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International Trade in the “Internet” Era

Release Date

04 March 2013

Today, 34% of the world population (irrespective of location, race, age and gender) are internet users. The Internet has transformed the way we do business both domestically and internationally. Days of you carrying a luggage full of brochures at tradeshows, waiting in the darkness for the safe arrival of shipping vessels and spending $200 on faxes and $120 on couriers for export documents are gone. Instead, having a teleconference on Skype with suppliers in a remote area while locating your shipping vessel on MarineTraffic and checking Alipay for incoming payment has become the norm for more and more international traders today.
 
A transparent world and a shorter value chain

Nowadays free information is only a click away. Middlemen who used to make a fortune by having access to information and overseas contacts find it extremely hard to operate a business the old way. Wholesalers can easily find manufacturers through search engines, online directories (such as World Directory of Importers Associations) and online marketplace (such as Alibaba); importers and exporters can search and compare global tradeshows at www.tsnn.com.  Hence the traditional value chain consisting of manufactures, exporters, importers, distributors, sub-distributors/wholesalers and retailers is being replaced by shorter ones.

The implication for importers and exporters is to reposition themselves and add value to the value chain through

  • Tailored international trade facilitation services
  • Development of own brands
  • Possession of special technology knowhow/intellectual property
  • Strong expertise in a niche market/focused product category
  • Strong financing capabilities
  • Backward or forward integration to shorten the value chain and lift profit margin
 
More E-traders and more B2C trades

Technology enables international traders to conduct trade via the internet. Exporters have started cutting off importers and distributors and built their own online stores to target end customers. They may have their own shopping websites in the target country’s language or have online stores on the target country’s online B2C marketplaces. For example, if you target Chinese end customers, you may consider having a Chinese online store on Taobao or Tmall. The practical procedures is still complex as it may involve third parties to manage the online store and marketing in the target country, but it provides a new avenue for exporters to interact with end customers and improve bottom line by cutting off middlemen.
Some online export models exporters adopt are as follows:

  • An online Brand  Store with its own domain name managed by the exporter or its distributor or a third party in the target country
  • An online store on a target country’s B2C marketplace managed by the exporter’s own office or its distributor/agent or an online store management company in the target country
  • Order function on the distributor’s website in the target country
  • Order function on the exporter’s own multi-lingual website
 
Virtual office and virtual organisation structure

Micro-multinational is a recent term referring to small or micro businesses which operate globally by leveraging the capabilities and expertise of upstream and/or downstream partners at various markets overseas. For example, a one-man-band business in Sydney may work as a consolidator of its own brand, and outsource all or part of research and development, manufacturing, sales and marketing and after-sale services to third parties overseas. In one case, a R&D academy in California is the business’ R&D department, an OEM manufacturer in inland China works as the business’ production base and its licensing partners overseas are the sales arm of the business. The business even does not have a physical office but rents a virtual office at minimal cost to have a shared receptionist manning the phone nine to five. Though a micro-business by number of employees, the business still has an organisation chart and even generates sufficient revenue to match sizable businesses. Technology enables the Micro-multinational to run business on iPhone and iPad and communicate with all its “departments” overseas when the business owner is traveling globally.

In the 21st Century, Importers and exporters cannot be judged by the size of their office and number of employees anymore.
 
Continuous learning and adaptability - a key to success

Global economic landscape in the 21st century is being reshaped and boosted by knowledge and technology. A key to success for importers and exporters in this century is the ability to learn and adapt to new technology and new models to cope with the ever changing challenges and seize fast moving opportunities. To catch up with the global industry and technology trend and be more proactive, importers and exporters may consider/take following actions:

  • Subscribing to industry association and government’s E-newsletters
  • Getting involved in social media and check competitors and industry activities via Linked-in, Facebook, Twitter and search engines
  • Regularly up-skilling through attending training programs and business events 
  • Allocating 15- 20 minutes a day to go through the titles and key contents in the business sections of major newspapers
Importers and exporters need to accept the fact that change is the norm of international trade today, and there is only one option- learn, adapt and succeed.

For more information or assistance with E-commerce in China, contact Sara Cheng, Manager-Greater China region, Australian Business Consulting and Solutions: sara.cheng@australianbusiness.com.au

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