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run an online business in China

Podcast transcript #43: Expert’s insight on how to run an online business in China

Find here the full  China paradigm episode 43. Learn more about Michael Simonet’s story in China and working hard to run an online business in China and find all the details and additional links below.

Full transcript below:

Matthieu David:  Hello everyone. I am Matthieu David, the founder of Daxue Consulting, a strategic market research company based in China, and this China marketing podcast, China Paradigm. Today, I am with Michael Simonet. You are based in Qingdao and have started a business called Alea E-Commerce, which supports sales and online operations for brands in China. You are also operating social media with a presence online.

You have been in China for a while now and had previous experience with a Swiss company called Swissmooh. You had been based in Qingdao since you arrived here in China, which is also something very specific. You are the second person I have interviewed from Qingdao. I have been to Yantai and Qingdao and actually thought about starting a business over there when I came to China. I would like to know more about your choice because I chose neither Yantai nor Qingdao. Thank you very much for being with us. Could you tell us now a bit of some metrics about your company, the size, the number of people in your team, and the number of clients you have worked with to give an idea of what stage of development you are at? 

Michael Simonet: Thank you very much for having me. Alea E-Commerce Company was founded at the beginning of 2017. Currently, we are a team of eight people. We are still a quite small company. We didn’t have enormously many clients, which we’ve been working with yet. Nonetheless, it’s an ongoing relationship with the ones we have. It’s about eight to ten clients that we’ve been either doing operational services or on the consulting side. We actually do much more than just the E-commerce business in China. We also do digital strategies or digital ecosystem management for foreign companies who want to come to China. 

Matthieu David: Could you tell us more about your story for us to understand what led you to Qingdao? It is a well-known city because of the beer and tourism, but still, it’s not as famous and popular for foreigners as Shanghai, Beijing or Shenzhen. So, why, Qingdao? How did you come to China and embark your entrepreneurship in China? 

Michael Simonet: I’ve actually been in China for almost 10 years now and I started off with some time in Beijing and then one year in Shanghai. It was quite a long time ago and it changed quite crazily from what I saw on my business trips. But why Qingdao? It all comes back to my previous employer called Swissmooh. This is a dairy farmers’ organization from Switzerland, which wanted to go to China to sell on Tmall with directly retail products, in order to pay the farmers a better milk price in the Swiss milk industry

It was a political decision because the milk market is pretty volatile in Switzerland with a much higher level than Europe. Prices were dropping and this open-minded farmer organization said, “Let’s go to China.” This is, in a nutshell, what they did. I had the chance to actually jump on that boat in the very beginning and be their first employee in China. We had, in the very beginning, a sales manager who was traveling from Switzerland to Asia and China checked Shanghai, Guangzhou, and Beijing, but didn’t really succeed in finding a distributor in China. At the same time, I came up and said, “I did some researches about tier-two cities in China. There might be some potential chance over there in these tier-two cities where spending power of Chinese online shoppers was getting higher.” I analyzed which tier-two city could be interesting in Shandong province. Then Qingdao showed quite a high GDP compared to other tier-two cities. We said, “Let’s go to Qingdao.” It was based on a bit of research. I immediately came from Shanghai to Qingdao to start the Swissmooh business. We’ve grown it to 25 people in 2017 when I left. This is a bit of history about Swissmooh.

I had been involved in everything there. In the first five years, obviously, it turned to more professional and established with how to do the business. When I look back, I’ve done marketing, accounting, sales, but running an online business in China was more or less the most successful part I can look back to. All the others were a struggle. We had five shops offline. I’ve done offline, online B2C, and B2B. These are fast-moving consumer trends in China. What we sell on Tmall is premium milk and cheese at a price that almost everybody cannot afford it. We have been launching this and growing it successfully on Chinese online marketplaces. I can look back and say we’ve built the biggest or most successful cheese shop selling on Tmall, which let you conclude that you are almost the best in the whole E-commerce business in China targeting Chinese online shoppers. Swissmooh never had the idea to target foreigners like other famous cheese sellers that everybody knows probably from Shanghai. It gave us a very good understanding of the actual target Chinese online shoppers of cheese is mothers who buy cheese for their children.

