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26 27| BUSINESS-CIRCLE.COM.AU BUSINESS-CIRCLE.COM.AU |
中国热点 中国热点
CHINA HOT TOPICS CHINA HOT TOPICS
During the Spring Festival and the start of the
Year of the Monkey, a news item regarding Chi-
nese e-commerce suppliers became a talking
point in Australia’s business community.
The news story ‘Tragedy! Classic Australian
brand opens store on Tmall and loses 25,000
Australian dollars!’ shocked readers:
C Stuart is a classic Australian brand of no small
size. For the last few decades it has concen-
trated on retail baby products. Among its well-
known brands are Merino Baby, Big Softies and
Snugtime.
At the beginning of 2014, C Stuart partnered
with a Chinese supplier to sell Merino Baby
products on Tmall. Although sales for the initial
period did not meet expectations, the response
from consumers was very positive.
Disaster struck at the end of 2015. C Stuart’s
Chinese partner found that several hundred
fake orders had suddenly appeared in the store,
which after confirmation would then be cancelled
within a few minutes. Reasons for the cancellation
of the orders included insufficient stock or that the
products could not be delivered on time. However,
the CEO of C Stuart, Paul, declared that plenty of
stock was available. He believes that this was a
deliberately planned attack and that the attackers
had a deep understanding of Tmall’s system.
Before opening a store, according to Tmall’s re-
quirements, C Stuart had to pay Tmall a 100,000
RMB security deposit - valued at the time at
$25,000 Australian dollars - to serve as compen-
sation where customers possibly might have their
orders cancelled due to the seller having insuf-
ficient stock. After several hundred orders had
been cancelled, C Stuart’s bond was ‘appropriated’
by Tmall.
The investigation into the incident is still ongoing,
but Tmall’s response to the issue has been rela-
tively muted. Paul has already made the decision
to close their Tmall store, with the $25,000 Aus-
tralian deposit never to be seen again.
Paul has the following recommendation for oth-
er Australian companies currently considering
whether to sell their goods to the Chinese mar-
ket through a third party e-commerce platform:
‘Unless there is research showing they will be
able to sell the products into the Chinese mar-
ket, do not go into the Chinese market. And if
you are thinking of providing Tmall with a se-
curity deposit, think about our experience, and
judge whether the risk is worth it.’
A modern and successful business tested the
waters on the world’s largest e-commerce plat-
form in a huge 1.4 billion consumer market,
with the result that it was sent home packing.
This provides fellow businesses with a caution-
ary lesson.
We feel very sad for C Stuart about their expe-
rience in China. But Paul’s comments should not
be considered as the final word on the matter!
In the last few years, e-commerce has taken
over China. In 2009 Alibaba launched its first
‘Singles’ Day’ event and the amount traded
on that single day for today’s Tmall, (formerly
Taobao Mall), was 52 million Yuan; in 2010 this
jumped to 936 million; in 2011, Taobao Mall
and Taobao launched a joint promotion with
transactions reaching 5.2 billion; in 2012, the
total amount for all Tmall and Taobao transac-
tions broke through 19.1 billion; in 2013 it was
36.2 billion; in 2014 it was 57.1 billion; in 2015
Singles’ Day - and only for Alibaba’s platform
Tmall - reached 91.217 billion Yuan.
All this in only 7 years.
It’s a fairytale! A fairytale that happened in
China!
The visage of the main architect of this fairytale
and the boss of Alibaba, Ma Yun, has already
come to represent the image of a God of Wealth
and master businessman - one who is held in
awe and respected by e-commerce suppliers.
In 2015, there were over 300 million consumers
in China participating in internet shopping; total
shopping expenditure reached 500 billion Austra-
lian dollars with a 50% increase year-on-year.
This year, China will come to have the first
e-commerce retail market valued at 1 trillion US
dollars.
By 2018 at the latest, the Chinese e-commerce
domain will have become the largest online
goods importing market in the world.
It seems to really validate the saying: do
e-commerce or don’t do business at all!
But there have certainly also been those who
have had a less than supercharged e-commerce
experience - C Stuart, for example.
Accompanying this news is the fact that Aus-
tralian products have a huge and extremely
enviable market in China; countless Australian
purchasing agents are throwing themselves into
the buying process on a grand scale; with one
masterstroke after another by large e-commerce
suppliers and brands in Australia and China are
jumping on board too.
A Massive Market
The Melamine Incident was a key turning point.
Beginning with baby infant formula, infant prod-
ucts, and functional natural healthcare products,
cosmetics, even to meat, crayfish, abalone,
eggs, and seasonal fruits, the enthusiasm the
Chinese consumers now have towards Austra-
lian products has become a genie that cannot
be put back in its bottle.
One of Melbourne’s freight companies has
revealed that the amount of Australian baby
infant formula transported every week to China
in 2015 was almost always at least 20 tonnes.
This quickly created an Australian ‘infant for-
mula famine’, and after inciting complaints
from many Australian mothers, in the year just
passed, Chinese consumers and their purchas-
ing agents in Australia have now cast their eyes
towards Australian fresh food products. A few
rounds later and Australians now find them-
selves unable to buy Tasmanian cherries. Even
branded biscuits one day may be available to
all Australians but might be out of stock on the
next. And, of course, there’s Blackmores and
ships-worth of Penfolds currently arriving on
Chinese shores.
In 2013, the total value of agricultural products
exported from Australia to China was around 9
billion Australian dollars, more than that of any
other country, and this has continued to grow in
the following two years. The Australian Bureau
of Agricultural and Resource Economics and
Sciences (ABARES) has forecast that the pro-
portion of global growth attributable to China
in demand for agricultural products will get to
43% in 2050. At that time, half of all increased
demand for Australian agricultural products will
come from China.
But there is something else that has got Austra-
lian companies even more excited – over 80% of
China’s customers for Australian products were
born in or after the 1980s. That means that for
the Australian products now making their mark
in China, their attributes and characteristics have
had a decisive impact on their main body of con-
sumers, and this is the very same body of con-
sumers that today, and also tomorrow, constitutes
the backbone of China’s population and those with
the greatest purchasing power!
