“The Millennials are coming!”
It was a great honor and pleasure to speak about cross-border ecommerce (CBE) trends and opportunities during APEC SME Summit by DHgate and during WECC 2016 World Ecommerce Conference organized by the CECIA. The later event was held on March 14 in Shenzhen, and the latter one on April 11-13 in Yiwu.
In my presentation I shared research data from DHgate in collaboration with University South California (USC) and ABAC, but also from Cross-border Ecommerce Community (CBEC) partners, Payvision and Acapture, and last but not least, my own views on the subjects.
Cross-border e-business in China is estimated to reach 6.5 trillion yuan (US$1.02 trillion) in 2016, with an increase of 30% growth rate and 20% in the ratio of China’s total import and export trade, according to Chinese Ministry of Commerce. Nearly 40% of apparel products sold in the US are imported from China. In the US apparel counts for only 3% of the total B2B ecommerce.
Starting 2012, as co-founder and chairman of the CBEC knowledge platform, I started collecting in-depth research data to help merchants to lower their barriers for cross-border ecommerce. Not for profit and with the main objective to educate the industry and boost the cross-border eco-system globally.
As economies want to grow their CBE share, working together in a disruptive collaborative model and ‘educate’ the market is one of the best approaches. The CBEC offers a platform where partners from all over the world can share research and best practices to assist manufacturers (b2b) and merchants (b2c) in boosting import and export trade.
WHY do you want to do CBE as a manufacturer?
CBE and omnichannel are the main trends of the global market. Let’s take a look at the reasons why the values of CBE are widely recognized among APEC economies and why CBE is empowering SMEs to enter the global value chain. Asia-Pacific region has become the dominant region in the global economy, growing faster than any other, at a rate of 35.2% year on.
The values of CBE to global SMEs are recognized among APAC economies because of two major reasons. First is the disruptive force in economies that are undergoing massive political, social and economic changes to support CBE. Even traditionally ‘closed’ economies are putting CBE at the highest priority on their digital 2020 agenda. Second, SMEs are fast-growing due to disruptive innovation. By applying new sets of rules, values and models which ultimately disrupt and/or overtake existing markets by displacing earlier technologies and alliances, these innovative SMEs create new markets.
International research conducted by University of South California revealed that 74% of businesses surveyed considered CBE as the key disruptive force on their economy over the next three years, 82% indicated that CBE would have great impact on SMEs over the next three years, and 48% said that CBE would have greater priority for their company strategy and development.
Domestic markets have become mature and saturated. CBE is the most logical way for future growth. Governments around the world have recognized ecommerce as an engine of future economic growth, especially in supporting SMEs to expand cross-border. Supportive policies boost the development of CBE.
International research conducted by Payvision showed that 70% of companies surveyed indicated that selling products and services overseas has proven to be profitable. While 40% indicated that emerging markets were their primary focus, and 45% indicate that China will be their main focus in the future.
CBE is empowering SMEs to enter global value chain, to survive in a mature and saturated competitive domestic market, increase their speed of development and broaden their business opportunities.
SMEs with high internet and technology usage grow 2.1 times faster than SMEs that do not leverage technology, regardless of the industry. 60-80% of ecommerce exporters survive their first year in business compared with a 30-50% survival rate for traditional businesses. Ecommerce firms on average export to 30-40 different economies compared with 3-4 economies for traditional exporters. That’s 10 times more opportunities for business growth.
Using CBE the business risks are reduced to a level with lower intensity of competition in overseas markets, and wider reach of global markets. CBE offers more flexibility and lower barriers, no geographical restrictions, thus it increases the profit margins for sellers and saves money for global buyers.
Under CBE industry, B2B is the leading force in driving the industry forward.
Let’s take a look at the number of global B2B. According to Frost and Sullivan report (LINK), it is estimated that in 2020, the total global transactional volume in B2B business will be twice the size of B2C business, with 6.7 trillion USD revenue.
According to 2015 ecommerce marketplace data, in China, in terms of cross-border sales, B2C revenue dwarfed with $221m in B2B. Chinese ecommerce market reached USD 2.3 trillion in 2015 and almost 70% came from B2B (China Internet Watch).
