When the Largest Electronic Market in Shenzhen Began to Sell Cosmetics

This article was originally writen by the Chinese media Story On (显微故事) and translated by PandaYoo.com after it was licensed. Copyright belongs to the original author and it is forbidden to reprint without permission.

Author: Shun Zi
Chinese editor: Fang Yuanjing, Sun Shi

Shenzhen is the largest electronics distribution center in Asia, while Huaqiangbei is the very heart of all these.

Almost all the electronic products crowdfunded on Kickstater come from here, because engineers can find every part they need in one afternoon, in this incomparable market.

But Huaqiangbei’s bosses are starting to transform.

Starting in 2018, these southern Chinese businessmen with a keen sense of business found that mobile phones were no longer sold like hot cakes. Some merchants with less fund chose to leave, yet more changed direcgtion and started selling cosmetics.

Today, there are still so many people in front of the stalls of Huaqiangbei Building, and there is no sign that the epidemic has effected here. It’s just that customers have changed from electronics dealers to cosmetic purchasing agents.

This story is about the transformation of Huaqiangbei: it includes the owner of a cosmetics store transformed from a mobile phone store, a WeChat businessman who comes to Huaqiangbei as an “overseas buyer”, an investment officer of a building in Huaqiangbei, a courier in charge of a building in Huaqiangbei, and so on.

In their description, the light of the former electronic mall gradually faded, replaced by “shop rent soaring to 1000 yuan per square meter”, “hundreds of thousands of make-up parcels per day”, “online-live broadcast celebrities dragging suitcases to pick up items”.

Here, only people who have no network resources and no channels continue to sell mobile phones.

Mixed sale of real and fake goods, buyers do not even know if they have bought fake goods

Mr.Da, the operation of an e-commerce platform in Huaqiangbei.

“At first, our company did mobile phone trade in Huaqiangbei, however in recent years, the business has become more and more difficult. Several major e-commerce platforms have strongly promoted digital devices for a long time in order to capture the market, and the selling price was even lower than the purchase price of ours.

At first, we tried to sell clothes, but we had to spend a lot of money on clicks and advertisements. The actual sales could not cover these costs, consequently we lost a lot of money.

Later, when we saw that there were many beauty shops nearby, we quickly took down a stall and switched to the beauty make-up business, using the same supply channel of smuggled mobile phone before.

At present, the business is quite good. We can sell more than 100 orders every day.”

Any market with a certain scale but short of regulation, will have some unscrupulous sellers. The most common issue is that real goods are mixed with fake ones.

If you buy a fake from buying agent, don’t rush to scold him, he might be innocent.

“Agent delivery”(一件无痕代发) means that even if you only buy one item, it can also be shipped by Huaqiangbei seller. The seller will fill in the buying agent`s name rather than the name of original seller.

Some unscrupulous sellers will adulterate fake goods at the time of shipment, and in the end, buying agents themselves do not know whether the goods are real or fake.

A product sold too hot, resulting in out of stock will become an opportunity for adulteration.

There was a stall boss, whose downstream is an online celebrity, directly put fake goods when replenishing because a product was sold out.

Of course, there are also some bad buyers who come to Huaqiangbei, pretending to be victims. When they buy the real goods, they replace them with fake ones and then come to the seller for compensation.

As a result, merchants in Huaqiangbei never open online stores due to the fear of being swapped and returned, while offline is easier to control. The rule of the industry is “when you leave the store, I will not be responsible any more.”

“The question I am asked the most every day is: ‘can you guarantee that your goods are real?’

I don’t know about other places, but our store is absolutely real.”

Most of Huaqiangbei`s American makeup stalls are mainly real goods, and the possibility of buying fake goods in Hong Kong is higher than here. After all, everyone is afraid of damaging the reputation of Huaqiangbei, because it will be bad for them all.

Most of the goods purchased by cosmetics agents in China come from Huaqiangbei.

Ms.Shu, owner of a Huaqiang North American cosmetics store.

“After Mingtong Mall (formerly known as Mingtong Digital City, now the best cosmetics market in Huaqiangbei) changed to sell cosmetics in 2018, I became one of the earliest sellers to come in.

I worked as a full-time Hong Kong buying agent for 8 years before opening a store in Mingtong. Around 2011, cosmetics in Hong Kong still had a big price advantage. I charged a 10% labor fee on the purchase price to help mainland customers buy cosmetics.

Over the next few years, Hong Kong’s price advantage gradually disappeared, and the profits became less and less, so I stopped working as a “porter”. Relying on the supplier resources accumulated when I was a buying agent, I set up a trading company and changed my profession to a supplier.

I now specialize in some unlicensed real skin care products, which can be purchased in two ways:

1. Place a large number of online orders abroad and bring them back through ‘smugglers’. There is generally no ‘Chinese label’ on the packaging of such products, but they will be coupled with some samples. We will take the formal products and samples apart and sell them separately.
2. The goods taken off the shelves of the official cosmetics counter: these products are approaching the expiration date and will be dumped to us at a low price. After I get the goods, I will sell them through an agent.”

