BUILD, OPERATE, AND PROFIT FROM A CROSS-BORDER WECHAT SHOP IN CHINA - JUNE 20TH 2018, PORTUGAL
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Build, Operate, and Profit from a Cross-Border
WeChat Shop in China
June 20th 2018, Portugal
A project financed by the European Union
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
About the Speaker
Rafael Jimenez, MSc Physics. In
China since 2009. Fields of
experience: software development,
food industry, international trade.
Spanish. Three sons
Rafael Jimenez
September 2017 rafael.jimenez@eusmecentre.org.cn
3
Cross-Border WeChat Shop A proven way to sell directly to Chinese consumers
Agenda Setting up a cross-border shop in WeChat 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
Background 6/20/201830/11/10
Background
Market Key Factors Policy Key Factors
• CBEC is booming • Pilot Free-Trade Zones
• WeChat’s unparalleled • Consumption as the lever
success in China to lift China’s economy
• A more discerning middle • Reaction to the effects of
class inefficient General Trade
6/20/201830/11/10
Background
Market Key Factors Policy Key Factors
• Little variety of foreign • Making China’s CIQ part of
assortment on sale the solution
• Foreign products are • Daigou impacts Chinese
expensive government tax collection
• Cashless is king • Laisser-faire, little (initial)
regulations
6/20/201830/11/10
Background
Market Key Factors Policy Key Factors
• Smartphone quick • 4G/5G
adoption
6/20/201830/11/10
A more discerning Chinese consumer
interacts with the world through the cell
phone and a unique home screen,
WeChat
10 6/20/201830/11/10Agenda Setting up a cross-border shop in WeChat ✓ 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
The Advantages
Cross-Border over General Trade
Cross-Border Trade General Trade
• No need of an importer in China • It needs an importer in China
or setting up a legal entity (long, costly scouting process)
• Quick process to authorize the • Cumbersome process, to test
imports of the product your product category isn’t easy
• Brand’s gross margin is much • Brand’s gross margin is much
higher [= Shelf Price – Taxes – CIF Cost] lower [= EXW Price – Product Cost]
• Consumer’s data in the hands of • Consumer’s data is the hands of
the brand, who is purchasing, importer, distributor, or Chinese
when, what, why e-commerce platform
There are more….
6/20/201830/11/10Cross-Border Trade General Trade
• The brand can step down the • The brand is bound by the time
process any time agreement with the importer
• The brand controls and decides • Importers use to claim upfront
over the cost of promotion and from the brand ludicrous
knows it beforehand promotional expenses
• And it can actually measure the • Importers’ feedback on
return on investment (ROI) promotional expenses ROI uses
almost in real-time to be poor or non-existent
• It can be deployed China-wide • Only the area of influence of
importer or its network
Still more advantages, 6/20/201830/11/10The Advantages
Cross-Border over General Trade
Cross-Border Trade General Trade
• It can be integrated with O2O • Having your brand in an off-line
operations, your brand displayed store is expensive, requires
and sold in brick-and-mortar paying listing fees, and inherent
stores difficult negotiations
• It provides your company with • Consumer’s data and sales
real consumers’ data and channels’ performance is in the
channel knowledge, a priceless hands of the importer. It is not
asset, very costly to achieve by unusual the EU brand ignores
other means where the brand is sold
• Once you operate cross-border • General Trade importers have
is much easier to find an importer little interest in developing the
to import via General Trade. You market for the brand. They
have a proof that your brand is demand a proof that the market
selling in China demands the brandAgenda Setting up a cross-border shop in WeChat ✓ 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
A couple of examples to get familiar with the
conceptTwo Real Cases
Cross-border E-commerce WeChat Shop
Emerald Green Baby (Ireland) Nihao Hygge (Denmark)Two Real Cases
Cross-border E-commerce WeChat Shop
Emerald Green Baby (Ireland) Nihao Hygge (Denmark)Two Real Cases
Cross-border E-commerce WeChat Shop
Emerald Green Baby (Ireland) Nihao Hygge (Denmark)
Emerald Green is in Nihao Hygge sells the
the business of Nordic concept of
mother-care, infant hygge. Products that
formula, and baby- transmit a quality of
care. cosiness and
With products stored comfortable
in an off-shore conviviality
warehouse at a Free engendering a feeling
Trade Zone, the of contentment or
company sells online well-being.