In absolute terms, the European B2B ecommerce market is growing at a faster rate than the B2C sector. Yet, the B2B sector still has major growth opportunity. More than 50% of companies make purchases through ecommerce, but less than 22% of companies are actually selling through ecommerce.
So, why is B2B the winner?
With the integrated online B2B platforms, a complete service chain is moved online, shortening the purchasing cycle and cutting the cost through less middlemen. Buying in bulk also means an enhanced logistics efficiency. And with larger order size, businesses are more inclined to enter this business with more profit margins.
Did you know that Prada makes about 20% of their collection in China? Miuccia Prada told the Wall Street Journal, “Sooner or later, it will happen to everyone because Chinese manufacturing is so good. Their skill set is better, their finishing is better, and they can handle that type of fashion.” This example illustrates the demand from overseas markets for Chinese high quality products. I believe with the increasing productivity and improved product quality, made-in-China products will be tested and recognized with good reputation in the global markets! Over 40% of apparel sold in the US is made in China. For B2B demand by the rest of the world for machinery parts that are made in China will be double that of the US by 2022. Quality reputation is being restored.
Around the world, Computers and other Machinery, Automotive, Pharmaceutical, Petroleum & Minerals, are leading the B2B rankings for many years, as the early adopters. But let’s be clear about these numbers; lately many new categories are on the rise. Look at apparel, only ranking around 5% is already bringing solid business to China. Good quality products will grow every industry/sector in CBE.
Although consumers will have the largest number of devices, the greatest value will be driven through B2B spending until 2020 when this is predicted to level out. Business-to-business IoT devices and applications will capture more value initially—over 60 percent in 2016—than consumers, although consumer applications, such as fitness monitors and self-driving cars will grow at a fast pace, and by 2020 will generate more value than B2B. As adoption grows, consumers will become more confident with payment security and will spend on higher value items. On top of that, we reached the turning point where millennials in the age of 18-34 are the digital natives, able to analyze and understand information incredibly fast. This business model will be highly acceptable for them. They bring in buying power with ‘no border’ mentality and higher demand for convenience and user experience.
The main barriers to adopting an integrated Internet of Things strategy is privacy security, and the main barriers to B2B cross-border ecommerce are lack of awareness, business intelligence and technical skills.
The B2B ecommerce industry needs support with education and expertise for growth. As economies grow, working together in a disruptive collaborative model is best, to ‘educate’ the market wherever we can. Partners from all over the world can share research and best practices to assist manufacturers (b2b) and merchants (b2c) in boosting import and export trade. This is where the CBEC can play a significant role.
Nowadays, manufacturers and merchants focus on being present on many channels and platforms; online, offline, mobile, social and everything in between. This makes the landscape very fragmented and it pushes merchants to multi-vendor operations. The East is way ahead of The West when it comes to integrated platforms and aiming for a better user experience. I’ve been in China many times and I am a frequent user of the integrated in-app solutions such as WeChat. It’s used by the entire population because it’s convenient, efficient and all-in-one solution for daily purposes such as chatting, sharing experiences and photo’s with friends, video conferencing, ordering taxis, finding information on theater, train and flight tickets, paying with one click for the tickets, buying on marketplaces, you name it and its possible, all-in-one.
My advice to SMEs is finding ways to connect to, or stick to one vendor that can accommodate your specific omnichannel needs that fits to your business. From a payment provider perspective, omnichannel is still in its early stages because all elements of the experience are fragmented. In this increasingly omnichannel retail landscape, SMEs’ main challenge is often the jointed processing systems they use, the independent fulfilment and CRM systems for each channel, the different settlements dates, reports, contacts and so on. With such disparate operations, uniting the user experience can be impossible. Merchants should unite their channels so customers can be approached as a single, identifiable customer. By moving from multi-vendor strategies, integrating and connecting the processing systems and collecting visitors’ data, merchants can better understand their customer’s desires and needs and add new services to their offering. Payment providers are very well positioned to gather this data and make it available for their retailers to integrate it in the shopping experience.
If you are interested to read and learn more from this research download the free infografics conducted by Acapture, a global payments company in B2B AND B2C, and one of the partners of CBEC.
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