Observers in this space have seen the business
opportunities available. Hence there is a con-
stant dance of investment and acquisition now
unfolding between China and Australia focused
around popular Australian products. Dominat-
ing the field is Biostime International Holdings
Limited, a Hong Kong stock exchange listed
company valued at 1.67 billion, that bought
well-known Australian healthcare brand Swisse.
They did not become shareholders, they did not
form a partnership - they bought it outright!
The Amazing
Purchasing Agents
‘daigou’ is not a word officially used in the En-
glish lexicon, nonetheless the Australian public
is very familiar with the concept.
The vastness of the Chinese consumer land-
scape begins with individual purchasing agents
– ‘daigou’. This kind of business model can not
only enable Chinese-based consumers to buy
top quality products at relatively low prices,
they can also provide purchasing agent com-
panies with quite ample returns, and once it
emerged, this model took off in an extremely
short period of time, and even today it is still
the only pathway by which most Chinese con-
sumers purchase their loved Australian prod-
ucts. In the last ten years, mass purchasing by
daigou has become significant in Australia. The
buyers have also become honoured customers of
many Australian businesses as well as a thorn in
the flesh of many an Australian housewife.
Blackmores has revealed that local purchasing
agents have increased their yearly turnover by
about 65 million dollars. Bellamy’s also estimates
that as much as 40% of their baby infant formula
last year was sold to China. During this time, total
retail sales from third party e-commerce plat-
forms reached 27 million dollars in six months,
being nearly twice the figure for infant formula
exported to and retailed in China through official
company channels. Bellamy’s has already opened
its own flagship store on Tmall.
In 2015, the scale of transactions in the Chinese
overseas daigou market reached close to 300
billion RMB. On Taobao there are over 420,000
stores engaging in daigou operations, but it is
more in people’s WeChat friendship circles that
one can find vast numbers of daigou. There are
4,670 Australian agent businesses promoting
Australian products on Chinese websites. On
Taobao, there are nearly 900,000 Australian
products listed for sale.
The first Australian daigou general meeting took
place in Melbourne in 2015 and some migrant in-
vestors from China started to get involved in the
purchasing agent scene. It would be impossible not
to say that the blueprint of the daigou industry on
display via that meeting was not impressive.
Embrace the Era of
Chinese-Australian
E-Commerce!
28 29| BUSINESS-CIRCLE.COM.AU BUSINESS-CIRCLE.COM.AU |
中国热点 中国热点
CHINA HOT TOPICS CHINA HOT TOPICS
There are organizations forecasting that, with
the exception of some terrible event, it is a
foregone conclusion that the scale of the Chi-
nese overseas daigou market will break through
the 1 trillion Yuan barrier in 2018.
China has already unveiled a cross-border
e-commerce ‘test city’ policy. Internet giants
have followed, with cross border e-commerce
platforms based in free trade zones or low-tax
zones such as Tmall International, JD Overseas
Shopping, NetEase KaoLa Shopping, Suning
Overseas Shopping and so on emerging around
these opportunities. Vast hoards of daigou have
already laid the way for the realisation and de-
velopment of cross-border e-commerce.
The Big Fish in the Pool
On 17 November 2014, China and Australia
signed a free trade agreement and in the next
four to eight years the vast majority of products
exported to China from Australia will eventu-
ally be entirely tariff free. This is an extremely
advantageous situation for Chinese-Australian
cross-border e-commerce suppliers.
Sensing opportunity, Alibaba quickly announced
on the following day, with its more than 800 mil-
lion registered users and its subsidiary company
Alipay Australia set up in Sydney doing an aver-
age of 80 million transactions every day, that it
is going to be working with local companies pro-
moting development of its operations in Australia
locally, providing tailored cross border e-com-
merce solutions to grow the Chinese market and
promote cross-border e-commerce between the
two countries. At the same time, Alipay Australia
began partnering with Australia Post selling, dis-
tributing and promoting Alipay Purchase Cards at
4,400 retailers for Australian consumers to use
online at Tmall and Taobao. Soon after, the Tao-
bao Australia Pavilion was released, providing a
one-stop shop for e-commerce services ranging
from product selection, to logistics, from customs
to marketing and receivables, providing Australian
food products and agricultural byproducts to Chi-
nese consumers.
It was 2015 that exemplified the numbers and
dominant position of cross border e-commerce
suppliers. The big fish from each industry started
to gradually take control of the Australian scene.
On 15 April 2015, JD Global Shopping formally
went online, where consumers could select and
buy high-quality imported and genuine prod-
ucts from countries like Australia at discounted
prices and through quick and flexible channels,
receive a high quality, one-stop shop, overseas
purchasing experience.
On 29 June, JD Mall held an opening ceremony
in Melbourne for its ‘JD Worldwide Australian
Business Forum’ and ‘JD Worldwide Shopping
Australia Mall’. At the meeting, JD announced
three important points of cooperation: firstly,
that they had concluded a strategic partnership
with Australia Post in the areas of e-commerce
and logistics, that both parties would offer
product delivery and retrieval services in Aus-
tralia and in China, and they unveiled strategic
partnerships in many areas such as Australian
and overseas storage, sea and air transporta-
tion, all-region direct postage for small parcels
from Australia to China; secondly, that they had
concluded a strategic partnership with Treasury
Wine Estates, taking hold of a famous Australian
wine brand in their palm in one stroke, and this
implies that more than 80 famous wine brands
under the Treasury Wine Estates banner will
be relying on JD to enter the Chinese market;
thirdly, that they have initiated a Chinese-Aus-
tralian era of e-commerce together with Aus-
trade, Australian Chamber of Commerce and
Industry and Australia Post.
In July, JD spent 20 million Australian dollars to
become Devondale and its milk powder’s sixth
largest shareholder!
On 24 June, Alibaba’s Juhuasuan.com and Tmall
International started a joint ‘global village’ for-
mat. Juhuasuan announced that it had initiated
a comprehensive partnership process with the
embassies of 20 countries, and it is hoped that
more special overseas products might be sold
on Juhuasuan for the first time.
