Going for the gold with digital

Foreign trade enterprises are racing to embrace the digital revolution, which has helped them emerge stronger from the economic shock of the coronavirus pandemic.

Foreign trade enterprises are racing to embrace the digital revolution, which has helped them emerge stronger from the economic shock of the coronavirus pandemic. Industry players call digitalization an inevitable trend for businesses if they want to adjust to market demand and stay competitive. Zhou Mo reports from Dongguan.

Inside an expansive 2,180-square-meter factory workshop in the Guangdong city of Dongguan - the Chinese manufacturing cradle - sewing machines are buzzing as workers toil on assembly lines, churning out outdoor tents to be shipped to all corners of the globe, including to highly industrialized nations like the United States and Japan.

Although the number of overseas clients who have visited the factory this year has been reduced to a trickle compared with previous years as a result of the pandemic, Guangdong Everlead Outdoor Gear Co said the number of orders remains on the high side.

"There has never been a time before when small and large overseas buyers alike rushed to buy our products," said Liu Shiyun, CEO of the outdoor equipment exporter.

"With offline purchasing channels blocked, they've gone online for deals. As a result, our revenue went up 66 percent year-on-year to more than 90 million yuan ($13.2 million) in the first half of this year," said Liu, who has been quick in switching to digital trade.

While the pandemic has caught many Chinese exporters off guard, some are relishing the fact that they've not only survived the darkest days of the economic storm, but have actually grown stronger. As the public health crisis has forced foreign trade companies to change their business models and strategies, they've come up with the answer - going digital. The digital revolution in the foreign trade industry is in full swing and is likely to subvert the traditional way of doing business and breathe new life into the struggling sector.

In traditional business, foreign trade enterprises normally seek out potential clients by joining various offline exhibitions and clinching deals face-to-face.
The coronavirus has eroded that channel, with most world expositions either scrapped or put on the back burner. Crippled by faltering overseas orders and disrupted supply chains, businesses have found themselves at the "bottom of the crater".

"The pandemic has dealt us a heavy blow as the US and European markets make up more than 80 percent of our business," lamented Lu Bin, president of Brothersbox Industrial Co.

The Dongguan-based company specializes in manufacturing packaging and stationery products, as well as game-class toys, with packaging accounting for the biggest share of its business at more than 50 percent, followed by stationery and game-class toys at some 25 percent each.

"Normally, we rake in about 3 million yuan in revenue each month, selling packaging products. But due to the pandemic, it had slumped by 70 percent in March," Lu said.

To get his enterprise back on track, he turned to Alibaba.com - the business-to-business online marketplace run by Chinese e-commerce giant Alibaba Group.

"We found that board-game products were well received on the platform. Their search volume soared as many overseas consumers who were forced to stay at home would like to kill time by playing the games," Lu said.

Positive results

"So, we adjusted our focus, pouring more resources into the production of game products, raising its share from 25 percent to 80 percent."

It had positive results as the company's overseas orders surged from late April and total sales reached $1 million in June, almost back to the same level as a year ago.

"Through the platform's big data analysis, we were able to come to grips with customer demand and market changes quicker and more precisely, making us more competitive," Lu said.

A world of difference from the traditional business model, digital trade uses electronic tools, such as big data, cloud computing, livestreaming, to search, showcase, trade and deliver products and services across borders. The new format has played a pivotal role in helping the nation's foreign trade sector cushion the COVID-19 shock.

According to the General Administration of Customs, trade via cross-border e-commerce platforms, under the oversight of the customs authorities, picked up 26.2 percent year-on-year in the first half of 2020, with exports and imports rising 28.7 percent and 24.4 percent, respectively.

"The coronavirus pandemic underscores the importance of digital trade," said Zhang Kuo, general manager of Alibaba.com.

"As demand from foreign buyers changes quickly, suppliers must know their current needs as fast as possible and produce in accordance with those needs. The days of foreign trade businesspeople sitting it out and waiting for business each year are gone."

Chinese e-commerce consulting firm Ebrun said in a report that 84 percent of the Chinese foreign trade enterprises surveyed have not halted operations despite the coronavirus outbreak. They've instead gone online for business.

The report based its findings on a survey of more than 100 small and medium-sized foreign trade enterprises in the country.

