How a Chinese seller figures out what Western online shoppers want
August 23, 2016 06:00 AM
More Chinese manufacturers are selling directly to consumers in other countries via the web, often through the marketplaces operates by such U.S. companies as Amazon.com Inc. and eBay Inc.
HLC Metal Parts Ltd. is one example. Created in 2004, HLC is a metal products factory based in Dongguan in the heavily industrial south China province of Guangdong. The company’s business, which used to rely on orders from overseas wholesalers and retailers, began to slow in 2013, according to HLC’s president, Feng Zhaohui. Annual growth rates that had held steady at around 50% slowed to 15% in 2013, he says.
“I knew we would have no future if we made products only based on the orders from overseas companies,” Feng tells Internet Retailer. The idea of selling direct to overseas consumers came from a meeting at a business event with Anker CEO Yang Meng, whose company has become a major seller of electronics products on Amazon’s global e-commerce sites. Feng and Yang grew up in the same province, Hunan. “He introduced e-commerce to me and encouraged me to sell the products directly to global shoppers,” Feng says.
HLC started selling directly to consumers via the web in 2014, and the early results were disappointing. “In the beginning, I heard some merchants sold mobile phone accessories like iPhone cases quickly, so I followed their steps to procure similar products with the volume of several containers. That inventory is still there and the sales are really bad.
“The lesson I learned is that we have to develop our own unique products. To avoid excessive competition, now we focus on selling unique products in outdoor and home products,” Feng says.
Online merchants that own manufacturing plants can develop innovative products that they can sell directly to consumers via the web, he says. That’s worked for HLC. Orders from Amazon and eBay sites now account for 40% of the company’s sales and he has 30 employees on his e-commerce team, he says.
Feng declines to disclose his online sales, but says, “One hint is that directors for our several stores on global marketplaces each earned as much as 1.3 million yuan (about $200,000) in commissions in 2015.”
To fulfill orders quickly, HLC has warehouses in 31 states in the United States and plans to open its first overseas factory this year. Feng would not disclose the location.
Feng says a key to success is to study online reviews to discover needs that other retailers aren’t meeting. “I like to read reviews on Amazon, even bad reviews, to discover what consumers need,” he says. “For example, recently I noticed a best-selling trampoline product that sold out its 20,000 units in just one day. But one consumer posted a message asking for a portable trampoline so that he can easily use it in different places. Based on our manufacturing expertise, our engineers soon developed a product to meet this demand. Since we are the first seller to offer this product, our profit rate can be up to 300%.”
At a recent conference, an Amazon China executive said that about 30% of apparel sellers on Amazon.com are Chinese merchants. Although Amazon China declines to confirm this data, the company did say earlier this year that sales on Amazon’s global sites of Chinese sellers doubled in 2015.
Chinese merchants can sell on Amazon sites in 10 countries: the United States, Canada, France, United Kingdom, Spain, Italy, German, Japan, China and Mexico. Amazon also offer a Chinese-language version of its merchant portal to Chinese sellers.
Amazon, is No. 1 in the Internet Retailer 2016 Top 500 and No.4 in the 2016 China 500.