Industry insiders predict that China’s two Inter-
net purchasing giants, Alibaba and JD, will enter
the Australian market in 2016 with real shop-
fronts supported by Internet stores. This will
change the way Australians make purchases,
and even their lifestyles.
Australia in Motion
It takes two to tango.
Many of Australia’s well-known brands are fo-
cused on retailing to their own Australian mar-
ket and enormous interest from the Chinese
market has caused an explosion in sales leaving
some brands at a loss about what to do. Fre-
quent problems such as stock shortages and
insufficient capital, management, production
capacity and productivity and so on have fol-
lowed.
But some have responded very fast
As recently as the beginning of the year, one
of Australia’s largest e-commerce pharmacy
suppliers - Pharmacy Online - had already
started entering the Chinese market, initiat-
ing direct-to-China postage services with their
Chinese website being formally launched on 2
February! Chinese consumers could cross lan-
guage, region, payment and other such barriers
to easily purchase natural organic nutritional
and healthcare products, skincare products, and
mother and infant products from Australia.
In June, former Australian Prime Minister Kevin
Rudd’s daughter, Jessica, entered the ‘Tmart
Mall’, exclusively selling local Australian prod-
ucts. In October, she moved to JD where she
opened a flagship store, mainly focusing on
selling Australian infant and children products.
Business boomed over the next several months.
With plenty to be exuberant about, Jessica Rudd
recommends that Australian companies ought
to take hold of this business opportunity.
In September, Australia’s largest discount phar-
macy chain, dubbed ‘heaven for Australian pur-
chasing agents’ - Chemist Warehouse - signed
an exclusive strategic cooperative agreement
with Tmall International. In November they en-
tered Tmall selling Australian healthcare, skin-
care and pharmaceutical products to Chinese
consumers at discounted prices.
Before this, retail chain Metcash had also regis-
tered on a Chinese e-commerce platform.
Over the last year, Australia’s number one
healthcare products company, Blackmores, saw
their sales volumes on China’s e-commerce
platforms increase exponentially, and they have
been entering into partnerships with China’s
main e-commerce suppliers. Due to their ex-
ceptional performance in the Chinese market,
Blackmores’ Australian share price jumped to
100 Australian dollars per share.
PharmaCare’s e-commerce sales in China have
already developed from their previous daigou
method to a team-orientated company business
model; they participated in both Singles’ Day
(Double 11) and ‘Double 12’ events in China.
In November 2015, the RMB joined the SDR,
which has been extremely advantageous for the
Chinese-Australian e-commerce trade. To have
cross-border e-commerce transactions calculat-
ed in RMB has reduced foreign exchange risks
and costs, raised confidence between Australian
companies and China towards trade, and is
certain to increase significantly the volume of
transactions.
On 23 December 2015, Australian supermarket
chain Woolworths entered a partnership with
e-commerce supplier eCargo, setting up an
overseas flagship store in Tmall International
with four special domains focusing on healthcare
products, food, infants and skincare. The main
focus is on products like milk powder, collagen,
fish oils, cereals and skincare products, cov-
ering more than 80 varieties of products from
many brands including Swisse, Blackmores, Red
Wing, G&M, Kids Smart and so on. In terms of
logistics and post-sale services, Woolworths has
adopted a direct postage model, sending out
goods directly from its Australian warehouses
and has also partnered with Everfast Worldwide
Express.
At the start of 2016, Australia Post formally
unveiled the ‘Australian Pavilion’ with Alibaba’s
1688, providing an online platform for Austra-
lian companies selling large quantities of prod-
ucts to China and attracting Chinese importers
to buy Australian products at discounted prices.
At the moment, there are more than 100 mil-
lion registered users on this platform. Australia
Post’s Managing Director and CEO Ahmed Fa-
hour has stated that China and Australia have
entered a free trade era constituting a historical
milestone, and this is an optimal time for Aus-
tralian companies to enter China’s flourishing
e-commerce area.
E-commerce suppliers have said that the last
ten years have been a ‘golden decade’ for the
development of China’s domestic e-commerce
trade. They believe that the next ten years
will be the ‘diamond decade’ for cross-border
e-commerce.
China’s Singles’ Day and e-commerce explosion
has informed us that today’s Chinese people
have incredible purchasing power. But if we only
look to China’s purchasing power and hastily
enter the field - particularly in joining third par-
ty e-commerce platforms - from being in a for-
eign market, being completely unable to control
sales, or by being forced to accept one-sided
rules or even ridiculous and overreaching claus-
es on foreign platforms, to which is added a
deficit in understanding for the habits and psy-
chology of consumers in a foreign country and
society’s general trust level, one may possibly
endure a harsh baptism of fire as an inevitable
outcome.
The fate of C Stuart in China should also cause
some reflection on the part of China’s e-com-
merce suppliers. Being e-commerce suppliers
who control the world’s largest e-commerce
market, they should be particularly observant of
fundamental business norms. Improvements in
business standards grounded on win-win prin-
ciples guarantees the quality of products based
on a foundation of genuineness and on the in-
tegrity of the platform, and this is essential for
protecting the healthy development of China’s
e-commerce industry. Should consumer dis-
putes continue to skyrocket; should ‘counterfeit
goods’, fake sales reports, ‘negative feedback’,
‘unfair refund charges’, and such other key
words jumbled about in Chinese e-commerce
circles continue to exist; should hidden rules
and ‘mysterious practices’ continue to run rife;
should the ‘return my money QQ hoards’ con-
tinue to grow; should the platform staff ‘honchos’
continue to be unreasonable, dominating, and
capricious, then even if your platform were to
grow and your logistics services become more
advanced, it will still be hard to avoid being
shunned overseas brands or even outright re-
jection. The world is flat. And the idea of using
asymmetric information and such other factors
to gain an advantage belongs to a historical era
that is soon coming to a close!
As a completely new business ecosystem of the
Internet age, the revolution in cross-national
commerce and operational models has arrived.
Irrespective of whether you proceed through
a distributor or wait for purchasing agents to
clear the shelves; irrespective of whether you’re
relying on the help of a third party platform or
wanting to enter directly as a brand, when it
comes to China and Australia do e-commerce or
don’t do business at all! ‘Be there or be square’.
