Wang Jianjun, chief executive officer of Yiwu China Commodities City Information Technology Co Ltd, the market's e-commerce arm.

The 11 sites are expected to operate as the second-level domains of yiwugou and will be launched later this year in each country's official language. The websites will be run by yiwugou's global partners, which are trade agents with years of experience providing services to importers.

"With e-commerce improving the efficiency of doing business, the role of brick-and-mortar markets is changing rapidly," says Wang, who was a senior vice-president of Sohu.com Inc, a major Web portal in China, before heading the online department of the offline market in Yiwu in 2012.

Most of China Commodities City's revenue of 3.65 billion yuan in 2013 came from the rents of vendors who do business in the markets. The rent for a booth, which is usually 2 to 3 sq m, can be as high as a half-million yuan a year if the location is good.

"The time when a market operator can make a fortune by simply erecting a building and renting out booths will soon be over. In the Internet era, offline market operators need to think how to offer better services to vendors and buyers," says Wang.

This is the main reason that China Commodities City launched its e-commerce site. The majority of the market's transactions still come from offline despite the fact that the businesses are actually bridged through an online portal. In addition, there are many well-established business-to-business platforms in China dedicated to facilitating trade between China and other countries, such as 1688 from China's e-commerce giant Alibaba Group Holding Ltd.

But Wang says the website has a lot of potential because China Commodities City enjoys unique advantages by having both online and offline operations. "No online marketplace can replace offline markets. Rather than pure competitors, online markets and offline markets work more like interdependent partners."

Gong Chenghao, vice-manager of yiwugou, echoes that assessment, saying that the orders of trade businesses are much bigger than the sales of a retailer. "So importers are looking for suppliers who are reliable rather than those who merely have cheap products," he says.

"All of the suppliers on yiwugou are vendors who have booths in our market. So compared with e-commerce companies, which can only shut down online virtual stores if there is misconduct, our company has a much bigger say in terms of regulating our vendors' online behavior."

Many of the vendors in China Commodities City have witnessed rapidly growing online orders over the past year despite the fact that most of the orders still came from offline.

mengjing@chinadaily.com.cn

(China Daily Africa Weekly 06/20/2014 page16)