September 10, 2012 / 9:00 PM / 7 years ago

China's export slump drives vendors online

HANGZHOU, Sept 11 (Reuters) - Chinese clothing sellers, burnt by declining export orders, are turning to online retailing to try to tap domestic buyers as China’s e-commerce industry expands rapidly.

Wang Liang, 30, started selling his firm’s dye-free organic baby clothes online this year, after orders from Europe and North America came to a standstill. He has a store on Alibaba Group’s online retail site Taobao Mall and also sells through distributors on Taobao Marketplace, Alibaba’s eBay-like consumer-to-consumer website.

“Orders started falling from 2010 and in July this year, Europe orders stopped completely,” said Wang.

“We used to be so busy with overseas orders we didn’t have time to cater to the China market. Now the domestic market is very attractive for us,” Wang said.

E-commerce represented just 4 percent of China’s retail sales in 2011, but the transaction value jumped 30 percent to 5.8 trillion yuan ($914 billion), equivalent to 12.5 percent of China’s gross domestic product, China’s vice minister of commerce, Jiang Yaoping, said in May. An estimated 16 percent of China’s population shops online.

Alibaba held its annual conference last weekend in Hangzhou, where it was founded, and organised a trade fair for online vendors. Reuters spoke with several vendors to gauge how their businesses were holding up as China’s economy cools.

Wang, who works with two factories in China, sells to authorized distributors on Taobao Marketplace. The economic slowdown does not worry him.

“Whether the economy is slow or not, people still need to give birth,” he said.

Data released on Monday showed China’s exports rose an anemic 2.7 percent in August while imports declined. . That followed a lacklustre batch of data on Sunday showing China’s factories ran at their slowest rate for 39 months in August while retail sales rose 13.2 percent from a year ago, in line with forecasts.

Some analysts think China’s economic data undercounts the rapid growth in online sales, suggesting that domestic demand may be stronger than the retail sales figures indicate.

“In urban areas, e-commerce has become pervasive, it has become the primary source of buying for many of the middle income young folks,” said Ken Peng, a Hong Kong-based economist with BNP Paribas.

A Credit Suisse report on Sept 3 said China’s central bank felt the retail statistics did not reflect the whole picture of domestic consumption.

“We heard the central bank arguing that consumption was doing better than retail sales statistics indicated, as many new types of consumption (sales in remote areas and on the Internet) were not covered by the traditional samples,” Dong Tao, a Credit Suisse analyst wrote.


Jin Guowei, who at 19 set up his menswear business out of the export hub of Yiwu, has long sold his shirts to companies in Canada, Italy and the United States. But weak export demand caused him to shift a portion of his business online to tap the domestic market.

“The whole environment was not good, so we decided to open up online because for brick and mortar shops the competition is too great,” said Jin, who has stores on platforms E-Commerce China Dangdang Inc, 360buy and Yihaodian, which is majority owned by Wal-Mart Stores Inc.

Growing demand has created a sub-market where many online sellers become suppliers to other online shops, enabling more items and individuals to become involved in e-commerce.

Ren Ping, a 26-year-old from Henan province who has a womenswear store on Taobao, was browsing for jeans to buy from one online vendor, who declined to give his name. Ren said the slowdown had not affected her business because it was small and she was expanding her offerings.

The vendor, who declined to be named because he was shy about speaking to the media, said selling to Ren was beneficial for both sides. “I charge 80 yuan at my store, I sell it to her at 40, she makes 40. It’s a good business model. Whether the customer buys it at her store or mine, it is like striking the lottery,” the vendor said.

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