Hong Kong Tech Investor on China’s B2B Market - Part 2 (GSOL, EBAY, YHOO, Alibaba)

Two weeks ago Hong Kong technology investor Brent Suen provided an overview of China's B2B market. In the following article Suen highlights recent accomplishments of one of his investments Tradeeasy (HKSE – 8163) which facilitates trade between China / Hong-Kong suppliers and buyers worldwide. His comments have implications for Global Sources (ticker: GSOL) and Yahoo (ticker: YHOO) partner Alibaba:

In late August, Tradeeasy (HKSE – 8163) and Sitoa Corporation a San Mateo, CA based developer of the Sitoa OneSource direct delivery model, partnered to form a joint China Direct program. This new program links Greater China small-to-medium enterprise (SME) suppliers’ products directly to US online markets via Sitoa’s multi-channel OneSource network.

The partnership provides the first true direct connection between thousands of greater China suppliers and U.S. markets, enabling the suppliers to place their products directly in front of potential U.S. customers. The companies utilize the natural synergy between Tradeeasy’s network of 3,000 Asian suppliers and Sitoa’s OneSource direct delivery model to bring value-priced, high quality merchandise to the U.S. marketplace.

The first online B2B transaction from a major US retailer/customer of Sitoa was initiated last week via the platform and the two companies fully expect to scale up rapidly.

This is the first of many online B2B transaction initiatives that Tradeeasy is pursuing, and there will be many exciting developments to follow….

That being said, the company is no longer under the radar screen and will probably be under pressure from others who have larger resources and greater access to capital:

Alibaba and Global Sources (ticker: GSOL) currently operate portals based on advertising and listing fees but neither are engaged in actual online transactions where a transaction fee is charged. Alibaba, no doubt, will implement one within the next year and Global Sources formed a strategic alliance with eBay (ticker: EBAY) to assist China suppliers with selling products thru eBay.

There are several challenges that still exist in order to conduct seamless trade:

• Most SME’s are reluctant to ship goods for warehousing outside of China. So deposits or partial/full payment is currently required.
• Furthermore, the initial orders of non-branded goods are usually tests to see the quality, customer acceptance and overall value. This can also pose challenges in that the order size is smaller than normal and the shipping costs can eat into margins creating inability to be competitive against goods accessed thru wholesalers.
• Then there are the challenges that arise from returns, defects, and non-working products. Inventory must be maintained and then adequate staff must be on hand to fulfill.

As with any emerging market, challenges arise – mostly it’s the giants with global presence that end up winning. Sometimes, smaller more nimble companies can take the lead. Time is the ultimate test though.

Related:

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