DHGate

© DHgate

DHgate is a Chinese ecommerce platform for wholesale items sold by small and medium sized manufacturers and retailers. In this article, we will look at, 1) what is DHgate?, 2) the business model, 3) lessons from the DHgate founder, 4) taking precautions, and 5) DHgate success stories.

WHAT IS DHGATE?

The Company

DHgate is a Chinese ecommerce platform which focuses on business to business sales. The aim of this website is to create a connection between small and mid-sized businesses based in China and potential buyers worldwide. These potential buyers can purchases products manufactured in China from the website directly from the manufacturer. As with other Chinese ecommerce platforms, the website offers detailed customer support through email, telephone and chat services.

The name is derived from the word Dunhuang which is a Chinese city in the Gansu province. In ancient times, the city was a strategic location along the Silk Road which connected China the rest of the world. The company draws on this comparison and positions itself as a modern day Silk Road, providing the same connection between China and the rest of the world.

The products listed on the website include electronics, sports supplies, clothes, accessories and beauty products among others. The majority of buyers for the website are located in North America and Europe.

 

History

Diane Wang

The company was created by Diane Wang in 2004. Wang remains the current CEO of the company. A well-known figure in China, she is often covered by the country’s media. Prior to founding DHgate, she was among the people who created Joyo.com, now Amazon China. During her career she has served as the country marketing director for Cisco Systems China, managing China marketing communications. Her other credentials include Marketing Service Manager and Head of Business Development for Microsoft China for six years.

Diana has received the ‘Outstanding Woman of China’ and ‘Outstanding Woman of Beijing’ awards. These are two of the highest accolades received by professional women in China.

She began her career as a lecturer at the TsingHua University in Beijing, China. Ambitious for more, she applied for a position in Microsoft China and was selected. Though the corporate culture was a bit of a shock for her, she managed to stay on and went on to outperform all other sales teams. Though she faced class ceiling when it came to promotions and growth, she persevered and took each new supervisor as an opportunity to learn and grow. It paid off, with a promotion that made her the first professional executive to be promoted in the company from mainland China.

After moving to Cisco, she co-founded Joyo.com and led the startup through the internet boom and downturn. The business grew and was eventually acquired by Amazon. In 2004, she created a new ecommerce platform by the name of DHgate. The company had 425 employees as of 2012 with 50 percent of them being female.

The Company

As of 2011, the company is said to have close to 25 million listings of products from as many as 900,000 suppliers who are Chinese. There are also 4 million buyers registered from as many as 230 different countries. The company’s quick growth landed it on the 2009 Deloitte list for China’s Top 50 Fast Growing Enterprises.

The company had a strategic relationship with PayPal till 2012. Since then, PayPal is no longer an accepted means of payment on the website. The company works with China Construction Bank to provide a microloan service to those users who have good record on the website. The company also works with UPS and eBay.

THE BUSINESS MODEL

The website does not charge a membership fee from either buyer or seller. Instead, it charges only a commission as a percentage of successful transaction amounts. This percentage ranges from 3 percent to 10 percent. Though the website remains free for sellers, a special value added services feature called DHfactory has recently been added. Sellers can pay an annual fee to avail this service. The company is set to launch further exclusive services to compete better in the Chinese online wholesale market.

Buyers and sellers are required to interact through the website. There is an escrow payment service that protects buyers and a customer service department to help resolve disputes.

The company is built to facilitate small and medium sized Chinese enterprises. Average order sizes remain small for this reason. The variety of items listed however, is not affected by the size of the businesses and categories of products include clothes, bags, shoes, sports items, toys, jewelry, electronics, mobile phones, musical instruments, car parts, video games and many more.

Differentiation

DHgate differs from other Chinese ecommerce platforms by focusing on only smaller scale manufacturers and suppliers. In addition, the transactions and payments are through the website which offers some degree of trust and reliability for the buyers. The website offers benefits to small suppliers that have thus far been restricted to only larger and more business aware suppliers. These small suppliers are able to get quick and easy access to the global supply chain.

LESSONS FROM THE DHGATE FOUNDER

The DHgate founder has overcome odds again and again to become one of the most respected and successful business women in China. Because of her experience with multinationals as well as startups, as well as her entrepreneurial venture, she has a lot to offer to potential entrepreneurs.

6 Tips for Achieving Entrepreneurial Goals

  • Dream Big: This is Wang’s number one prerequisite for any entrepreneur. She believes that the road to the fulfillment of any dream is full of adversity and the temptation to give up. If the dream is big enough and the belief in it strong enough, then these difficulties can be overcome and the goal achieved. She says, “The original dream is the foundation that empowers you to stay focused whenever you feel lost.”
  • Make Entrepreneurship a Lifestyle: According to Wang, no one can treat entrepreneurship as a part time endeavor. Instead, it needs to be a lifestyle change and choice which goes on to impact every aspect on your life. She believes that a person needs to be physically and psychologically strong to handle any challenges that arise. As an employee of a company, one always has the option to leave the job if one is not challenged or happy. But as an entrepreneur, the option to give up or take a break is not available at all.
  • Let go of Comfort Zones: When you are an entrepreneur, there is no chance of being able to stay within your comfort zone. There has to be a constant readiness to play any role that needs to be played and stretch yourself in often unexpected ways. Wang says that she was not always comfortable with public speaking. But when she became the public face of her company she had no choice but to practice, overcome anxiety and become a strong speaker. She says, “Over time, I realized it was an invaluable self-improvement process, and an opportunity to grow with the company.”
  • Don’t Look for Shortcuts: DHgate was created when the value of ecommerce was still not understood or recognized by most people in the country. To overcome this lack of awareness, Wang and her team made dozens of trips on trains, motorcycles and even donkey carts to get across the country and explain the benefits directly to the manufacturers. There is no magic pill and real work needs to be done to achieve success.
  • Find Your Niche: Wang believes that it is important to narrow focus and find a niche to work within. It is not always possible to beat all competitors in all areas. Instead, a niche along with a unique selling point can help differentiate you from competitors and become the biggest fish in your pond.
  • Lean on Others When Needed: Wang emphasizes the importance of staying outwardly focused as well. This includes getting to know people in the field but outside the company and build up a network. This network can then be leveraged to fill any gaps in the business. This can be done through a partnership with people or companies. Experienced investors can be identified and encouraged to invest in the business to help growth. Wang says, “This allows you to remain focused on what you are good at, and to unleash your potential to create something of significance.”