No one can stop it no one can resist!
The Chinese-Australian e-commerce era has
arrived. Apart from embracing it, there’s
nothing you can do!
30 31| BUSINESS-CIRCLE.COM.AU BUSINESS-CIRCLE.COM.AU |
澳中贸易 澳中贸易
AUSTRALIA-CHINA TRADE AUSTRALIA-CHINA TRADE
Online China consumer spending is expected to
reach $6.18 trillion sometime this year, up from
$2.03 trillion in 2010. The Chinese e-commerce
consumer market is growing at nearly 50 per cent
each year. There are now more than 668 million
Internet-connected consumers and more than
596 million mobile Internet users.
For Australian businesses, Chinese consumers’
emerging online spending behaviour presents a
rare opportunity to sell directly into the largest
growing e-commerce market in the world.
Paul Greenberg, Chairman of the National Online
Retailers Association and founder of Deals Direct
says: “The e-commerce opportunity for Austra-
lian retailers in China is the new El Dorado.
“There’s been an explosion of China e-commerce
sites over the last decade. Popular online shop-
ping sites such as Tao Bao, Yihaodian, Jing Dong,
TMall and Suning are delivering shopping pack-
ages to consumers over China in ever-increasing
numbers; bypassing traffic with deliveries, car-
rying their loads in compactly designed electric
scooters.”
Outside apartment buildings in many Chinese
cities, one can see these logistics vehicles on two
wheels gather together as they disperse packages
to local residents. This highly competitive busi-
ness has as its leaders Jingdong and the Aliba-
ba-owned T Mall.
According to Wang Xiao, IT Director at Simba
Innovation, “What gives Jingdong a competitive
advantage is its sophisticated logistics and ware-
house network near many major Chinese cities.
Jingdong promises a same day delivery, a prom-
ise on which they are able to deliver.”
Wang adds: “The customers also get a great,
convenient experience”.
TMall, backed by the Alibaba-group, is high-pro-
file, marketed as a huge online shopping mall with
many different products where designer brand
retailers license third-parties to sell their wares.
Shoppers are then assured of the authenticity
of the product, essential in China where “fake”
goods of all description are easy to come by.
Australian supermarkets chains IGA and Wool-
worths have taken note of these consumer-buying
trends and now distribute their products directly
into China via e-commerce sites. Woolworths
recently struck a deal with TMall Global, the in-
ternational arm of TMall. Through this channel,
Woolworths are focussing on specialized products
such as vitamins, milk powder as well as Wool-
worth’s own branded products.
Similarly, Metcash, Australia’s largest food and
liquor wholesaler and the company who own IGA,
Cellarbrations and Bottle-O, launched their own
shop front on TMall Global promoting Australian
products. TMall Global is much smaller than
TMall, with only 10-15% of the overall consumer
traffic. Interestingly, it is the high-wealth Chi-
nese customers who are purchasing from this site
in order to find genuine imported products.
Chinese consumers have an insatiable appetite for
all things Australian; products labelled “made in
Australia” with the government-licensed kangaroo
logo have become strong identifiers for Chinese
shoppers.
Combine this with Australia’s reputation for nat-
ural and clean food products, natural plant and
animal body beauty and health products and it’s
easy to see why Australian products resonate
strongly with the Chinese as a consequence of
China’s plethora of on-going severe food safety
and air pollution issues.
Australia’s reputation has led to an exponential
increase in Chinese consumers’ demand for Aus-
tralian imported food products, and points to the
opportunities ahead for Australian businesses will-
ing to move into ecommerce.
Milk powder, fresh milk, Blackmore’s vitamins
and meat are some of the hot items for Chinese
imports. According to Greenberg: “…not nearly
enough retailers are harnessing the flat world.
Australia’s advantage is precisely the types of
products that well-heeled Chinese consumers are
now looking for.”
Of smaller Australian e-retailers, Greenberg points
to Black Milk, a fashion apparel company who
specialize in quirky designs from iconic shows like
Dr Who and Star Wars.
“Australian fashion retailing is doing well in China.
You’ve got a business in South Australia selling
Emu Oil; others selling merino wool, UGG boots,
and even lavender bears from Tasmania. There’s
no question in my mind that there are literally
hundreds of mumprenteneurs utilizing Chinese
e-commerce. We’re really seeing that; we’ve got
proof points now”.
Greenberg advises Australian businesses: “If I
was thinking of getting into business again, I
would find products that are unique, aspirational
and have a point of difference. The Chinese are
looking for unique and hand made products and
there are plenty of margins in that range”.
The challenge for Australian businesses is to un-
derstand Chinese consumer needs and online
shopping channels. Chinese consumers are be-
coming accustomed to fast service and delivery
via their mobile device apps.
Location-based service and delivery is a
fast-growing online sector and Chinese consum-
ers, particularly the younger, female generations
are willing to pay for the convenience with service
location apps like 58 DAO JIA providing house-
keeping, child-rearing and beauty services to their
homes.
Chinese women will increasingly need to out-
source traditionally female roles, as their rising
education levels and participation in the workforce
means they are time-poor and yet enjoy the
convenience of online shopping. According to
the Voice of China, Beijing and Shanghai-based
Chinese women aged 30-39 are now the driving
force of online shopping.
Engaging with
China’s savvy
e-commerce spenders By ELIZABETH WINKELMAN
China is entering the “she-economy” with a grow-
ing need for health and well-being.
With 850 million monthly active users, social
media has become the most important function
of mobile phones in China. And WeChat is the
most popular app in China with more than 650
million monthly users, globally. As ubiquitous as
Facebook, Wechat allows users to create shops
and sell within their social circles or by creating an
official account. Thus the rise of entrepreneurial
Chinese students purchasing tins of infant formula
in Australia and on-selling via their Wechat circles
in China.
Tencent, the owner of Wechat is speeding up their
expansion of Wechat wallet overseas. Wechat’s
wallet function links debit and credit cards allow-
ing its users to pay via storing money or transfer-
ring money to other Wechat users. Wechat users
are now able to pay for electricity, food, airtime or
wherever a retailer has a QR code that supports
the SnapScan mobile payment platform.