We had to first establish this learning curve. We said, “International brands might think Chinese people drink a glass of wine with cheese. No, forget it.” It’s real children who are eating it for a benefit of nutrition and very well-researched mothers buying that and checking, “What’s the best cheese selling on Tmall?”. It turned out the Emmentaler AOP cheese from Switzerland is a perfect match for it. We had quite a lot of educational work to do and this is how we successfully built up the most successful cheese shop selling on Tmall. In the end, I have this learning curve. I understand very well this one particular target group of Chinese online shoppers and I can actually copy that or transform it to help other brands or companies have a similar way of running an online business in China. That’s the basis of why I built up my own startup, Qingdao Alea E-Commerce.

Matthieu David: When you were talking, I was looking at your shop, Swissmooh, selling on Tmall. Indeed, the prices look pretty high like ¥30 for one bottle, which is €4.5 or $5 per bottle. Indeed, you are targeting a lot on the growth and health of the kids. You’re targeting on how natural the landscape of Switzerland is.  Could you tell us more about this specific story because that’s the foundation for your E-commerce business in China? Could you tell us more about how you started and developed the team, including the product itself because I see the packaging is written in Chinese? I believe you had to redo everything because you were the Chinese representative of the organization. Could you explain to us and give us some landmarks on how you did it? 

Michael Simonet: There was a learning curve involved. When we came in 2012, we had ideas about what we wanted to do, but it wasn’t really what Chinese online shoppers needed or wanted. This is the major struggle that all foreign brands have while running an online business in China. They come and say, “I know what my product is, and that’s why you should buy.” But they did not really well research on what Chinese online shoppers want. 

As I mentioned before, we focus on cheese. Milk was always just on the side and is a very hard and competitive business. Milk is a commodity. There is a ceiling on the pricing on the Chinese online marketplaces. You can’t ask more than ¥30 for a bottle of milk. But cheese is a different story and it’s not like milk. It’s white. It’s liquid. It’s from France or Switzerland. It’s all within 1-200 kilometers. How can it be so much different? To explain this is much harder, although Swiss milk is better. You should try Swissmooh milk. You will love it. What was their mistake? Going into China with a cheese approach and thinking that the open-minded Chinese who have studied abroad will like cheese with a glass of wine. The cheese culture in China copied one to one and say, “There are Chinese who also like this kind of cheese culture and will buy the cheese.” Obviously, they target very wealthily, high-income Chinese online shoppers in tier-one-and-two cities to be their consumers. 

Obviously, in Qingdao, we used offline shops with a similar and very premium approach and service. The whole thing looks premium. We have a golden package of the cheese. Obviously, this is something only valuable for a Chinese. A foreigner would say, “I don’t need the golden package, but I can pay l¥5,6 per cheese. I don’t need the package.” It’s always from the very beginning to the Chinese. This was a good move, but we had to learn that the target Chinese online shoppers were completely different. We slowly moved into the game about one and a half years. I got feedback from the Chinese online marketplaces. Who’s buying cheese? I see it’s actually all-female, mostly mothers who are buying it for their kids. I said we had to do everything new. We had to revamp the whole marketing strategies. We had to check what these mothers were looking for. We did a lot of researches and then started to push. In the beginning, we outsourced the E-commerce business in China. It was growing slowly. At a point, I said, “I have enough of the learning curve to actually say I saw what we’ve done wrong on running an online business in China.” I hired my own designer and operators. A team of three of us really pushed it. We made amazing visuals. We had a super talented designer of packaging, which is a very important point in running an online business in China. Don’t underestimate this. We started to educate the market. In the past seven years, Swissmooh has had a huge impact on cheese education in China as a leader selling on Tmall, because Chinese online shoppers research on Tmall a lot and they check a little bit on Baidu for general information.

