Leveraging Cross-Border E-Commerce for B2C Into China With Dominiek Pouwer

This week’s GFA interview series we have Dominiek from TMO Group. I have known him since at least 2012 and he has been at this cross-border e-commerce into China game for the long haul! He was a speaker with me at the Global From Asia Shanghai meetup during the CHAt conference this past September and we were fortunate to use my gear there to record the audio.

I know this is an extremely valuable one – he goes into the various options and thought process for those looking to sell cross-border into China. We have his presentation slides here as well, in PDF form, for you to download

Get the cross-border ecommerce slides here:

√ Tmogroup.asia
√ Dominiek’s linkedin

Today’s podcast is brought to you by Aurelia Pay. I use them for sending money to my Chinese supplier from Hong Kong – it is a cross border payment solution between China, Hong Kong and South East Asia. So when I need to make a payment to a Chinese supplier, I just hop in to place a remittance, pay to their HK bank account, and Aurelia Pay settle RMB within the same business day! Check them out

Thank you Dominiek for sharing! We also are discussing having him involved next year’s Cross Border Summit – everyone please mark down your calendars well in advance – April 20-21, 2018. Already there are some pre and post events too.

Only a few more GFA interview series for 2017 – let’s all make the most of it. And these interviews are really amazing, we do go both ways – into China such as today’s show, as well as export / out of China like we will have next week. Also there is a new initiative we are working on here so stay tuned.

Get the cross-border ecommerce slides here:

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Welcome to the Global From Asia podcast where the daunting process of running an international business is broken down into straight up actionable advice and now your host, Michael Michelini.

Today’s podcast is brought to you by Aureliapay. I use it personally for sending money to my Chinese suppliers from Hong Kong. It’s a cross border payment solution between China, Hong Kong, and Southeast Asia. So, if I need to make a payment to a Chinese supplier, I just hop online to place the remittance, pay to the Aureliapay Hong Kong based big account and Aureliapay will settle RMB within the same business day. So, check them out online at www.aureliapay.com A U R E L I A P A Y .com or check them on their link at our show notes.

Mike: Everybody’s getting over their cyber Monday shopping black Friday shopping, Turkey on Thanksgiving. I had some great hot pot. Thank you Wendy for preparing an amazing Thanksgiving dinner. It’s not about the Turkey, right? It’s about the food and the family and getting people together and being thankful. So I hope you guys are having a thankful day and are enjoying listening to this show and I appreciate you spending the time to figure out how to download podcast. You know people still, I talked who don’t know what the podcast is and we’re almost in 2018, is crazy. But thank you so much for listening at 203 interview shows of Global From Asia. And we’re almost in December, few more weeks actually I’m a little bit early, I can’t announce it just yet but next show we got something interesting coming up for the end of the year here at Global From Asia. Always trying to keep things interesting. So stay tuned, there’s gonna be a year-end 2018 little campaign. Trying to keep you guys interested and getting involved not just listening but taking some action, that’s what should we be doing. This week’s show, I’m pretty excited about, what’s up in Shanghai, we had a GFA meet-up. We had Dominiek Pouwer speaking from TMO group and he specializing in Cross Border E-Commerce into China. It was a very valuable speech and you guys are lucky enough that I brought my gear, i’m a gear head and we recorded this. It’s a live speech that he did and my editor, an amazing guy. This is not the perfect quality because it was clip on microphone in the Shanghai co-working space in China. But I think it’s amazing content and we are trying to get unique stuff out here. The next few episodes we have some amazing content. We’re going Cross Border sometimes in to China, sometimes out from China ‘coz we’re going Global From Asia, global businesses here. You will need a show notes. There’s quite a bit of links on things he’s talking about. You can have them over at www.globalfromasia.com/episode203. And also can download the slides. We’ll have a download link to get the slides so you can enjoy those as well. ‘Coz he discussed some amazing stuff he’s talking about. So without further adieu, let’s tune in to Dominiek.

