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ECVV.com Uses Pay-per-Inquiry to Fight Alibaba, GSOL
 China's business-to-business (B2B) e-commerce industry may be led by Alibaba.com (1688.HK), but, with some new moves, smaller companies could grab a slice of the market. JLM recently caught up with Chen Dong, the CEO of Shenzhen's ECVV.com, to talk B2B models and future prospects.
JLM: Can you talk a little bit about ECVV.com's business model?
Chen Dong: Our business model is different from more traditional companies that rely on fixed, annual fees. Our registered suppliers put RMB 5,000 down to open an account and we deduct RMB 30 from the account each time a supplier responds to an inquiry that they receive for free from our buyers. In addition, we offer a monthly package for RMB 390 that allows for unlimited inquiry response and annual packages for RMB 8,000, RMB 15,000 and RMB 25,000. About 30% of the suppliers who sign up for our pay-per-inquiry service transfer to monthly or annual packages, another 30% will churn after their first year and the remaining 40% will stay on as pay-per-inquiry users.
In terms of search, we have limited results to 20-30 entries per query and will continue to optimize the system.
JLM: What kind of background does the ECVV.com team have?
Dong: After working for one year at Meetchina.com, I joined Alibaba.com in 2000 to become the South East China senior sales manager. I left Alibaba.com in 2002 and brought some of my team members to create ECVV.com. Currently, our team has more than 200 people, mostly coming from Alibaba.com (1688.HK) and Global Sources (Nasdaq:GSOL). Former Alibaba.com staffers are in charge of marketing, while former Global Sources employees do tech support.
JLM: How many users do you have currently?
Dong: We have had stable user growth over the past three years, going from 1 million users in 2006 to 1.3 million in 2007 and more than 1.5 million today. Buyers increase faster than suppliers, and currently 75% of our registered users are buyers.
JLM: What do you see happening to the market in 2009?
Dong: We believe more big buyers and suppliers will come to our site in 2009, as the global economic downturn causes B2B users to look for better cost-performing platforms or new B2B models.
As B2B users reduce their budgets, they will need to switch from high-end platforms like Global Sources to cheaper, medium-sized platforms like us. I think China's B2B market will grow 40-50% in 2009. At the same time, I think the market will become more mature this year as smaller B2B sites die off.
JLM: Do you worry that smaller companies may copy your business model or that big players like Alibaba.com will release similar services?
Dong: Since the industry is in a relatively mature growth stage, promotional costs are much higher than they used to be for new entrants, while, at the same time, margin is falling. Furthermore, the whole supplier-to-buyer chain is key but not easily established in a short period of time. A lot of new B2B platforms tried to copy Alibaba.com, but they disappeared after a few years.
On the other hand, I don't think the B2B industry is going to be a monopoly. The industry needs three to four different models to meet market demand adequately. We have built our platform as a complement to services offered by Alibaba.com and Global Sources to target people who don't want to pay huge annual fees up front.
JLM: How do you rank your company against industry leaders?
Dong: If Global Sources keeps losing customers, I think we are going to surpass them to become the number three player in the market.
JLM: What are ECVV.com's short- and long-term targets, and how do you intend to reach them?
Dong: ECVV.com is profitable, and company revenue grew from RMB 25 million in 2007 to RMB 30 million in 2008. We expect these trends to continue in 2009 and realize net profit of more than 10 million in 2010 and an initial public offering in 2011. The local government has already agreed to support us for an IPO on the Shenzhen Growth Enterprise Market.
We have already invested in business-to-consumer (B2C) e-commerce site okbuynow.com, which was built by one of our employees, and we plan to acquire another B2C platform similar to Shanghai-based catalogue and online male clothing seller PPG (www.ppg.cn) in the future.
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