Build, Operate, and Profit from a Cross-Border€¦ · Build, Operate, and Profit from a Cross-Border WeChat Shop in China December 14th 2018, Riga . Get Ready for China! The EU SME

A project financed by the European Union

Build, Operate, and Profit from a Cross-Border

WeChat Shop in ChinaDecember 14th 2018, Riga

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

Speaker

3

Felim Meade:

Co- Founder of Emerald Green

Baby

Co- Founder of Emerald Green

Consulting

Programme advisor to EUSME

[email protected]

mailto:[email protected]

Cross-Border WeChat Shop

A proven way to sell directly to Chinese consumers

CBEC :The future is already here!



CCross Border e-commerce: WeChatro

12/10/201830/11/109

Agenda

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

Setting up a cross-border shop in WeChat

Background

12/10/201830/11/10

11

Background

Market Key Factors Policy Key Factors

12/10/201830/11/10

12

• CBEC is booming

• WeChat’s unparalleled

success in China

• A more discerning middle

class

• Pilot Free-Trade Zones

• Consumption as the lever

to lift China’s economy

• Reaction to the effects of

inefficient General Trade

Background


12/10/201830/11/10

13

• Little variety of foreign

assortment on sale

• Foreign products are

expensive

• Cashless is king

• Making China’s CIQ part of

the solution

• Daigou impacts Chinese

government tax collection

• Laisser-faire, little (initial)

regulations

Background


12/10/201830/11/10

14

• Smartphone quick

adoption• 4G/5G

12/10/201830/11/1015

A more discerning Chinese consumer

interacts with the world through the cell

phone and a unique home screen,

WeChat

Agenda

✓Background

1. Advantages for EU SMEs






7. Financials


The AdvantagesCross-Border over General Trade

• No need of an importer in China

or setting up a legal entity

• Quick process to authorize the

imports of the product

• Brand’s gross margin is much

higher [= Shelf Price – Taxes – CIF Cost]

• Consumer’s data in the hands of

the brand, who is purchasing,

when, what, why

• It needs an importer in China

(long, costly scouting process)

• Cumbersome process, to test

your product category isn’t easy

• Brand’s gross margin is much

lower [= EXW Price – Product Cost]

• Consumer’s data is the hands of

importer, distributor, or Chinese

e-commerce platform

Cross-Border Trade General Trade

12/10/201830/11/10

17

There are more….→

• The brand can step down the

process any time

• The brand controls and decides

over the cost of promotion and

knows it beforehand

• And it can actually measure the

return on investment (ROI)

almost in real-time

• It can be deployed China-wide

• The brand is bound by the time

agreement with the importer

• Importers use to claim upfront

from the brand ludicrous

promotional expenses

• Importers’ feedback on

promotional expenses ROI uses

to be poor or non-existent

• Only the area of influence of

importer or its network


12/10/201830/11/10

18

Still more advantages, →

The AdvantagesCross-Border over General Trade

• It can be integrated with O2O

operations, your brand displayed

and sold in brick-and-mortar

stores

• It provides your company with

real consumers’ data and

channel knowledge, a priceless

asset, very costly to achieve by

other means

• Once you operate cross-border

is much easier to find an importer

to import via General Trade. You

have a proof that your brand is

selling in China

• Having your brand in an off-line

store is expensive, requires

paying listing fees, and inherent

difficult negotiations

• Consumer’s data and sales

channels’ performance is in the

hands of the importer. It is not

unusual the EU brand ignores

where the brand is sold

• General Trade importers have

little interest in developing the

market for the brand. They

demand a proof that the market

demands the brand


19

Agenda

✓Background

✓Advantages for EU SMEs






6. Financials


A couple of examples to get familiar with the

concept

Two Real CasesCross-border E-commerce WeChat Shop

Emerald Green Baby (Ireland) Nihao Hygge (Denmark)

22



23



24

Emerald Green is in

the business of

mother-care, infant

formula, and baby-

care.

With products stored

in an off-shore

warehouse at a Free

Trade Zone, the

company sells online

China-wide through its

WeChat shop. It also

sells O2O via

agreements with

regional chains of

O2O stores.

