Cross-Border Service Provider in the Xiaomi Way

In the ever-evolving landscape of global commerce, the drive toward cross-border e-commerce presents both significant opportunities and daunting challenges for manufacturers, especially those in China. This phenomenon is at the forefront of discussions among business leaders, particularly in a series of interviews that aim to illuminate new perspectives in the world of consumer behavior and retail. As we delve into the essence of cross-border e-commerce, we will explore the insights shared by industry pioneers, such as Lan Youyang, the founder of Haibi E-commerce, who emphasizes the transformations within this dynamic sector.

According to recent calculations by the General Administration of Customs, Chinese cross-border e-commerce is experiencing fruitful growth. In the first three quarters of 2024, imports and exports reached an astounding 1.88 trillion yuan, marking an 11.5% year-on-year increase—significantly outpacing the overall foreign trade growth of 6.2%. This surge is a testament to the ongoing globalization wave, which has more and more Chinese factories and brands redirecting their attention towards the vast arena of e-commerce.

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However, venturing into the realm of cross-border commerce is not without its trials. The stark contrast between traditional foreign trade systems and the agile, tech-driven nature of e-commerce complicates matters further. Particularly for small to medium-sized factory owners, the transition from business-to-business (B2B) operations to direct-to-consumer (DTC) models requires an overarching grasp of the retail landscape and a nuanced understanding of consumers who might be halfway around the globe. Lan Youyang poignantly remarks on the pervasive mindset among many manufacturers, who have spent decades entrenched in the established OEM (Original Equipment Manufacturer) and ODM (Original Design Manufacturer) frameworks, as they struggle to adapt to the demands of the modern marketplace.

Over recent years, the narrative surrounding cross-border e-commerce has shifted from one of basic, broad-margin endeavors to a more refined, competitive space where only the most adept players thrive. As the founder of a professional global brand management organization, Lan has led Haibi E-commerce through a journey of nurturing multiple billion-dollar brands over the past decade. He expresses a visionary goal: to cultivate twenty brands achieving over one hundred million sales in the next three years. Yet, he warns that time is of the essence for Chinese manufacturers to adapt or risk obsolescence in a landscape dominated by professional entities with a firm grip on all critical aspects of e-commerce—from cost management to technical capabilities and marketing strategies.

The competitive environment is further exacerbated by globally synchronized events such as the "longest Black Friday in history." This annual shopping extravaganza puts immense pressure on teams like those at Haibi E-commerce, who must meticulously organize inventory, calibrate prices, and strategize sales initiatives to ensure their partners thrive amid heightened competition. This urgency reflects a harsh reality Lan articulates: a staggering 80% of traditional factories may find themselves out of business due to excessive competition and inability to shift gears.

Reflecting on the panorama of cross-border e-commerce, it’s important to recognize the historical context that has led us here. Lan’s foray into the industry began ten years ago when he walked away from a longstanding role supplying major international retailers like Walmart and IKEA to establish Haibi E-commerce in Fuzhou. As cross-border B2C ecosystems started to form domestically, supportive regulations began to roll out, including the landmark Customs regulation known as Document No. 56, which propelled the industry into a more structured phase.

Despite these advancements, traditional foreign trade models have faced ongoing challenges, not least of which is an intensified competitive landscape. Early players engaged in OEM and ODM faced diminishing orders and declining profit margins. Lan, having spent five years immersed in foreign trade, recognized these shifts and the difficulties plaguing many manufacturers. He observes the paradox; despite generating substantial revenue from overseas sales, profits for these factories often amounted to a mere fraction—less than 10%—of total product earnings, leaving many hesitant to establish their own brands.

Transforming the landscape necessitates a pivot toward the retail side of things, as manufacturers leverage e-commerce to create and nurture their own brands. This transition is critical against the backdrop of a global manufacturing industry increasingly oriented towards high-value goods and services. According to Lan, the harsh reality is that only about 5% of domestic manufacturers possess genuine R&D capabilities, while another 15% are driven by client demands, leaving a staggering 80% vulnerable to decline amid price wars and market pressures.

For manufacturers aiming to thrive, establishing technological barriers and developing proprietary brands are becoming crucial imperatives. Even prior to the pandemic, trends suggested a slowdown in foreign trade, but the onset of COVID-19 led to a surge in demand for Chinese manufacturing as global supply chains faced disruption. As international markets regain footing, traditional factories face renewed existential threats.

