April 1, 2020
China eCommerce

China eCommerce


>>Welcome and thank
you for standing by. I’d like to inform all parties
that the call is being recorded. If you have any objections, you
may disconnect at this time. I would now like to turn the
call over to Kellie Holloway, US Department of Commerce. Thank you. You may begin.>>Thank you. And on behalf of
the US Department of Commerce’s Commercial service
including our six offices in China, the China
Business Information Center, and the very strong network of international trade
specialists located throughout the US, we thank you for joining
us today for this webinar. The program is on e-commerce
revolution in China and how to sell US products online. A special thanks to
the team of Export Now for making today’s
event possible. We have a great program
that I’m anxious to get to, just a few housekeeping
details first to make sure you get
the most of the webinar. If at anytime, you experience
technical difficulties, please press star zero
for operator assistance. Our program is about
45 minutes long. Following the presentations,
we will have ample time to address your questions. We invite you to type those
in during the remarks. You’ll see a Q and A tab
at the top of the screen or you can submit a
question at anytime. We’ll make every effort
to answer as many of these as we can during the Q and
A session and we’ll focus on the topics of
widest interest. We will also provide contact
information for presenters where you can follow up
directly after the program, if we don’t get to
your question. Note too that a recording
of today’s program and the presentation
materials will be e-mailed to all registrants
following the webinar. So on to our program,
I am Kellie Holloway with the Department of Commerce’s China
Business Information Center which is a clearinghouse
of information on doing business with China. We facilitate export
education events such as this, have a wonderfully-rich
website, and a call center where you can speak directly with an international
trade specialist. As a global agency, the US Commercial Service
has some 108 offices around the country staffed with international trade
professionals and overseas, all leagues fill the
commercial sections of the US embassies
and consulates. And bottomline, their
job, all of our job is to help your company
export more. So if you’re not
taking advantage of it, in those resources
and their expertise, please, do consider doing so. China is our largest
overseas presence. And in addition to the offices
of six, we have a network of partners and another
13 second tier cities. On the line today, we have at
least one of our commercial– senior commercial specialists
who tracks the retail in consumer goods sector
from Beijing, Mr. Shen Yan. Thanks for joining us, Shen Yan. We’ll start our discussion
today with your China host, Joshua Halpern, a
commercial officer at the US embassy in Beijing. Josh leads a team of
colleagues around China to help American businesses,
make local connections, find partners, understand
regulations, and other trade supports. And following Joshua here
from our future presenter, Frank Lavin, Global CEO of
Export Now, and you’ll hear about the Export Now approach to reaching Chinese consumers
via the most popular online retail channel in
the country, Tmall. And together, they are sure
to get you very excited about how attainable
online sales to Chinese consumers
can be for small and medium-sized American
businesses or firms looking to outsource their IT
and logistics needs. And I want to give due
respect to the impressive, truly global business and
public service backgrounds of these professionals. But if they request, then to
allow for maximum time to dig into the topic of
selling online in China, we’re going go straight
to their presentations. So with that, let me ask Josh
to go ahead and take it away.>>Okay, thank you Kellie. Good evening, good morning
to everybody no matter where they’re plugging in from. I was supposed to be– we’re
here over with a team here in Beijing but we’ve
been working with the entire China Commercial
Service to really look at the growing, the e-commerce
market, and actually bring a lot of those e-commerce
opportunities to our clients. And then we were
fortunate enough to link up with Export Now and realize
how much more can be done and hopefully, I’ll move forward
to bring that e-commerce back from that in China to all of
you back home in the States. So I want to jump right in
to articulating a little bit about where the e-commerce
market is at right now. We’re looking at, a
total right now in 2011 of 180 million online
customers– online users in China. But really, if you look into
it right now, 32.4 percent of those users are actually
buying things online. A particularly interesting one that I circled here
is just in 2012. We’ve now surpassed, one-third of online Chinese Internet
surfers are actually purchasing items online, jumping into the
e-commerce relative to retail. When we’re looking right
now at the 2013 projection, we’re saying that 6.5
percent of all retail done in China is going to be
conducted online in comparison with a mature market like
the US where 8 percent of all retail is
done actually online. So again, I think, we all–
everyone on the line is aware that China is booming. What I want to further
articulate is how e-commerce is booming. They’ve really leapfrogged a lot
of other already mature markets in terms of their adopting
of the e-commerce market. Just to mention some things,
what you can you buy online? We’re looking at a lot
of different platforms but everything from
chicken feed, you know, coupons for plastic
surgery, Mercedes Benz, vacation packages, to everything
else that you really would buy in Amazon.com for
example in the US. We’re looking at
the again, another– some more facts that you can
read that articulate more about all the different things
going on and permutations of that activity going
on online in China. Now, just taking a quick look
now and I want to show you when we move on to Taobao
and our friend at Export Now who have a unique partnership
with Taobao and Alibaba, I’ll let them talk
more about that. But I want to show you where
that’s positioned online so that it’s better
understood once you dive in. Taobao, obviously the largest