Users can now scan their Wechat QR codes in Chi-
na at shops, to pay for taxi fares and many other
services. Both Alipay and Wechat wallets have
promoted their services in hot Chinese tourist
destinations like Japan and Korea, allowing their
users to pay for goods via their apps. WeChat
Wallet is now available to be used in stores in 20
countries.
Yet many Australian retailers are still being put off
due to the difficulties of market entry. “With the
introduction of Alibaba’s Alipay wallet and the ad-
vancement of many forms of online payment sys-
tems” Greenberg says, “have been a real game
changer”.
“I would argue that factory to the customer’s front
door is the new reality. The discount market is not
doing very well. There is a new sensibility in Austra-
lia that customers want quality and brand”.

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E Commerce article EW

  • 1. 26 27| BUSINESS-CIRCLE.COM.AU BUSINESS-CIRCLE.COM.AU | 中国热点 中国热点 CHINA HOT TOPICS CHINA HOT TOPICS During the Spring Festival and the start of the Year of the Monkey, a news item regarding Chi- nese e-commerce suppliers became a talking point in Australia’s business community. The news story ‘Tragedy! Classic Australian brand opens store on Tmall and loses 25,000 Australian dollars!’ shocked readers: C Stuart is a classic Australian brand of no small size. For the last few decades it has concen- trated on retail baby products. Among its well- known brands are Merino Baby, Big Softies and Snugtime. At the beginning of 2014, C Stuart partnered with a Chinese supplier to sell Merino Baby products on Tmall. Although sales for the initial period did not meet expectations, the response from consumers was very positive. Disaster struck at the end of 2015. C Stuart’s Chinese partner found that several hundred fake orders had suddenly appeared in the store, which after confirmation would then be cancelled within a few minutes. Reasons for the cancellation of the orders included insufficient stock or that the products could not be delivered on time. However, the CEO of C Stuart, Paul, declared that plenty of stock was available. He believes that this was a deliberately planned attack and that the attackers had a deep understanding of Tmall’s system. Before opening a store, according to Tmall’s re- quirements, C Stuart had to pay Tmall a 100,000 RMB security deposit - valued at the time at $25,000 Australian dollars - to serve as compen- sation where customers possibly might have their orders cancelled due to the seller having insuf- ficient stock. After several hundred orders had been cancelled, C Stuart’s bond was ‘appropriated’ by Tmall. The investigation into the incident is still ongoing, but Tmall’s response to the issue has been rela- tively muted. Paul has already made the decision to close their Tmall store, with the $25,000 Aus- tralian deposit never to be seen again. Paul has the following recommendation for oth- er Australian companies currently considering whether to sell their goods to the Chinese mar- ket through a third party e-commerce platform: ‘Unless there is research showing they will be able to sell the products into the Chinese mar- ket, do not go into the Chinese market. And if you are thinking of providing Tmall with a se- curity deposit, think about our experience, and judge whether the risk is worth it.’ A modern and successful business tested the waters on the world’s largest e-commerce plat- form in a huge 1.4 billion consumer market, with the result that it was sent home packing. This provides fellow businesses with a caution- ary lesson. We feel very sad for C Stuart about their expe- rience in China. But Paul’s comments should not be considered as the final word on the matter! In the last few years, e-commerce has taken over China. In 2009 Alibaba launched its first ‘Singles’ Day’ event and the amount traded on that single day for today’s Tmall, (formerly Taobao Mall), was 52 million Yuan; in 2010 this jumped to 936 million; in 2011, Taobao Mall and Taobao launched a joint promotion with transactions reaching 5.2 billion; in 2012, the total amount for all Tmall and Taobao transac- tions broke through 19.1 billion; in 2013 it was 36.2 billion; in 2014 it was 57.1 billion; in 2015 Singles’ Day - and only for Alibaba’s platform Tmall - reached 91.217 billion Yuan. All this in only 7 years. It’s a fairytale! A fairytale that happened in China! The visage of the main architect of this fairytale and the boss of Alibaba, Ma Yun, has already come to represent the image of a God of Wealth and master businessman - one who is held in awe and respected by e-commerce suppliers. In 2015, there were over 300 million consumers in China participating in internet shopping; total shopping expenditure reached 500 billion Austra- lian dollars with a 50% increase year-on-year. This year, China will come to have the first e-commerce retail market valued at 1 trillion US dollars. By 2018 at the latest, the Chinese e-commerce domain will have become the largest online goods importing market in the world. It seems to really validate the saying: do e-commerce or don’t do business at all! But there have certainly also been those who have had a less than supercharged e-commerce experience - C Stuart, for example. Accompanying this news is the fact that Aus- tralian products have a huge and extremely enviable market in China; countless Australian purchasing agents are throwing themselves into the buying process on a grand scale; with one masterstroke after another by large e-commerce suppliers and brands in Australia and China are jumping on board too. A Massive Market The Melamine Incident was a key turning point. Beginning with baby infant formula, infant prod- ucts, and functional natural healthcare products, cosmetics, even to meat, crayfish, abalone, eggs, and seasonal fruits, the enthusiasm the Chinese consumers now have towards Austra- lian products has become a genie that cannot be put back in its bottle. One of Melbourne’s freight companies has revealed that the amount of Australian baby infant formula transported every week to China in 2015 was almost always at least 20 tonnes. This quickly created an Australian ‘infant for- mula famine’, and after inciting complaints from many Australian mothers, in the year just passed, Chinese consumers and their purchas- ing agents in Australia have now cast their eyes towards Australian fresh food products. A few rounds later and Australians now find them- selves unable to buy Tasmanian cherries. Even branded biscuits one day may be available to all Australians but might be out of stock on the next. And, of course, there’s Blackmores and ships-worth of Penfolds currently arriving on Chinese shores. In 2013, the total value of agricultural products exported from Australia to China was around 9 billion Australian dollars, more than that of any other country, and this has continued to grow in the following two years. The Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) has forecast that the pro- portion of global growth attributable to China in demand for agricultural products will get to 43% in 2050. At that time, half of all increased demand for Australian agricultural products will come from China. But there is something else that has got Austra- lian