The Chinese market is hugely important to the electronic component industry, but isn’t usually mentioned in the context of e-commerce. We talked with Sourceability’s Director of Sales in China, Stan Foo, about why and what we might see from the Chinese online market in the near future.
China is one of the leading countries for Internet industry. We have our own Google (Baidu), Amazon (Alibaba/Taobao), and Facebook (WeChat). We have even more in the B2C area; for example, JD.com and VIP.com. When talking about B2B, however, in general China has catching up to do.
Two decades ago, Alibaba was one of the leading B2B platforms linking Chinese sellers and overseas purchasers. Now, it’s still Alibaba. There has been no obvious progress. It’s also difficult to find individual components or sub-assemblies. You can buy any type of mobile phone from Chinese B2C platforms and you can buy a standard battery for mobile phone assembly from Chinese B2B platforms, but when your demand is a screw or electronic components your online sources are limited.
China is strong on vertical B2B with specific products, usually those related to major Chinese industries. For example, for steel raw materials we have zhaogang.com. EHSY.com and zkh36.com are platforms for MRO products (Maintenance, Repair & Operations, such as the tools and labor protection products factories use). EHSY.com is particularly interesting since it is one of, if not the only vertical B2B platform in China that can link their system to customers’ factories’ ERP systems. [Ed note: Sourcengine also has this functionality and is now available globally.]
China wants to increase its share of the e-commerce pie and go beyond the existing, mostly Western-owned internet giants. How? In the IC design field, there is a focus on AI chips. In IC manufacturing, Chinese companies are starting to build factories for memory chips. In the distribution field, though, traditional distribution (franchise and broker) are largely still as same as before.
Several years ago e-commerce was the hottest topic about distribution in China, and more than 100 e-commerce platforms appeared in the marketspace. None, however, surpassed the already-existing industry leaders. Common difficulties included running B2B platforms like B2C platforms (asking customers to pre-pay), non-immediate online transactions, and a lack of support for lead times.
It will likely be a while before China has an e-commerce giant of its own, but probably not many more years. China’s “computer generation” (people born in the ‘80s and ‘90s) is moving up in the business ranks, and these are people who are used to and comfortable with buying things online. They’ll push companies forward to develop better online platforms. The biggest question is just when.
This article was written by Stan Foo and edited for publication by Lisa Cooper. Featured graphics by Ashley Hawthorne.