online retailer in China and growing everyday,
it’s everything from a C2C, a B2C platform. It’s owned by Alibaba. They also own another division
of which is called Tmall which is more of a
brick-and-mortar site which has the requirement
of companies being online, being actually physically
here in China in order to list things online which
has gotten rid of some of the challenges of IPR. We can go through each one
but today, I think it’s– I’ll just pick out a few
360buy, largest online retail for consumer electronics,
Suning online for overall electronic
appliances. You got Amazon.com,
also doing very well in expanding their
warehouses throughout China to meet the needs. These, we can follow up with. You’re welcome to ask some
questions then we can also follow up offline on those. But that’s generally
the overall view. Just to give some quick
challenges and opportunities, but I want to practice
it by saying, a lot of these challenges
are actively being pursued and mitigated. So you’re actually seeing that because this challenge
is being taken cared of and changing rapidly,
you’re going– you’re seeing an
explosion right now and that’s what we’re
witnessing everyday as we’re going out
into the market. But now, the competitive market,
as we’re saying, you know, you’re seeing a lot
of this right now, a lot of different new
sites are bubbling up. But also, the main players
are getting even more founded in the market. You’ve got strict
regulations, yeah, there’re strict regulations of foreign companies
creating their own website, creating their own
services here online. But with partnerships like what
Export Now is doing with Taobao, you really– you’re
going to be able to make that a much more fluid process and cut away some
of the competition. Yeah, so immature payment
system, up until now, a lot of the work was done
with cash-on-delivery. So a lot, there are still
a lot of sites online that do cash-on-delivery,
which has created a lot of extra high operational cost. But with Taobao and Tmall,
you’re actually seeing that they’re no longer
using cash-on-delivery. And so as the credit card market
which, increases and the more, more and more user rates are
going up, they’re, you’re going to see a lot more hurdles on
the Taobao and the Tmall site and then ultimately
on the overall online. And that’s happening right now. Yeah, immature delivery
system up until now, you had a logistics chain
that was fragmented. You had– you have– you still
have large players like UPS and FedEx not being able to
get out to the rural areas but that’s all being taken
cared of very quickly. They’re working on local
licensing right now, as we speak. And there is a lot of
other local players that are filing the gaps out. So surprisingly,
huge penetration on logistics chain throughout
even secondary tier cities which is opening up markets
further for companies. Even companies that are US
brick-and-mortar in Beijing, Shanghai, Guangzhou, are finding
that they’re going to look at e-commerce platforms to get
out to some of those places that they don’t otherwise
have a presence. So you can leapfrog them
actually by coming straight through an e-commerce platform
to some of these other tiers. Counterfeit products,
yes, always an issue here. But a lot of what’s
happening now with Taobao, for example is one of
the big stakeholders to make sure IPR
infringement is reducing. One of the things that they’re
doing is creating things like Tmall which require that
brick-and-mortar presence here or Tmall partnering
with the Taobao– with the Export Now to
create kind of a wall guard of US export, US products
and give a better branding so that you get a little
bit more, kind of moving up the chain and a
little bit more of a vote of confidence among the
e-commerce platforms for your products being
absolutely legitimate. Just quick takeaways,
yes, e-commerce, huge growing logistics,
valid entries but Export Now and Taobao partnerships
are really starting to move through this issue. Don’t let your good name go bad. One of the things that we always
want to caution our clients on is before you come over
here, especially if you get over so quick as you might
with an e-commerce platform in Export Now, take a
look at stopfakes.gov. Take a look at the facts, understand better how you can
protect your mark over here because you have a
first to market– first that you register
law here. So if your products,
for example, some of our clients found
out, once they came over here that 10 years ago, somebody in China actually registered
the name, registered the logo which actually created a
lot of problems later on. So if you’re not even sure if
you’re coming over but you want to test the market,
protect your brand, what we do as Kellie alluded to, we do a lot of different
things here in e-commerce, in the commercial service, everything from vetting
your targets, promoting your business,
providing market intelligence so we can actually give you
some feedback, do some– looking into some of the
companies you’re looking to partner with, and on
the ground, matchmaking. A lot of these things, things we
would do if you’re coming over and you really want to set up
a shop here, these are things that we can do in conjunction with what you do
with Export Now. And we look forward to talking
to you further about those. And with that, I want to
say we’re always welcoming, for anybody who wants
to come over, give us a call, give
us an e-mail. But right now, let’s talk
about Export Now and I’m going to pass it over to Frank. You’re going to note
that contact information. We’ll give you one minute
to– okay, that’s it.>>And again, the contact
information will be circulated to all participants after. I know that screen
flashes quickly. You can type questions at
any time on the Q and A tab at the top of your screen. Thank you. Frank?>>Yeah, thanks Kellie. Thanks Josh, very good
overview and thanks to everybody on the webinar. I’m sitting here in
China, in Hong Kong. So it’s early morning here
and I’d say happy afternoon or evening to folks in the US
and, good to connect with you. I want to talk a little bit about how our business allows
US companies to capture that e-commerce market in China
and to do so, from their desk or from their factory or their
