As major Chinese e-commerce players train their sights on the global marketplace, Beijing-based Wandou Gongzhu is laser-focused on the booming cross-border commerce between China and Japan, driven by the demand for premium Japanese products among young and increasingly affluent Chinese consumers.
It was launched in 2015 as a Chinese-language B2B2C platform for facilitating the sale of Japanese products to Chinese consumers. It has more than 20,000 registered users who are aged between 20 and 30 years old. Users in this demographic account for 60% of active users.
According to Japan’s Ministry of Economy, Trade and Industry, the market for Japan-focused China e-commerce is expected to rise by 20 per cent in 2020, Wandou CEO Weng Yongbiao noted.
The platform deals with 3,300 Japanese brands with over 40,000 products – covering cosmetics, medicine, food & beverage, and home appliances. It offers customers next-day delivery services and operates a 16,000sq. m ‘smart’ warehouse in Japan and a nearly 10,000 sq m one in China. Wandou has also set up offices in Tokyo and Hangzhou.
In January, Wandou raised $48 million in a new Series B funding round, from investors SBI Holdings, pharmacy chain Sugi Holdings, and XJ Holding, a unit of China’s CITIC Group.
Among Wandou’s earlier investors was Japanese trading house ITOCHU Corporation, which had participated in a $10 million Series A round in 2016.
Weng told DealStreetAsia in a recent interview that part of Wandou’s efforts involve helping Japanese retailers reach Chinese consumers. Last year alone, the platform helped more than 70 Japanese brands to sell into China.
Cross-border e-commerce is already crowded. Is there enough room for more players targeted at the Sino-Japanese market?
Growth will continue, with more and more young consumers who enjoy online shopping. With competition, the platforms will launch better, user-friendly and interactive services, such as live-streaming shopping.
As a whole, the medium-to-large groups will monopolise the market. But the niche market-focused platforms are drawing attention. The latter group follow the new consumption patterns. For instance, we know from our database that the pet-related and anti-hair loss products are in much more demand than ever before. We believe that Chinese consumers’ trust in Japanese merchandise will definitely drive growth in the sector.
What do you consider as the three most important turning points of Wandou’s development over the past few years?
China’s State Administration of Taxation, the Ministry of Finance and the General Administration of Customs jointly implemented new tax policies for cross-border e-commerce retail imports in 2016. It indicated that the imported commodities would no longer subject to personal postal tax while being levied import duties, import value-added tax and important consumption tax. It is beneficial to direct delivery services, which we provide.
Subsequently, we tied up with Japan’s top 16 intermediaries in 2017 to launch WJS, a supply chain alliance, to integrate the Chinese and Japanese markets in information, logistics, business and data analytics. The alliance has leveled up our supply chain in Japan. In 2019, we focused on management and efficiency, such as in our warehouses and logistics operations, and cash flow management, among others.
How will the slowing Chinese economy, protracted US-China trade tensions, and the coronavirus outbreak affect Wandou’s prospects?
Actually, the impact is minimal. Because our markets are different, so the US-China trade war hasn’t affected us. Regarding the slowing Chinese economy, we have to say that probably the brick-and-mortar businesses, such as real estate, are the ones that suffer. On the contrary, the e-commerce sector shows a growth trend. During the Chinese Spring Festival, the order volumes were up 50 per cent.
The recent coronavirus outbreak causes a crisis for Chinese economy, but we do believe it is temporary and will recover soon.
What are the unique challenges you see in the Sino-Japan market, as Wandou continues to grow?
In China, consumers demand flexibility, speed, novelty, and value, so we must offer the best options that we can. The more advanced a supply chain we build, the better the services we can offer.
[But] the challenge is that Japanese brands follow a consistent annual production plan made each year. This means it cannot quite meet Chinese customers’ requirements.
What are your business plans for the coming 1-3 years?
First of all, we are consolidating the supply chain and hoping to introduce more lesser-known, but key local brands. We have so far seen the potential in those brands. Take the cosmetic brand rinRen for example. It made its debut in the Chinese market in September 2019, and the sales volume in Alibaba’s Singles’ Day carnival [in November] hit 900,000 yuan ($129,006), 170 per cent higher than regular sales after two months of marketing.
Second, it is important to upgrade the app to provide better services. We are also deepening our business-to-business (B2B) and business-to-customer (B2C) sales networks to gain recognition in Japan. Thirdly, we are aiming to sell Japanese merchandise globally.
Last year, we did partner with local e-commerce platforms in Russia and Southeast Asian countries to explore opportunities, but we withdrew as it involved a lot of resources. In any case, we do acknowledge that huge potential exists in Southeast Asia. Therefore, we do hope that we gear up to enter soon.