Challenge on the e-commerce front

Online advertising company IZP Technologies Co is looking at Chinese shoppers' enthusiasm for overseas products to build a new shopping platform challenging traditional electronic-commerce websites such as Tmall.com and Taobao.com.

"As an increasing number of Chinese buyers look overseas for higher end products it is high time to create a new business model and introduce more choices to China," said Luo Feng, founder and chief executive officer of IZP.

Luo's new model will help overseas businesses set up e-commerce websites and push advertisements to Chinese customers using IZP's data-based target-marketing system. He calls his business a "factory-to-consumer solution".

The major business for IZP is mining data provided by telecom operators and helping advertisers distribute advertisements to target audiences. The 700-staff company claims its annual revenue exceeded $100 million last year.

On April 25, the Beijing-based company announced a partnership deal with SFR, the second largest telecom carrier in France, in setting up an Internet-based marketplace for Chinese shoppers to buy French made products.

"It's a French companies' exclusive online promotional platform in China," said Luo. "We will provide services such as advertising, logistics and storage to those companies."

IZP's new model will help overseas companies to directly reach Chinese customers, saving operational costs for sellers, he added. The company is in talks with companies in Italy, the United Kingdom and Spain over similar projects.

IZP has made partnerships with more than 20 telecom carriers around the world.

Luo said his company is in a unique position compared with others in the industry because IZP has a great number of telecom carriers to collate customers' purchase behavior, a key information for every e-commerce website.

Luo's idea of entering the rapid-growing e-commerce sector came after industry analysts said there is enough room for China's online shopping business to grow at least until 2020.

Online shopping is one of the most vibrant commerce markets in China because more and more Chinese buyers are looking for better prices on the Web, they said.

Tech-savvy online shoppers in the country are placing their orders to overseas websites in the United States, Europe and Japan for better deals. Most of the orders evade value-added tax, import tariffs and consumption taxes imposed by the Chinese government.

"Without doubt the government wanted to keep online purchases in the country when they implemented policies to boost domestic consumption," said Luo.

He added IZP's new way of doing business will also attract more overseas companies to enter China's fast-growing online shopping market.

The annual turnover of China's online shopping industry could hit 1.85 trillion yuan ($302 billion) this year, a surge of about 40 percent year-on-year, according to iResearch Consulting Group.

Statistics from China Internet Network Information Center also revealed that China had 242 million online shoppers by the end of last year, the equivalent of more than 40 percent of its total Internet population. Luo hopes his factory-to-customer business model could help local brands explore global markets.

Some Chinese companies are finding their products difficult to sell in the domestic market because of a huge supply surplus.

At the end of last year, China's top sportswear manufacturer Li Ning Co Ltd warned of a substantial loss of $228 million because of moves to buy back inventory from its distributors.

The inventories of Chinese clothing companies were valued at 256.97 billion yuan in the first three quarters of last year, figures from the National Bureau of Statistics showed.

"We are ready to introduce good quality made-in-China products to global buyers because most of the Chinese brands deserve a better global image," said Luo.