office, meaning up until now, if you wanted to
participate in that market, you had to actually figure
a way to get to China and language issues,
currency issues, establishing the warehouse,
CRM, this range of your issues and barriers were somewhat
daunting for most US companies. But particularly, if you say
we don’t know what the ultimate upside is, but we want you to
be taking on all of these cost and management expense for
the next 6 or 12 months to chase this, the
result of which was a lot of US companies said,
“Look, I’m not going to– I’m not going to actively pursue
China e-commerce even though the numbers are pretty impressive.” So what we tried to
set up was a mechanism so that any company can
participate in that market and do so without the
kind of direct expense and management burden that had
previously been so intimidating. And I’ll just– we’ve
got about 15 slides here and I’m going to
walk you through. So, we know that there
is extraordinary amount of good news in China
and if we look at the left-hand
side screen as some of the numbers Josh
talked about. But it’s not just a booming
market in terms of GDP growth but we see consumer spending,
outpacing overall GDP growth. So GDP growth is in
that 9 percent or so. But consumer spending is at about 30 percent
or 40 percent growth. So very rapid growth
and as Josh pointed out, e-commerce growth
even outpaces that. It could be 60-70
percent growth. So there’re all sorts
of good news at market on the left-hand side. On the right-hand side,
there are the barriers, all of these soft
barriers between the– these neat US companies
in accessing that market. And if you don’t know what the
ultimate revenue is, if you say, “Look, I can– if I entered that
market, an appropriate market, I might earn 5 million
dollars or 10 million dollars.” That’s very enticing,
but if you say, “Look I can spend 3
years trying to navigate through that to get there.” So this was our solution. And it’s to make
exporting as easily as selling online domestically, so that you can run your China
account the same way you would run a US webpage, proprietary
webpage at your store. The factory operates for
the same way you’d operate a platform– on a platform
in the US such as eBay or Amazon shops, and so forth. So we have an online solution
and a logistic solution. The online solutions means that
you register online in English, you deal with US account
support, US time zones, US currency, and you’ll only
ship domestic if you’re only at domestic operations. So you shipped us in Long
Beach then we take it to China. The key to all of this
I think, of this slide, the key takeaway is the very
bottom clause in boldface, excuse me, that our
model is based on the market inquiry approach
that allows US companies to enter China after domestic
price point enter domestic margin, so that they can compete
in China on Chinese terms with the Chinese customers. So for the Chinese customer, your product is posted
in Chinese. It’s on the top e-commerce
platform in China and perhaps, the top e-commerce
platform in the world. CRM in China is all
Chinese language as you would have hoped. It’s all Chinese time zones
and as Josh pointed out, you can use Chinese
payment instruments with different payment
instruments to pay, so that all of those
soft barriers for the Chinese customer
are removed and all of the soft barriers
from our entry for the US merchant are removed. So some of these numbers
come from different sources, so just clear up
our one point Tmall, Tmall here is the largest
marketplace in the world with 370 million registered
users, but does not mean, on any given day or
any given timeframe to the 370 million customers,
but still, whether you look at online shopping, over the
last year, a 240 million total or the total number registered
users are 370 million. It’s a staggering opportunity. And as Josh indicated,
sometime in the next year, to online penetration
of the retail market in China passes the US in
terms of the penetration with– so those from 6 to
7 to 8 percent. Let me take a minute
on this slide. It’s a bit dizzy but I want
to just walk through the model and I’ve touched on
some of this point. But look, number one, the company registers
online on a portal. So there’s a portal where you
can enter product information, shipping information,
but the company, the US company sets the
inventories, sets the SKUs, sets the products,
sets the price points, just as if it’s running it’s own
webpage for the United States. Then in number two, you
can get the product to us in the west coast
or west coast depo where we consolidate
and take to Shanghai. Or, if you’re already
shipping internationally, you can use your current
shipper to get us to Shanghai. But we’d get the products,
it’s consolidated in three and take them to our bonded
warehouse in Shanghai. So for companies that already
reasonably experienced an international shipping, this
part of it is discretionary. But we have a lot of trip with
US companies that don’t do a lot of international shipping
and they’re very grateful to have a helping hand
participate with them. We get it on the point of 6,
we have a bonded warehouse in Shanghai where
we consolidate. We put it in the bend. We work with you on
translation photos and posting it on in the mall. We typically just
model the Tmall posting after a US posting. Some people don’t
have US e-commerce. So it’s new for them,
so we work with them to make sure they have
ultimate sign off on the photo and the look and the
description of the products. And then we go to marketing
in A. And as we talked about the Chinese customer
accesses, this product, the same way they access
any other product in China. It’s their language, their
currency, their time zone, their customer support. So we’re able to
compete on equal footing with the Chinese
competitors of other products and we do the [inaudible]
at number nine there, handle all the regulatory
financial elements at agreement funds back
to the US merchants. So we’re acting as a middle
office and back office for all the Chinese activity. And we do this, we want a
proprietary department store in Tmall. So we have the dedicated US
store on Tmall so anybody in China who’s looking
for US products, whether it’s a neat gadget,
whether it’s fashion, whether it’s children’s