It plans to move to off-

line shops importing

via general trade in the

future. It uses all sort

of digital marketing

techniques, such as

influencers (KOL), live

streaming, or

broadcasting from

Ireland

Nihao Hygge sells the

Nordic concept of

hygge. Products that

transmit a quality of

cosiness and

comfortable

conviviality

engendering a feeling

of contentment or

well-being.

The Nordic design is

present in each of

products of

assortment.

Nihao Hygge is

currently selling

cross-border via its

WeChat shop

shipping directly from

Denmark.

The company is

exploring to shorten

the delivery time by

using a bonded

warehouse at a Free

Trade Zone


Emerald Green Baby (Ireland)

25

Please,

scan the QR-Code

Agenda

✓Background


✓Real examples to get familiar with the concept





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

✓Background



✓How does it work?




4. Financials


The Blocks You Need

The Blocks You Need

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.g

1

The Blocks You Need

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 owner

2

The Blocks You Need

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 purchase

3

The Blocks You Need

Register Your Products

China Inspection and Quarantine

CIQ4

Free Trade ZoneInspection & Quarantine

CIQ

Products

entering China

require CIQ

approval.

Registering at

CIQ in the Free

Trade Zone is

necessary

before start

operations

The Blocks You Need

Select a Logistics Operator

Integrate the Shop with Logistics5

Free Trade Zone

Products

entering China

require CIQ

approval.

Registering at

CIQ in the Free

Trade Zone is

necessary

before start

operations

The Blocks You Need

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 WePay

6

The Blocks You Need

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 Gateway

7

The Blocks You Need

Integrate with the

Payment Gateway

To do the clearing or

Renminbi into EURO

and receive the

payment into your bank

account in Europe

8

The Blocks You Need

It’s DONE

Agenda

✓Background




✓The blocks you need



3. Financials


The Pros and Cons

The pros and cons

Pros Cons

12/10/201830/11/10

44

• Easier access to the market

• Easier withdrawal from the market

• Costs control

• Real operational test with Chinese

consumers

• Precious data collection

• The brand owns all the supply

chain up to the consumer

• The brand has a real say in pricing

• The brand owns image and

promotion

• It helps to enter off-line/General

Trade

• The Free Trade Zone is a trial

project subject to change

• The list of products that can be

traded via CBEC is not universal

• It is only Business-to-Consumer

• There is an upper limit to the

money a consumer can spend,

per year, per single item

• Brand needs commitment and

budget to develop a digital

marketing strategy

• CBEC regulations have ups and

downs

Agenda

✓Background





✓The pros and cons


2. Financials


The Missing Link

Digital Marketing

Digital Marketing

t

Digital Marketing

t

Digital Marketing

t

Digital Marketing

t

12/10/201830/11/1051

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

12/10/201830/11/1052

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

• 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

stores

12/10/201830/11/1053

There’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

Digital Marketing

Guideline Online Training

http://www.eusmecentre.org.cn/guideline/digital-marketing-essentials-china

http://www.eusmecentre.org.cn/event/2018-01-09/digital-marketing-essentials

Digital MarketingTerms of Reference

Digital MarketingTerms of Reference

Financials

Category

Toddlers’ toys

✓ Brand registered

✓ B2C

✓ Price < 2,000 CNY

✓ CBEC allowed

✓ High demand foreign

✓ Low-end domestic

Price Europe 24 €

Price China 32 € (CNY 249)

Uplift +33% ( 25% cheaper in EU)

Very good package, I even keep the box;

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

love it.

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 €

* EU Toy Industry Stats

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)

Agenda

✓Background





✓The pros and cons

✓The Missing Link: Digital Marketing

✓Financials


Thank You

Felim Meade

[email protected]

Get Ready for China

https://www.facebook.com/EUSMECentreChina

http://www.linkedin.com/groups/EU-SME-Centre-4520770?gid=4520770&trk=hb_side_g

https://twitter.com/EUSMECentre

http://www.youtube.com/user/EUSMECentre

Documents

Build, Operate, and Profit from a Cross-Border€¦ · Build, Operate, and Profit from a Cross-Border WeChat Shop in China December 14th 2018, Riga . Get Ready for China! The EU SME