The cost rise is too fierce, and there are still three major challenges for small and medium-sized foreign trade enterprises to transform cross-border e-commerce

"Our recent production costs have soared, with raw material prices up 30 to 40 percent. The factory can not ignore it, but can only find other raw materials that are not so affected as much as possible to replace it. ”

As a Chaoshan foreign trade manufacturing enterprise, He Jiayang, general manager of Dongyang Ceramic Manufacturing Company in Fengxi District, Chaozhou City, told First Finance and Economics that due to the impact of the international situation, the energy prices they use in production have recently risen sharply by at least 40%, and this cost accounts for more than 30% of the total cost. This, combined with the recent appreciation of the renminbi, has left them with greater challenges than in the previous two years.

According to data from the Shanghai Oil and Gas Trading Center, the ex-factory price of liquefied natural gas in China has risen sharply since February 7, and the price nearly doubled on March 2.

At a press conference held by the State Council's new office on March 1, Minister of Commerce Wang Wentao said that the mainland's foreign trade pressure this year is very huge, and the situation is also very complicated and severe. From the perspective of demand contraction, the global epidemic is still up and down, the momentum of recovery is unstable, and the external demand market is also facing some uncertainties. From the perspective of supply shock, the supply of raw materials and commodities has still not recovered, and these bottlenecks in the supply chain have not been alleviated, and it is expected that they will be difficult to alleviate in the short term. Judging from the weakening of expectations, problems such as lack of cabinets and lack of labor continue to plague foreign trade enterprises, and raw material prices and freight rates are still maintained at a relatively high level. Especially some small and medium-sized foreign trade enterprises, some of the profits are not very optimistic, but also affected their confidence in receiving orders.

How to find the space to survive and develop under greater pressure and challenges? With the accelerated penetration of cross-border e-commerce under the global epidemic, more and more foreign trade manufacturing enterprises have begun to accumulate experience in the past two years of cross-border e-commerce testing, and are also trying to find new business opportunities.

Testing the waters of cross-border e-commerce to taste the "sweetness"

Although he has recently suffered unprecedented cost pressures, He Jiayang has achieved a continuous 50% annual growth in the past two years. Previously, the annual growth rate was only 10% to 20%. The driving force, in addition to the background of the global epidemic, is also because the young her began to let the family's traditional manufacturing plant open the transformation of cross-border e-commerce.

Three years ago, He Jiayang, who returned to China after graduation, entered the ceramic manufacturing factory founded by his father, responsible for the foreign trade sales and operation of ceramic supplies. Today, all products produced in factories are exported through cross-border e-commerce.

Chen Han, born in 1999, is also a new force driving traditional foreign trade manufacturing enterprises to move towards cross-border e-commerce. As the successor of Shantou Chenghai District Huiye Toys Co., Ltd., he told First Finance and Economics that in recent years, he has begun to do cross-border e-commerce, and cross-border e-commerce business has accounted for 50% to 60% of them, and last year's business volume increased by 40%.

"My parents didn't know much about online operations, but they left us with the ports and resources of the supply chain." In Chen Han's view, what they have reaped is the dividend of the supply chain - about 80% of the country's children's toys are produced in the Chaoshan region, and the local supply chain of this industry is complete and mature.

At the 2022 Cross-border E-commerce (Southeast) Summit on March 1, Wang Tiantian, general manager of the cross-border supply chain of Alibaba International Station, said that from the perspective of industrial advantages, China is a supplier country with distinct industrial supply chain cluster benefits, of which the Minshan region is the export industry with mechanical and electrical, textile and ceramics as the core. However, in the past year, the profits of foreign trade manufacturing enterprises have been under great pressure, whether it is the cost of logistics, the fluctuation of exchange rates, or the cost of compliance services, the superposition of many factors has made the original foreign trade export more certain profit margins appear great uncertainty.

Backed by a strong supply chain foundation, with the help of cross-border e-commerce platforms to shorten the link and cycle, and better develop products and services that adapt to market changes and needs, in the brand establishment to gain greater pricing power and even premium space, has become a way for more and more foreign trade manufacturing enterprises to transform and break through.

Lin Shile, general manager of Fujian Xinshiying Garment Industry and Trade Co., Ltd., has entered the cross-border e-commerce field since 2005. He told First Finance and Economics that cross-border e-commerce has shortened the link of traditional foreign trade, traditional foreign trade is 7 processes, and cross-border e-commerce is 2 or 3 processes, which can make the supply chain obtain higher profits. In the fluctuation of the exchange rate, cross-border e-commerce can also grasp a greater pricing initiative, through product improvement or adjustment of timely price increases, but also let the supply enterprises have a stronger control.

In Lin Shile's view, the biggest advantage of Chinese sellers is the integration of supply chain and the application of capital, and cross-border e-commerce is the initial stage of the internationalization of Chinese brands.