For those long steeped in B2B operations, the journey toward retail and e-commerce presents a steep learning curve. The lack of experience in product development tailored for consumers, alongside the high costs associated with cultivating a talent-rich team capable of navigating cross-border nuances, adds to their challenges.

In the midst of these changes, Haibi E-commerce has been refining its methodologies to bridge the gap between manufacturers and the consumer market since 2018. Transitioning from simply being a seller to a service-oriented entity, Haibi aims to empower manufacturers by sharing the expertise they have developed over years of research and practices.

The process of transformation for traditional foreign trade factories is decidedly turbulent. Lan expresses the sentiment that many manufacturers must be willing to ‘lose an arm to survive.’ He cites how, in the wake of competitive pressures, several factories have begun pivoting their business models toward cross-border operations as early as 2014. As the years progressed, many lagged while remaining cocooned in comfort zones built over decades, a glaring signal that their transition is increasingly overdue.

The disparity in operational logic between traditional B2B foreign trade and contemporary cross-border B2C models is monumental. Order volumes that once seemed stable under traditional structures now feel fickle and dispersed. This new operating model introduces the necessity for agility and quick response to shifting consumer demands—a concept referred to in the industry as dynamic production. Lan emphasizes the revelations drawn from interactions with transitioning companies; the fundamental challenge often lies not just in embracing new operational protocols, but in altering their ingrained mindsets as well.

One area of particular concern is the visual presentation of products. Cross-border e-commerce requires significantly higher visual standards than traditional retail; superior imagery and design directly correlate to conversion rates. Yet many manufacturers remain reluctant to invest in quality visuals, like high-quality photography and videos, viewing them as expenses rather than necessary investments. They tend to prioritize advertising spend over foundational product presentation—a misalignment in focus that Lan has keenly noted.

As the sector matures, the reality remains that transitioning foreign trade factories must develop cost, technical, and marketing barriers to remain viable. Lan posits an elevated 'passing score' for survival, asserting that businesses now need to achieve a benchmark of 80, compared to the previously acceptable level of 60.

The narrative of competition has also shifted; where once companies were battling in an era defined by operational efficiencies, the coming decade will challenge them to deploy robust product strategies and brand building. As the market landscape evolves, players who fail to adapt may find themselves increasingly at risk of being weeded out. The convergence of capabilities across various functions—be it product development, visual marketing, or supply chain efficiency—has become non-negotiable for success.

Haibi E-commerce has approached its operational blueprint by segmenting its organizational structure into distinct operational centers dedicated to data, products, operations, and marketing, reflecting a commitment to holistic management of the e-commerce value chain. This shift showcases their intent to integrate deeply into the manufacturing process, engaging with factories right from product development stages to ensure success.

Differentiating itself from conventional sellers and service agencies, Haibi emphasizes tangible results in niche sectors, focusing on building long-term brand equity rather than merely chasing quick sales. Lan’s approach involves a meticulous selection of products that ensure alignment with growth potential and market relevance, continually refining focus towards market-leading categories such as outdoor, gardening, fitness, lighting, and pet products.

As industry participants grapple with intensifying competition, the narrative of e-commerce becomes clearer. Lan passionately expresses the ambition for Haibi to be seen as the ‘Xiaomi of cross-border services,’ committed to delivering unparalleled value offerings while fostering collaborative ecosystems that benefit all stakeholders along the manufacturing spectrum.

Despite the formidable terrain of the e-commerce landscape, the company has remained resolutely focused on sustainable growth. Lan reflects on his entrepreneurial journey, highlighting that the most significant stresses often arise during decision-making phases, particularly when venturing into uncharted service territories without clear frameworks to emulate. Having once faced dire financial constraints where borrowing was necessary to meet payroll, he now oversees Haibi’s services to numerous factories and brands—many of which are achieving considerable sales milestones.

Looking ahead, Lan’s aspiration is to foster a robust pipeline of brands, projecting that over the next three to five years, Haibi E-commerce will facilitate the establishment of over twenty brands each crossing the one-hundred-million-mark in sales. While such ambitions may seem aspirational, he is resolute in his belief that they are not simply about achieving billion-dollar brand status, but rather about cultivating lasting consumer recognition and loyalty in a complex market landscape.

Reflecting on the decade-long journey, he feels a profound sense of fulfillment in having planted seeds in an arid desert, now witnessing them germinate and flourish. This encapsulates Lan Youyang’s vision; to not only see his organization succeed, but to pioneer pathways for others in the ever-expanding domain of global commerce, ensuring that more brands from China can genuinely resonate within the hearts and minds of consumers worldwide.