Dominiek: Thank you very much. First of all, thank you very much Global From Asia for inviting us today here, for this event. Thank you Mike Michellini for inviting us and a little bit about myself. My name is Dominiek Pouwer. I’m from TMO Group, working and living in China for the last 11 years and for 7 years focused in e-commerce as a partner of TMO Group. Just a little bit about TMO Group, we really focused on brand e-commerce solution brand experiences. So e-commerce platforms, websites, WeChat stores, cross border e-commerce websites, link to Customs in China. WeChat stores and also I’m hosting services for clients. So what we wanna talk about today is actually there’s a lot of topics if you start selling cross border import into China and where we. Especially will focus on today is B2C because B2C of course is a big challenge and also there was a lot of questions for a lot of sellers in China. And first of all we would like to talk about what can you sell in China. So which type of products can you sell in China market and which are basically allowed to sell. Second of all we want to talk about the channels in sales. So what are the channels in sales and what are basically the ways to multi-channel in a phase way into the China market. Third of all the strategy and strategy is everything in China. It’s not only about the overall strategy, the product strategy. It’s about your channel strategy but it’s also about the strategy that you adapt in terms of your free trade zone. Where do you post your product? Where do you store your product? And how do you basically focus on logistics. What we don’t want to talk about today because we gonna have a limited presentation and a minimum requirements about the branding the marketing and of course about intellectual property rights. So, key in China is want to start researching if you can sell your product into positive list. The positive list has been introduced in 2014 and basically is giving and telling people which type of products will fall within category to sell cross border. So to sell cross border on a B2C level. From 2014 to 2017 have been a lot of regulations. They also has been a negative list which products are not allowed. And actually up to this moment, it has been a basically a question mark when there would be a new policy on this positive list. What’s interesting maybe would like to scan the QR code we made a tool on the website and you can actually use this our website to check if there’s a product that you have in mind that is actually on the positive list. So one misconception and that’s what we always see come to us and say one of the cross border is that the cross border policy in China when it comes to positive list and selling really in a cross border manner is a B2C thing. It’s not a B2B thing. And the reason why it’s a B2C thing is because there’s a lot of limitations to it. So, choosing your products is all about looking at the value of the product because every order value can only be a maximum of 2,000 RMB and on yearly basis. Every Chinese citizen that always register with Chinese ID can only spent for 20,000 RMB on cross border expense. Another thing is that what we see now is that, yes?

Dominiek: First pacific shipment. If will include the VAT which is like 70% of the China National VAT and that will also be the logistics cost. So the 2,000 includes the whole amount to be lowered than nothing. So once it owns the positive list, there’s a lot of products. Some products actually need pre-approval or pre-filing. If we talking about baby product about milk powder, if we’re talking about food and nutrition, we have a customer from U.S. that wants to sell food and nutrition in China and it took them for example runs 3 months to pre-file this product. There’s always a key thing is once you know that the product is saleable then you also make sure that it has the CFDA approval if that’s applicable. Now let’s look at the channel. I think you know China is always on the e-commerce, its always on the multi-channels strategy. It will never be only selling to one channel over a period of 3 to 5 years. For in China we see, multiple marketplaces of course the big one’s TMO and Yamato which is actually started in 2013 already. So Yamato was one of the first cross border e-commerce because they made a link between Hongqiao Airport and US Market. And they were actually able to do the first cross border e-commerce model. And that of course we have the one’s on the supplier level. So the left side you can see the stores where you can open your own stores. Next one is the supplier level. So you can come in as a supplier but you don’t have full control of pricing and marketing. Next one in verticals. I think verticals are very interesting if you have a product that’s focus on a specific target group. Let’s say baby products, let’s say within foods and fruits. Like you have for example food day in China which is only focus on selling fruits. Then you have the flash sales and most of the time we get feedback from our clients is that flash sales is really like an additional channel. It’s a channel to get you out of stocks, to finish some of your products or the off season products and to sell it via this channel. And then of course, that’s maybe a little bit part that we focus on which is getting more attraction is building your own brand experience. Being more in control of pricing. Being more in control of branding. And also being more in control if you want to introduce loyalty program, so we work on programs which can be of course very interesting. Of course also social commerce and using KOLs, using basically social attraction to have in a very cost effective way using marketing, we’re getting more attraction on getting more users and followers to sell more via online. And looking at the market share now for cross border which doesn’t include brand e-commerce is basically only 40% of the marketplaces where you set up your own store. So where you basically open up your own store and present your product catalogue is actually contributing to cross border. 60% is basically focus on suppliers. So 60% of people doing cross border sales are doing it on a supplier level excluding of course brand e-commerce. A note that I still wanna make is actually where you see TMO being crossed out. So recently maybe over the last 2 to 3 weeks. TMO has been limiting the fact to open TMO global shop and bringing some of the people back that were in Europe and promoting TMO global. And also letting out this people open a China national TMO stores. So, it shows a little bit of trend where TMO really start at the beginning of the year then actually don’t, they are not open anymore to open shops on TMO global.

