Seeking out the Customer

January 24, 2011 | By More

The year was 2004. The shareholders of the Beijing YXZZ eCommerce Company (not real name) was at the crossroads – inject new capital into the company or shut it down.

The dotcom bust had been brutal. The company which was founded in 2000 had over 120 employees at the height of the dot com era, with offices in Beijing, Shanghai, Shenzhen and even considered opening another in Xiamen before the internet bubble popped. They were reminising about the offer they had rejected to sell the company to Alibaba a few years ago. What to do now?

The company was located in Yabaolu, the wholesale garment district in Beijing, and the main center for Russian traders for the whole of North China which is everything north of Shanghai. Garment manufacturers all over China know if they do not have a showroom in this district, even a hole in the wall kind, they might as well forget about the market in Eastern Europe. The traders accept only cash – in US dollars. Every evening, piles of cash will change hands and by midnight, the fur jackets or designer suits will be on the way to Beijing airport for a airplane bound for a city in Eastern Europe.

Russian customers window shopping at Yabaolu

The shareholders were smart. They know these Eastern European buyers need a place to stay and so they built a hotel, luxurious by Russian standards but fairly basic for the international jetsetter. They built an online platform in 3 languages, loaded it up all the suppliers around Yabaolu which numbered several thousand and installed access to it in every room in the hotel via a PC. Chinese for the suppliers, Russian for the customers, and English just in case. They had over 20,000 members when the bubble burst.

After a few weeks of investigation, it was clear that: 1) the Russian traders were not really interested in transacting online because they rather like the trip to Beijing as a well earned holiday, and 2) the online platform is well known by most Chinese suppliers, all around China.

Showrooms in Yabaolu wholesale shopping center

The target customer was the wrong one! But who would be?

To answer that, we had to look at a wider perspective. When China was accepted into WTO in Sept 2001, one of the consequences was the removal of export quotas on textiles and clothing. The Multi-Fiber Agreement (MFA) had been put in place since 1974 by the predecessor of WTO called GATT. This severely restricts how many garments can be exported from the whole of China every year. This quota system was to be removed on 1st January 2005.

The expected impact will be an opening of the China market to anyone who wants to buy from Chinese manufacturers – from all over the world, especially the Americas and Europe!   The lingua franca will be primarily English. And these buyers currently do not know the manufactuers are and what they specialise in. They certainly do not know about Yabaolu!

Packing goods ready for shipment at Yabaolu

Once the target customer is identified, the rest is obvious. The primary focus needs to be in English – we dropped Russian. The look and feel needs to be of a standard high enough for the discerning American fashion buyer. We decided not to target European haute couture since they will have their own methods and standards. We can help the majority of Chinese manufacturers to present their capabilities and products in a simple contemporary ‘western’ style.

We also had to understand the western tastes for fashion and what is the season’s fashion. To do that the team had to track fashion trends worldwide, attend fashion shows and keep in touch with all the gossip pages.

We decided the homegrown platform would be inadequate and found a technology provider who could do the job. The plan then was to provide a full service to build customised online stores for each supplier, advice what types of products to put online and take photos if needed, and be the first line of contact for all enquiries – all for a small price.

The online site quickly became the standard for other Chinese wannabes.

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About the Author ()

EngTong, pioneer and innovator. Graduated from Imperial College London with an MBA from Cranfield School of Management. Lived in Scotland, England, California, Beijing and led teams in Italy, France, Japan, Taiwan and Malaysia to do the impossible. Now based in Singapore and believes the future is to blend the sophistication of western management practices with the strength of Asian Values. Trained as a Chartered Engineer. Member of IET, Associate of City and Guilds and a certified SixSigma Champion.

Comments (4)

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  1. neon says:

    What is GATT?

    • Error: Unable to create directory uploads/2018/12. Is its parent directory writable by the server? ET says:

      GATT stands for General Agreement on Tariffs and Trade, formed in 1949 and replaced by WTO (World Trade Organisation) in 1995.

  2. arthur says:

    This can be a good case study for MBA students. thanks

    • Error: Unable to create directory uploads/2018/12. Is its parent directory writable by the server? ET says:

      You are welcome.