toys, these, just these wonderful
things that come through in the US retail system,
they confide specifically on the US department
store on Tmall. This would take a
second to make one point about the different platforms
and outlets that Josh talked about because they’re
certainly aren’t arranged. But there’s one critical
difference between our approach or Tmall approach
and other outlets. And the critical approach
is the difference is this. We are an open platform. We are the only open platform. So as far as I know,
the other major sites, every other major site is a
close platform meaning it’s their proprietary platform. They source the good. They purchase the goods. And they post the goods. And they distribute. So it’s their activity. But we operate more in
eBay or Amazon shops model that we welcome any merchant,
any product range and who wants to try to access
the China market. So we have a range of
products, of SKUs of companies that that other places
aren’t going to have and we also invite small
people, big people, new people, any company at all to
participate in this process. So we think over the long
run the open platform, the eBay model so to speak
are just provided a lot more advantages to the merchants
because the merchants decides which product did once
sell, what price points are if you want to do a special
promotion and so forth. So it lets the– it lets
the US manufacturer, the US merchant make all of those commercial
determinations themselves as part of the open platform. It does require for
logistics reasons and customer support
reasons, it does require, if you want to participate
in this program that we have goods in Shanghai. So we fill goods, and we fill
orders directly from Shanghai to the Chinese consumer. Because one of the key barriers in cross border e-commerce
is that– and we’ve probably
seen this ourselves, if you look at another
country’s website and you see something
interesting for 30 dollars or 40 dollars and you want to
purchase it, it might cost 30 or 40 dollars to ship it. So it really kills the deal. So in that case, the company
is not really participating in the market. It’s really an exotic
product a distant product. And it’s not going
to have the kind of market penetration at once. So our model allows the company
to participate on local putting but it does require inventory,
in advance, on consignment in the Shanghai warehouse. But that way, anybody who
calls in gets local delivery, local terms and that cost
of that 40 or dollar cost of shipping really collapses
to very, very small amounts. That’s why we say, you can hit
the same price point in China that you have in the US. You can have the same margin in
China than you’ve have in the US if you use this model. I think Josh has
covered most of this, we touched on these points,
it’s worth looking at some of those materials about
we’re trying in and out. Sales are going and how
roughly this market’s going. But it doesn’t seem to be
slowing down anytime soon. And what most business
professionals say is, very soon China’s going to
be ahead of the US in terms of total amount of e-commerce
sales and total amount of e-commerce penetration because it’s neat
broad technology. It’s the same reason developing
countries have greater cell phone penetration than landlines because they just leap
broad the landline. So the point is China doesn’t
have the shopping mall density that the US has. China doesn’t have a
car ownership density that the US has. So the idea of going to the
mall and getting your kids back to school close is something
that’s almost obligatory in the US. But it’s far more common
in China to go online. And what we’ve seen very
dramatically is that even when sales are made for
traditional channels, the sales discussion and the
sales engagement starts online. So the customer looks
online, evaluates the prices and compares products
and so forth. And then they might– they might
very well go to a shopping mall but that online footprint
is part of the overall commercial
experience. So more, so more background
on Taobao and e-commerce and the key point here I think
is the very last bowl of that in the United States,
you might go to Levis store online
to buy your Levis. In China you’re going
to go to Tmall and on Tmall there’s
a Levis store. And you’d go there
to buy online. So it’s far more common to
go to these open platforms, these massive platforms
rather than go to an individual
proprietorship store. US products are already quite
popular on Taobao and Tmall, but the problem is
indicated in the last bullet, that if you’re a major firm,
you could set up your store and your warehouse on how
your team design your webpage. So if you’re a major store, you can get in the
game, so to speak. There’re also some
Mom-and-Pop people who just sort of buy products in the
US and bring them back and you can see those
products around too. But it’s very hard for the
Meteor [phonetic] company to get in the game because
the Cafex [phonetic] and [inaudible] were
burdened up of setting up e-commerce operations
to be so significant. People ask, well, trying
into developing market, what kind of products
go through there? Is all kind of low end
products, this was their– the dime was a smart
card that listed a little over 20 thousand US but they
seemed to be pretty well with high end products online. We are proud to say that we have
just launched our company export now in the US three weeks ago. We already have 8 partners
with us the market in the US. We think we’re going
to have about 50 by the end of first quarter. So we’re very proud to be able to offer these services
to US companies. We’d be delighted to work with
people on this call to see if there’s a good fit and if there’s a way we could
help your companies succeed in China as well. And Kellie thank you for
putting this call together, Josh thank you for your
introductory comments. If we’re be able to go
questions I’d be very happy to take Q and A.>>First I appreciate your
remarks sir, as an active stream of question is coming
in to the Q and A box. So we’d appreciate it as Frank,
Josh and the Export Now team that have also joined
us can look at those. I want to remind
the participants that if you haven’t used
the speaker yet there’s a Q and A button at the top of your