We actually educated the market. We came up with waste cook with the cheese. That’s the second wrong thing we thought. You cut it and eat it in the morning with a piece of bread. That’s wrong. We had to come up with an innovative way of how to cook cheese for breakfast for the kids very easily. We’re not talking about Lasagna or what we used to have in Italian or French kitchen. We are talking about a very simple way with the oven or rice cooker in 5-10 minutes. For mothers who cannot cook, which is, unfortunately, more and more the case right now in China. We did a lot of education and gave free recipe booklets with it and so on. 

Slowly, things started to kick off. The snowball was rising extremely well. We had a bit of leveling out in between on Chinese online marketplaces. We are actually limited in the shipping and logistics because it needs to have a cold chain to be delivered. At the same time, I came up with a package, which can cool the cheese for a certain amount of time like 48 hours. In summer, we reduced it to 36 hours. This limited us very much in scaling up on Chinese online marketplaces but with a better package, in the end, we could go to 48 hours or even more. With SF Express, you can almost reach any destination. The bottleneck was killed. E-commerce business in China was opened and that’s when they really were able to grow tremendously. 

Because we are Swiss, we do things very on the point of how it should be. We keep to the rules. There was a very short shelf life, six months. This is crazy in China selling on Tmall with food of six-month shelf life. Things were flown in by air. That’s why the prices are so tremendously high, not because we want to cash in tremendously. There were so many difficulties of running an online business in China, which we were able to master somehow and bring to our benefits. One interesting story was that we were at the point where we sold more than we actually have. We were sold out on Tmall. Our stock was not enough. We didn’t foresee that much of a growth. I told my boss in Switzerland, “This is terrible. We lose a lot of momentum. If you’re sold out on Chinese online marketplaces, you have no exposure to Chinese online shoppers. You drop down and need to start from the bottom again”.  

What happened was we were able to minimize the sold-out period to two weeks because of airfreight. The biggest headache was the CIQ import procedure in China. But limiting to two weeks let us say that, “This cheese is sold out right now, but in two weeks we are going to have the freshest thing Chinese online shoppers can have. The first day they arrive here in China and freed by the CIQ, we are going to send it to Chinese online shoppers. It’s basically from farm to factory. Then the cheese is aged, maitre’d, cut, packed and sent to Chinese online shoppers directly. Chinese online shoppers were loving it. This is the third thing I learned. Fresh is king and it’s going crazy. That’s why Hema Fresh is so successful. 

Fresh is king. The fresher your products are, the more successful you’re going to be while running an online business in China. But it’s a challenge. If you are fresh and have a short shelf life, you have so many high costs to handle everything like the risk of expiration. But we managed it along the way of running an online business in China pretty well. This was like the final kick. This bad situation turned into a huge sales push and an additional unique selling point that brought our E-commerce business in China to the next level. This was really fun to actually observe that point. 

Matthieu David: It’s a very interesting point. To have an understanding of what it means to be successful in running an online business in China, could you share some numbers? What is a big mark? What is to be the leading website of cheese selling on Tmall? Is it to sell 100 or 1000 per day in terms of revenue?

Michael Simonet: Let’s take two approaches. One is how easy you will be able to be found with organic search results on Chinese online marketplaces. This is all you strive for in the backend on feedback management and CRM. You want to be the number one in the organic search results because you don’t have to spend money on it. This is being successful in running an online business in China per se. If you search imported cheese selling on Tmall, Swisshmooh is on the first page. It’s not the first spot because there are some others with pay per click advertising on Chinese online marketplaces in the front but you can find the Swiss Emmentaler when searching imported cheese selling on Tmall in Chinese. That’s when the snowball is growing crazily. There are, of course, a bit of parameter in between. 

The second thing which means to be successful in running an online business in China is how many feedbacks you have. This is credibility on Chinese online marketplaces. Being the first in organic search results doesn’t give you credibility from Chinese online shoppers yet. This could be built by pay per click advertising and other measurements. Going into the product, you need to be credible with your own story, but then with like third-parties that give you this credibility. These are feedbacks. If you have 20,000 feedbacks or have been selling on Tmall for five or six or seven years, you would have many feedbacks with a percentage of 2% or 3% negative feedback, which you always will have. Negative feedbacks on Chinese online marketplaces are normal and you must have them because when people start to not believe you, you will have bad feedbacks. You need to have them to get this 100% credibility. All these measurements give you a complete credibility package to Chinese online shoppers and you will not be questioned. Immediately, Chinese online shoppers will think about purchasing the product. They will still have one major issue, which is the price. But this stuff is premium and the price level is where it is. Chinese online shoppers then will start to compare. There is a different Emmentaler out there, which is unfortunately not actual Emmentaler. It’s more like Swiss cheese with holes. The name was not protected. There are others like French cheese. 