China-wide through its The Nordic design is
WeChat shop. It also present in each of
sells O2O via products of
agreements with assortment.
regional chains of Nihao Hygge is
O2O stores. currently selling
It plans to move to off- cross-border via its
line shops importing WeChat shop
via general trade in the shipping directly from
future. It uses all sort Denmark.
of digital marketing The company is
techniques, such as exploring to shorten
influencers (KOL), live the delivery time by
streaming, or using a bonded
broadcasting from warehouse at a Free
Ireland Trade ZoneTwo Real Cases
Cross-border E-commerce WeChat Shop
Please,
Emerald Green Baby (Ireland)
scan the QR-CodeAgenda Setting up a cross-border shop in WeChat ✓ 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
How Does it Work?
The Upstream Flow of Goods
The Upstream Flow of Goods
The Downstream Flow of Payments
[or directly to gateway]Agenda Setting up a cross-border shop in WeChat ✓ 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
The Blocks You Need
The Blocks You Need
1 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.gThe Blocks You Need
2 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 ownerThe Blocks You Need
3 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 purchaseThe Blocks You Need
Register Your Products
4 China Inspection and Quarantine
CIQ
Products
entering China
require CIQ
approval.
Registering at
CIQ in the Free
Trade Zone is
necessary
before start
operations
Free Trade Zone
Inspection & Quarantine
CIQThe Blocks You Need
5 Select a Logistics Operator
Integrate the Shop with Logistics
Products
entering China
require CIQ
approval.
Registering at
CIQ in the Free
Trade Zone is
necessary
before start
operations
Free Trade ZoneThe Blocks You Need
6 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 WePayThe Blocks You Need
7
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 GatewayThe Blocks You Need
8
Integrate with the
Payment Gateway
To do the clearing or
Renminbi into EURO
and receive the
payment into your bank
account in EuropeThe Blocks You Need
It’s DONEShort Summary 6/20/201830/11/10
Agenda Setting up a cross-border shop in WeChat ✓ 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
The Pros and Cons
The pros and cons
Pros Cons
• Easier access to the market • The Free Trade Zone is a trial
• Easier withdrawal from the market project subject to change
• Costs control • The list of products that can be
traded via CBEC is not universal
• Real operational test with Chinese
consumers • It is only Business-to-Consumer
• Precious data collection • There is an upper limit to the
money a consumer can spend,
• The brand owns all the supply per year, per single item
chain up to the consumer
• Brand needs commitment and
• The brand has a real say in pricing budget to develop a digital
• The brand owns image and marketing strategy
promotion • CBEC regulations have ups and
• It helps to enter off-line/General downs 6/20/201830/11/10
TradeAgenda Setting up a cross-border shop in WeChat ✓ 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
The Missing Link Digital Marketing
Digital Marketing
Reportt Online Trainingt
www.eusmecentre.org.cn tDigital Marketing
Terms of ReferenceDigital Marketing
Terms of ReferenceDigital Marketing
Digital Marketing
Financials
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
49 6/20/201830/11/10But 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
50 stores 6/20/201830/11/10There’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
51 6/20/201830/11/10Financials
Category
Toddlers’ toys
✓ Brand registered
✓ B2C
✓ Price < 2,000 CNY
✓ CBEC allowed
✓ High demand foreign
✓ Low-end domestic
Very good package, I even keep the box;
Price Europe 24 € 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
Price China 32 € (CNY 249) love it.
Uplift +33% ( 25% cheaper in EU)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 €
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)
* EU Toy Industry StatsAgenda Setting up a cross-border shop in WeChat ✓ 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
Contact To have a turnkey solution for your Cross-Border WeChat Shop, including all blocks 1 to 8, please contact the EU SME Centre in Beijing Write to WeChatShop@eusmecentre.org.cn
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