screen and you would simply type in the question there and
hit submit and we’ll look to answer those that
are most relevant. And we have ample time
to work through this.>>Can I, Kellie, Frank here,
I’m on the Q and A button and I’m seeing some
of the, you know, I managed some of the questions. Can we just get in to them
or what’s the best way of just tackling some
of these questions?>>Please, why don’t you.>>On the Q and A
tab, or the manage tab within Q and A please.>>In the manage tab within
Q and A, so for example, a couple of questions
have come up and we’ll throw this out at you. It says, does Export Now only
deal with consumer products, you know, things one can
touch and feel or you know, mostly handled services or
other types of products.>>Right. Well, yes, the
e-commerce place right now is at Taobao, Tmall is
essentially a consumer platform, consumer products, I should say,
are much more broadly defined in China than they
typically are in the US. Meaning, you can get into,
sometimes medical equipment, automobile parts that
might not normally be in a normal consumer
display in the US. So it tends to be more broader. Also, it intends to
encompass the whole sales base as well as the retails base. Meaning, you’ll see
an item, item for sale and that’ll be one price,
they’ll say that if you want to buy a gross of these
or a dozen of these, here’s the other price. So they’re clearly orienting that to the wholesale
person as well. We do not have any
service products on our system right now. I think we’re open, those service products
can be more complicated and the key variable was then
resolved on shore or off store. But if you’d care to
send us a private note about what you envision, we
can have a discussion with you if you’ve got a service idea.>>And some other questions about different types
of products. A couple have come in
about wine, alcohol, are there any goods that,
other than services, that you would not
want to get into?>>Sure. China, I would say, in
general, China has the same kind of restrictions about products
that the US would have. But they’re more
liberal or more open in one very important aspect. So the restriction that the US
usually have to do with things like registered pharmaceuticals,
explosives or firearms or something of that nature
and there’s always sort of cultural sensitivity
if it’s pornography or [inaudible] blood. But, so those– the
same sort of issues that would encourage
people not to get into those products categories
that are online in China. But one area where it’s more
liberal and more open is with wine and spirits. Because it’s very tough,
or more less in hospitals, in the United States to
sell online, it is legal and it’s a huge field in China. So we’d be very happy
to talk to you about, if you’re selling wine or
spirits, about how to do that.>>Related to that and then
some other product lines of questions have come in about
registration requirements, product certification and things like that certainly
applicable to wine. What role did your firm play?>>Yeah that’s a great question. There are certain
families of products that require independent
certification or registration independent
testing. And those would be food
products, which is huge in e-commerce, or
intellectual property reasons, safety reasons. Wine and alcohols, we discussed
cosmetics, dog food, cat food and then also electrical
appliances have to be again similar to the US. You have to– anything
that plugs in, not a battery operated
toothbrush but a plug in has to be independently
licensed, thereby. We will work with the US
manufacturer on those points. Can either be an extra, extra
set of activity that has to take place, forms and
so forth and there’s– and we do just pass
through the [inaudible] because we’re just here to
help getting you online. And then it’s up to the ultimate
jurisdiction of the government to make a determination,
but we’ll work with the US manufacture merchant to pursue the food licensing
requirement and so forth. [ Pause ]>>A couple of questions
have come in relevant to where the website is hosted
and you know, if the people on the line now, can
they look at Tmall to see what listings,
you know are like?>>Oh, yeah, great question. The– excuse me–
the– there’s two, we’re talking about
two websites. There’s a US website
exportnow.com which allows US manufacturer
merchants to sign up to work with us, work with the
export portal and so forth. And that’s up, although the
portal itself is just being put into place. The China website is a store, on Tmall that had
encouraged people– and that goes live in
about 10 days or 2 weeks. But we just had our official
launch in the United States about three weeks ago,
meaning we’re working directly with merchants. We’ve got eight terrific
branches. We’re already shifting to
China to put on the store. The store itself goes live
in about 2 more weeks. I would encourage
people to look at Tmall, which is just T-M-A-L-L
dot com as the platform, and but of course,
it’s all in Chinese but here’s the interesting
point. In the search window,
you can type in English and you can search in English so
you can at least get a sense of, is your family products
already up there and for sale. What are the price points? How many different merchants are
there, our competitor’s products up there and so forth,
or similar products. So you could at least click
around and type in tennis racket or at Levis or electric
toothbrush or anything you want into the pet supplies,
the kayaks and so forth. And just see what kind of ideas, what kind of activity
is up there. Hey Kellie, can I– I just
want to add one, ask one thing. I’m sorry for the
type of question here. Put on my cue, what I’d
like to do is put some link, or give you a link on the Q
and A tab here, do I do that? Do I get from manage tab?>>I will pull up a link or you?>>I’ve got a link that I just
wanted to share with people on the call because they’re
just an interesting material, if I could just send it on. And people want to click
on it and so forth.>>Once you post a question
and then answer the question and then the– all the
participants can look in the Q and A box to see
it, either that. Or you can type it onto
the screen using that, the letter feature at
the bottom of your–>>Oh right. Oh but I can’t cut
