Author: Hamik Akhverdyan, Xi’an Summit Software Information Technology, Co. Ltd.
The best time to plant a tree was 20 Years Ago. The second best time is now.
Over the last ten years the global marketplace has rapid grown and changed. What was once considered impossible has become reality. The rise of companies like Alibaba , Amazon , and eBay created a unique opportunity for manufacturers and export companies. Instead of selling merchandise to foreign businesses, they could now sell directly to consumers at a much higher profit margin. In 2016, the global marketplace was shaken up the e-commerce start-up mobile app , Wish.
A single conversation with a wise man is better than ten years of study”
With over $2 billion in sales and $1.08 billion in investments from 31 investors , Wish’s success is evidence that with the right tools, Chinese companies could sell directly to consumers without their foreign partners. Wish’s investors include Jerry Yang, Matt Cheng, Bill Tai, Dovey Wan, Hans Tung, Sizhao Yang, Steve Chen, and David Lee – all pioneers whose success has helped Chinese companies increase sales to foreign consumers. While the Wish platform has provided Chinese companies many useful tools sell to foreign consumers directly, it has not provided a means for Chinese companies to build a consumer base outside of China. That’s where we believe we can help.
Customers are jade; Merchandise is Grass
Whether in China or the United States, for a businesses to succeed it must acquire customers. While the goal is the same, there are differences in both approach and culture between the two. With a presence in both China and the United States our company provides an all in one solution that allows Chinese companies to grow in the United States without relying on Amazon, Alibaba, and Wish.com to bring in sales and customers. Our company’s all in one solution gets rid of all barriers that prevent Chinese companies from selling directly to U.S. consumers with global E-commerce.
Every Crisis is an Opportunity
In 2016 China exported over $484 billion worth of goods to the United States . A majority of these goods were sold to American businesses who resold the goods at a higher profit margin to U.S. consumers. As consumers turn to the internet to meet their needs, big retail chain stores are struggling to survive , while E-commerce based businesses are growing rapidly thank to social media platforms such as Facebook , Instagram , and Pinterest.
Macy’s – the largest U.S. department store company recently closed 100 of it’s 728 stores, while one of our clients – Fashion Nova , an E-commerce based store has opened 3 physical store locations in Los Angeles, California to better serve its customer base. We will take a further look at Fashion Nova and their success shortly.
The Culture behind Business and Customer Relations
Before we explain how we can help China companies increase their sales to U.S. based consumers, we must take a look at the American consumer and their perspective and thought process when it comes to purchasing merchandise. This is extremely important as it differs tremendously from consumers from both the East and Europe.
There is an American saying – “The customer is always right “. This has been repeated time and time again by American businesses. Why ? Why do American companies go above and beyond to keep their customers happy , even if it means refunding a customer’s money and allowing the customer to keep the merchandise? Customer Lifetime Value.
Customer lifetime value refers to the net profit that a business obtains from one customer for all future business. By keeping a customer happy, companies ensure a customer will keep returning. This is important because sometimes the cost per acquisition or cost per sale will exceed the profit generated from the initial transaction.
Example : Company spends $15 in marketing to get one new customer. The customer spends $20 at the company’s Ecommerce store, but it costs the company $15 for merchandise and $15 in marketing. The company is at $-10 after a sale. To ensure their profit the company must ensure the customer’s experience brings them back again without having to pay for marketing again for that customer. By bringing the customer back for more they ensure that customer generates them more profit over the many years.
The American consumer is aware about his or her customer lifetime value. They know businesses are competing for their business. This has given the American consumer power to be extremely picky and demanding when it comes to shopping. In exchange the American consumer is very loyal to the companies who meet their demands. Not only will they return for more merchandise , but they will share their experience with friends ,family, and social media. This also works the other way around. If the American consumer feels they were cheated by a company, they will share their negative experience with friends, family, and social media as well. This results in the loss of many potential customers.
This brings us to our next point. The American consumer often does research before making a purchase online. If they stumble upon negative feedback from another consumer, it is highly likely they will take their business else where.
The American Consumer’s Perspective on Chinese Merchandise
Before we go further we want to emphasis these are not our personal views or thoughts, but rather biases and views that are held by many U.S. consumers. As a performance marketing firm we know most products sold in the United States are manufactured in China by Chinese companies for U.S companies ,and while most consumers know this as well, many don’t know the true cost of manufacturing of the products they purchase.
While American consumers have no issues with buying products from U.S. companies that manufacture in China or user Chinese manufacturers to produce their product, they do have a bias that Chinese products are lower qualify and unsafe to use. If three products originate from the same factory, but one has a U.S. Brand, one has a Chinese brand, and one has no brand the Chinese brand would have the least sales even if priced lower than the rest. Here’s a real life example to better explain the American consumer’s thoughts based off a product our firm white labeled as our own 2016.
The product was manufactured in China and was fulfilled out of a U.S. based fulfilment company. Before we talk about own product sales, let’s examine 4 different eBay sellers who sell the same waist trainer product. There is a good chance the vendor’s product comes from the same manufacturer in china.
|Product shipped out of||HK||HK||US||CN|
( S&H included)
|Solid in last 24 hours||0||0||10||3|
At $16.99 , summersunny1688 not only has the most revenue in 24 hours, but his profit margin is most likely the highest. Not to mention he has the lowest eBay feedback score. Why? The answer is perceived value.
Perceived value is the value that a consumer believes a product or service is worth. American consumers are usually unaware of the real cost of production for the products they buy; instead, they often base a products value by what they see and how it makes them feel.
American consumers are willing to pay more for the same exact product if they believe the following:
- It functions better
- Packaging and product look visibly better. This applies to both real life photos and E-commerce photos.
- It is priced higher than other competitor products o Cheaper often translates to lower quality for American consumers – It’s the original “brand name” product and not a knock off.
o Despite two products being the same exact product and come from the same manufacturer , often the one with no brand will be labelled a “knockoff” or fake of the product with branding.
American consumers are less likely to purchase products if they have/are the following:
- Products that originate directly from China or have Chinese packaging are often interrupted as cheaper and lower quality products, even though the consumer may have purchased the same exact product with different labelling and packaging.
- E-commerce stores with no U.S. based customer service phone number.
o Americans want to know a company stands 100% behind their product and they have a way to reach the company if anything goes wrong.
- E-commerce stores in foreign language or poor/grammar/vocab/spelling.
o Identity theft and credit card fraud are a huge problem in the United States and many consumers fear their credit card information could be stolen.
Now that we have given you some background information on the American consumer and their perspective, views ,and biases , we will present you our own success stories and the success stories of some of clients we have worked for.
The first case study we will present will be of the Perfect Waist Trainer, an in-house product we launched in 2016. The product was manufactured in China and white labeled as “The Perfect Waist Trainer”. As marketing firm that originally began as a direct response or performance based marketing company, we have successfully white labeled and launched a handful of our own products, many of which were manufactured in China and white labeled as an American brand.