China eCommerce


Uploaded by TradeGov on 17.12.2012

Transcript:
>> 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--
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