Where will the E-commerce in China end up after the pandemic? -Focusing at Yiwu, the city of E-commerce, during the COVID-19

By Haixiao Shen, Yikyeung Lam and Xing Gao

Yiwu, the “supermarket for the world”, has suffered from the epidemic and experienced an “economic crisis”. However, many parts of Yiwu and its citizens have survived relying on their outstanding entrepreneurial ability. Speaking of daily shopping, online purchases are gradually dominating the Chinese market. In the past few decades, the world has witnessed the colossal blossom in the internet economy in China, especially in Yiwu: one of the most developed cities in the e-commerce domain. Since the wind of the internet first blew into China, Yiwu was never left behind. There’s no doubt that this city is the pioneer and epitome of the economy of the whole of China.

Despite its late start in the e-commerce industry, China has experienced various paths of e-commerce development. Looking at Yiwu, after the formation of Chinagoods.com in 2012, the flourish in e-commerce ensues. Within 2 years, the turnover of e-commerce exceeds that of the small commodities market, which is a great success. In 2019, the turnover of e-commerce in Yiwu alone reached 277 billion. Moreover, in recent years, some new ways of online marketing arose. For instance, off-line exploration stores and influencer marketing. Owing to the impact of the epidemic and some successful cases(e.g. Jiaqi Li), influencer marketing has become an extremely popular pie that every company would not let lose the opportunity of grabbing a piece of it. Even some normal people with merely a 2-digits number of fans are trying to make something out of it.

This paper utilizes the first-hand interviews and field research findings to the full to present a thorough perspective of how various kinds of E-commerce have influenced Yiwu.

Live streaming advertisements can be seen everywhere in the “First Village of live streaming – Beixiazhu”.

Traditional E-commerce: online shopping

The history of Chinese E-commerce could be traced back to the foundation of Taobao–an online selling platform that allows merchants to settled. Afterward, varieties of E-commerce platforms emerged. For instance, JD, Vipshop, and Yiwugo. Comparing to traditional offline business, E-commerce executes transactions on the internet, which eliminates the information gap. Shoppers can easily compare prices and qualities of the same commodity from different vendors to prevent themselves from being overpriced. Meanwhile, it aims at a wider range of customers and enables users to buy anytime, anywhere.

After years of development, E-commerce has merged with the real economy and has been an inalienable part of the whole market. Nowadays, in Yiwu, E-commerce has been entrenched in merchants’ communities. Although most of their sales are still offline, every vendor in the town now runs an online store on the website called Yiwugo. Those online stores bring more renown to their offline stores and provide more convenient channels for people who are not able to purchase offline. According to a merchant, Mr. Gao, in Yiwu small commodity market, he has been doing business here for 15 years, he started to realize how perfect on and offline stores can cooperate in 2013. Time has proven his point: during the epidemic, while other merchants around were frustrated to find a way to support their families, Mr. Gao went on doing business with people from all around the world.

However, online shops have become the “traditional” part of the e-commerce world. New forms of e-commerce keep popping up and turning down, such as WeChat e-commerce, which is a miniaturized form of e-commerce that completely relies on the social interaction between people to present products’ information and finally reach transactions.

The updated iteration speed is faster than before, and the WeChat e-commerce is gradually weakening. Turning down does not mean disappearance. WeChat merchants choose to be the commodity supplier behind the scene. “Our boss owns several factories; he supplies goods directly from his factories to the streamers’ team. This ensures that the price is at the lowest possible, the massive quantity of goods gives the boss enough profit to keep on. Some people say WeChat merchants are already out of the market, but the truth is, no.” According to Mr. Tu, WeChat E-commerce is not only fine but becoming an essential component in the whole online marketing system.

Content marketing of E-commerce: Short videos and live streaming

Short videos act as an important role in streaming live marketing, but it is not easy to produce popular videos. Creating a piece of video or a series of them is extremely time-consuming and money consuming. According to Mr. Liu who was working in the E-commerce town in Yiwu, “a perfect targeted video is bounded to a professional team, including editors, directors, actors, photographers, and post-production technicians”. Considering the difficulties, platforms are using policies to support original creators. By bringing them additional views for free. However, having a large fan base is not the final object. Some of the audience are simply interested in the content of the video but do not have purchasing capabilities.

Live streaming is another commercial form that linked short videos and the market tightly. Live streaming was originated from 2016, it began with nothing related to business, at first it was mostly gamers. Later in 2019, as a product of the epidemic, live was first used as an assistance for selling products. A new service method of using live broadcast technology for online commodity display, consulting and answering questions, shopping guides, and sales.

Yiwu’s local government has offered huge support for those who are interested in doing business through the streaming way. A proposal published by the Yiwu government in 2020; Yiwu planned to build 10 E-commerce industry belt in three years, cultivate 100 leading streaming companies, a thousand famous brands online, and ten thousand famous streamers; trying its best to break through a hundred million yuan of turnover before 2022. The main administrator of a live broadcast training center, Mr. Zhu, told us “Everyone is encouraged to come here and learn, he or she needs to pay the tuition of 900yuan at first to get a four-day course, what makes it special is that after you finish the course, the government will return the 900 yuan to you with a certification.”

