Global Sources Direct Shuts Down, Wholesaler Chinavasion Responds

Author xlxmarketing 16.12.2008. | 11:11

The latest victim of the global economic downturn: China ecommerce site “Global Sources Direct”. Sources close to the firm reacted with surprise at the abrupt closure, and reflected on the challenges of the Global Sources Direct business model.

The strategic alliance between eBay and NASDAQ-listed Global Sources had been in operation since June 2005. Global sources direct (prweb.com/releases/Chinavasion/wholesale/prweb1738034.htm) offered eBay sellers access to many products from China in individual pieces and small lots at what it described as wholesale rates.

So, what happened, was it just the tough economic climate that has caused some veritable corporate giants (marketwatch.com/news/story/fearing-collapse-merrill-lynch-sells/story.aspx?guid={CF19C66B-BEBF-4A50-AA1C-88BDE2D21FAE}) to tumble and car manufacturers (google.com/hostednews/ap/article/ALeqM5h3kgMAkbLwyfxBdjzw8Pc4KZ7DhQD9531HIO1) to go to the government with the caps in hand? Or were there other factors behind the company’s closure?

Wholesale company Chinavasion feels that there were two reasons for the difficulties Global Sources Direct faced in supplying vendors outside of the current credit crunch and subsequent recession.

The first issue identified by Chinavasion’s analysis was the difficulty of ensuring product quality under the Global Sources attempted system of ‘virtual inventory’.

“Virtual Inventory” is a concept pioneered by major ecommerce sellers such as Amazon.com.

Virtual inventory Vs warehouse stock

In the virtual inventory system items listed at the online shop come from the inventories of many different providers.

Thus, suppliers manage the actual stock levels of products remotely, not the seller centrally.

According to Chinavasion’s Rose Li, this approach is popular with sellers because it allows them to expand their online catalogs but has some critical weaknesses in less evolved supplier environments, like the wholesale China manufacturer base.

“The only way ‘virtual inventory’ will work is if you have reliable suppliers and database systems that can guarantee consistent quality and guaranteed supply,” says Rose Li. “Most electronics factories in China are not at the level where they can offer that right now.”

According to many on ecommerce sites even larger companies with very strict supplier requirements, like Amazon, struggle with virtual inventory with customers complaining about high prices, being told they can’t get the items they actually want and receiving faulty or damaged goods.

Pricing can be an issue for users of a wholesale sourcing company that uses virtual inventory, like Global Sources Direct, as the company had to go with the price the supplier gave them on the day the item was ordered instead of buying in bulk when prices were low.

Chinese Wholesaler, Chinavasion, has developed its business model to overcome those issues.

Firstly, Chinavasion has invested in an in-house QC department, checking the quality of all items before they go onto warehouse shelves.

Chinavasion QC department

A quick look at the QC department inside the Chinavasion office and warehouse.

Secondly, Chinavasion’s policy has always been to limit the number of products added to the catalog, only selling those products which are particularly high quality and innovative.

viable products

Chinavasion staff going through products to make sure they are unique before listing them on our site.

Thirdly, products are only advertised for sale if they are actually in stock ready to ship out.

Chinavasion’s Rose Li predicted that Global Sources would now probably focus on its role as a B2B advertising platform.

Larger retailers would be happy that Global Sources had refocused on an area of business that allowed them to get bulk orders of products for low prices.

However, according to Rose Li, this is not an option for millions of small to medium ecommerce operators – who can’t afford to deal in orders of 100 pieces or more, but still need wholesale price breaks.

Chinavasion’s Rose Li says that small to medium suppliers often don’t have the time or money to deal with the time wasting, unreliable information, and lack of coverage for small orders that going through a B2B service like Global Sources entails.

“Power sellers and small business owners want to buy directly online,” says Rose Li. “They don’t want endless email exchanges with unknown parties and continuously returned goods.”

However, Chinavasion’s Rose Li offered her congratulations to Global Sources Direct (prweb.com/releases/Chinavasion/wholesale/prweb1738034.htm) for the three years it had put into getting goods from China into the hands of eBay powersellers and small business owners internationally. She suggests that all is not lost for Global Sources Direct customers.

“Chinavasion is going from strength to strength due to our focus on stability and guaranteed quality supply,” says Rose Li. “Chinavasion would like to extend an open invitation to GSD customers to join the Chinavasion family.”

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Author xlxmarketing 16.12.2008. | 11:11
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4 Comments

  1. Dan Scott December 22, 15:18

    why there are no people?

  2. mohit January 30, 23:04

    i want t join and discuss

  3. William Jacobs February 22, 20:55

    I think I found my partner to do business with:-)
    Thnx for the invitation to join the chinavasionfamily. I just started my own business and I’m realy looking forward to a long digital relationship.

    kind regards,

    William Jacobs

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