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On bumpy road, Chinese exporters tap into home market
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08:17, May 18, 2009

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At a sales booth in a special trade fair here in southern China, Zhou was complaining how hard it was to sell her products.

"We sell them at factory-gate prices, but buyers still bargain. That makes me mad," said Zhou, a Taiwanese senior manager of Poly Dragon Industrial, which is based in the booming city of Dongguan neighboring Guangzhou, capital of China's manufacturing base Guangdong Province.

The trade fair she attended was co-organized by Guangdong and Hong Kong-listed e-commerce giant Alibaba.com. The two-day fair, opened on Saturday, was aimed to help small Chinese exporters tap into the domestic market amid weak overseas demand.

Organizers said the fair was attended by 400 small- and medium-sized exporting firms in Guangdong that displayed their company profiles at Alibaba's business-to-business division, and up to 30,000 big online sellers at taobao.com, China's largest consumer-to-consumer auction site owned by Alibaba.


Representatives of domestic buyers and exporting companies discuss possible business deals during an event at the 105th Canton Fair in Guangzhou, capital of south China's Guangdong Province, on May 6, 2009.

Zhou's company, owned by a Taiwanese, produces high-end lighting, decorative accents and photo frames. More than 95 percent of its products are for export.

The financial crisis and global slump in demand for made-in-China products have taken a toll on tens of thousands of exporters in Guangdong, which produced more than a quarter of China's foreign trade last year.

In the first four months this year, Guangdong exported 98.5 billion U.S. dollars worth of goods, down 17.8 percent year on year. Its exports continued to decline for the sixth consecutive month since last November. Nationally, exports in the first four months totaled 337.42 billion U.S. dollars, down 20.5 percent.

Poly Dragon, though keeping its workforce of nearly 300 relatively stable, lost up to 20 percent of overseas orders. In response, it aimed to tap into the huge market to sell more products on the mainland. Last year it began to display the company profile in Chinese at Alibaba to attract domestic buyers. In the past, it only provided an English profile at Alibaba for overseas importers, Zhou said.

The road to return home, however, isn't easy. Besides cut-throat competition and a price war, she had to redesign many exporting products, which often featured Greek and Roman gods, angels and other religious figures from Western civilization.

These products were not popular among Chinese customers, particularly those in southern China, because they were unfamiliar with these gods and figures, she said. For the home market, the company would replace them with Buddha or bodhisattva, or maybe statues of sexy women.

In addition, selling products at home needed good marketing, which Zhou said was very complex. "I have not learned how to sell them in the domestic market," she admitted.

Zhou said her company would continue to make use of Alibaba and capitalize on China's booming online shopping in its effort to develop a domestic market. "China's market is so huge and we won't skip it."

China, with a population of more than 1.3 billion, is the world's largest potential market for seemingly everything, ranging from electronics and cars.

The Chinese government has been making favorable policies to encourage exporters to shift from their focus on overseas markets. So Zhou's company was by no means alone. But as many Chinese once-thriving exporters sought to tap into the domestic market, they found themselves facing a bumpy road.

Wang Dongping, general manager of Guangdong Top Umbrella, said he just couldn't strike the right note in domestic sales. Among the many problems were a totally different business model, no sales channel and inability to design products suitable for the Chinese market, he said.

Top Umbrella sold more than one million U.S. dollars worth of umbrellas, 90 percent of which was for export. It had been manufacturing umbrellas for Western companies such as Disney, Kaloo, Happy Rain and Coca-Cola.

Wang said he had good expectations for the domestic market and tapping into it was not a makeshift business strategy.

"I am planning to organize my own sales team. And I hope that domestic sales could account for up to 30 percent of my company's annual output in the next two or three years," he said.

Poly Dragon and Top Umbrella, both small-sized enterprises, were trying to expand their domestic sales through e-commerce. And they won a promise from Alibaba of more help.

Wei Zhe, CEO of Alibaba's B2B division, on Saturday promised that Alibaba would help China's small- and medium-sized enterprises as much as possible. "In the first quarter this year, our profit was 50 million yuan (7.3 U.S. dollars) less than the same period last year. But we gave assistance to some 50,000 SMEs, cutting service fees by 1,000 yuan for them. And we will continue doing so," he said.

According to Wei, Chinese exporters were facing at least four hurdles on their road to tap potential at home -- raising design capability, finding a sales channel, setting up an after-sales service network and building their own brand.

Many Chinese exporting firms used to manufacture through an OEM(original equipment manufacturer) arrangement with overseas brands and make products based on the design provided by overseas brands. Once the products finished shipment, they finished their tasks.

Alibaba aimed to give SMEs a cotton coat to pull through the economic winter, he said, claiming that the survival rate of SMEs that have used e-commerce methods was four times higher than that of others.

According to an industry report released in February by the Shanghai-based iResearch Consulting Group, an Internet market researcher, China's online transaction volume last year rocketed 128.5 percent year on year to 128.2 billion yuan, which was 65 times more than that of 2003. That meant every Chinese spent more than 1,600 yuan last year on online purchases, 582 yuan more than the previous year.

The report said a quarter of China's nearly 300 million netizens took to online shopping last year. In 2008, Taobao had a total consumer-to-consumer transaction volume of 98 billion yuan, more than double that of 2007, outselling all retailers in China including Bailian Group and Wal-Mart.

While Poly Dragon and Top Umbrella made a shot at e-commerce, others were trying in other ways. One of them was to team with domestic retail companies and became a supplier.

Chen Chaohong, a senior manager of Qingdao Liqun Group, a major retailer based in eastern China's Shandong Province, said making OEM arrangements with retailers seemed to be one of the most effective ways, particularly for those without their own brands.

He told Xinhua at the Canton Fair, known as China's largest export event, which ended on May 7, that his company had reached several manufacturing agreements with exporting firms. The fair was opened to a group of domestic buyers for the first time in its half-century history. The organizers hoped domestic deals could offset a plunge of overseas orders.

Such cooperation allowed both sides to do what they were best at -- exporting firms were good at manufacturing while supermarkets had excellent sales channels, he added.

Source: Xinhua



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