Traders embrace new concept in selling [China Daily: Hong Kong Edition]
(China Daily: Hong Kong Edition Via Acquire Media NewsEdge) Companies large and small, State-owned and private, are embracing a new way of doing e-commerce in China that they hope will revive flagging profits.
As a result of central government dispensations to Ningbo in Zhejiang province, the city has opened a free trade zone and an Internet site that allows companies to import goods at a relatively low tax rate and sell them online.
One of the first to jump in was Ningbo Fubang Holding Group Co Ltd, a trader and manufacturer which is also involved in other areas.
Fubang's exports dived last year as many world economies continued to flounder. It had a net loss of 35 million yuan ($5.6 million), having had net profit of 5.13 million yuan the year before.
Instead of just hoping for the best, Fubang decided to innovate and try importing overseas products by setting up Ningbo Fubang E-Commerce Development Co in September, just weeks before the Ningbo free trade zone opened.
"Starting in 2008 when the economic crisis hit the United States, European countries and developed countries elsewhere, external demand weakened," says Li Feng, secretary to the general manager of Fubang's e-commerce company.
"But domestic demand has been growing rapidly. With rising incomes and the improvement in living standards, more and more Chinese are choosing products made overseas, particularly in countries like Germany and Japan."
Fubang started doing business through the free trade zone's e-commerce website, kjb2c.com. Companies using the site do so free of charge, but they pay free trade zone authorities for space in a warehouse in the zone in which their goods are stored.
Twenty Fubang employees handle 60 to 70 orders a day now, the company says. Monthly sales revenue has reached 400,000 yuan to 500,000 yuan.
"Compared with the revenue of the whole group, the e-commerce revenue is minuscule," says Song Hanping, CEO of Fubang Holdings.
"However, what is valuable for the group is the future this website can bring to it. If the new e-commerce operation performs as hoped, it will help transform the whole group, Song says. "We will establish overseas branches to get closer to our foreign suppliers, and the company will no longer be dependent on external demand."
State-owned Zhejiang Materials Industry Group, a Fortune 500 company, is using kjb2c.com, too, but is doing something a little different.
Using its established foreign trade network, it is providing supplier services to small and medium-sized e-commerce companies that want to do business using the website.
"The Ningbo model is that all companies store the goods in warehouses before they are sold," says Zhang Guohua, chief operating officer of Zhejiang Materials Industry Free Trade E-Commerce Co. For small operators, this is very risky and costs a lot because they have to buy and store goods beforehand."
The company helps e-commerce startups to stock up, Zhang says. "As a State-owned merchandizing company with a history of almost 20 years, our company has a strong network with the best suppliers in the world."
E-commerce companies registered in the zone can go to the Zhejiang Materials warehouse to choose the goods they need and sell them on their own pages, or e-stores, on kjb2c.com. Zhejiang Material Industry Group makes money by charging service fees.
"E-commerce is an inevitable trend for companies to follow. As a Fortune 500 company, we attach great importance to this cross-border e-commerce platform," Zhang says
The company has no intention of becoming a retailer on the free trade zone website, Zhang says. Instead, it wants to grow into a specialized role in the business chain.
(China Daily 07/21/2014 page17)
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