To be successful in running an online business in China, you also need to differentiate your E-commerce business in China. Why is your product better than the other? Because in the end, you have credibility. You have everything but Chinese online shoppers would still research compare. They’ll be like, “This is ¥45 for 200 grams and this one is 89, which is double. Why is that?” Then your story and differentiation kick in. In the end, the part you need to actively do from the beginning is differentiating yourself from your competitors. If you are a new company and want to come to China, while your product is pretty much the same as all your competitors with the same price, it’s not that lucrative to go in. If your price point is higher, forget it. If your price point is lower, you go with a lower price strategy and you can still be successful in running an online business in China. If you can’t differentiate with a higher or with the same price, don’t even come here. Chinese online shoppers are clever enough and well-researched to actually choose other products. 

These are several things that define being successful in running an online business in China. This doesn’t mean only selling on Tmall. It can be JD with the same parameters you need to have. 

Matthieu David: To be successful in running an online business in China, how many clients do you have to get in a year? How many products do you have to sell on Tmall?

Michael Simonet: I left there almost two years ago. At the time, we had been selling on Tmall more than a thousand packages per month all over China. But this doesn’t mean it’s a thousand cheese, but several thousand pieces of cheese, because in E-commerce business in China, you have several tactics to increase your consumer basket and conversion rate, and so on. We were also able to be quite successful in that. You need to pay for shipping for buying one cheese. But if you buy two, we give you free shipping with SF Express, which is the non-plus ultra. It’s free but you need to buy two kinds of cheese. This simple trick doubled the average consumer basket, which is perfect to actually earn money while running an online business in China. Because the lower the consumer basket is, the higher the percentage of shipping costs inside and the whole fulfillment like warehousing is. But if you have a higher consumer basket, it’s easier to make your E-commerce business in China profitable. Because you can sell a lot online, but earning money on Chinese online marketplaces is a different thing. Earning money online is very hard because the margin is very low. You always need to give bargains. There are so many measurements and advertising to push your sales, but it kills your margin. That’s not something that you can see that. You see 2,000 pieces selling on Tmall a month within the last 30 days. That’s what you see and all the people can analyze. But what they actually did to achieve that, you can’t see. Even very successful E-commerce businesses in China might not earn money. 

Matthieu David:  I went to the publications you made, and I have three topics I’d like to go through. The first one is the different moments when to sell on Tmall like specific events Double 11 and 618 that you mentioned in one of your posts on LinkedIn. Could you give an understanding of all those moments and when you need to sell on Chinese online marketplaces? When do you need to be ready, two or three weeks ahead?

run an online business in China

Michael Simonet: The event landscape of all these different Chinese online marketplaces is immense. Almost every month, different kind of events are taking place on Chinese online marketplaces. Nonetheless, the first half of the year is not as intense as the second half of the year. We basically start from a few weeks back until the end of the year. It’s our busiest season. February, March, and April are not that busy for us. The biggest events are starting, in terms of the calendar, in the Chinese New Year, when you can sell on Tmall very well in snacks and all kinds of thing. People enjoy sitting at home in the Chinese New Year holidays with the family or bringing home a gift. In this area, this is a very important part of what you can actually do. 

