Published: 12:24, June 12, 2024
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Shein, Temu back seamless sales overseas
By Fan Feifei

Chinese cross-border e-commerce platforms helping factories go global

Visitors gather at fast-fashion online retailer Shein's booth during a commerce expo in Zhengzhou, Henan province, in October 2023. (PROVIDED TO CHINA DAILY)

Zhang Min has taken over his parents' eyeglasses factory, which was founded more than a decade ago in Taizhou, Zhejiang province. The factory mainly received foreign trade orders and supplied various types of glasses for offline brand owners and dealers in the United States in its early stages of development.

However, its orders fell dramatically due to the impact of the COVID-19 pandemic. Looking to expand sales channels and reach more overseas consumers, Zhang decided to shift tactics by using cross-border e-commerce platforms. To bring about this result, Zhang registered with fast-fashion online retailer Shein.

"Consumer preferences vary in different countries, and we should dare to develop new products and open up new overseas markets," Zhang said, adding that her company usually determines whether to increase production in line with the latest sales and market trends, instead of manufacturing new products or stocking up goods blindly.

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Zhang said the biggest takeaway since she opened an online store on Shein is that glasses are an important fashion accessory, while young consumers exhibit strong demand for glasses in different scenarios, such as shopping, parties and tourism.

Currently, sales from Shein's online marketplaces have accounted for nearly half of Zhang's total revenue, with its turnover reaching nearly 10 million yuan ($1.38 million) each month.

Zhang is among millions of young Chinese entrepreneurs whose parents run factories that have survived operational difficulties by capitalizing on the emerging cross-border e-commerce platforms and digital technologies to secure new orders from international markets and rev up sales.

Experts said the unique advantage of Shein lies in its "small orders, quick response" model, which refers to using real-time market demand to regulate production.

Based on real-time analysis and tracking of fashion trends, the model involves starting with very small orders. If the sales trend is positive, sellers will ramp up production. However, if the sales fall short of expectations, production will be reduced or halted.

The on-demand production approach not only meets the diversified demand from consumers and bolsters sales, but also minimizes inventory and waste, improves operational efficiency and reduces costs, thus making the production process more agile and flexible and enhancing the competitiveness of products, industry insiders said.

Founded in Guangzhou, Guangdong province, and known for its low prices and large selection of fashionable clothing and accessories, Shein is ratcheting up resources to help Chinese manufacturers and brands expand their presence in overseas markets, and give a strong boost to the transformation of traditional industries by making use of its digital and flexible supply chains.

The company announced plans to extend its outreach to industrial belts in 500 cities in China in September. It hopes to facilitate the digital upgrade of more industrial chains, thereby helping them achieve on-demand supply in terms of production. Shein has covered more than 300 industrial belts across the nation since 2021.

For sellers who are good at designing and producing products, but have no overseas sales and operation experience, Shein said it will provide one-stop services including commodity operations, warehousing, logistics, customer service and after-sales, to help sellers make forays offshore.

In addition, Shein is accelerating steps to build a supply chain project in Guangzhou covering operations, warehousing, stocking, order-picking, distribution, logistics and delivery. The project is expected to create 100,000 jobs and provide support for goods sold overseas.

"As a new form of foreign trade, cross-border e-commerce has become an important driving force for bolstering the steady growth of foreign trade, as well as promoting the transformation and upgrading of manufacturing and global expansion of Chinese-made products," said Zhang Zhouping, a senior analyst tracking business-to-business and cross-border activities at the Internet Economy Institute, a domestic consultancy.

Workers transport export-bound cargo at a logistics center in Shanghai in January 2024. (PROVIDED TO CHINA DAILY)

Zhang said an increasing number of Chinese sellers and manufacturing enterprises are leveraging cross-border e-commerce channels that feature innovative and flexible on-demand production models to expand their global footprint, enrich product variety and build up new brands.

By constantly monitoring market changes and collecting consumers' real-time feedback, these platforms can make accurate predictions, while the flexible supply chain model is conducive to upgrading entire industrial chain, ranging from design and development to production, warehousing and logistics, Zhang added.

Data from the Ministry of Commerce showed that the import and export scale of the country's cross-border e-commerce transactions reached 577.6 billion yuan in the first quarter, up 9.6 percent year-on-year. E-commerce exports stood at 448 billion yuan, up 14 percent on a yearly basis.

Other Chinese cross-border online retailers are speeding up their globalization push. Temu, the cross-border e-commerce platform launched by Chinese online discounter PDD Holdings, has gained popularity among consumers overseas as it offers a wide selection of merchandise, including apparel, consumer electronics, jewelry, shoes, bags, cosmetics and baby products at competitive prices.

First launched in the US in September 2022, Temu has entered more than 50 countries in North America, Europe, Asia and Oceania. Experts said Temu's business model removes middlemen from the equation, allowing Chinese suppliers to sell directly to US consumers and ship directly from China, instead of building a network of US warehouses.

PDD announced plans to help China's manufacturing enterprises widen their global reach in September 2022. Currently, Temu has covered more than 100 manufacturing industrial belts in Zhejiang, Guangdong, Shandong and Anhui provinces.

The platform provides one-stop services including cross-border logistics, operations, promotional activities, after-sales services and legal affairs, while manufacturing enterprises just need to produce and ensure the quality of products.

Chen Lei, chairman and co-CEO of PDD Holdings, said the company hopes to leverage the supply chain capacities it has accumulated over the past years to create a new channel that enables consumers from different countries and regions to directly purchase products from factories, providing more flexible and personalized supply chains and more cost-effective shopping experiences.

The company has continued to invest in areas such as agricultural and supply chain technology, and core research and development capabilities, Chen said. PDD reported that its total revenue rose a whopping 131 percent year-on-year to 86.81 billion yuan in the first quarter.

Li Mingtao, head of the research institute at the China International Electronic Commerce Center, said Chinese cross-border e-commerce platforms can help establish a direct and definitive connection between manufacturers and consumers by applying advanced digital technologies such as big data, cloud computing and artificial intelligence.

"Many Chinese traditional manufacturers have gained an upper hand in production and quality control, but lack experience and capabilities in sales and operations, making it difficult for them to enter overseas markets," Li said.

He added that manufacturers should better learn about and grasp the needs of consumers via these platforms, adjust production in a timely manner and reduce inventory, which will be conducive to improving the competitiveness of Chinese manufacturing enterprises on the global stage.

Cindy Tai, vice-president of Amazon and head of Amazon Global Selling Asia, said Chinese sellers who sell products abroad through Amazon's overseas marketplaces have maintained steady growth in the past year, adding the company will ramp up efforts to help Chinese merchants build brands, simplify global operations, optimize global supply chain services, expand their global footprint as well as scale up localization inputs this year.

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Data from Amazon showed that the number of Chinese sellers on Amazon's global sites, each with sales exceeding $1 million, increased by more than 25 percent year-on-year from October 2022 to September 2023.

"Price, quality and service are the most important factors consumers consider when buying products, and cost-effective goods have shown some obvious advantages amid global economic downward pressure," said Chen Tao, an analyst at internet consultancy Analysys in Beijing.

Looking ahead, the competition among cross-border e-commerce platforms will be focused on the supply chains. "For Shein and Temu, one of their core competitiveness factors lies in products with competitive prices and fast delivery, which are highly dependent on the establishment of supply chains," Chen said.

"Chinese manufacturers should make full use of cross-border e-commerce platforms to quickly capture demand in overseas markets, learn more about relevant laws, regulations and quality standards in these countries, and adjust supply chains to make products that meet local requirements," said Cui Lili, director of Shanghai University of Finance and Economics' Institute of E-commerce.