Retail in Asia

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CEO Talking Shop: Embracing the “Chinese dream” with PayPal

In the latest 12th Five-Year Plan, China’s Ministry of Industry and Information Technology said that it plans to grow online shopping to CNY18 trillion  (USD2.86 trillion) by 2015. The horizon of the country’s e-commerce is expanding, providing new opportunities and challenges to SMBs. Retail in Asia caught up with Alan Tien, General Manager of PayPal China to learn about the latest e-commence trends and how SMBs can achieve their "dreams" with PayPal.

RIA: Can you talk us through the e-commerce trends in China? What are the challenges and opportunities for e-commence in China?

Alan Tien (AT): China’s government has revealed ambitious plans in its 12th Five-year Plan (2011-2015) to turbocharge the growth of e-commerce by doubling the value of e-commerce sales to CNY18 trillion (USD2.86 trillion) by the end of 2015. That would make China the world’s leading market for global e-commerce. In the first quarter of 2012, the gross merchandise value (GMV) of China’s e-commerce jumped 25.8 percent YoY, to CNY1.76 trillion. Online shopping’s GMV amounted to CNY228.2 billion in the first quarter of 2012, an increase of 40.9 percent YoY, according to iResearch.

Despite Europe’s worsening debt crisis and demand contradiction in traditional markets such as US and Europe, China’s exports amounted to over USD954.3b, up 9.2 percent in the first half of 2012 alone, according to China’s General Administration of Customs. Five million export-focused SMBs in China now account for 60 percent of the country’s total foreign trade, according to China’s National Bureau of Statistics. China’s SMB retailers are believed to be playing a critical role in sustaining and fuelling China’s export and import growth in 2012.

Nevertheless, cross-border e-commerce trade is still a relatively new industry in China and for SMBs. To support China’s SMBs in diversifying their exports to other high-growth markets more effectively, PayPal is committed to providing Chinese retailers with business consulting, technology support, professional service training, and delivering examples of best business practices from around the world.

The entrepreneurial spirit of Chinese retailers is remarkable. They are incredibly smart, resourceful and opportunistic. With traditional foreign trading models reaping increasingly lower profits for merchants, online international trade is seen as having great potential for growth, and has opened up numerous new opportunities for local merchants to extend their reach beyond the China market. Immediate access to millions of global customers, boosting conversion rates and lifting sales are the top priorities for Chinese retailers to stay viable in the current global market landscape. Overall, PayPal is bullish on China’s cross-border trade.

RIA: Are SMB retailers in China facing the above mentioned challenges and opportunities as well? What top export markets are these SMB retailers targeting and what challenges are they facing in these regions?

AT: On one hand, SMB retailers in China are increasingly forced to transform their businesses into e-commerce, to look beyond China’s domestic market. On the other hand, they are under immense pressure to upgrade and integrate a comprehensive global payment solution because their global customers are concerned about the payment security, trust, transparency and multi-currency support of China’s existing payment systems, and they are hesitant to commit to purchasing through unfamiliar payment systems.

  • Anti-fraud and risk management supports: Chinese merchants are looking for sophisticated, proprietary fraud risk models help detect unusual activities and stop fraudulent transactions before they actually take place and business is affected. A global anti-fraud team that work 24/7 to keep cross-border transactions safe, take prompt action after detecting suspicious and fraudulent transactions, and to ensure that sensitive information remains private are also areas that Chinese merchants need acutely to win customers’ confidence in doing business with them. 
  • Look beyond to expand distribution network: In China, distribution networks and close proximity to customers are the keys for a bricks-and-mortar retailer to compete and succeed in China beyond tier four cities. For SMB retailers that cannot afford an extensive distribution network or even a physical store, e-commerce is something that they need to bet on heavily. The exponential growth that we see in China’s cross-border e-commerce is fuelled by the increasing technological sophistication of retailers.
  • Pursue high-margin market: Even though Chinese retailers can overcome distribution barriers by moving into the e-commerce space, they still face stiff challenges in doing business in China especially if everyone is competing on price. Of course, customers welcome price wars, but engaging in price wars would eventually lower the already low profit margins and hurt the retailer’s bottom line. As a result, we see that more Chinese retailers will gradually focus more on international markets that can gain a higher profit margin.

Nowadays, Chinese merchants see cross-border trade as a silver bullet to expand business abroad. For thousands of PayPal’s SMB merchants in China, cross border e-commerce has been a proven platform for them to accelerate and grow their export business through SMB enabler programs such as the "Chinese SME Merchant Acceleration Program" that we launched in August 2011. In the first three months, some 50 percent of participating merchants achieved an average of 53 percent QoQ revenue growth, with maximum growth reaching 240 percent, far more than the 21 percent growth of China’s overall foreign trade export in the same period.

We firmly believe in cross-border trade’s potential to revolutionise retail markets worldwide, especially in China. What China’s SMBs need is simple – international business opportunities that deliver a competitive advantage through immediate access to millions of global customers, boosting conversion rates and lifting sales.

When we look into the robust transactions made by Chinese retailers in more than 190 markets around the world covered by PayPal’s online payment platform, we see a paradigm shift of cross-border e-commerce in China (PLEASE REFER TO INFOGRAPHIC):

  • Tapping into emerging markets has become an increasingly common practice for many e-commerce websites. In the first quarter of this year, Chinese exports to Brazil, Russia and India via e-commerce went up 79 percent, compared with 35 percent to the US.
  • Israel (+108 percent), Russia (+102 percent), Ukraine (+86 percent), Brazil (+58 percent) and Mexico (+55 percent) are the top five export growth markets for China from 1Q 2011 to 1Q 2012.
  • Diversifications of exports and cutting dependence on traditional markets have become a priority for Chinese retailers. Transformation of business to e-commerce – with a proven and trusted international payments system – is the key.