The next thing is 618 coming up on Chinese online marketplaces right now. We are very busy preparing it for our clients. At the same time, there is RED known as Xiaohongshu, which is celebrating its birthday on 6/6. This is a bit earlier than 618 and gives enough momentum with a quite interesting and good match to have a big event.  Along the way of running an online business in China, obviously, there is the mid-autumn festival, which is also a bigger event than Double 11 and Double 12. The very big ones are 618 and Double 11. There is always an event for new products selling on Tmall. If you are running an online business in China and you want to launch a new product on Chinese online marketplaces, you ideally launch it on the 618 or the Double 11. But this means a lot of preparation ahead like starting to think how much you want to import and get the whole thing in. It doesn’t matter if it’s cross border E-commerce business in China that might be stuck at the bonded area or a general trade that is just imported in a normal way. Basically, if you want to get ready for Double 11, you probably need to start in February and March like thinking about how much you want to sell and making a plan of landing strategy. Next, you go to the factory, because they need time to produce it. At the same time, if it’s a new product, you need to register it in China if it’s general trade or cross-border e-commerce, which gives you enough time to collect marketing material, plan your landing strategy and so on because you need to have pictures. Then, you need to start applying for events in August for Double 11. For products selling on Tmall, you should more or less be ready in August to have your strategy all set and start to apply for it. 

On JD, this is a bit slower. Actually, one or one and a half months ahead is enough to officially apply for the events. Then, another two months ahead to get started, organize everything, and make the planning. But when new companies approach me and want to land in China, I tell them, “Let’s go for Double 11, but now we need to really start getting into the books and sign the whole strategy.”

Matthieu David: There are two kinds of events, cultural events or social events like Chinese New Year, mid-autumn festival, and commercial events like Double 11 and 618. Do you see other events outside those two? Those two types of events are very different. One is when people need the snacks to start the Chinese New Year or mooncakes for mid-autumn festival. But the commercial and promotional events on Chinese online marketplaces are based on discounts. The logic is different. Could you elaborate more on the kinds of events? 

Michael Simonet: I don’t agree with the same opinion 100%, because every event on Chinese online marketplaces is about discounts. It doesn’t matter if it’s a social event or a pure sales event. It’s all about a bargain. You are able to get in these events only if you have a bargain. Obviously, the one who gives the highest discounts will be able to get a good spot on Chinese online marketplaces and driving traffic to its e-commerce business in China. To participate in is one thing, but to be in a spot on Chinese online marketplaces is really the crazy thing when people sell on Tmall a lot. In general, there is only seasonality, but it doesn’t matter what kind of event it is. Of course, there is also the milk or diary week somewhere in September on Tmall. There is a wine week on JD and Tmall. There is a specific sales promotion for one category.

But in general, you can always push everything but it’s based on seasonal products. 618 is big for beverages, beer, alcoholic wine and so on. It’s going crazy on 618 because it’s summer. Basically, chocolate is not going that well. Generally, there are winter products and there are summer products. So, if you are run an online business in China with products in both categories, you can actually play well on Chinese online marketplaces. In general, winter or the second half of the year is better for running an online business in China because there are more events and traffic on the whole thing. The shipping is easier, because the temperatures are lower, especially in the food. Also, warehousing is easier in winter than summer, because the temperatures are too high for storage in Shanghai. Even honey or nuts will change in taste compared to winter. 

Winter is easy and nice. It is the time where you need to scale. During the Double 11, Double 12, your growth curve should go up. In the first half of the year, it goes maybe stable or very slowly and then in Double 11, the curve goes up if you are successfully running an online business in China. Of course, there are thousands of other variables kicking in. There are constant changes in the advertising rules of Chinese online marketplaces. One simple rule that changed on Chinese online marketplaces can give you a massive headache, which leads to fewer sales. I have experienced that a lot in the past two years with one of my customers. They had several headaches there in between and the whole stock planning was messed up. 

These are products that have a shelf life. Chinese online shoppers are very careful. They don’t want anything that is over half of the shelf life. Europeans say that’s not the problem. It’s very safe to consume until the expiration date. If you’re close to expiry, which means two or three months to the expiry date and you have one-year expiry, it’s already close to expiration. Chinese online shoppers don’t accept it. You will face negative feedbacks on Chinese online marketplaces. There are so many variables in there. But in these events on Chinese online marketplaces, you need to know if it is the perfect fit for your product. If yes, I go big. If it’s not perfect, you still can participate, but you don’t need to have too many goals to achieve because it’s just not the perfect fit. There are lots of strategic things you should do to successfully run an online business in China. That’s why I said you need to start early because you need to identify a lot before running an online business in Chinas. 