The Job Ads in the elevator shows that 639 live influencers are working in the e-commerce industrial park.

Many people from the various background are joining the streaming live marketing simultaneously. As we visit the Yiwu import commerce center on July 21, 2020, the staff were working together preparing the incoming live in front of a pile of commodities that are about to sell. They were busy discussing how they were going to promote their products and carefully writing down the prices, components, and specialty about them. Later life started, they warmly greeted the few numbers of audiences on the other side and advertised how cheap their products are. Many live streaming participants firmly believes the market has a bright and sustainable future. “Live streaming will be a big trend in the following years, and nothing can replace it.” The president of the Yiwu talent incubation center, Mrs. Wu said.

Some types of products are particularly popular in live-streaming marketing. For example, cosmetics, skincare, clothing, and food are particularly popular in live-streaming marketing. According to the research of Zhigua Data, in the fourth quarter of 2019, the perfect diary, which featuring low prices, took the top spot of the hot-selling list, followed by Baicao Taste, Three Squirrels, and Bestore’s gift bags of nuts.

The targeting market for live streaming is different from many other forms of e-commerce. This can be attributed to the potential of the Xiachen market, the market positioning in China’s less-developed urban centers, and rural areas. The third tier and lower cities already account for 59% of China’s GDP, and these users have more leisure time to watch live streaming. Plus, most of the bestselling products are priced within 100 yuan, with a profit of only one or two yuan per order, but with the huge volume of orders, merchants still make considerable profits.

Interestingly, some high-end products also enjoy good sales on live streaming. Mr. Zhang in Yiwu’s live training center revealed that one of his students who sells ceramics has taken this unusual path of selling high-end products. “Even if only one person out of hundreds buys it, they can still make money, because their profit per purchase is high enough,” he said. Moreover, some high-end products also benefit from live streaming as a marketing approach. Mr. Ji, a red wine businessman, admitted that the quality of the low-price red wine sold on live streams is difficult to guarantee; and the middle and high-end red wine doesn’t sell well on the live broadcast With considerable offline business revenue, he still decided to follow the trend. He is developing a WeChat small program to do live-streaming and cultivating 30 or 40 anchors to introduce the knowledge of wine. He believes that live streaming can bring them better public praise and greater fame, while it may not bring much short-term interest.

Live streaming marketing has several advantages. First, it creates a stronger interaction and affinity than traditional E-commerce. Customers can communicate with sellers or even bargain with them just like they do in a shopping mall. Second, fiscal speaking, it can always achieve the lowest price on the whole network. It bypasses the traditional intermediary channels such as distributors and directly builds the connection between goods and consumers. due to the almost ignorable price starting a live cost, it creates jobs and offers opportunities for most of the people who want to enter the field.

On the other hand, the negative impacts are coexisting. First, many influencers use fake propaganda and poor-quality goods to fool the audience. Second, it creates some cutthroat competition. every vendor was trying to put their price to the lowest to attract customers and even without considering the average variable cost. Third, some political cadres use the broadcast studio as a show field, not only the views were faked, they even cooperate with streamers to do cyber fraud. This kind of self-deceiving grandiosity deviates from the original intention of doing practical things for the people and becomes a new formalism of showmanship and ostentation.

Offline exploration stores

The offline exploration store of Netease, one of the most popluar e-commerce platforms in China. Source: user zephyr0609 on Meituan

Off-line exploration stores, a newcomer in the market, the combination of online and offline marketing. This style of vending has never been seen throughout the whole history of business: these stores are usually subsidiary corporations of popular e-commerce companies such as Netease, TMall, and Alibaba. These stores brought popular commodities purchased on these platforms into reality and people can touch, see, smell, and feel them. This ensures the customers what exactly they are purchasing. The customers cannot purchase the goods in-store and take them home immediately, they can scan the QR code beside the object they wanted then purchase it online.

According to Mrs. Bao, the clerk of the stores, there are two major kinds of customers who often frequent the store: purchasing agent from business and normal people. Most customers are still ordinary customers. Generally, people still consider it as a high-risked way of marketing. First, the E-commerce platform must be popular enough to attract customers into the shop and to supply the goods customers needed. Second: the profit made can hardly match the cost it brings, such as the rent for the stores, the salary of clerks, etc.

China is a melting pot of various distinct E-commerce industries. Under the impact of the epidemic, different types of e-commerce have been promoted and changed to some extent. Especially content-based E-commerce with live streaming as an outstanding example, they are at the forefront of the industry. Live streaming undoubtedly has derived and stimulated a large part of the market. But given this intensity of competition and risks, further researches and wait-and-sees are needed to ensure whether its potential was overstated, and how it will develop in the incoming decades.

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