Foreign trade companies’ exploration of transformation and development in the post-pandemic period
By Pan Yingqiu
“Recently, I bought online a lot of high-quality and reasonably priced goods including clothing, household goods, and bedding, which were originally export-oriented products but are now available in domestic market,” said Chen Ni, a Beijing resident, while demonstrating shopping apps such as Taobao, JD and Pinduoduo on her cell phone.
Due to the COVID-19 pandemic, foreign trade companies’ domestic sales are increasing. During this year’s June 18 online shopping carnival, many foreign trade companies suffering losses of business in overseas markets demonstrated how they have seized e-commerce platforms and livestreaming to promote domestic sales.
Will this be an effective way for foreign trade companies to transform and develop in the post-pandemic period?
Exploring Domestic Market
“Foreign trade companies face a dire situation these days,” said Tang Yihu, manager of an agricultural machinery company in eastern China’s Shandong Province. “Most of our clients are overseas. Due to the novel coronavirus outbreak, many foreign ports have been locked down. When our goods arrive at the few ports that are still open, it takes a long time for us to communicate and coordinate with our clients to receive them. Our only hope for survival seems to be the domestic market. However, a lack of sales channels and brand reputation in the domestic market leaves a ton of work.”
Many foreign trade companies face the same difficult situation. To help solve the serious problem of overstock of goods caused by cancellation or postponement of overseas orders, the department of commerce of the Shandong provincial government organized sales of export-oriented civilian consumer goods through either local department stores or on livestreaming platforms. The department also arranged for foreign trade companies to sell their products on Alibaba’s e-commerce platform 1688.com or in Hema Fresh’s O2O stores.
“Food, clothing, crafts, household goods and other export-oriented consumer products have great potentials in the domestic market,” said Xu Bingbo, an official with the provincial commerce department, “Livestreaming on e-commerce platforms works to sell export-oriented industrial products as well as services.”
Statistics released by Jingxi, a JD social e-commerce platform, showed that in the two months after the launch of an assistance program for foreign trade companies to sell their products in the domestic market in mid-April, more than 10,000 companies registered with the platform. From June 1 to 17, the volume of orders for products from foreign trade companies through the platform increased more than 100 percent over the same period last month.
Jingxi’s operations manager Feng Yan explained that keyword phrases people search for such as “electronic thermometer,” “children’s mask,” and “ear thermometer” revealed an emerging market for baby thermo wristwatches. The custom-made product designed by a foreign trade company has been well received by consumers.
Li Danghui, deputy director-general of the department of consumption promotion at the Ministry of Commerce, commented that sales of export-oriented products in the domestic market will further diversify supply in the domestic market to meet the increasingly refined needs of consumers and expedite a consumption upgrade. At the same time, domestic sales of export goods will leverage the country’s advantages in market size and potential for domestic demand.
Making It Happen
Can foreign trade companies with export-oriented goods and services looking to the domestic market simply consider the different selling block? The shift is not so simple because of differing standards for goods and services in domestic and overseas markets. Foreign-oriented goods are produced according to demands and standards of the intended overseas market and do not necessarily conform to domestic consumption preferences.
For export-oriented goods to be sold in the domestic market, they must meet the needs of Chinese consumers and leverage appropriate brand promotion and distribution channels. Many export goods face competing products in the domestic market and competition is just as fierce as in foreign markets. Relevant companies must also tackle problems such as unknown brands, new markets, and a lack of experience and resources. They must make tough decisions on whether the shift is a temporary damage control or a long-term strategic transformation.
To meet the pressing needs of foreign trade companies, the State Council issued a guideline on June 22 to help exporters sell products domestically and help Chinese businesses in the foreign trade sector overcome difficulties to keep foreign trade stable.
Access to the domestic market should be accelerated for exporters, according to the guideline. Enterprises are encouraged to produce products on one production line following the same standards and the same quality requirements for both foreign and domestic markets. Article I of the guideline is highly significant to those dealing with an overstock of goods from the pandemic. It stipulated that the government would lead simplification of certification procedures to expedite foreign trade companies’ access to the domestic market. Article II encouraged foreign trade companies to make products that meet both domestic and foreign standards as the government builds informational platforms to help them transform production.
Yang Guoliang, deputy director-general of the department of foreign trade under the Ministry of Commerce, revealed three measures aimed at supporting foreign trade companies’ domestic sales. First, foreign trade companies are encouraged to connect with e-commerce platforms and participate in export-oriented product promotion on major shopping streets and seek direct purchases by big commercial companies. Second, they are encouraged to look to the country’s new infrastructure, new urbanization, and major industrial and communication projects for demand for export-oriented products. Third, they are encouraged to develop marketable products, create new brands, embrace new sales models, and promote integration of online and offline businesses.
Foreign trade companies turning to the domestic market are likely to be concerned with issues such as long accounting periods, need for greater funding, and high settlement risk. To ease their concerns, Yang said authorities will offer greater convenience and support to reduce costs, provide financial services, and boost credit support. The guideline also said authorities should improve financial services and encourage financial institutions to increase financial assistance to foreign trade companies.
It is difficult for foreign trade companies to transform from exports to domestic sales in such a short period of time. The Ministry of Commerce is expected to further connect supply with demand by organizing nationwide consumption promotion activities, supporting local governments to build consumption promotion platforms, and helping foreign trade companies cooperate with large domestic trade companies and e-commerce platforms.