Matthieu David: You mentioned in another article about the topic of fake sales or followers, basically fake activities on Chinese online marketplaces. I’d like to talk about that through a bigger topic, which is how to drive traffic to your E-commerce business in China. You have paid search, organic search, organic and paid social media. You have returning clients. I identified at least those five drivers. You mentioned organic search as a key for your first experience of running an online business in China. Could you tell us more about how to improve organic search on different Chinese online marketplaces?

Michael Simonet: I mentioned before what it means to successfully run an online business in China. It’s actually being able to be found and having credibility. One is UVs, Unique Visitors coming in, and the other one is conversion. The important thing is that you have credibility when Chinese online shoppers come to have a look. You start from zero with zero sales and feedbacks. Nobody will understand or believe you have credibility in that product category on Chinese online marketplaces. That’s why “shua dan” is necessary for every brand that runs an online business in China. This is just making your shop look full and more or less, there is something going on.

Matthieu David: When you say empty, it’s not a shop with no products, but no sales and feedbacks.

Michael Simonet: Yes. You can see sales on Tmall from the past 30 days. On JD, you don’t but you can see the number of feedback you have. I focus now on these two Chinese online marketplaces, otherwise, it would be too much to talk. An empty shop equals no feedbacks and no sales records. 

One measure I wanted to make is the comparison with an offline store. You have a 50-m² flagship store, and it’s empty. Nobody will want to walk in and be exposed to so much emptiness with a sales force directly coming to talk to you. This is a very common behavior. If you have five people in there and also people outside, the foot traffic sees that there is something going on in the store. Another two go in. If you have 10 or 15 people in there, they will say, “There must be something really good going on.” Another fifteen people come in there. Then, you have thirty people there and it will get crowded so much that you can’t even handle it. This is the same as getting people to your E-commerce business in China. You need to do things to have a certain basis of not having an empty shop. This is just a few self-purchases with a few fake feedbacks, with a few pictures to give Chinese online shoppers an idea of people have purchased it and there is something going on. This is not cheating. This is just preparing your E-commerce business in China that you actually can start to run an online business in China.

Now, there is a second “shua dan,” which is going more into cheating the algorithm, and it has been done a lot. This is actually forbidden on Chinese online marketplaces. It used to be very common. It’s probably still very common now, but it’s not the best way to engage with Chinese online shoppers anymore. Creating that sales volume and unique visitors and increasing your conversion rate with these fake sales are cheating the algorithm on this keyword, which will think you have quite a high conversion rate and propose your products to more Chinese online shoppers searching for that keyword. This is the growth of hacking in between. 

Matthieu David: I remember some E-commerce businesses in China that were selling on Tmall some items for ¥1, very cheap, and basically creating a lot of sales to rank top on Chinese online marketplaces. It’s not only the product, which is going to rank top, but also the shop itself is going to rank on those keywords on Chinese online marketplaces.

Michael Simonet: Correct. There are other measures to actually achieve the same result. As you said, this is a flash sale with crazy discounts that will have the same function of the “shua dan,” but you lower the price and Chinese online marketplaces are going to remember. If you have done that, you will have a very hard time getting into events with a 20% discount, because Chinese online marketplaces will tell you, “You did that for ¥1. I want that as well.” There are other strategic ways to run an online business in China. You need to be very careful about what you’re doing. Chinese online marketplaces remember. 

There is a third way of doing “shua dan.” Basically, you have a shipped product with a super high margin, and you are in for smaller or fast money. Then you create everything of these three steps of Shuadan just to let Chinese online shoppers buy it. This has been happening on Taobao a lot in the past seven years, but it stopped now in the past two years. This is the third way, which is not nice because you’re cheating everybody.  In the end, this is not sustainable. Because E-commerce businesses in China who have done that will get more negative feedback. But Chinese are in for the quick money, and we’ve observed that in the past as well. This is not a good way to run an online business in China

Matthieu David: You mentioned conversion rates previously. Could you share some numbers about a good conversion rate and an average conversion rate of products selling on Tmall and JD? 