and paste, sorry. Kellie?>>Right.>>I’m sorry broke up
there for a second. Can I cut and paste?>>If you want to
go ahead and send it to me, I’ll post it for you.>>Okay, that’d be
great and I’ll do what– here’s what it is, sorry,
sorry for the delayed question. But McKenzie, had just the
McKenzie Consulting Group, had just done two very
interesting studies on consumer behavior in China
and Boston Consulting Group, had just done a very interesting
study on e-commerce in China and I think it just gives
a little more detail, a little more background to
some of the interesting points. Josh wait, I’m going to
forward this to Kellie and she can post
this information, so grateful to you thanks. Sorry we can go ahead
with questions.>>A few questions have come
up about, if you only deal with manufacturers or you know,
can you deal with resellers or consolidators of products. Have you worked with
those groups?>>Right. We deal with
anybody from those groups who is the official agent,
the designated agent. We can only post on Tmall if we
are the original manufacturer or the official representative, official distributor
agent and so forth. So we will deal with
any intermediary party. There are a lot of
great US firms that already have China
rights, China marketing rights or sells rights are
already been given to, sold or whatever
to a third party. So were very happy to work
with that third party. But it has to be through
the official channel. And here’s the reason it’s an
intellectual property reason. Because there have
been problems in China with intellectual property with
fakes, with not off– whatever. Tmall was established
as the site where there is no
intellectual property issues, and you do that by saying only
the official store may sell the product. If you go to Levis on Tmall, it’s the official Levis
Store run by Levis. Only the official manufacturer, the formal entity is
allowed to sell that product. There’s nobody else selling
Levis on Tmall except Levis. So if we handle your product,
we’d be delighted to do it. It has to be with
the full authority of the ultimate manufacturer,
whether you on this call or the manufacturer or
consults in to a third party, whether if that’s
perfectly acceptable.>>How about questions that
have come up about some of the different types
of channels, on Tmall and others including
TV shopping. How Tmall or Taobao might
compare the use of TV shopping? That’s more of a
general question. If Josh perhaps could
start with that, or?>>Sure. Sure I have responded
in private– where could I– I guess we’ve been
looking at the shopping and we’re getting more and more
requests about kind of a QVC like the online TV
shopping channels. There are a lot of different
shopping channels here, one in particular at Cnrmall. But we’re just concerned about,
some of those products tend to be down market and
it’s not always the best, depending on the products
in terms of positioning. But some products, they do
like some of the QVC things for the babies in our lives who
are looking for, let me say, a lot of the kind of
hair and beauty products. And then they said, a lot of
other, like kind of therapeutic, kind of like in shawls
and the different kind of therapeutic products. But again, we’re
working with some of the TV shopping channels,
we can talk off line more. We’re just still
a little concerned about where positions
you had the brand, especially if you’re coming
straight from the US right into an online shopping. But we can talk more of offline.>>Josh, can I just
add a comment on that?>>Absolutely.>>Yeah, Frank here. Listen, I think what you
said is exactly correct. I would just add that it’s a
difference between a middle of the bell curve sales
model and a long tail model, meaning time on TV is the
most important commodity. So what they can put on the TV
sales channel is only the how to sell an item, only one item
on that for a few minutes. Time is irrelevant
on the internet, so we can put every SKU up. We can put the big
sellers, the small sellers. We can change, we
can experiment. So we’ve got these long tails. So we’d literally have
people we work with in which we have hundreds of SKUs. And we’re very happy to put them
up and they’ll say quite openly, we’re just new to China market. We don’t know what’s going
to work and what’s not. We want to take a kind of broad
approach to see what’s going on. And e-commerce is just
a much better mechanism that lets us get
data, get feedback and understand how the
process is going to work.>>And along the lines of
sort of the bigger picture and how these different
channels work together, and how US firms can
tap into these channels. One of the participants
has asked if– to clarify if products
from the US can be placed on Tmall website only or if
a company can design its own website for products
to sell in China?>>Yeah, I’ll be happy
to talk about that. And we’re– every company
has got a different approach and a different sort
of philosophy and a different budget. And we are here to support
the US Company regardless of what your budget is. So some companies
coming in and say look, what I really want is just
shelf space in your store because you’ve got flow in
your store, the products in your store and this is the
easiest and fastest way for me to get a few products out there. Other companies have
come to us and said, look we need a flagship store. Our overall brand
is very important. We’re making a much more
deeper commitment to China. We’re going to put in
marketing resources. And so we need a flagship
store behind this. That is our own stand
alone store. We can also list in
your department store but we got a flagship store. And then a curved permutation
kind of which you alluded to was, we can also
have a store, just a plain e-commerce site
outside of the Tmall platform. We can have our own
and certainly can. I’d say, initially that would
be viewed a large release in informational platform
rather than e-commerce platform because it just won’t
have the traffic. But it can be a great place to
go for people who have questions or want to have a discussion
or want to read a blog. And China have the same digital
marketing apparatus that US does where people have the equivalent
of Facebook pages and Linked in and they Tweet and so forth. And so a lot of companies have that digital marketing