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RIA: How can PayPal help SMB retailers in China to cope with these challenges?

AT: In the past few years, SMB merchants’ development and the booming growth of cross-border e-commerce in China have captured the spotlight as an important growth area for China’s exports. As a strong partner providing a one-stop solution for thousands of local merchants, PayPal has been consistently committed to helping merchants solve key challenges over the years: setting up an online store, promoting products, dealing with cross-border payments, international logistics and warehousing, enhancing competitive capabilities and expanding businesses to millions of overseas buyers. Therefore, PayPal currently plays a vital role in facilitating a large portion of online e-commerce cross-border transactions when Chinese companies, most of which are SMBs, look to sell to vast overseas markets.

PayPal has launched several key initiatives in recent years to help Chinese SMBs launch online sales and each buyer worldwide: 

  • July 2012: The second "Chinese SME Merchant Acceleration Program". All participants of the contest can apply for the Best Practice Integration (BPI) consultant service to increase transaction conversion for better performing and, most importantly, the online store mobilization service is free of charge, which is realised by "PayPal Mobile Commerce in a Box" solution. The outstanding performers will receive PayPal fee waiver or marketing funding with the total value exceeding CNY1 million.
  • March 2012: "Dragons Come out of the Sea" initiative offers cost-free, independent, foreign trade website support for SMB e-commerce start-ups. To meet international customers’ demands, PayPal and its partners’ service teams provide professional consultation, guidance and feedback on the progress, products and quality of service for their e-commerce sites.
  • March 2012: "Dragon Rising on the Seas" initiative targeting SMBs which have already started their online business. Small businesses can realise a sales boost on average with 23 percent higher conversion rates than credit card, together with the enhancement of credibility, reputation, return on investment and business stability.
  • August 2011: Launched "Chinese SME Merchant Acceleration Program" to help sellers transform their traditional offline business model to an online e-commerce model. 
  • March 2011: Co-established a Foreign Trade One-Stop Service Center with Suzhou Software Park Training Center to better serve more than 40 thousand SMBs in Suzhou with cross-border trades.
  • March 2011: Launched the "RMB 2011 Program" provides 5,000 merchants in China with comprehensive guidance, consulting services and incentives, totalling RMB 10 million in value to solve the operational challenges in the early stage of starting an online foreign trade business.
  • August 2010: Launched a Cross-Border Trade Portal ( that serves as a one-stop solution for Chinese SMBs to learn how to conduct cross-border trade – from setting up an e-commerce website, to marketing the website to collecting multi-currency payments to international shipping and delivery.

RIA: Has PayPal seen growth in transactions among SMB retailers in the last few years?

AT: PayPal is a leader in global e-commerce. Cross-border trade accounted for over 25 percent of the company’s USD118 billion in total payment volume in 2011. As of the end of the second quarter of 2012, there are 113.2 million active, registered PayPal accounts, a 13 percent increase over the second quarter of 2011, and PayPal’s net total payment volume (TPV) grew 20 percent YoY to USD34.5 billion, according to 2Q 2012 results. In the Asia Pacific region, China today stands out as one of the largest and fastest growing centers of cross-border trade in terms of total number and value of transactions. Adding Hong Kong and Taiwan, then Greater China is PayPal’s third-largest market ranked by TPV after the US and UK.

The strong growth in cross-border trade is complemented by the popularization of mobile commerce (m-commerce) in Asia Pacific. Merchants are quick to see the value of using PayPal’s faster, safer mobile checkout m-commerce solution. The mobile payments ecosystem is quickly catching up with mobile payment technologies (including NFC, RFID and others) and becoming a reality. We believe that the wallet should live and will live "in the cloud". Internet-connected devices will be the very fabric of the digital lifestyle.

Recognising that consumers have a "store in their pocket" and want to shop anytime and anywhere on their mobile devices, we have seen that merchants across the Asia Pacific region who innovated and adopted our mobile checkout solution were rewarded on average with a six-fold increase in their mobile sales in 2011. In China, over 15,000 merchants received at least one cross-border mobile transaction via PayPal in 2011. In 2012, PayPal China is working closely with local best-in-class partners to help more than 1,000 Chinese merchants, of all sizes, mobilise their business. PayPal projected a USD10 billion mobile payments volume (MPV) in 2012. This represents an enormous increase of nearly 70 times, from PayPal’s MPV in 2009.

RIA: Can you share one interesting, successful case study with us?

AT: With one of China’s most watched TV shows called "The Chinese Dream", people across China are just as aware of a China dream as Americans are of an American dream. One farmer from Shandong Province has had an opportunity to live out his own particular Chinese dream with a little help from global e-commerce expert PayPal.

Huang Jianzhen and his wife were hard working farmers from Shandong and could not have imagined that they could rise above a life of rural poverty to owning a thriving online wedding gown store with a monthly net profit of CNY30,000-40,000 with the help of PayPal.

Five years ago, when Huang first launched his online store on eBay, he was only able to sell several gowns a month to cover household expenses – until a PayPal sales consultant offered hands-on guidance and onsite support. PayPal business development and operations helped him navigate the challenges of payment-receiving procedures, anti-fraud and risk management experience to eliminate potential risks in transactions, etc.

Today, Huang’s online wedding gown store has become a big success, selling wedding gowns to buyers from all over the world. Called Happyshoppingstore2009, the company claims a monthly net profit of CNY30,000-40,000 – an amazing climb up the social ladder in a country where laborers can earn as little as CNY750 a month (USD120).

In five years, Mr Huang has solidly built his own Chinese dream of giving family a secure life financially.


CEO Talking Shop is the Retail in Asia section devoted to interviews with brand CEOs and retail industry leaders.