The parents of Liu Wenhai, 33, who works in foreign industry in Yiwu, China’s small goods hub in Zhejiang province, set up a hat factory in their Shandong province about 10 years ago.
During the past three years, orders at the factory, which is located in Rizhao, have fallen by two-thirds due to the impact of the COVID-19 pandemic.
Li said that when business was at its worst, hats produced at the factory had to be sold on domestic e-commerce platforms by the catty (0.5 kilograms is equivalent to one catty).
Looking to expand sales channels and reach more overseas consumers, Liu tried to sell hats through online retailers such as Alibaba Group’s AliExpress, Amazon and eBay. However, only a small number have been ordered, and he faces high operational and logistical costs.
In October 2022, Liu won an invitation to register with Temu, a new cross-border e-commerce platform introduced through Chinese discount store PDD Holdings.
Unlike the classic style that allows merchants to operate their own outlets independently, Temu requires them to ship their products to their national transit warehouses, while the platform takes care of logistics, sales, operations, promotional activities and after-sales services.
Liu said, “I had to try it. To my surprise, our factory’s stock from about five or six years ago has been liquidated. I even transferred some orders to my uncle’s factory due to my parents’ inadequate production capacity. ” ,” he said.
“We design and produce more than a dozen new products according to the latest fashion trends abroad, before deciding whether or not to develop a production based on sales in the online store. “
Baseball caps have gained popularity among buyers, especially in the United States, and more than a million caps prepared by Liu and his team were sold in Temu ahead of the Black Friday shopping carnival in November, he said.
Liu is one of millions of young Chinese marketers running small and medium-sized factories that have survived demanding operational situations through digital transformation.
These operators are taking advantage of the thriving cross-border e-commerce sector to secure new orders and spice up their businesses. Experts said those cross-border online marketplaces have become a vital new driving force for China’s foreign industry amid downward economic pressures and external pressures. Uncertainties.
Launched in the United States in September 2022, Temu offers a wide variety of competitively priced products, including competitively priced clothing, electronics, jewelry, shoes, bags, cosmetics, and baby products. It is now offered in more than 40 countries in North America. , Europe, Asia and Oceania.
Industry insiders said Temu’s business model removes middlemen from the equation, allowing Chinese suppliers to sell directly to overseas consumers and ship directly from China, instead of building a network of warehouses abroad.
Chen Lei, president and co-CEO of PDD Holdings, said the company hopes to use the origin chain functions it has developed in recent years to create a new channel. This outlet will allow consumers in other countries and regions to purchase products from the factories. offering more flexible and personalized chains of origin and more profitable food shopping experiences.
Temu’s popularity among foreign buyers has skyrocketed. Mobile app knowledge analytics company Sensor Tower said Temu was downloaded more than three hundred million times worldwide between September 2022 and November last year.
Data from research firm Apptopia shows that shoppers spend almost twice as much time on Temu as they do on competing apps like Amazon. On average, users spent 18 minutes a day on the Temu app in the second quarter of last year, for 10 minutes for Amazon and 11 minutes for AliExpress.
Li Mingtao, director of the research institute of the China International E-Commerce Center, said many foreign Chinese industrial enterprises have gained an advantage in production and quality control, but lack experience and roles in sales and operations, making it difficult for them. to enter. Foreign markets.
“As a new form of foreign trade, China’s upcoming cross-border e-commerce platforms can help identify a direct and definitive connection between brands and consumers by applying complex virtual technologies such as big data, cloud computing, and synthetic intelligence,” he said. .
Li added that brands can better know and understand customers’ desires through such platforms, temporarily adjust production and reduce inventories, which will contribute to the global competitiveness of Chinese production enterprises.
Coming home
After obtaining a master’s in finance in New Zealand in 2018, Gong Zhihan decided to return to China to take over his family’s factory in Jinhua, Zhejiang province.
In 1999, Gong’s parents founded a company that makes Array microfibers, as well as cleaning cloths, dishwashers, tea towels, and bath towels. The company is engaged in the production of original appliance manufacturer (OEM) cleaning products for brands sold in U. S. supermarkets. in the U. S. and on Amazon.
OEM refers to a company that designs a product and then awards it to a manufacturer to produce.
“Traditional foreign industry orders have fallen by about 30% since 2020 as some commercial production chains have moved to Southeast Asia and demand from evolved countries has been weak,” Gong said.
