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How a small logistics company profits from the huge online market in China

Monday, 13 June 2022

China is the largest e-commerce market in the world. By mid-2021, the number of online shoppers had already reached 812 million people. That was around 80 percent of Internet users in the country.

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The potential is huge - and Chinese consumers are keen on European and especially German products. Andreas Janetzko, Managing Director of the Cologne-based service provider MBS Logistics, knows this. At the medium-sized company, they have been intensively dealing with the mega market in view of the high growth rates in Chinese online trade. The Cologne-based company has been thinking about how it, as a small logistics provider in Germany, could also get a slice of the big pie in China. MBS wanted to break new ground as far as possible.

The idea was to sell consumer goods from German or European companies to online shoppers in China. It doesn't matter whether the products say "Made in China" or "Made in Germany," says Janetzko. If a product simply comes from Germany, that already means for many Chinese that it has a correspondingly high quality standard. For the Cologne-based company, it was clear: "As a classic logistics service provider, we have to try to become a logistics partner with retail expertise."

One platform, four shareholders

Discussions with potential partners ensued in China. "And we then founded the Marco Polo platform together," says Janetzko, who recently appeared at DVZ's E-Commerce Logistics Day. Marco Polo Cross-Border E-Commerce (MPCE) is an integrated service platform with four shareholders, he says. MBS cooperates here with Chinese partners, namely a charter airline, a hotel chain and a department store group. MBS is responsible for bringing in German or European companies and then making sure the products get to China right away, with all the services that go with it, he said.

"The beauty of it," Janetzko says, "is that when the products have to be brought to China, they automatically go through us. We develop our own closed market with it. Of course, we participate in the favorable rates from Germany to China. We don't have any bottlenecks there either." Janetzko adds that this is how the appropriate margin can be represented in the classic business. However, that doesn't mean that you can charge any fantasy prices in freight, but that everything has to be within the bounds. "It's all communicated very openly. We have an open book, so customers know exactly which item costs what." Finally, he said, another source of revenue is the sale of the products, with that margin then divided among the shareholders.

The first products: Sunglasses

The first products MBS brought to China were J. Athletics brand sunglasses. They came from the manufacturer Emmerich Fashion, a small company from Herdecke near Dortmund. The whole thing started about a year and a half ago. "We had then sold two pairs of glasses in the first three months," Janetzko recalls. "And I asked myself: was it really such a good idea to send 100,000 pairs of glasses to China?" But in the meantime, business in China is going well - all the glasses have now been sold, he says. Of course, it helped that J. Athletics is the official eyewear supplier to the Austrian Olympic team. The last Winter Games were in Beijing - and Austria is a giant in winter sports. So there was no better advertising.

According to Janetzko, more customers will be added in the coming months. The platform will also be used to advertise the entire product in China. So customers don't have to worry about anything, just provide some promotional material. "But at the end of the day, we are responsible for the entire external presentation of the product in China," says Janetzko.

In doing so, they go down a wide variety of paths. The hotel operator, for example, uses its lobby as a presentation area for the products. People can put on sunglasses there, for example, but they can't buy them. Those who want them then order them via QR code. "Then they're delivered within two and a half days, and no matter where the customer is in China."

Products can also be listed in the airline's catalogs, for onboard shopping. In China, he said, there are ultimately a wide variety of options for where consumers can order. There, multichannel has a completely different meaning once again.

The shareholders offer two models: either they buy the products and thus take a risk, as in the case of the 100,000 pairs of glasses, the value of which, however, remained within limits. Or they sell on commission.

The shareholders do not operate their own warehousing infrastructure in China. However, they have rented a hall in the Free Trade Zone of the port of Shanghai.

MBS now has sales in the low double-digit millions with its platform business, he said. "And we are now rolling out the topic further," Janetzko announces. This does not only apply to Germany. Potential customers in Italy are now also being approached via a partner. France, for example, is also a potential market. In China, people are definitely willing to pay for products from Europe. For one thing, the Chinese basically love to store. "The appetite is huge. And prosperity is growing successively," says Janetzko. And in addition, the Corona pandemic has fueled the entire cross-border business with non-Chinese goods. Only in the past few weeks has there been a slowdown due to the lockdown situation in China, especially in Shanghai.

The downside: commodity tourism

However, there is still one negative side to the whole business, and that is when you look at it from a sustainability perspective: Because to a large extent the products are manufactured in China, are then first transported to Germany, for example, and then go back to China for sale. "So they have goods tourism behind them, you have to say," Janetzko admits. "However, we have the legal requirement here that the products have to come from outside, so outside of mainland China."

Source: https://www.dvz.de/rubriken/logistik/industrie-und-handelslogistik/detail/news/wie-ein-kleiner-logistiker-vom-riesigen-onlinemarkt-in-china-profitiert.html