build, operate, and profit from a cross-border€¦ · build, operate, and profit from a...
TRANSCRIPT
A project financed by the European Union
Build, Operate, and Profit from a Cross-Border
WeChat Shop in ChinaDecember 14th 2018, Riga
Get Ready for China!
The EU SME Centre is an EU Commission funded project which helps EU SMEs prepare to do business in China by
providing them with a range of information, advice, training and support services.
The Centre is implemented by a consortium of six partners and was established in October 2010. It successfully
completed its first phase in July 2014 and has now entered its second phase which will run until July 2018.
2
Speaker
3
Felim Meade:
Co- Founder of Emerald Green
Baby
Co- Founder of Emerald Green
Consulting
Programme advisor to EUSME
Cross-Border WeChat Shop
A proven way to sell directly to Chinese consumers
CBEC :The future is already here!
CBEC :The future is already here!
CBEC :The future is already here!
CCross Border e-commerce: WeChatro
12/10/201830/11/109
Agenda
1. Background
2. Advantages for EU SMEs
3. Real examples to get familiar with the concept
4. How does it work?
5. The blocks you need
6. The pros and cons
7. The Missing Link: Digital Marketing
8. Financials
Setting up a cross-border shop in WeChat
Background
12/10/201830/11/10
11
Background
Market Key Factors Policy Key Factors
12/10/201830/11/10
12
• CBEC is booming
• WeChat’s unparalleled
success in China
• A more discerning middle
class
• Pilot Free-Trade Zones
• Consumption as the lever
to lift China’s economy
• Reaction to the effects of
inefficient General Trade
Background
Market Key Factors Policy Key Factors
12/10/201830/11/10
13
• Little variety of foreign
assortment on sale
• Foreign products are
expensive
• Cashless is king
• Making China’s CIQ part of
the solution
• Daigou impacts Chinese
government tax collection
• Laisser-faire, little (initial)
regulations
Background
Market Key Factors Policy Key Factors
12/10/201830/11/10
14
• Smartphone quick
adoption• 4G/5G
12/10/201830/11/1015
A more discerning Chinese consumer
interacts with the world through the cell
phone and a unique home screen,
Agenda
✓Background
1. Advantages for EU SMEs
2. Real examples to get familiar with the concept
3. How does it work?
4. The blocks you need
5. The pros and cons
6. The Missing Link: Digital Marketing
7. Financials
Setting up a cross-border shop in WeChat
The AdvantagesCross-Border over General Trade
• No need of an importer in China
or setting up a legal entity
• Quick process to authorize the
imports of the product
• Brand’s gross margin is much
higher [= Shelf Price – Taxes – CIF Cost]
• Consumer’s data in the hands of
the brand, who is purchasing,
when, what, why
• It needs an importer in China
(long, costly scouting process)
• Cumbersome process, to test
your product category isn’t easy
• Brand’s gross margin is much
lower [= EXW Price – Product Cost]
• Consumer’s data is the hands of
importer, distributor, or Chinese
e-commerce platform
Cross-Border Trade General Trade
12/10/201830/11/10
17
There are more….→
• The brand can step down the
process any time
• The brand controls and decides
over the cost of promotion and
knows it beforehand
• And it can actually measure the
return on investment (ROI)