The decisive move by small and medium-sized exporters to embrace digitalization, along with the flexibility of switching to producing medical supplies, led to their quick rebound from the depth of the pandemic.

According to the XTransfer foreign trade advance index compiled by Chinese cross-border financial services provider XTransfer, while deposits paid to the small and medium-sized enterprises surveyed had slipped by 29 percent and 36 percent, respectively, in December and January on a monthly basis due to the Lunar New Year holidays and the pandemic, payments had soared by almost 90 percent in February.

As global COVID-19 infections escalated, growth in deposits dipped by just 2 percent in March before recording double-digit growth in April and May - at 11 percent and 10 percent, month-on-month, respectively - based on the index, which traces the performance of tens of thousands of Chinese exporters using the XTransfer platform for cross-border financial services.

Traditionally, exporters would proceed to manufacture for overseas customers only after receiving advance payment. In this sense, the index is a barometer of the export sector's well-being and dynamics.

"Through digital transformation, many small and medium-sized exporters have got to know the changes in market demand and, thereby, adjusted their strategies. This shows their flexibility and resilience," said Bill Deng, co-founder and chief executive of XTransfer.

Liu calls digitalization an "inevitable trend" for market players in foreign trade.

"Consumption through online channels has been growing as the market becomes bigger and bigger. We feel it's increasingly important to make the change."

She said Everlead is stepping up online promotions, having poured 1.6 million yuan into Alibaba.com so far this year, doubling its investment in 2019. In addition, the company has spent more than 20 million yuan on online promotion on US tech colossus Amazon this year, compared with 15 million yuan in 2019.

Like other industry peers, Liu is also resorting to livestreaming to reach out to more clients.

"Livestreaming is a good way for foreign trade businesses to showcase their products virtually and win trust from new clients with global travel restrictions still in place," she said.

During a two-hour livestreaming session on May 11, Everlead received more than 100,000 likes and secured 258 new orders.

The company is working with more than 70 internet celebrities from the US, Japan and other countries on product promotion. It has also signed deals with 16 foreign anchors and set up an eight-person livestreaming team to specifically deal with online shows.

Timely adjustments

While more and more enterprises have recognized the importance of digitalization, the transformation process won't be smooth sailing all the way.

"Businesses could face a number of hurdles, such as the lack of digital skills or practical experience and so forth," Deng said.

"They should be aware that digitalization is a comprehensive reform of their mindset, operation philosophy and operating model, and they have to make timely adjustments."

Zhang Yi, chief executive and chief analyst of online consulting firm iiMedia Research, said that for foreign trade businesses, digitalization involves changes from multiple aspects, including people, research and development, as well as marketing.

"Firstly, it's vital that a company's management team has the awarness of carrying out the transformation," he said.

"Secondly, most foreign trade businesses used to rely on the single mode of securing overseas orders and make production. With the help of digital tools, they can now find out customers' changing demand by using big data analysis and online market research, and make R&D according to their needs. This way, they can produce more competitive products that better suit the market.

"In marketing, the previous mode of selling products through agents can now be replaced by various channels such as cross-border e-commerce platforms and online communities. Online marketing also helps to promote branding as more buyers get branding information and form their perception of a brand through the internet," Zhang said.

But he acknowledged it's still not completely hassle-free, given that the quality of many Chinese foreign trade professionals has remained at a relatively low level and the information technology infrastructure of many businesses remains underdeveloped.

Li Yi, general manager of digital accessories maker Shenzhen Focuses Electronics Co, warned of the difficulties in the process. "Just in terms of online platform operation, there are a lot of rules and 'playing methods' you need to study, not to mention others," he said, adding he has taken a training course to acquire deeper knowledge of the subject.

While striving to bring his company onto the path of digital trade, Li believes the key to being the ultimate winner lies in brand-building.

"In the past, Chinese small and medium-sized foreign trade enterprises had no idea about brand building. They just manufactured products based on the orders they got.

"Now they've come to realize it. Without branding, they've little bargaining power and can only expect a meager profit," he said.

"Digital trade has opened a new channel for Chinese foreign trade businesses to flourish in the pandemic. Creating Chinese brands will allow us to thrive in the long run."