companies even more excited – over 80% of China’s customers for Australian products were born in or after the 1980s. That means that for the Australian products now making their mark in China, their attributes and characteristics have had a decisive impact on their main body of con- sumers, and this is the very same body of con- sumers that today, and also tomorrow, constitutes the backbone of China’s population and those with the greatest purchasing power! Observers in this space have seen the business opportunities available. Hence there is a con- stant dance of investment and acquisition now unfolding between China and Australia focused around popular Australian products. Dominat- ing the field is Biostime International Holdings Limited, a Hong Kong stock exchange listed company valued at 1.67 billion, that bought well-known Australian healthcare brand Swisse. They did not become shareholders, they did not form a partnership - they bought it outright! The Amazing Purchasing Agents ‘daigou’ is not a word officially used in the En- glish lexicon, nonetheless the Australian public is very familiar with the concept. The vastness of the Chinese consumer land- scape begins with individual purchasing agents – ‘daigou’. This kind of business model can not only enable Chinese-based consumers to buy top quality products at relatively low prices, they can also provide purchasing agent com- panies with quite ample returns, and once it emerged, this model took off in an extremely short period of time, and even today it is still the only pathway by which most Chinese con- sumers purchase their loved Australian prod- ucts. In the last ten years, mass purchasing by daigou has become significant in Australia. The buyers have also become honoured customers of many Australian businesses as well as a thorn in the flesh of many an Australian housewife. Blackmores has revealed that local purchasing agents have increased their yearly turnover by about 65 million dollars. Bellamy’s also estimates that as much as 40% of their baby infant formula last year was sold to China. During this time, total retail sales from third party e-commerce plat- forms reached 27 million dollars in six months, being nearly twice the figure for infant formula exported to and retailed in China through official company channels. Bellamy’s has already opened its own flagship store on Tmall. In 2015, the scale of transactions in the Chinese overseas daigou market reached close to 300 billion RMB. On Taobao there are over 420,000 stores engaging in daigou operations, but it is more in people’s WeChat friendship circles that one can find vast numbers of daigou. There are 4,670 Australian agent businesses promoting Australian products on Chinese websites. On Taobao, there are nearly 900,000 Australian products listed for sale. The first Australian daigou general meeting took place in Melbourne in 2015 and some migrant in- vestors from China started to get involved in the purchasing agent scene. It would be impossible not to say that the blueprint of the daigou industry on display via that meeting was not impressive. Embrace the Era of Chinese-Australian E-Commerce!
  • 2. 28 29| BUSINESS-CIRCLE.COM.AU BUSINESS-CIRCLE.COM.AU | 中国热点 中国热点 CHINA HOT TOPICS CHINA HOT TOPICS There are organizations forecasting that, with the exception of some terrible event, it is a foregone conclusion that the scale of the Chi- nese overseas daigou market will break through the 1 trillion Yuan barrier in 2018. China has already unveiled a cross-border e-commerce ‘test city’ policy. Internet giants have followed, with cross border e-commerce platforms based in free trade zones or low-tax zones such as Tmall International, JD Overseas Shopping, NetEase KaoLa Shopping, Suning Overseas Shopping and so on emerging around these opportunities. Vast hoards of daigou have already laid the way for the realisation and de- velopment of cross-border e-commerce. The Big Fish in the Pool On 17 November 2014, China and Australia signed a free trade agreement and in the next four to eight years the vast majority of products exported to China from Australia will eventu- ally be entirely tariff free. This is an extremely advantageous situation for Chinese-Australian cross-border e-commerce suppliers. Sensing opportunity, Alibaba quickly announced on the following day, with its more than 800 mil- lion registered users and its subsidiary company Alipay Australia set up in Sydney doing an aver- age of 80 million transactions every day, that it is going to be working with local companies pro- moting development of its operations in Australia locally, providing tailored cross border e-com- merce solutions to grow the Chinese market and promote cross-border e-commerce between the two countries. At the same time, Alipay Australia began partnering with Australia Post selling, dis- tributing and promoting Alipay Purchase Cards at 4,400 retailers for Australian consumers to use online at Tmall and Taobao. Soon after, the Tao- bao Australia Pavilion was released, providing a one-stop shop for e-commerce services ranging from product selection, to logistics, from customs to marketing and receivables, providing Australian food products and agricultural byproducts to Chi- nese consumers. It was 2015 that exemplified the numbers and dominant position of cross border e-commerce suppliers. The big fish from each industry started to gradually take control of the Australian scene. On 15 April 2015, JD Global Shopping formally went online, where consumers could select and buy high-quality imported and genuine prod- ucts from countries like Australia at discounted prices and through quick and flexible channels, receive a high quality, one-stop shop, overseas purchasing experience. On 29 June, JD Mall held an opening ceremony in Melbourne for its ‘JD Worldwide Australian Business Forum’ and ‘JD Worldwide Shopping Australia Mall’. At the meeting, JD announced three important points of cooperation: firstly, that they had concluded a strategic partnership with Australia Post in the areas of e-commerce and logistics, that both parties would offer product delivery and retrieval services in Aus- tralia and in China, and they unveiled strategic partnerships in many areas such as Australian and overseas storage, sea and air transporta- tion, all-region direct postage for small parcels from Australia to China; secondly, that they had concluded a strategic partnership with Treasury Wine Estates, taking hold of a famous Australian wine brand in their palm in one stroke, and this implies that more than 80 famous wine brands under the Treasury Wine Estates banner will be relying on JD to enter the Chinese market; thirdly, that they have initiated a Chinese-Aus- tralian era of e-commerce together with Aus- trade, Australian Chamber of Commerce and Industry and Australia Post. In July, JD spent 20 million Australian dollars to become Devondale and its milk powder’s sixth largest shareholder! On 24 June, Alibaba’s Juhuasuan.com and Tmall International started a joint ‘global village’ for- mat. Juhuasuan announced that it had initiated a comprehensive partnership process with the embassies of 20 countries, and it is hoped that more special overseas products might be sold on Juhuasuan for the first