24 February 2012

Why Did DHgate Trouble Troubles in 2011

As extremely cold weather the economic field in the European and American market is also becoming a hot topic worldwide. The victim has extended to some countries in Asia, especially China. In the country, foreign trade has struggled in most months in 2011. According to the disclosure of employees ebrun, in past years, the peak Christmas shopping articles were usually from September while the peak appeared in November last year.

PayPal important partner in China, DHgate, which was famous as the initiator of B2B2.0, met a lot of suffering in the whole year, for example, traffic to the dive site, massive layoffs, recent attack Industry insiders foreigners, etc. But troubles were far more DHgate thereof.

1. Clone items has become a hard to cure cancer in its normal development.

If you search for "phone" on DHgate, you will find many cell phones clone.

According to the survey, there were 1,300,000 kinds of products sold on the site, including counterfeit products occupy 10%. DHgate Some employees told the media that the sale of counterfeit goods on the platform had exceeded 50% although the rate was low. Fake cell phones, MP3, MP4 and other electronic devices with small volumes and the pirated discs, handbags and clothing brand clone, ect, are the most popular.

Clone China wholesale products were once key to the success of DHgate. 2008 The financial crisis has forced many foreign industries to seek methods of survival for new items to their false. The appearance of DHgate perfectly fit their requirements on reducing the risk of the ban and the freezing of account finances. DHgate had its source in that year and became the winner.
However, the false have become obstacles in his path uprising. When China made clone items become an international problem, the partner of PayPal and its main battlefield of marketing Google started to intervene.

As an American company, PayPal tolerance for Chinese counterfeit goods is declining day by day. His "career manager" policy made related people should pay attention to fake products in China. Each year, PayPal will check the products of their partners in China by chance. DHgate under a lot of pressure. The employees at the press: "The busiest time in DHgate is when PayPal check the products of the platform by chance most of the day working staff and night to screen for counterfeit goods temporarily When finishes check, things will recover immediately so as not to influence .. income of the company. "
At the end of 2009, Google banned CO.UK domain names that were used by Chinese companies to sell counterfeit and tightly controlled Google Adwords to buy China. In February 2011, Google launched the Panda plan, which has influenced many Chinese websites of foreign trade, including DHgate for blocking websites garbage.

Counterfeit products are like an incurable cancer to DHgate. This is the contradiction between investors and operators. Investor site force the company to obtain achievements in a short time, so hurry DHgate developed although they know what they sell. However, if DHgate want to be on the market, they must refuse counterfeiting. Although these counterfeit products DHgate interfered and blocked some rank account and password, they get little return. The transformation of DHgate disapproved by the industry.

2. Avoid the declaration of trade brings difficulties to the accounts of decision.

The orientation of DHgate is wholesale trade of small volume. As exports of most products are in small quantities, they are shipped to other countries in the form of "international small package." This delivery method not only avoids detection by customs, but also huge amount of escapes tariffs.

However, the Chinese government improves policy for dealing with such small international packages. The new policy complements the stipulation on the attributes of the internal components of the packaging, method of payment, documentary evidence, etc., refining trade of these small foreign commercial vendors.

In addition, there is a legal risk in this kind of small business. They could not do formal tax breaks and exchange fees that their packets to avoid customs duties, inspection of commodities and other formal procedures of foreign trade. "International small package do not report their trade, he brings difficulties for companies to do, even on their accounts one. This is a problem for most sellers on DHgate." Some seasoned experts of foreign trade said ebrun.

3. China has lost its advantage of low cost products

Throughout China faces dilemma products manufacturers because of the increased value of RMB and labor costs. Many owners of trading companies in coastal cities admitted that 2011 was more difficult than the last 2 years. Many manufacturing industries in third countries around China is growing rapidly, foreign companies grabbing with the Chinese.

Although many countries around the world have more and more clearly their foreign trade, people in China had an experience quite the opposite. According to analysis by industry experts, requests for overseas on daily necessities are increasing. The real factor that blocks the increase of foreign trade in China is falling profits caused by rising cost of labor, materials, and others. Many medium and small businesses abandoned the trade as they could not obtain high profits as before. On DHgate, most sellers are small business people of average height. Some reviews say if DHgate is to survive, they must attract sellers in other countries, to seize their advantage in the manufacturing sector.

4. DHgate face awkward to return to old business models

Dhgate was appointed B2B 2.0 because of its profit model different from Alibaba membership fees. Many experts doubted the development of this model.

A man leading commercial foreign ebrun old said that the 7% commission on each successful transaction has damaged DHgate seller profit no matter it requires the buyer or seller. "In the normal trade, sellers take care of their cost. When their business reaches certain scale, they might not be willing to pay a high commission. DHgate So great would lose customers if they do not solve this problem.

DHgate tried to transform their mode of business in 2008 when the financial crisis erupted. His new company, named "habour manufacturing", charged membership fees on foreign manufacturing. This meant DHgate was back in a B2B. However, most sellers and buyers on the platform are individuals or small companies - they limit the development of the company in the B2B world.
5. Financial difficulties are DHgate, another difficulty.