establishment to complement the
actual sales channel. So we can work with your in any
of these kind of permutation. [ Silence ]>>I need few comments
on the cosmetics, I’m sorry about cosmetics,
the craft markets in China. Is that a growing area
that a product line that would do well on the Tmall?>>I’ll try to answer that
but I mean certainly– I do think that there
is a growing number of custom made products and
people doing and creating in all things, selling them
as a craft market style kind of like FC, if your
friends are like in fc.com. But I don’t know if
it’s significant enough to really speak about
it right now. But we’ll take a look at it
and feel free to e-mail me, this is Josh, directly and
we can take a deeper look.>>And I would like to point out
that if the participants look on their Q&A list, they’ll
see that the URL links that Frank had alluded
to earlier there, they’re posted there now.>>I just want to say, you know,
we’re getting a lot of comments and maybe Frank you can speak. So how soon before you get to– start exporting in other
company– other countries, you got request for
Japan and elsewhere, that’s only the good sign but–>>Sure, sure. We’d love to do that. We’d love to go to
other countries. What we can say, what we’re
doing with China is there’s at least 2 or 3 things going
on with China, it’s both– it’s the second largest
economy in the world after US. So it’s the biggest market in
the world outside our borders. And secondly, for most
Americans typically, it’s the least accessible
market, meaning American firms can
generally find out at some way to give them to European
markets and so forth. And Canada, Mexico
they’re more accessible but China has just got
a degree of difficulty. So for all those reasons,
we want to just start in China and get that going. But you’re absolutely right. Once that gets going,
we’re very keen to look at another market as well. But it’s not going to be in the next few months,
so I can say that. [ Silence ]>>And I’m assuming Frank that–>>I’m not sure if we
touched on the question about cosmetic registration
for cosmetic products? Hello?>>Yes, please go ahead.>>Okay. I can just speak
briefly, when you come through, you know, commercial
service and we’re looking at bringing cosmetic
products into the brick and mortar retail
network we have, we usually have partners
here that will help with the registration
process and other contractors that are really familiar
with the process. But it is a good question
in terms of Export Now, with the different kind of
products that come through, to what degree does
Export Now help to make that process a little
more fluid? [ Silence ]>>Another theme to the
questions is about content, US content if you’re
requiring 100 percent content for the US content for the
firms that you work with. What if portions of the firm’s
product lines are actually made in China?>>Right. Let me
try to answer that. We’re an American platform or
we’re helping American firms but we also realize full well, that that means different
things at different times. And you get [inaudible]
with American companies that have some off– soaring
of production in China or in a third country. And so we’re happy
to work with them, regardless of where the product
is sourced or manufactured. But as long as we’re honest
to the Chinese consumer about what we’re
selling, we’re not going to say made in America. It’s not made in America. But it’s an American brand
and American company, that’s perfectly fine, and
we’re happy to work them.>>And quite a few question about the fee structure,
that type of thing. I’m assuming that those
few queries should be sent to Export Now directly.>>Yeah, we’ll be happy
to talk about that but let me just give an outline
on that, because my guess is that something that
everybody has got in the back of their head about saying okay
this might– this might fit. This sounds kind of appealing but what’s the–
what’s the price tag? And there’s 2 elements
of a fee structure. There is a sign up fee, which
it helps us get our fixed cost, get you online, get
that first shipment to saying hi and get you posted. So there is a sign up fee and
then there is a transaction fee. That data, just gross value. So the actual dollar amount of
course then are driven by sales. But the transaction the
sign up fee is 3,000 dollars for 1 Euro [inaudible]. So they’ll get you one
cubic meter of product, one family product from
Long Beach, Shanghai and in the [inaudible] the
consolidated group customs translated online trade mark
registration, so a set of– a set of activities
around that 3,000 dollars, that you gets you
on the platform. And the transaction fee,
it depends a little bit on which product family product because there are different
tariffs and Taobao’s with different fee structures
as well, but it usually ends up being in the 15 to
20 percent gross range. So there is a Taobao fee if
you will, there is our fee. That’s the cost-side. The benefit side is remember,
there is no distributor, there is no wholesaler,
there is no retailer. So we say even with China’s VAT, China has a value added
tax that’s 17 percent. So even with China’s 17
percent VAT, we believe, for most companies,
your total cost when getting a consumer will be
more or less the same in China as in US, that all of these
additional cost are offset by the fact that there’s
no distribution middle man. So that’s why we say that in
the power point, you can more or less hit the same price point
in China that you have in US and more or less the
same margin as well.>>And for the actual product
pricing, is it Export Now or is it the manufacturer that
determines pricing to consumer?>>The manufacturer
sets the pricing just as the manufacturer would for
their own webpage or for Amazon or eBay back in the US. The manufacturer controls this. We would certainly like to
have a conversation about this and going to be as constructive
as possible about it and give some thought to as where you’re trying
to go and so forth. But our general advise
in entering China is try to enter the same price point
you have in the United States where you already
have established. There is a market,
you can be successful on that price point
and so forth. Indeed, if you look at
what some of the majors do, if you look at what