TAKING PRECAUTIONS

Services Offered by DHGATE

The website offers three services that can protect buyers from counterfeits or scams.

  • Seller Feedback: This is a rating given to each seller by various buyers. A higher rating means a higher degree of reliability given previous performance. The comments section gives more detail about the ease of doing business, seller attitude, credibility, reliability and support.
  • Escrow Service: The escrow service sees DHgate act as a third party that collects and holds payment till the merchandise is shipped and received. If the buyer accepts the merchandise, then the payment is released by the escrow service.
  • Dispute Process: When any disputes do occur, there is a dispute resolution process that tracks, manages and resolves disputes as quickly as possible with DHgate acting as a neutral and impartial mediator.

 

Scams and Speculation

As mentioned previously, there is not a lot of information available on this ecommerce platform. Though some of the information that is available is positive and encouraging, there is also a lot of confusion and many bad reviews on different websites. This lack of complete information means that any attempt to do business through DHgate should be undertaken after careful consideration, research and initial orders should be smaller amounts so as to find reliable suppliers for longer term commitments. There is also a danger of counterfeits and badly made items which again means a loss of revenue if investment is made in purchasing them.

Common Complaints

Some of the negative customer experiences from DHgate include:

  • Clothes: The most common issue that buyers face when buying clothes from the website are materials, fitting and delivery time. Most reviewers have felt that the items are delivered later than promised, often missing important occasions for which they were ordered. Others have found the items to be ill-fitting even though specific measurements had been provided. Still others found design mismatch from promised items as well as use of inferior quality materials.
  • Electronics: Items are often received in battered conditions and will not work when turned on. Often they turn out to be non-working imitations. Some are sent to be exchanged and the seller disappears without replacing the item.
  • Understanding Complaints: Users often find it difficult to communicate with both suppliers and DHgate employees themselves. DHgate is often accused of siding only with the supplier and not making an effort to understand the nature of the problem.
  • Items Different from Listed Ones: A common complaint is when items delivered are drastically different from those shown on the website. In several such cases, the supplier becomes impossible to reach, does not respond to queries and the payment is released as the item has been delivered according to DHgate escrow rules.
  • Extremely High Shipping Costs: Some sellers will charge extremely high shipping costs as a way to offset the low prices on offer. It is a good idea to check all shipping charges before finalizing an order.

Scams

The most common scam found listed on the various review websites is when the seller sends an empty envelope to the wrong address deliberately. The item appears as delivered and the escrow service releases payment. In reality, the item is never shipped and never received by the customer.

The other type of scam is basic counterfeit products. The supplier claims to sell originals at significantly lower prices than the original. These turn out to be counterfeits almost all the time.

DHGATE SUCCESS STORIES

According to the DHgate founder, there are many success stories from sellers who have used the platform to break barriers and achieve success. She mentions a young Chinese woman from a poor background who sold clothes through the website and eventually made enough money to move to Paris and study fashion design. There are also many stories of middle-aged women with children who have left home, who have built up businesses by selling products from home.

However, because of the predominantly small scale nature of Chinese sellers that list on DHgate, there is very little direct information available about these sellers and their success stories. Instead, there are many stories of people or other small businesses in different parts of the world who buy from these Chinese sellers and successfully run their own businesses based on these products. Some of these stories include:

William Daniel – USA

William began by scoping out several websites for products and prices before deciding to try out DHgate with a small electronics purchase. It was delivered on time and he was able to sell it for a profit. He continued to purchase from DHgate and sell onwards eventually growing his business enough to hire employees and continue to grow. He suggests researching the marketplace thoroughly before deciding to buy. He also suggests checking out the seller completely through ratings and conversations over email, chat or phone before establishing any relationship. If all else fails, he counts on the DHgate escrow service and the customer service team for support.

Martin Flynn – USA

Martin uses DHgate to purchase cell phone related items and accessories to sell via his own online retail business. He now relies on DHgate as his only source of supply. He finds their prices extremely competitive and is happy with reliability of service.

Carlucho Sabal – USA

Sabal runs a small company that conducts business in Venezuela. The company was unable to raise the substantial funds required to import products in bulk via a container from China. They decided to go small instead and purchase from different wholesale websites online. Through some of these, the items received were either damaged or got lost in transit. At this point they discovered DHgate. There were some initial issues before they understood and started making use of the seller feedback system. Once this was sorted out, Sabal’s company was in a position to select reliable sellers and slowly grow their own business.

Timur Hassan – UK

Timur heard about DHgate and after preliminary research, decided to give the service a try. He created an online store and started listing items that he purchased from DHgate. After experimenting for two months, he decided to establish a relationship with one of the sellers. This seller was reliable and shipped sealed, good quality products as listed on the website. Shipping was quick and any damaged items were replaced easily. He is especially happy with the DHgate escrow service which holds the buyer’s money until the item is delivered. He manages to resolve any issues with support from the DHgate live chat service.

Image credit: DHgate.

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