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SMEs going online to survive crisis

By Hu Yuanyuan (China Daily)
Updated: 2009-01-12 07:56

Zhang Liang, a sales manager at Yiwu Rongzhi Toy trading company, recently spent much more time online seeking new business partners.

After Zhang's US buyers reduced their orders by nearly 80 percent in October, he has been exploring the domestic market.

"We usually seek overseas customers at the Canton Fair, but the traditional way didn't work well this year," said Zhang.

With the financial crisis crunching western consumers, the peak December holiday season for toys and gifts didn't come as expected this year, Zhang added.

Zhang is not the only businessman seeking new business opportunities online. As the global financial turmoil has squeezed China's exporters, more small and medium enterprises (SMEs) are now trying online marketing to survive.

Special Coverage: Coping with Financial Crisis Related readings:  China lowers threshold for bond market entry  SMEs and banks at loggerheads over loans  SMEs scouting for ways to remain in business  SMEs to receive loan support

Xu Xiangjun, general manger of a Ningbo-based wallet and purse exporter, is also thinking the same way.

He set up his own website in 2003, but he is now considering putting the company's website link on a third-party platform to increase the number of visitors.

"Doing business in the past few years wasn't so difficult because we have several fixed overseas buyers. So, the company's website is only used as a reference for our products and background, instead of a major means of marketing," said Xu. "But now we do need the website to attract more potential buyers."

Xu just joined the "yipage" at yidaba.com, an online information book of enterprises. So when Xu's potential customers log on the website, they can easily "google" them.

According to Lin Juanru, general manager of Yidaba.com, the number of visitors to www.yidaba.com.have jumped by nearly 20 percent in the past few months, signaling that SMEs have a growing demand for professional B2B services.

Analysys International, an advisor of technology, media and telecom (TMT) industries in China, said in its recent report that China's online B2B market (delivery value) reached 1.299 billion yuan in the third quarter of 2008. And the quantity of China B2B registered accounts is 58.011 million, representing a 10.1 percent increase quarter on quarter. The paid accounts also went up by 7.4 percent on a quarterly basis, reaching 572,300 at the end of September.

Analysys International defines B2B business as marketing activities conducted by the third party service providers that allows business partners such as buyers and suppliers to obtain or communicate information about their products and services via online platforms or offline ones such as trade shows or print publications.

Currently, the country's major online third party service providers include alibaba.com, hc360.com and yidaba.com.

"Attending a four-day middle-scale expo usually cost us 30,000 yuan, and opening an online shop on professional B2B websites needs some 50,000 yuan for one-year. In such an awful market, we have to rely on both," said Xu.

What Xu likes about yidaba.com is that he can exchange ideas with lots of counterparts and industry experts in the online chatting room at the website. Meanwhile, the website also holds regular offline seminars, thus enabling Xu meet more business partners in the industry and gain more business opportunities.

"What SMEs need from the online third party website is not orders, but also industry information, marketing and management skills and business communications," said Lin.

For instance, securing a batch of orders online also means that more rivals would follow suit and thus possibly trigger a price war. Also, too many orders in a short period of time may also lead to a cash-flow problem if the company can't manage its receivable accounts well, she explained.

When more SMEs are resorting to the B2B services providers to fend off the plight, those websites are also striving to sharpen their core competitiveness.

"Alibaba.com and hc360.com are very strong in offering demand and supply information, but we are more focused on offering services to help SMEs' to grow, such as giving industry information and in-depth analysis," said Lin, adding the market still has huge growth potential.

In the country's Eleventh Five-year Plan (2006-2010), it is predicted that the proportion of SMEs that frequently use e-commerce will grow from 2 percent to 30 percent.