Dominiek: I mean it’s probably a thing to cost. Because now it is really some high level people and different countries. I know for example, myself. They really hire high level people to promote TMO global. And I don’t think it pick up that smooth. Because at the end of the day there’ not a too much benefit. We have TMO global or we have a TMO store in China.

Dominiek: Let’s say most of the models are also sees that say the second, the third, and the fourth column legal supplier models. But it also depends on of course how many products you want to sell cross border import. Because if you have 1 or 2 products, there’s no reason to open a store because you only have 2 products in that store. So, again it comes about your product strategy, how many products can I have a value that fit within that range. How many products actually are allowed to be so called cross border import and of course does it make sense, the viable concept to sell that on a marketplace.

Dominiek: Thank you very much, I think that’s very valuable week. We actually also, we check in our last week actually if that would be any changed and I think that is sort of is a very vague so I think before they set up the end of 2017 and its good news that it’s not extending in 2018, right. Because, of course you know for sellers they live in quite a lot of insecurities. How can I build my business and does it sustain still in the next year. This is actually no what you see here is, you see a lot of logos and hopefully it’s sort of clear to you guys what it stands for but this is basically the slide in every, emergence I want to start selling and ok, how do I combined all the things that we just talked about products strategy, the channel strategy and finally you know the strategy on which we come on a later stage logistics. That side you can see the organic strategy, the low cost strategy. But don’t miss on the standards. Still this left side will still cost you half a million RMB. So a lot of people think that, let’s start selling in China, you can’t to do it low cost. It will always cost you half a million RMB including marketing cost, including infrastructure, technology, etc. The right strategy is the, sorry? Half a million RMB. 500,000. And if you talked about the right strategy, on the right side, depending on your brand. This is where the big muscle. You come with 1 to 3 million at least and you go into marketplaces and you build up the supplier model. So basically the first strategy would work is you start to know very small, you start limited on WeChat, you start building your brands because maybe your brand is not that big in China. You have not so enough people know you. You start gathering a lot of data. You start analyzing your customer, and you start knowing who’s interested in my product, and want his profile. Once you know that, then you start putting more money into marketing. Basically your marketing at this moment is very gorilla style, using KOL trying to find ways how to write a content and via alternative methods and try to get as much sales as possible. Once you go more into this supplier model, you start opening other channels, find position your product in a very strategic way and also making sure that you still in control of your pricing. Because once you into supplier model, all of a sudden the sellers basically make the pricing. And then once you know that you have a market model, once people know about your product, about your brand then you start going into a big muscle again and you start opening your store. Of course it’s also depending if you have enough product catalogue. If you have enough product variety. Then basically the right side would be getting if you already have a brand, people know you, there’s a lot of organic search on marketplaces, and you can already attract a lot of people without spending too much on marketing on a marketplace. Let’s say red wine lafite . A lot of Chinese people looking for lafite. So, you can basically capitalize on that search behavior of people. Then once you’re growing and you open a couple of stores you can go into supplier model and maybe at the end you want to go into brand e-commerce. But the right strategy on the right side is more focus on volume. How can you create a lot of sales and how can you benefit from what the brand awareness already is in the market. Supplier model would based, so you have a store model where you opened a store in a marketplace. and you could be a supplier of that marketplace. So if you sell you could also say I’m only delivering the goods but you are a marketing of goods and you are basically positioning your goods. So that would mean you are not in control of how’s being.