time. Industry insiders predict that China’s two Inter- net purchasing giants, Alibaba and JD, will enter the Australian market in 2016 with real shop- fronts supported by Internet stores. This will change the way Australians make purchases, and even their lifestyles. Australia in Motion It takes two to tango. Many of Australia’s well-known brands are fo- cused on retailing to their own Australian mar- ket and enormous interest from the Chinese market has caused an explosion in sales leaving some brands at a loss about what to do. Fre- quent problems such as stock shortages and insufficient capital, management, production capacity and productivity and so on have fol- lowed. But some have responded very fast As recently as the beginning of the year, one of Australia’s largest e-commerce pharmacy suppliers - Pharmacy Online - had already started entering the Chinese market, initiat- ing direct-to-China postage services with their Chinese website being formally launched on 2 February! Chinese consumers could cross lan- guage, region, payment and other such barriers to easily purchase natural organic nutritional and healthcare products, skincare products, and mother and infant products from Australia. In June, former Australian Prime Minister Kevin Rudd’s daughter, Jessica, entered the ‘Tmart Mall’, exclusively selling local Australian prod- ucts. In October, she moved to JD where she opened a flagship store, mainly focusing on selling Australian infant and children products. Business boomed over the next several months. With plenty to be exuberant about, Jessica Rudd recommends that Australian companies ought to take hold of this business opportunity. In September, Australia’s largest discount phar- macy chain, dubbed ‘heaven for Australian pur- chasing agents’ - Chemist Warehouse - signed an exclusive strategic cooperative agreement with Tmall International. In November they en- tered Tmall selling Australian healthcare, skin- care and pharmaceutical products to Chinese consumers at discounted prices. Before this, retail chain Metcash had also regis- tered on a Chinese e-commerce platform. Over the last year, Australia’s number one healthcare products company, Blackmores, saw their sales volumes on China’s e-commerce platforms increase exponentially, and they have been entering into partnerships with China’s main e-commerce suppliers. Due to their ex- ceptional performance in the Chinese market, Blackmores’ Australian share price jumped to 100 Australian dollars per share. PharmaCare’s e-commerce sales in China have already developed from their previous daigou method to a team-orientated company business model; they participated in both Singles’ Day (Double 11) and ‘Double 12’ events in China. In November 2015, the RMB joined the SDR, which has been extremely advantageous for the Chinese-Australian e-commerce trade. To have cross-border e-commerce transactions calculat- ed in RMB has reduced foreign exchange risks and costs, raised confidence between Australian companies and China towards trade, and is certain to increase significantly the volume of transactions. On 23 December 2015, Australian supermarket chain Woolworths entered a partnership with e-commerce supplier eCargo, setting up an overseas flagship store in Tmall International with four special domains focusing on healthcare products, food, infants and skincare. The main focus is on products like milk powder, collagen, fish oils, cereals and skincare products, cov- ering more than 80 varieties of products from many brands including Swisse, Blackmores, Red Wing, G&M, Kids Smart and so on. In terms of logistics and post-sale services, Woolworths has adopted a direct postage model, sending out goods directly from its Australian warehouses and has also partnered with Everfast Worldwide Express. At the start of 2016, Australia Post formally unveiled the ‘Australian Pavilion’ with Alibaba’s 1688, providing an online platform for Austra- lian companies selling large quantities of prod- ucts to China and attracting Chinese importers to buy Australian products at discounted prices. At the moment, there are more than 100 mil- lion registered users on this platform. Australia Post’s Managing Director and CEO Ahmed Fa- hour has stated that China and Australia have entered a free trade era constituting a historical milestone, and this is an optimal time for Aus- tralian companies to enter China’s flourishing e-commerce area. E-commerce suppliers have said that the last ten years have been a ‘golden decade’ for the development of China’s domestic e-commerce trade. They believe that the next ten years will be the ‘diamond decade’ for cross-border e-commerce. China’s Singles’ Day and e-commerce explosion has informed us that today’s Chinese people have incredible purchasing power. But if we only look to China’s purchasing power and hastily enter the field - particularly in joining third par- ty e-commerce platforms - from being in a for- eign market, being completely unable to control sales, or by being forced to accept one-sided rules or even ridiculous and overreaching claus- es on foreign platforms, to which is added a deficit in understanding for the habits and psy- chology of consumers in a foreign country and society’s general trust level, one may possibly endure a harsh baptism of fire as an inevitable outcome. The fate of C Stuart in China should also cause some reflection on the part of China’s e-com- merce suppliers. Being e-commerce suppliers who control the world’s largest e-commerce market, they should be particularly observant of fundamental business norms. Improvements in business standards grounded on win-win prin- ciples guarantees the quality of products based on a foundation of genuineness and on the in- tegrity of the platform, and this is essential for protecting the healthy development of China’s e-commerce industry. Should consumer dis- putes continue to skyrocket; should ‘counterfeit goods’, fake sales reports, ‘negative feedback’, ‘unfair refund charges’, and such other key words jumbled about in Chinese e-commerce circles continue to exist; should hidden rules and ‘mysterious practices’ continue to run rife; should the ‘return my money QQ hoards’ con- tinue to grow; should the platform staff ‘honchos’ continue to be unreasonable, dominating, and capricious, then even if your platform were to grow and your logistics services become more advanced, it will still be hard to avoid being shunned overseas brands or even outright re- jection. The world is flat. And the idea of using asymmetric information and such other factors to gain an advantage belongs to a historical era that is soon coming to a close! As a completely new business ecosystem of the Internet age, the revolution in cross-national commerce and operational models has arrived. Irrespective of whether you proceed through a distributor or wait for purchasing agents to clear the shelves; irrespective of whether you’re relying on the help of a third party platform or wanting to enter directly as a brand, when it comes to China and Australia do e-commerce or don’t do business at all! ‘Be there or be square’. No one can stop it no one can resist! The Chinese-Australian e-commerce era has arrived. Apart from embracing it, there’s nothing you can do!