Some industry analysts that analyzed DHgate is no money for their operation from money due vendor and lay off a large scale. According to reports, until 2010, had obtained DHgate three-time investments of KPCB, JAFCO Asia and Warburg Pincus. The introduction of investment risk accelerated the development of the company, and so did the pressure. After laying off large scale, according to the disclosure of certain media, KPCB has withdrawn investment after carefully analyzing all of its activities DHgate. Although Linqi Ru, which is an initiator and president of Partner KPCB China and TDF VC Investment Fund, held a negative attitude towards the withdrawal, investors lose confidence on the platform.

Compared with the traditional B2B intermediary information, DHgate interfere in the process of trade on the majority. But the limitation makes PayPal they have no real power to control their capital flows. When risks appear transaction, PayPal has the right to seal account to reduce the loss of any degree, influencing capital flows on DHgate. DHgate receives profit from the commission of a successful transaction, making it difficult for them to obtain from the Commission, if PayPal is frozen.
According to the judgment of the industry insiders, breaking the chain of financial DHgate has been known by many people. "If DHgate could not make new investments, they would feel very bad day in the future."

Under the same business model, DHgate-alike sites like Beltal tradetang and face the same problem, but they could earn some development retraction DHgate. Some person ebrun disclosed: "Beltal is the only site in China that have not accepted the VC investment, so they just pressure from the outside of their recent zero commission, which lowers the Committee seller to raise profits and reduce the price of the product, is appreciated. by sellers and buyers. "

6. Alibaba is fighting back.

As we all know, DHgate gave a heavy blow to Alibaba in 2004. But after 5 years, Alibaba has fought back. See the traffic and the following comparison and ranking DHgate AliExpress:

In 2010, Alibaba launched Aliexpress that supports the small volume of foreign trade. Its business model is the same as DHgate. After several months, traffic exceeded Aliexpress DHgate. According to Alexa data, all data Aliexpress grew rapidly in 2011, while DHgate taken much more behind. Alibaba financial reports showed that GMV on AliExpress increased six times a year. Some media have revealed that there were 100,000,000 products on Aliexpress and its traffic was number one among all international online B2B platforms.

Aliexpress obviously more advantages in the B2B world:

* Although they have comparable results by reason that instructs the Committee on the successful transaction, the commission rate is less than DHgate, about 5%.
* Aliexpress stopped using PayPal in August 2011. They offer the user platform Alipay international version as well as other methods of payment such as Visa, MasterCard, Moneybookers, etc. So they have more freedom than DHgate in financial control.
* Aliexpress has an advantage in the design and traffic management source. They benefit not only information exclusively to Alibaba sellers, but also overseas buyers source quality when Alibaba bought Vendio, an American e-commerce application service provider.

7. His new company has met frustration.

DHgate DHgate CEO named Wang ShuTong 2011 layoffs scale "construction adjustment". In the adjustment, Liu Sijun who is a veteran of risk DHgate, was transferred to manage the new company. However, many people doubted the new company.

In April 2011, DHgate launched foreign-stop service of a trade. Although she says the company aims to help lower trade difficulty for small and medium-sized foreign trade enterprises, the new company did not provide to customers is expected to increase. The data showed that traffic DHgate in April increased slightly, but fell back in August and September.

Abortion in the new company DHgate was not unprecedented. In the past, DHgate ready to build a warehouse overseas large scale. However, the project ended like most sellers on DHgate were small companies, even those who could not bear the pressure of storage.

Frustration of new business has influenced the development of DHgate.

8. SMEs trade limits the development of DHgate.

DHgate centers on trade volume of small foreign affairs. But the scale of this market? Vice President of Shenzhen One Touch Business Services Co. Ltd., Xiao Feng denied: "Many people liked to use eBay as an example, but it has only several billion dollars in the Chinese market Small volume of foreign market commerce companies is not so great .. in China. "

Some industry insiders said that foreign trade ebrun bound is very limited, especially petty trading business volume. As a service location business of foreign trade is still vey weak, most home and garden that require the installation and clothes and shoes that have a high rate of change and redemption are actually products and services, sale of bonds. It is difficult to trade overseas to meet. Although e-commerce trade jumps many traditional foreign trade procedures, leaving retailers in China face the industry or consumers directly limit the development of foreign trade.

9. All vendors have the same high quality.

Most sellers on DHgate are individuals or business at home, instead of formal foreign trade business. Wholesale trade is a transaction orders, instead of the transaction in real time. The immature commercial add the risks of violation. This becomes a very negative development for the platform.

10. Marketing methods are limited.

Marketing methods from abroad E-commerce is limited. Many company uses SEO, SEM open market. Google Adwords are widely used by platforms e-commerce in China. But in recent years, the cost increases rapidly PPC. The conversion cost was approximately 5 to $ 10 five years ago, while it reaches 40 to $ 50 recently.

PPC-based e-commerce relies heavily on the finances and the search engine. If there is no problem going on in finance, sales would drop immediately. The current situation, the platforms of many e-commerce vendors and feel hard to pay for their ads.
DHgate has adjusted their marketing method to reduce the cost of the operation. They now move towards SNS sites like Facebook and Twitter. Shutong Wang said: "We plan to build a network buyer social blog in English, micro websites, etc." It is a challenge to DHgate.