Michael Simonet: I’ve always been specialized in the premium category. The conversion rate of premium products, in general, is lower on Chinese online marketplaces. A normal conversion rate, which could be okay with a normal product in the fast-moving consumer goods, is 5% plus. 5% is pretty average. This is what I see from our competitors in the backend. But for more expensive products, it doesn’t even need to be premium products, just food or snacks a bit more expensive, this conversion rate will drop. If your organic search is one of the highest, you have so many people coming into your E-commerce business in China. Even people who cannot afford it will check your E-commerce business in China. They will have a look and say, “That’s nice but I just can’t afford it right now.” So, your conversion rates go down. 

What I see right now and also in the past is that the conversion rate might be between two and three. This is pretty low when you have a more expensive product. It doesn’t mean you’re not successful in running an online business in China. Obviously, there are several ways of optimizing your E-commerce business in China by getting more UVs in, increasing the average consumer basket, or increasing the conversion rate. You can twist or change these three valuables to achieve your sales results. You can work actively on these factors. Even though this is slow, this is how you can influence your sales targets.

Doing forecasting actually is on these three parameters. Not even so much about actually, “I want to sell on Tmall with 100,000 sales.” It’s how much UVs you are going to get, how much your conversion is, and then you put average consumer basket. These three will give you a number. You don’t need to analyze the change in sales. You need to analyze the change in these three factors, which have an influence on your sales. These are really the parameters you can influence or you should work with while running an online business in China. 

Matthieu David: You mentioned the word, growth hacking. Growth hacking has actually been used for anything that is linked to growth. But what you mentioned is to create a few fake sales in order to go fast on growth, but it’s not going to sustain so long. That’s why we call it growth hacking, which is creating growth on a short-term basis but cannot sustain the same way. It’s not a driver for the long-term of E-commerce business in China. Could you share other growth hacking you have observed so far? 

Michael Simonet: There are several ways of doing growth hacking and a lot of strategies behind it. But you’re right. It’s never something you’re going to do all the time. There are different indicators. I want to run an online business in China. I want to counteract a best or a low season. My product was sold out and I lost the momentum. I want to create momentum again. So, I would call it like a nitro injection to your business, which is marketing spend. It doesn’t matter if you go spend it on KOL marketing in Xiaohongshu, which we also do, or on PPC advertisement. It’s part of the game and at some point, you need to work with it. It’s not sustainable and you can never build your growth model only based on that. The idea is to get the snowball to the next level and achieve more feedbacks, which would result in better organic exposure on Chinese online marketplaces. This is not something you should have as part of your marketing spend every month. This is not what we actually suggest to our partners.

Matthieu David: Thank you very much. It’s already actually more than one hour we’ve talked. I think you could have continued with the cases you have worked on geo-targeting in our next episode in the coming month. Thank you very much, Michael, for your time. It was very interesting, very precise, and very specific. That’s exactly what the audience like. I hope you enjoyed it. 

Michael Simonet: Thanks a lot. It was great sharing a bit of that. Obviously, we are professional in E-commerce business in China, but we do much more. We are also doing a bit more traditional marketing but with a focus on E-commerce business in China and influencer marketing on Xiaohongshu with our services because you need to measure ROI. Unfortunately, influencer marketing is not that much an ROI, but what we’ve been talking about in the past one hour is pretty much measurable. You have numbers, and that’s what it’s all about. Being measurable and seeing how much you can actually grow and how this input leads to output.  I have been enjoying it a lot. Obviously, once we grow a geotagging company in Switzerland and will have a bit more to talk about. I am very happy to be back on the Paradigm. Thanks a lot. 

Matthieu David: Thank you very much. Thank you, everyone. Bye-bye.

China paradigm is a China business podcast sponsored by Daxue Consulting where we interview successful entrepreneurs about their businesses in China. You can access all available episodes from the China paradigm Youtube page.

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