360HQB offers a wide range of e-commerce products and plans to sell electronic components soon. Lin Jing / China Daily

Online platforms to help merchants deal with changing market trends

The white board with the inscription "8-11, 2011-2021" in his office is a constant reminder for Wang Laobao of what he needs to do to achieve his dreams.

"It means getting up at 8 am and sleeping at 11 pm. Over the next 10 years, I will stick to that schedule to store up energy," Wang says. His enthusiasm is directed at his dream of moving Huaqiangbei's business online.

With an area of 1.5 square kilometers, Huaqiangbei, a business district in Shenzhen, has become a hub of electronic products in China.

"I have seen the potential of e-commerce, but some merchants in Huaqiangbei still do not feel the need for it. That is why I decided to come up with the idea of taking the whole business online," says Wang, chairman of 360HQB, a local e-commerce website.

The website was launched in November 2011, with an initial investment of 100 million yuan (12.1 million euros; $16.1 million). The site has 3,000 online merchants and 250,000 registered members.

Explaining the differences between 360HQB and other e-commerce giants, such as 360buy and 51buy, Wang says that like others 360HQB also offers a wide range of products. "But our advantages lie in the access to the tens of thousands of physical stores, big scale of offline sales, various suppliers and mature logistics," he says.

"The key officials at 360HQB have been doing business in Huaqiangbei area for over 20 years. They have a sound knowledge of the market and the products. We are able to source the products locally within a minute of the order being placed online. This convenience cannot be found elsewhere," Wang says.

But Wang admits that the current scale of business is not big enough. "Till now we had only 3C (computer, communication and consumer electronics) products available online. We want to scale up to electronic components, which is the traditional business of Huaqiangbei," he says.

Zhang Yang, manager of the electronic components division, says a new line of products will go online as soon as the platform with local dealers is finalized.

"Our platform aims to integrate the distribution channels and buyers. Physical stores will soon be a thing of the past and will gradually become exhibition and display centers," Zhang says.

Moving the business online is advantageous for growing sales as buyers no longer need to be present physically to source the product.

With concerns about copycats and fake products jeopardizing the reputation of Huaqiangbei, platforms like 360HQB have begun to put extra emphasis on quality control to ensure the veracity of their products.

Liu Xuehai, vice-president of 360HQB says the platform has roped in professional buyers to conduct quality checks and also charges a security deposit of 30,000 yuan from merchants to rein in copycats.

Besides being the chairman, Wang is also an active deputy to the Shenzhen Municipal People's Congress. He recently proposed the local government publish more stringent rules on phishing websites, which look like real e-commerce platforms, that defraud online shoppers of their payments.

"These websites will ruin the reputation and normal operation of e-commerce and should be punished severely."

Wang's reputation precedes him in Huaqiangbei. He is know as the "Godfather of Huaqiangbei" for his contributions.

"I believe more in action. There is not much to talk about given that I have not achieved anything yet," the 40-year old Wang says.

It is not an exaggeration to say that he has witnessed the ups and downs of Huaqiangbei in the past 20 years. Wang, a Shantou native, started his own electronics business in 1987 when he was just 15 years old and set up a small store in Huaqiangbei in 1991.

At first, he sold radios and black-and-white televisions from the Huaqiangbei shop. His business philosophy was quite straight-forward. "People need to believe in dreams, otherwise, they will lack enough confidence to keep going."

According to Wang, though it is not easy for Huaqiangbei to change, steps like e-commerce would help make the transition faster.

"The Internet is the future and the future of Huaqiangbei," Wang says. "Most of the sales will come from online transactions. The street will be weeded out if merchants do not actively participate in this exercise," he says.

Wang says that rising rents and stiff competition will also prompt more companies to go online. "The physical stores can be kept as an exhibition and display center, while the online platforms can route more traffic and orders."

360HQB expects to post sales of 5 billion yuan this year and 10 billion yuan in 2014. He says that the platform is like a small child that needs care, money and guidance.

"The current annual sales in Huaqiangbei area is roughly 300 billion yuan. Even with just 10 percent online transactions, the transaction amount can be huge."

The website does not charge any fees from online merchants, because the gross margin for merchants is only 5 to 8 percent. "If we charge fees, they will not join our platform."

Their platform plans to optimize the business model in the first two years. It has teamed up with lenders to offer financial services for middle- and small-sized merchants.

"Cooperation with banks and providing financial services to qualified merchants, will be one future direction of the website."

Wang says that at present, the website still relies on Huaqiangbei street for most of its business. In the next stage, the platform plans to set up more physical showrooms in first-tier cities, where buyers and consumers can experience the products and place orders online.

He says that the company still needs to work for another five to 10 years, before they could achieve that.

"It would be ideal if I could succeed. If not, I can still be regarded as the first one to dip my toes into the water."

(China Daily 03/08/2013 page18)