almost in real-time
• It can be deployed China-wide
• The brand is bound by the time
agreement with the importer
• Importers use to claim upfront
from the brand ludicrous
promotional expenses
• Importers’ feedback on
promotional expenses ROI uses
to be poor or non-existent
• Only the area of influence of
importer or its network
Cross-Border Trade General Trade
12/10/201830/11/10
18
Still more advantages, →
The AdvantagesCross-Border over General Trade
• It can be integrated with O2O
operations, your brand displayed
and sold in brick-and-mortar
stores
• It provides your company with
real consumers’ data and
channel knowledge, a priceless
asset, very costly to achieve by
other means
• Once you operate cross-border
is much easier to find an importer
to import via General Trade. You
have a proof that your brand is
selling in China
• Having your brand in an off-line
store is expensive, requires
paying listing fees, and inherent
difficult negotiations
• Consumer’s data and sales
channels’ performance is in the
hands of the importer. It is not
unusual the EU brand ignores
where the brand is sold
• General Trade importers have
little interest in developing the
market for the brand. They
demand a proof that the market
demands the brand
Cross-Border Trade General Trade
19
Agenda
✓Background
✓Advantages for EU SMEs
1. Real examples to get familiar with the concept
2. How does it work?
3. The blocks you need
4. The pros and cons
5. The Missing Link: Digital Marketing
6. Financials
Setting up a cross-border shop in WeChat
A couple of examples to get familiar with the
concept
Two Real CasesCross-border E-commerce WeChat Shop
Emerald Green Baby (Ireland) Nihao Hygge (Denmark)
22
Two Real CasesCross-border E-commerce WeChat Shop
Emerald Green Baby (Ireland) Nihao Hygge (Denmark)
23
Two Real CasesCross-border E-commerce WeChat Shop
Emerald Green Baby (Ireland) Nihao Hygge (Denmark)
24
Emerald Green is in
the business of
mother-care, infant
formula, and baby-
care.
With products stored
in an off-shore
warehouse at a Free
Trade Zone, the
company sells online
China-wide through its
WeChat shop. It also
sells O2O via
agreements with
regional chains of
O2O stores.
It plans to move to off-
line shops importing
via general trade in the
future. It uses all sort
of digital marketing
techniques, such as
influencers (KOL), live
streaming, or
broadcasting from
Ireland
Nihao Hygge sells the
Nordic concept of
hygge. Products that
transmit a quality of
cosiness and
comfortable
conviviality
engendering a feeling
of contentment or
well-being.
The Nordic design is
present in each of
products of
assortment.
Nihao Hygge is
currently selling
cross-border via its
WeChat shop
shipping directly from
Denmark.
The company is
exploring to shorten
the delivery time by
using a bonded
warehouse at a Free
Trade Zone
Two Real CasesCross-border E-commerce WeChat Shop
Emerald Green Baby (Ireland)
25
Please,
scan the QR-Code
Agenda
✓Background
✓Advantages for EU SMEs
✓Real examples to get familiar with the concept
1. How does it work?
2. The blocks you need
3. The pros and cons
4. The Missing Link: Digital Marketing
5. Financials
Setting up a cross-border shop in WeChat
How Does it Work?
The Upstream Flow of Goods
The Upstream Flow of Goods
The Downstream Flow of Payments
[or directly to gateway]
Agenda
✓Background
✓Advantages for EU SMEs
✓Real examples to get familiar with the concept
✓How does it work?
1. The blocks you need
2. The pros and cons
3. The Missing Link: Digital Marketing
4. Financials
Setting up a cross-border shop in WeChat
The Blocks You Need
The Blocks You Need
Register your Trademark
You need to demonstrate
you have the rights over
the trademark. Also the
products at store. Selling
in China without having
registered the trademark is
a huge mistake business
wise
E.g
1
The Blocks You Need
WeChat Account Set Up
An Official Account (OA)
is mandatory. This is how
Tencent – owner of
WeChat – identifies and
registers the bona fide
data of an account owner
2
The Blocks You Need
WeChat SHOP Set Up
The mobile website –
the shop itself, fully
built within WeChat – is
associated with the
WeChat OA. Your
potential client can use
the smartphone to
browse products in
your WeChat store.
Once there, they are
only a click away from
making a purchase
3
The Blocks You Need
Register Your Products
China Inspection and Quarantine
CIQ4
Free Trade ZoneInspection & Quarantine
CIQ
Products
entering China
require CIQ
approval.
Registering at
CIQ in the Free
Trade Zone is
necessary
before start
operations
The Blocks You Need
Select a Logistics Operator
Integrate the Shop with Logistics5
Free Trade Zone
Products
entering China
require CIQ
approval.
Registering at
CIQ in the Free
Trade Zone is
necessary
before start
operations
The Blocks You Need
Integrate a Payment
Method
WeChat Pay/Union Pay
WeChat Pay is the
preferred mobile payment
method within WeChat.
The Chinese consumers
take for granted they can
pay via WePay
6
The Blocks You Need
Open a Bank Account
in China
A bank account may be
needed to receive
consumer payments,
exchange currency,
and wire money to the
EU. Not strictly needed
if the WeChat Shop
payment method
(WePay) is directly
connected to a
Payment Gateway
7
The Blocks You Need
Integrate with the
Payment Gateway
To do the clearing or
Renminbi into EURO
and receive the
payment into your bank
account in Europe
8
The Blocks You Need
It’s DONE
Agenda
✓Background
✓Advantages for EU SMEs
✓Real examples to get familiar with the concept
✓How does it work?