Xie Senchu, the founder of the ADO brand, is an electric bicycle export enterprise, and its own brand products have been exported through cross-border e-commerce since May last year. Xie Senchu told First Finance that through cross-border e-commerce to do branding, pricing power in their own hands, "at the beginning we set the product price at about 70% of overseas local brands, in the face of rising raw material costs, etc., we will increase prices accordingly through the timely upgrading of products", and the impact on profits will not be as large as traditional foreign trade enterprises.

Customs statistics show that in 2021, the import and export of the mainland comprehensive bonded zone, the free trade pilot zone and the Hainan free trade port increased by 24.3%, 26.4% and 57.7% respectively. In terms of emerging trade formats, the scale of cross-border e-commerce and market procurement in the mainland has expanded rapidly, of which the scale of cross-border e-commerce imports and exports in the mainland will reach 1.98 trillion yuan in 2021, an increase of 15%. Since 2017, the scale of cross-border e-commerce in mainland China has increased by nearly 10 times in five years.

In February this year, the State Council approved the establishment of new cross-border e-commerce comprehensive test zones in 27 cities and regions. Up to now, a total of 132 cross-border e-commerce comprehensive test zones have been set up nationwide, which have basically covered the whole country, achieving full coverage of major foreign trade provinces such as Guangdong, Jiangsu and Zhejiang and municipalities directly under the central government such as Beijing, Tianjin, Shanghai and Chongqing.

The challenge of the transformation of traditional foreign trade

What kind of challenges will traditional foreign trade manufacturing enterprises face in the process of transforming cross-border e-commerce?

Wang Tiantian told First Finance that the core challenge of traditional foreign trade manufacturing enterprises is how to gain the trust of buyers on the platform and convert these buyers into customers. In the past, these companies mainly through traditional exhibitions to obtain orders, and buyers will have an opportunity for offline face-to-face communication, and buyers also value the production and manufacturing or supply chain capabilities of enterprises, but now they have shifted to online, to form a transformation needs to strengthen the ability to market and store operations on cross-border e-commerce platforms, in order to better show the strength of enterprises, and as accurate as possible to hit customers.

"Now that foreign trade orders are becoming more and more small, and buyers also have a strong dependence on traditional foreign trade services and are not professional, sellers also need to provide such supporting services and resources through the platform." Wang Tiantian said that in order to better serve the needs of small and medium-sized foreign trade enterprises, the international station has also changed from the original matching platform to a trading platform, and is now being further upgraded to a supply chain integrated service platform.

Hao Jianbin, director of the New Industry Center of Ali Research Institute, believes that it is the growing demand for logistics funds, customs clearance, finance and taxation and comprehensive services in foreign trade of small and medium-sized enterprises that has driven the rapid development of Cross-border E-commerce in China.

He proposed that Ali Research Institute found through the small and medium-sized foreign trade survey done in the second quarter of last year that about 38% of enterprises are facing losses. Among them, enterprises with a transaction volume of more than 30 million US dollars pay more attention to the adequacy of branding and overseas warehouse development, enterprises with transaction volume of 800,000 to 30 million US dollars are more concerned about the risk of taxation in export countries, and for enterprises with a scale of 150,000 to 800,000 US dollars, they pay more attention to the future traffic of e-commerce and the policy risks of exporting countries, while small and micro enterprises with a scale of less than 150,000 US dollars are concerned about the legal risks of exporting countries, while the lack of relevant legal and operational talents.

Secondly, although cross-border e-commerce platforms have stronger aggregation capacity and warehousing capacity than individual enterprises, which can correspondingly reduce the cost of going to sea for enterprises, enterprises will inevitably be affected by the sharp rise in international logistics costs. Therefore, Hao Jianbin said that how to enhance the added value of commodities is what foreign trade enterprises should think about in the transformation.

The third challenge is the complex and volatile external environment, such as rising tax and legal risks in exporting countries or destinations and the increase in protective tariffs under the trend of trade protectionism. All kinds of challenges require foreign trade enterprises to improve their e-commerce operation capabilities while paying attention to issues such as overseas warehouses, logistics and transportation capabilities and payment security in the entire ecosystem.

Chen Han said that the export scale of the company this year is expected to reach more than 500 containers, so he wants to directly sign a contract with the shipowner and lock the space in advance to ensure the capacity and freight rate.

In Lin Shile's view, foreign trade manufacturing enterprises need to have long-term thinking to do cross-border e-commerce, pay attention to their own improvement at different stages, and pay attention to product research and development and localized pre-sales and after-sales service.

"When the reservoir opens, every fish comes down and it's easy to catch." Lin Shile said that during the rapid development of cross-border e-commerce under the epidemic, the quality of services and products that enterprises can provide has not improved, logistics and after-sales are the same, coupled with the rise in sales prices, the overall customer experience is declining, which is not conducive to the long-term development of the industry. After the epidemic, international customers will have higher requirements for quality and cost performance, and the online level of local enterprises in Europe and the United States is also improving, so cross-border e-commerce will usher in diversion.