To increase the company’s profitability and optimize its production capacity, Gong began promoting its products through cross-border e-commerce platforms such as Amazon and Walmart’s online marketplace. In November 2022, she enrolled in Temu.
“Temu can help me better identify customer desires and I have become more sensitive to global market trends. Our sales on the platform increased 40 times between April and November,” Gong added.
His company creates traditional designs based on the personal tastes of consumers in other countries and also receives their feedback before launching new products. “We hope to create own brands on the platform to achieve user engagement and increase product repurchase rates,” Gong said. .
Other Chinese cross-border markets are accelerating their globalization.
Fast fashion retailer Shein has announced a further expansion of its product categories by collaborating with global brands and third-party distributors to meet customer demand for a wider variety of products and categories.
The company’s customers can now buy products other than fashionable attire, including home appliances such as portable washing machines and smart home products, including remote-controlled lighting.
Founded in Guangzhou, Guangdong province, and known for its low prices and large selection of fashionable clothing and accessories, Shein has gained traction among US shoppers. Data from the analysis platform App Intelligence show that the number of Shein downloads in the US in November surged by 26 percent year-on-year.
Meanwhile, in September, short-video app TikTok, owned by Chinese company ByteDance, launched its e-commerce service, TikTok Shop, in the United States. The service allows users to locate and purchase products used in live streams and short videos.
TikTok, which began rolling out its e-commerce service in 2021 in Indonesia, has a presence in more than 10 countries, including the United Kingdom, Malaysia, Thailand, the Philippines, and Vietnam.
China’s cross-border e-commerce has seen robust growth in recent years, with the sector’s import and export scale reaching 2.38 trillion yuan ($332 billion) last year, up by 15.6 percent year-on-year, the General Administration of Customs said.
Motivational Power
Zhang Zhouping, senior analyst for business-to-enterprise and cross-border business at the Internet Economy Institute, a national consulting firm, said, “China’s cross-border e-commerce sector has grown during the pandemic to become a vital driving force in strengthening the development of the country’s overseas industry.
Cross-border e-commerce is also playing a vital role in encouraging traditional foreign trade enterprises to build new brands and open up more overseas markets, Zhang added.
Competition between cross-border e-commerce corporations will influence the construction of the origin chain, he said, adding: “The core competitiveness of Temu and Shein lies in products with competitive costs and fast delivery, which are highly dependent on the status quo of the source. chain. “
However, experts have expressed considerations about the sustainability of the low-price strategy pursued through those platforms to attract cut-price hunters, saying it could benefit small business margins.
Given the intense festival among China’s new cross-border e-commerce platforms aimed at price-sensitive consumers, US tech company Amazon has announced that it will particularly reduce fees for merchants promoting clothes under $20.
From this month, Amazon reduced seller fees on clothing products priced below $15 to 5 percent, while the rates on clothing priced from $15 to $20 dropped to 10 percent. The fees for both categories had previously been 17 percent.
Cindy Tai, vice president of Amazon and head of global selling for Amazon Asia, said this year the company will intensify its efforts for Chinese merchants to grow their brands, simplify global operations and optimize global supply chain services. global presence and increase your contribution to localization.
Last month, the company said it would launch its first innovation center in Shenzhen, Guangdong. The center is expected to accelerate innovation among sellers for new product introduction, brand building, digital operations, green development, and new business models.
Amazon data shows that the number of Chinese distributors with sales above $1 million on the online retailer’s global sites increased by more than 25% year-on-year between October 2022 and September. The number of distributors with sales of more than $10 million is up about 30% year-over-year.
Additionally, the number of products sold through Chinese distributors to consumers and businesses through Amazon’s global sites increased more than 20% year-on-year in this period.
Zhang Jianping, head of the center for regional economic cooperation at the Chinese Academy of International Trade and Economic Cooperation, said, “Cross-border e-commerce platforms connect some key links covering procurement, sales and logistics, to provide a new way for micro, small and medium-sized Chinese enterprises to expand their footprint abroad and create unprecedented new development opportunities.”
These platforms aim to help logos and brands better understand visitors’ desires and temporarily adjust product strategy and logo positioning, he added.
Cui Lili, director of the Institute of E-Commerce at Shanghai University of Finance and Economics, said Chinese corporations deserve to make full use of cross-border online platforms to temporarily meet the demands of markets, be more informed about other countries’ laws, regulations and quality criteria. countries and adjust source chains to produce products that meet local requirements.