Amazon not only sold $2.5 billion worth of goods, it introduced Prime members to new services. How should rivals compete in 2017?
Purity Cosmetics, which sources ingredients from Alibaba.com, will sell on Taobao.com.
Pretty much every business today is competing globally, says Ric Kostick, CEO of Purity Cosmetics. And the maker of natural cosmetics is a prime example of how a small company can use the Internet to both buy and sell more effectively internationally.
Incorporated in 2004, Purity sells online at 100percentpure.com, and has sold its products through the Bath & Body Works store chain and via TV and web retailer QVC. Bath & Body Works is part of Limited Brands, No. 18 in the Internet Retailer Top 500 Guide; QVC is No. 8.
An initial challenge Purity faced was to identify suppliers: find the ingredients to make products like its vanilla bean body wash or French lavender hand lotion, identify providers of eco-friendly packaging materials and make deals with factories to produce and package Purity’s branded products.
A Google search led to Alibaba.com, the China-based site that enables businesses from China and other countries to offer their services to buyers internationally. “We found that web site to be the golden key for finding vendors,” Kostick says. And not just suppliers from China. “We’ve found vanilla from Tahiti, lavender from Provence, organic lavender hydrosol from Bulgaria, organic eucalyptus oil from Australia. A lot of the packaging is in China. We found a lot of ingredients from around the world, and all on Alibaba.”
Through Alibaba, Purity can buy directly from farms and factories, cutting out middlemen who often mark up products and services 20-100%, Kostick says. Those agents often visit the suppliers, which Purity does not do. Instead, Kostick asks for production samples, which suppliers typically will charge for, but apply the fee to any subsequent order. “In the worst case, we just lose the price of the product sample, which doesn’t happen very often,” Kostick says.
While Alibaba disclosed last year that some 2,300 suppliers on its marketplace were defrauding buyers, particularly on orders for consumer electronics, Kostick says he’s never had a problem with Alibaba suppliers not delivering. “Through Alibaba, we’ve never had anybody take the money and run,” he says. Alibaba booted the fraudulent sellers off its marketplace, and the scandal has not slowed Alibaba’s growth: the company reported 22% revenue growth to $495 million for the first half of 2011; its international marketplace had 1,867,452 storefronts selling to 21,625,081 registered users as of June 30.
Having successfully sourced goods through a Chinese online marketplace, Purity now intends to sell to Chinese consumers through Taobao, a direct-to-consumer marketplace similar to eBay that is the leading online retail site in China, according to iResearch, a market research firm based in China.
Purity became aware of the opportunity when it started to receive large orders for deliveries to U.S. addresses, and learned some of the buyers were selling Purity’s products to Chinese consumers on Taobao.com. Some of those buyers have asked for authorized reseller certificates that they can highlight on Taobao, which Kostick says is a reflection of Chinese consumers becoming more savvy and learning to look for assurances they’re not buying counterfeit goods.
But Purity is likely to limit the number of Chinese resellers it gives its blessing to in the future as it moves to start selling directly to Chinese consumers itself on Taobao.com in about a month, Kostick says. “There’s a great opportunity, selling in China,” he says. “With Taobao, you can sell straight to the consumer if you can get the shipping costs down. Companies are starting to pop up that can handle the logistics side of it.”
Purity has engaged one such company, a California firm called Zsw Inc., that will handle fulfillment to China, including customs, for $4 per pound shipped. Since many of Purity’s items weigh no more than a pound, Kostick figures that will enable the retailer to charge only $4 in shipping to most Chinese consumers.
Purity does not report its financial results, but Kostick says the company’s total sales exceed $10 million and that 35% are online.