Gong Jingqiang: Driving Packaging Transformation Through an E-commerce Ecosystem

E-commerce Committee of the China Packaging Federation — Gong Jingqiang

Distinguished guests and colleagues,

Good morning! It is a great pleasure to meet packaging colleagues today on the scenic banks of the Suzhou River. My speech is titled 'Leading Packaging Enterprise Transformation and Building an E-commerce Ecosystem,' and around the themes of e-commerce, transformation and development, I will discuss the transformation path for China's packaging industry.

In recent years, e-commerce has expanded rapidly across industries, and the arrival of the Internet has accelerated the information age. Packaging is a deeply traditional sector, and many traditional business owners still have a vague understanding of e-commerce. Let me begin with its history: China's e-commerce started in 1990 and now spans more than 20 years; it has become an important part of the national economy. E-commerce refers to transactions and related services carried out through electronic trading via the Internet, intranets and value-added networks, representing the electronization and networking of every stage of traditional business. For anyone running a business today, whether selling flowers or home appliances, there will certainly be no future without understanding e-commerce.

The rise of e-commerce, with its distinctive features, has opened a new customer-centric business model. In this environment, customers can obtain product information quickly, accurately and in large volume. E-commerce is characterized by low payment, low cost, no time or space limits and a broad user base; customers and companies can communicate directly. This has also fostered personalized products, made personalization possible and greatly reduced costs. So why should e-commerce be integrated with the traditional packaging industry?

Especially during the 12th Five-Year Plan period, China's e-commerce industry grew rapidly, its scale expanded quickly, and service enterprises in e-commerce information, trading and technology kept emerging. As an important pillar of the national economy, the packaging industry appears somewhat weak against the impact of e-commerce; with the arrival of the Internet, traditional industries fell behind in an instant. To reach its peak, the packaging industry must assess the situation, follow the market, and adjust its business approach and industrial structure to adapt to e-commerce. E-commerce is the general trend; companies must go with it, keep up with the latest global developments, join the e-commerce tide and strengthen competitiveness.

The rapid momentum of information development is reshaping the times, prompting more traditional enterprises to plan for transformation, and a new e-commerce ecosystem has taken shape. In the asymmetric competition between newcomers and veterans, how traditional packaging companies can both attack and defend has become a key concern for many traditional enterprises.

It is understood that physical operations account for most of the operating costs of traditional enterprises. If traditional packaging companies cooperate with asset-light e-commerce platforms, they can save substantial capital costs in areas such as human resources and actual operating expenses, while also expanding their business scope. In addition, rising labor costs in China have greatly weakened the advantages of processing and production enterprises, making transformation the only choice to change their fate. Brand owners and distributors across industries have already moved online, forming an enterprise transformation and profit-model innovation system that integrates business model, profit model, operating model, capital model, and sales and channel model innovation.

Therefore, enterprises should fully consider their own strengths and weaknesses, analyze the risks and opportunities of transformation, and reasonably control risks during the process, so as to determine a transformation strategy suited to their characteristics and ensure sustainable development. Choosing the e-commerce approach that fits the enterprise is the real key to development.

China is still in the early stage of Internet e-commerce. Although a start has been made, much work remains for vigorous development. What is the biggest obstacle for the packaging industry in embracing e-commerce? In summary, it comes down to internal and external factors.

Internal factors mainly involve enterprise managers: vague concepts, difficulty in moving beyond traditional marketing thinking, insufficient attention to Internet e-commerce, and a single profit model that is hard to scale are all key constraints on internal transformation. For packaging companies to transform, they must first improve managers' mindsets. The essence of the Internet should be 'de-Internetization' — treating networking as a habit rather than something deliberate, and fighting for survival.

External factors are mainly reflected in the operating context of e-commerce transformation: resistance from traditional distributors and intermediaries has squeezed the survival space of traditional enterprises to some extent; e-commerce talent is scarce; and incomplete e-commerce laws in the broader environment hinder deeper e-commerce transformation.