Dominiek: Distributing it to the platform. Exactly, but still you know a lot of people think, okay I’m a supplier I don’t need to invest anything on marketing. If you for example go to Koala and recently, they still also want you to invest in marketing. It’s not like okay you just give the product, no. What’s gonna be the amount that you gonna invest in doing the marketing for this product. So just a quick one. So where do you see, there’s now in total 13 pilot cities in China. And all the green, basically you can see the ones with the highest income. So the first, second, and third, and the fourth, and fifth year cities in China. The green dots represents the ones where the free trade zones are. So where does it happen in China, this moment in the East Coast. 25% of the sales is either coming from Shanghai or is coming from Guangdong province. That’s also a way to strategize because every free trade zone in China has speciality. Either on the product so maybe they are more focus on consumer products or they are more focus on nutritions as well as the country of origin. So going to a free trade zone whether it has already known about this country and whether the product is already supported, it really makes a big difference to get for example you see FDA approval. We had a client they just went to one of the new opening free trade zone Shanghai and Shenzhen and it took them a really long time because everything was new for the customers and it took much more time to apply for CFDA and to get everything set up. So today I didn’t really talk about the postal model because you cannot sustain something about post and then there’s a chance that customs will intervene the package and you will get a tax on it. Today, we only talking about the sustainable models where every business will really build, can build the business on and which is fully according to China regulations. So we focus on cross border bonded model where you have your own bonded warehouse in a free trade zone. Or we talking about cross border direct shipping. So the product doesn’t stay in China, the product is being shipped at the moment that the sales order was paid. So that means that the product actually is let’s say ship from Germany and once it comes to China it just goes to distribution center. Instead of being in a bonded warehouse and a free trade zone. The difference of course is that, in the first model on the left side, you can be much more lean and faster to market. Because once customer’s order, you can maybe deliver into 2 to 3 days. Whether right side model of course takes at least 7 to 10 days. Meaning the left model is of course better for customer experience. Right model is of course better in terms of taking an inventory risk. So as not to having to have all the inventory in China. So that’s basically all that we cover today. So once again I think for cross border e-commerce is doing your research and having the right product strategy, having the right channel strategy and having the right logistics strategy. Key thing to start e-commerce in China. The last that I can say is please follow us on WeChat so TMO Group we are publishing on weekly basis. Basically a lot of articles about cross border e-commerce, about e-commerce in China and let’s keep you informed. Once again thank you for attention and looking forward to question and answer session. Thank you.

Mike: Thanks Dominiek. I hope you all enjoyed that. And we’re trying to provide unique value. I don’t know if you guys have heard but I have had some service providers tell me I should removed some of the blogs or the podcast because it’s giving too much information way for free. And I should charge for that. I just believe sharing is caring and I am, of course it’s always the hard thing is what should be paid of course, and what should be free, right. But this stuff is so hard to find anywhere. And we’re trying to create a source to give people a chance in China business. Because I think it’s so hard here and I’m sick and tired of only a big players being able to win. I want Americans and people around the world Europeans, people in Africa, people in Philippines, people anywhere, people sell to China. Because it’s a huge market and it’s pretty challenging so even with the free information, there’s a lot to do. But there are slides I talked to Dominiek and we’re working it out, so you guys can download them off at the show notes here at www.globalfromasia.com/episode203 PDF versions, it would be helpful if you didn’t download before the show. You can get them there and listen and learn. So, 2017 is almost over. 4 more episodes for this year. And will be rocking strong into the next year. Thanks for listening everybody. Take Care.

To get more info, on running international business please visit our website at www.globalfromasia.com that’s www.globalfromasia.com. Also, be sure to subscribe to our iTunes feed. Thanks for tuning in.