McDonald’s does in China or what Starbucks does in
China what Levis does in China, you’ll see they very
much follow that approach that the Starbucks coffee cost
essentially the same in China as it does in the United States. And Starbucks is doing extremely
well but what it might mean, they have much more of
penetration in China than in the United States because there is less
purchasing power. But that’s, at least
somewhat offset by the fact that the country is 4 times
as large and you don’t have to certainly need precisely
the same penetration.>>And how about returns? Howe are those handled?>>You mean, returns from the
consumer to us in the warehouse or returns from us in the
warehouse of US manufacturer? Let me touch on both
’cause there’re at least two levels
of returns here. So on the retail side
from the ultimate consumer in China team all the
platform requires a policy of all merchants,
we subscribe to it as the 7-day return policy. So the Chinese consumer
has 7 days to return. Now that gives the
consumer, consumer confidence and then allows them to buy from
a merchant they’ve never heard of or to try something else. So we think that the very
powerful sales tool helps us go faster. But it also protects
the merchant. It protects us because the
return policy requires actual physical return of the product
at the customer’s expense. So the scope for fraud we
think is very, very limited, the cost might actually
[inaudible] it up and ship it up and say, the tennis racket
was the wrong tennis racket or defective or whatever. But then, we will
refund the money. So there is a return policy,
standard return policy on the Chinese side, which
we think is very helpful. We also then in our side,
these are the pacing of the US. We have that with return
policy because we’re going to have some merchants who,
in the course of their year of activity or the end of their
year of activity say, “look, I’ve got SKUs that
aren’t working or I’ve got a whole family of
products that aren’t working or I’m at the end of my
year and it hasn’t worked. And you still got an
inventory in China. So we got, we’ve
got 2 or 3 options. Then of course we worked with
you in the course of the year so it’s not, you know, we
could look at adjusting prices, special promotions, other
kind of activity in a year. I think swapping out SKUs in
the course of the year is going to be a reasonably common
activity for many companies because they’re experimenting
in the market. So we’re very happy to work
with you on that basis on, it’s just a pay-go basis, right? Because what we’re
trying to do– what we’re trying to do at Export Now is the exact same
activity what the manufacturer emergence is trying
to do which is to say, how do we get transaction
volume up? How do we get sales as
effectively as possible? And that requires alterations
in price points or colors or sizes, then let’s do it. So we’re very happy to
work with the US company on changing the product
mix and price points and so forth throughout
the year. But let’s take a worst case
scenario at the end of the year that there are still inventory
there that it hasn’t worked in a commercial sense, then we
basically got three options. We can roll over for
another year and keep trying. We’re happy to do that. We can liquidate the goods. This kind of liquidate,
the merchant sets the price or we can return the goods. So by the way, this would be
not terribly different I think than what would happen in
similar setting domestically. I mean there’s only a
few things you can do. But there, the goods belong to
the US company, and we’re happy to get them back
to the US company.>>But we have kept our
participants on longer than the time originally
allocated. Did you want to touch on any of the other questions
before we wrap up, Frank?>>Well, let me just say this. We’ve got in a few
questions in the system that are very interesting that
I haven’t been able to respond to in the course of this
discussion ’cause we did have to kind of stick
to the general ones that people want to
follow up with us. We are just delighted
to have a chat. We’ve got a US team that will
probably put you in touch where they can answer the
mechanical questions a little more easily when we come up to
China or have China questions. We are very happy to call in
from Hong Kong or Shanghai and have that discussion
as well. But on the very last
slide, Kellie, is the contact information. And you’ll get info at Export
Now or sales at exportnow.com, are two great places to go. I just want to thank you
Kellie and thank Josh and thank everybody
on this webinar. It’s been a very interesting
chance to have this discussion.>>Okay. And Josh did you
have any last comments that you wanted to make
to the participants?>>No, so what Frank said too,
if you want anything specific to what the commercial service
can do or stuff that’s related to getting into the
market on the ground here, feel free to e-mail me as well. And Frank and I and our teams
are working in tandem so, you know, anything that
one of us isn’t able to answer the other
one well, and again, it’s just been a great pleasure. I think this is probably
the largest webinar I think in CS history or when
we’re here in terms of participants, not sure. We’ll clarify those
numbers later but again, a lot of that is due to Kellie’s
work on the ground in the US and of course the wonderful
product of Export Now that we definitely support. So again, thank you again
and I’m signing out, we’re signing out from Beijing.>>I want to thank all the
participants, our speakers, Export Now, Frank Lavin and your
team for making this possible, bringing a really compelling
approach to US firms. And we look forward to
following up with you with these additional questions. Please participants,
don’t be shy. Send your questions
and we’ll work to address every
single one of them. A reminder that we’ll be
sending a link to a recording of today’s program to later
in the week, you will be able to listen to that
at your convenience. With that, we will sign off. Thank you.>>That concludes today’s call. Thank you for participating. You may disconnect at this time.>>You are on hold
for a conference call. Please press star 0.>>So we’re on a– [ Music ]

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