✓The blocks you need
1. The pros and cons
2. The Missing Link: Digital Marketing
3. Financials
Setting up a cross-border shop in WeChat
The Pros and Cons
The pros and cons
Pros Cons
12/10/201830/11/10
44
• Easier access to the market
• Easier withdrawal from the market
• Costs control
• Real operational test with Chinese
consumers
• Precious data collection
• The brand owns all the supply
chain up to the consumer
• The brand has a real say in pricing
• The brand owns image and
promotion
• It helps to enter off-line/General
Trade
• The Free Trade Zone is a trial
project subject to change
• The list of products that can be
traded via CBEC is not universal
• It is only Business-to-Consumer
• There is an upper limit to the
money a consumer can spend,
per year, per single item
• Brand needs commitment and
budget to develop a digital
marketing strategy
• CBEC regulations have ups and
downs
Agenda
✓Background
✓Advantages for EU SMEs
✓Real examples to get familiar with the concept
✓How does it work?
✓The blocks you need
✓The pros and cons
1. The Missing Link: Digital Marketing
2. Financials
Setting up a cross-border shop in WeChat
The Missing Link
Digital Marketing
Digital Marketing
t
Digital Marketing
t
Digital Marketing
t
Digital Marketing
t
12/10/201830/11/1051
But first, a bonus, potential positive effects of CBEC WeChat shop
CBEC O2O
Taiyuan (3rd tier) Mother Care Stores
• 195 stores
• Cross-Border Aisles
• 10,000 DAU (daily active users)
• First O2O promotion in Women’s
Day launched in 28 stores
• Store Chain live-stream once a
week (internal live stream channel)
• 2 million viewers
• Regional reach (Shanxi)
• Test Women’s Day in 28 stores,
near 1,000 orders in 24 hours
• July 2018, launch for all 195
stores
12/10/201830/11/1052
But first, a bonus, potential positive effects of CBEC WeChat shop
CBEC O2O
Taiyuan (3rd tier) Mother Care Stores
• 195 stores
• Cross-Border Aisles
• 10,000 DAU
• First O2O promotion in Women’s
Day launched in 28 stores
• Store Chain live-stream once a
week (internal live stream channel)
• 2 million viewers
• Regional reach (Shanxi)
• Test Women’s Day in 28 stores,
near 1,000 orders in 24 hours
(equivalent to 100,000 year)
• July 2018, launch for all 195
stores
12/10/201830/11/1053
There’s more, potential positive effects on General Trade E-Commerce
General Trade E-Commerce
小红书 XiaoHongshu
• 70 million registered users
• DAU 6 million
• 80% of users females, born 1990-
1995
Digital Marketing
Guideline Online Training
Digital MarketingTerms of Reference
Digital MarketingTerms of Reference
Financials
Category
Toddlers’ toys
✓ Brand registered
✓ B2C
✓ Price < 2,000 CNY
✓ CBEC allowed
✓ High demand foreign
✓ Low-end domestic
Price Europe 24 €
Price China 32 € (CNY 249)
Uplift +33% ( 25% cheaper in EU)
Very good package, I even keep the box;
very cute bunny I like it very much; at
beginning my baby didn’t get used to hold it,
but after few times hope she will gradually
love it.
Financials
(CNY 249)
Fits within average of value per order. Item falls under
unplanned decision category. Purchase is triggered by a well
crafted promotional message
Financials
• Price Europe 24 €
• Margin* at Retail 40%
9.6 €
• Profit* Toy Ind. 6%
1.5 €
• Production Cost 24-9.6-1.5 = 50% Sales
12.9 €
* EU Toy Industry Stats
12-month cost of a WeChat Shop including all, also KOLs: EUR 5,000/month = 60,000
Breakeven 12-month (0% Profit)
Sales – Production Cost -60,000 EUR = 0
Sales – 0.5*Sales – 60,000 EUR = 0
Sales = 120, 000 EUR = 900,000 CNY
Average Purchase = 600 CNY
Breakeven Units = 1,500/year or 30/week (China Wide)
Agenda
✓Background
✓Advantages for EU SMEs
✓Real examples to get familiar with the concept
✓How does it work?
✓The blocks you need
✓The pros and cons
✓The Missing Link: Digital Marketing
✓Financials
Setting up a cross-border shop in WeChat