China has become the major player of world’s e-commerce market. Surprisingly, we’ve seen successive 26 percent annual growth rate of Chinese e-commerce transaction over the past five years, equal to 4 times of China GDP growth. The transaction of Chinese B2B e-commerce sector reached 3 trillion US dollars in the last quarter of 2017 and is predicted to hit a record high in the near future.
What makes B2B so lucrative in China?
The business model.
Let’s start with the evolution of China’s B2B business model.
From B2B 1.0 era to B2B 3.0 era, the role of B2B platform keeps changing and generally becomes an irreplaceable part of a “closed-loop” trading.
The success of China has made it an indicator of world’s e-commerce. While other western e-commerce giants developing rapidly by absorbing the experiences from China, lots of sideliners are cautious but curious about the secret to create such a competitiveness. You know the profitability of B2B e-commerce, but you may not know by what makes B2B so lucrative in China. The answer is the business model.
How many business models lie between the Business to Business? If you only know the “sell and buy” routine, you’re probably be shocked to see such diversified and professional models are working in China.
1. Online Foreign Trade Services Based Model
The enterprises of this model mainly provide services for foreign trade online. The main sources of income are: membership fees, advertisements and search engine ranking fees for providing value-added services, and certification fees collected from certified suppliers.
Examples: Alibaba, Made-in-China
2. “Industry Portal + Industry Alliance” Based Model
This model enables enterprises to integrate the resources of B2B websites of various industries in an alliance manner and provide “broadly integrated and professional” B2B services. Enterprises of this model gain profit from network infrastructure services, network information promotion services, and portal services for advertising and publishing services.
3. Self-run or Business matchmaking, or Combined Model
Self-run or business matchmaking are the most representative business models of China commodity trading industry, they could be separately applied in or combined in the business.
For self-run B2B enterprise, the funding requirement is much higher than a business matchmaking one. A pure self-run enterprise should equip own warehouse, logistics and low-price goods supply. However, self-run and business matchmaking are not conflictive, many Chinese B2B enterprises have combined them together, therefore, they can earn the price difference as well as commissions from a successful business matchmaking.
4. Small Foreign Trade Services Based Model
Enterprises of this model not only provide information services, but also integrate payments, logistics, and customer relationship management functions to achieve online transactions. The major income is the commissions of transactions.
5. Business Leads Based Model
This model is focusing on the collecting and promoting of buying and selling leads. The number of industries involved in this model could be large, so as the lead database. Hence, enterprises who are interested in this model must prepare the best telemarketing courses for your team.
6. Specific Industry Chain Focus & Supply-Chain Service Based Model
Compare to the most online marketplaces, this business model roots in one or more specific industries and often produces vertical-oriented industry platforms.
While connecting upstream to downstream enterprises, another important feature lies in the services, providing solutions throughout the transformation from raw materials to finished products that are delivered to the end customer.
The six models JumoreGlobal insights summarized are the most trending forms of China B2B e-commerce and we hope you can get a deeper understanding of e-commerce through our examples. With the application of new technologies like blockchain and AI in B2B e-commerce, we are looking forward to discovering more advanced models and cases in the world.