Despite this, Zhao Ping, director of the international trade research department of the Academy of China Council for the Promotion of International Trade, suggested the small commodities market in Yiwu should put more effort into exploring the domestic market and take both markets into consideration as overseas demand could continue to decline.
The current situation makes it more urgent for Yiwu’s small commodities market to conduct more business online. Some business owners in the YITM said they have felt the squeeze from cross-border e-commerce in recent years, and the pandemic aggravated the situation. Without an online shop, Chen Ailing said she noticed the impact of e-commerce in 2014, when her annual transactions contracted by 20 percent to 8 million yuan (US$1.14m).
“The internet is making the market more transparent,” said Chen Ailing. She said that people can directly contact purchasers via cross-border e-commerce platforms to get orders and then find factories to produce the goods they want. Foreign buyers can also buydirectly on e-commerce platforms if their orders are small. “Offline transactions do not have an obvious price advantage either. Losing orders is inevitable,” Chen said.
Between 2011 and 2016, YITM’s trading volume rose from 45.6 billion (US$6.5b) to 110.5 billion yuan (US$15.9b), but its share of the city’s total transactions dropped from 43 to 35 percent, which shows the market’s weakened role in absorbing resources and in foreign trade under the decentralizing effects of e-commerce. Despite YITM’s expanded trading volume, growth slowed between 2014 and 2018, dropping from 25.5 percent to 10.8 percent.
Fan Wenwu, vice director of Yiwu’s market development committee, said Yiwu was early in developing cross-border e-commerce. “But wholesalers in the small commodities market are not the main users.”
Jia Shaohua, former vice president of Yiwu Industrial & Commercial College, said wholesalers in YITM felt the pinch when e-commerce bloomed around 2009, but it was not until 2013 that their sense of urgency grew. Some sold both offline and online.
Li Xiaoli, a shop owner in the market, first tried cross-border e-commerce in 2014. Now 40 percent of her foreign trade is online. She had to sell one of her two stalls last year, at a price half that of 15 years ago, as offline business declined.
Shopping site Yiwugou was built for the market in 2012, but it only lists product photos and prices. It does not process transactions. Most purchasers still buy in brick-and-mortar shops.
Zhang Jinyin, a regional manager in Yiwu of Alibaba.com, Alibaba Group’s platform which focuses on expanding business for foreign trade companies, said the platform had about 7,000 registered vendors from Yiwu, but those from YITM accounted for only 20 percent.
This situation is about to change. According to Zhang Yuhu, since March the ZCCCG has been building a digital platform named Chinagoods for online transactions. It will provide services to cover the entire chain of trade from placing orders to the transport and clearance of goods.
In June, the Yiwu government and Alibaba Group announced they will develop a digital comprehensive bonded zone and an eWTP (Electronic World Trade Platform, a framework of Alibaba aiming to boost cross-border e-commerce) trade service platform for Yiwu, to make cross-border e-commerce more accessible to small- and medium-sized enterprises in the city, a year after the two partners agreed to launch an eWTP hub in Yiwu. This is expected to speed up the shift to e-commerce for the world’s biggest small commodities market.
As livestreaming has boomed in Yiwu, after this Spring Festival, the ZCCCG also built more than 200 free livestreaming chat booths in the market and organized training for the shop owners, encouraging them to sell in this way. But NewsChina saw only a few shops doing this in the market.
Not all goods are suitable for livestreaming, said Zhang Yuhu, because products like large mechanical equipment and zippers are hard to demonstrate. The narrowing profit margin, unsustainable flow of incoming orders and impracticality of demonstrating goods prevent livestreaming from being widely used, experts said.
“[Yet] it is inevitable that offline transactions will continue to decrease as the small commodities market develops an online presence,” said Chen Zongsheng, a professor of economics at Nankai University in Tianjin.
Zhang Kuo, general manager of Alibaba.com, said that physical stores will only function as demonstration spaces. Some worry that even physical exhibition halls will become unnecessary as virtual showrooms are easy to set up.
But Zhang Yuhu believes that it is not possible for e-commerce to totally replace the brick-and-mortar market. “Physical stores are necessary, at least in the near future. Seeing is believing. Foreign buyers still regularly visit Yiwu several times a year. Besides, regular offline contact helps maintain a good seller-buyer relationship,” said Zhang.
Envisioning the small commodities market’s future in e-commerce, Yiwu boasts a remarkable edge with its sound supply chain and logistics, Zhang Jinyin said. All the links of the trade process, from shipment and clearance to quarantine, can take place within a five-kilometer radius in the city. The express delivery fee there is five times less expensive than other places in the country. These advantages, which have boosted traditional transactions, are expected to facilitate its online transition.
But its weaknesses are also obvious. Compared with leading cross-border e-commerce cities like Shenzhen in Guangdong Province and Hangzhou, a tech hub just 130 kilometers away, Yiwu falls behind in talent and big influential e-commerce companies, Fan said. In the city, which does not have a university, for example, people who engage in e-commerce are usually from junior colleges, while many of their counterparts in Shenzhen and Hangzhou have postgraduate degrees. It is one of the gaps the county-level city will need to overcome if it is to catch up and transform its sales model.