  • 3. 30 31| BUSINESS-CIRCLE.COM.AU BUSINESS-CIRCLE.COM.AU | 澳中贸易 澳中贸易 AUSTRALIA-CHINA TRADE AUSTRALIA-CHINA TRADE Online China consumer spending is expected to reach $6.18 trillion sometime this year, up from $2.03 trillion in 2010. The Chinese e-commerce consumer market is growing at nearly 50 per cent each year. There are now more than 668 million Internet-connected consumers and more than 596 million mobile Internet users. For Australian businesses, Chinese consumers’ emerging online spending behaviour presents a rare opportunity to sell directly into the largest growing e-commerce market in the world. Paul Greenberg, Chairman of the National Online Retailers Association and founder of Deals Direct says: “The e-commerce opportunity for Austra- lian retailers in China is the new El Dorado. “There’s been an explosion of China e-commerce sites over the last decade. Popular online shop- ping sites such as Tao Bao, Yihaodian, Jing Dong, TMall and Suning are delivering shopping pack- ages to consumers over China in ever-increasing numbers; bypassing traffic with deliveries, car- rying their loads in compactly designed electric scooters.” Outside apartment buildings in many Chinese cities, one can see these logistics vehicles on two wheels gather together as they disperse packages to local residents. This highly competitive busi- ness has as its leaders Jingdong and the Aliba- ba-owned T Mall. According to Wang Xiao, IT Director at Simba Innovation, “What gives Jingdong a competitive advantage is its sophisticated logistics and ware- house network near many major Chinese cities. Jingdong promises a same day delivery, a prom- ise on which they are able to deliver.” Wang adds: “The customers also get a great, convenient experience”. TMall, backed by the Alibaba-group, is high-pro- file, marketed as a huge online shopping mall with many different products where designer brand retailers license third-parties to sell their wares. Shoppers are then assured of the authenticity of the product, essential in China where “fake” goods of all description are easy to come by. Australian supermarkets chains IGA and Wool- worths have taken note of these consumer-buying trends and now distribute their products directly into China via e-commerce sites. Woolworths recently struck a deal with TMall Global, the in- ternational arm of TMall. Through this channel, Woolworths are focussing on specialized products such as vitamins, milk powder as well as Wool- worth’s own branded products. Similarly, Metcash, Australia’s largest food and liquor wholesaler and the company who own IGA, Cellarbrations and Bottle-O, launched their own shop front on TMall Global promoting Australian products. TMall Global is much smaller than TMall, with only 10-15% of the overall consumer traffic. Interestingly, it is the high-wealth Chi- nese customers who are purchasing from this site in order to find genuine imported products. Chinese consumers have an insatiable appetite for all things Australian; products labelled “made in Australia” with the government-licensed kangaroo logo have become strong identifiers for Chinese shoppers. Combine this with Australia’s reputation for nat- ural and clean food products, natural plant and animal body beauty and health products and it’s easy to see why Australian products resonate strongly with the Chinese as a consequence of China’s plethora of on-going severe food safety and air pollution issues. Australia’s reputation has led to an exponential increase in Chinese consumers’ demand for Aus- tralian imported food products, and points to the opportunities ahead for Australian businesses will- ing to move into ecommerce. Milk powder, fresh milk, Blackmore’s vitamins and meat are some of the hot items for Chinese imports. According to Greenberg: “…not nearly enough retailers are harnessing the flat world. Australia’s advantage is precisely the types of products that well-heeled Chinese consumers are now looking for.” Of smaller Australian e-retailers, Greenberg points to Black Milk, a fashion apparel company who specialize in quirky designs from iconic shows like Dr Who and Star Wars. “Australian fashion retailing is doing well in China. You’ve got a business in South Australia selling Emu Oil; others selling merino wool, UGG boots, and even lavender bears from Tasmania. There’s no question in my mind that there are literally hundreds of mumprenteneurs utilizing Chinese e-commerce. We’re really seeing that; we’ve got proof points now”. Greenberg advises Australian businesses: “If I was thinking of getting into business again, I would find products that are unique, aspirational and have a point of difference. The Chinese are looking for unique and hand made products and there are plenty of margins in that range”. The challenge for Australian businesses is to un- derstand Chinese consumer needs and online shopping channels. Chinese consumers are be- coming accustomed to fast service and delivery via their mobile device apps. Location-based service and delivery is a fast-growing online sector and Chinese consum- ers, particularly the younger, female generations are willing to pay for the convenience with service location apps like 58 DAO JIA providing house- keeping, child-rearing and beauty services to their homes. Chinese women will increasingly need to out- source traditionally female roles, as their rising education levels and participation in the workforce means they are time-poor and yet enjoy the convenience of online shopping. According to the Voice of China, Beijing and Shanghai-based Chinese women aged 30-39 are now the driving force of online shopping. Engaging with China’s savvy e-commerce spenders By ELIZABETH WINKELMAN China is entering the “she-economy” with a grow- ing need for health and well-being. With 850 million monthly active users, social media has become the most important function of mobile phones in China. And WeChat is the most popular app in China with more than 650 million monthly users, globally. As ubiquitous as Facebook, Wechat allows users to create shops and sell within their social circles or by creating an official account. Thus the rise of entrepreneurial Chinese students purchasing tins of infant formula in Australia and on-selling via their Wechat circles in China. Tencent, the owner of Wechat is speeding up their expansion of Wechat wallet overseas. Wechat’s wallet function links debit and credit cards allow- ing its users to pay via storing money or transfer- ring money to other Wechat users. Wechat users are now able to pay for electricity, food, airtime or wherever a retailer has a QR code that supports the SnapScan mobile payment platform. Users can now scan their Wechat QR codes in Chi- na at shops, to pay for taxi fares and many other services. Both Alipay and Wechat wallets have promoted their services in hot Chinese tourist destinations like Japan and Korea, allowing their users to pay for goods via their apps. WeChat Wallet is now available to be used in stores in 20 countries. Yet many Australian retailers are still being put off due to the difficulties of market entry. “With the introduction of Alibaba’s Alipay wallet and the ad- vancement of many forms of online payment sys- tems” Greenberg says, “have been a real game changer”. “I would argue that factory to the customer’s front door is the new reality. The discount market is not doing very well. There is a new sensibility in Austra- lia that customers want quality and brand”.