The E-commerce Committee of the China Packaging Federation was approved by SASAC of the State Council, filed with the Ministry of Civil Affairs, and established in July 2014. As a professional committee under the China Packaging Federation, it builds a communication bridge between e-commerce service institutions and the government and serves as a cross-regional, multi-level and diversified national e-commerce alliance. Its purpose is to advance e-commerce adoption in the packaging industry and accelerate the transformation and upgrading of traditional packaging enterprises.

The committee promotes deep integration of industrialization and informatization — the 'two integrations' — and plays an important role in tracking industry trends, expanding industrial scale, supporting industry transformation and upgrading, building a public e-commerce service platform, and promoting e-commerce adoption in broader fields. The E-commerce Committee upholds and implements the scientific outlook on development, safeguards industry interests, regulates market economic order, builds an enterprise credit certification system, and serves industry enterprises comprehensively. It comprises packaging organizations, professional committees, packaging enterprises and related colleges and universities.

E-commerce in China's packaging industry is now facing a new opportunity. It is hoped that the E-commerce Committee will set sail and accelerate e-commerce development in the packaging industry. The committee has proposed an integrated e-commerce solution strategy covering five areas: e-commerce strategy, e-commerce training, e-commerce operations, e-commerce transactions and mobile Internet. By integrating resources from packaging and related industries, enabling data sharing and making full use of China Packaging Network resources, it aims to play a major role in e-commerce, promote rapid enterprise upgrading, achieve the ultimate goals of transformation, innovation and development for the packaging industry, speed up transformation and upgrading, advance integrated and innovative development between packaging and the Internet, and contribute significantly to China's packaging industry.

In my view, e-commerce in the packaging industry must be closely integrated with electronic system applications, industrial clusters and supply chain models, online customization, e-commerce transactions and brand upgrading, and should operate from the following aspects:

First, electronic system applications. For most packaging enterprises, the initial move online should begin with digitalizing internal management. China Packaging Network developed and launched EPS, an online enterprise informatization application software, to improve the operating strategy of B2B e-commerce websites and advance the deep integration of the two integrations, placing it at the forefront of the times. EPS not only digitalizes existing customer management, procurement management and inventory management within enterprises; more importantly, it integrates upstream and downstream customers in the packaging and printing industry for users, enabling them to conduct independent e-commerce marketing and complete online procurement and sales in one stop — a first in related industry fields.

Second, promoting online e-commerce transactions. Online customization companies face diverse customers from all industries, which makes their products special — they must provide different packaging products according to different customer needs, making customization a common industry phenomenon. It is precisely this customization that leaves many packaging companies at the level of online promotion in their understanding of e-commerce. Undeniably, promotion is the first and an important step in e-commerce. In fact, online negotiation, online transactions, WeChat interaction and optimized promotion are all important parts of e-commerce. Given these particularities, the e-commerce trading platform 'Packaging E City' emerged, creating a professional section for 'customization' by packaging enterprises. 'Packaging E City' pushes enterprises from merely touching the Internet to truly connecting with it, and is a genuine online trading e-commerce platform for enterprises.

Third, the benefits it brings to enterprises are roughly as follows:

1. Fewer intermediate links. Through the advantages of the Internet, producers and consumers can trade directly, saving costs and time for both buyers and sellers, while using e-commerce to capture consumer shopping demand in real time.
2. Lower inventory. To cope with unpredictable market demand, packaging companies sometimes have to hold certain product inventory; and because they cannot accurately judge the raw material market, they often maintain a certain level of raw material inventory.
3. More business opportunities. Traditional transactions are limited by time and space, while e-commerce can operate online 24 hours a day without regional or time constraints, and business can extend to markets that traditional marketing and advertising promotion cannot reach.
4. Online promotion. Online promotion uses certain methods to publicize and promote products, services and even people, improve enterprise operations, and use online branding to directly drive brand value — a widely shared consensus among enterprises. Using existing comprehensive platforms such as Baidu for e-commerce can only serve as a promotional window, with less-than-ideal results. We are committed to building one-stop enterprise website design, website... (the original text is too long; excerpted here)