“In 2018, Huaqiang North’s mobile phone business began to decline, and the government led mobile phone merchants here to switch to selling beauty makeup.

When I moved in, there were not many big make-up malls here. At the beginning, the business was not very prosperous, mainly depending on those regular customers I accumulated before.

In the past one or two years, the beauty business has surpassed that of mobile phones, and similar cosmetics shops have opened nearby. The general sellers themselves also had some customers, and soon a large number of buying agents came here to compare goods.

The reputation of Huaqiangbei makeup market has gone out like this. To put it bluntly, most of the goods on the Chinese market are now sold by Huaqiang Bei.”

In the past year, the mobile phone shopping malls in Huaqiangbeu begun to transform into make-up business, and the competition is becoming more and more fierce. The prices of goods at many stalls are even lower than those in Hong Kong, so each shop is comparing their prices to see who has more competitive advantage.

In order to prevent the price from being known by competitors, some stores will play some tricks, such as casually marking price on the label. They will not give the real price until determine that customers are not competitors in disguise.

Unsurprisingly, there is a mandatory rule that photography is not allowed here.

In addition, “false-pricing” has another advantage: prices can change according to the market at any time. “We never give customers a long-term ‘final price.’ Because the sales volume here is very large, it is the weather vane of the price of the domestic beauty makeup industry, and many e-commerce platforms are also purchased here.”

The price fluctuation of Huaqiangbei always reflects the relationship between supply and demand in the whole domestic market.

For example, last month La Mer The Concentrate (cosmetics counter price 2730 yuan) suddenly became popular. The purchase price of this product in Huaqiangbei has risen by 300 yuan in a week, from 1480 yuan to 1720 yuan.

“There is another example. Recently, a mask brand is promoting their products, which led all purchasing agents in Jiangsu, Zhejiang and Shanghai to ask us for goods. Within a week, the price of a box of masks has gone from 50 yuan to 65 yuan.”

Huaqiangbei engages in a “price war” every day, and sellers with insufficient funds are easily defeated by prices at any time.

Some sellers who have a deep relationship with the supply channel will sell some products with a purchase price of 32 yuan for 32 yuan, even this means zero profit. They are trying to close down a nearby store that sells for 35 yuan.

This vicious competition directly leads to many shops simply taking risks by mixing fake goods with the real ones. Only in this way can they survive.

“I am relatively lucky, because I do it earlier and have a good relationship with the source, so the business is good. Now I can send out 100 cases of products and dozens of small parcels every day.”

In a few days, a new cosmetics mall will be opened nearby, and hundreds of businesses will settle in. Despite the hustle and bustle of Huaqiangbei, there is blood everywhere.

The scene of the transaction is like a duty-free shop. I met a lot of overseas buying agents here.

Mr.Fang, professional overseas purchasing agent

“Because of the epidemic, my foreign buying agency business has all come to a standstill, even many customers who placed orders before came to me to apply for a refund.

Later, when I heard that my colleague said Huaqiangbei could buy the authentic products, I simply came here for an on-the-spot investigation.

I was shocked by the situation at the scene. I always thought Huaqiangbei was a place full of fakes, like Putian in Fujian. However after I came here, I found that Huaqiangbei was more formal than I thought, and most stores even put forward the slogan of “one fake will be compensate for ten real goods.”

I also met many other buying agents here, and some of them even dragged their suitcases to stock. If it were not that everyone was speaking Mandarin, I would recognize here as overseas duty-free shops.”

Huaqiangbei is different from the duty-free shop in that although the area of the shop may be small, the goods are more plentiful and the service attitude is even better. No matter how many customers are there, the shop assistants will be enough friendly, will not rush you, and also provide survices such as”agent delivery”.

“More importantly, the price here is really low, much cheaper than flying abroad to buy by myself.”

“I also met many familiar colleagues here. After talking to them, I found that the returning rate of goods going out from Huaqiangbei is not high, which is about the same as when purchasing from duty-free shops.”

Being a buying agent is most worried about the credibility, but purchasing from Huaqiangbei does not have these concerns.

“There are many overseas buying agents here, Huaqiangbei shopkeepers also provide quality assurance. It seems that I will be shopping here for a long time before the end of the epidemic.”

Each floor of the mall sends 2000 pieces of express every day, and we set up a delivery station in each building.

Mr.Li, a courier in an express company.

Express delivery in Huaqiangbei is qutie uniqu. In other places, it usually delineates the working scope of couriers according to streets and communities. But here, the scope of business is based on the building. Some couriers are even responsible for only a few floors of a building.

The daily shipping volume here is so large that there is even an express station for each building in some areas.

At present, there are three kinds of express delivery services in Huaqiang North:

1. Ordinary express delivery: delivery immediately after offline purchase by purchasing agents.
2. E-commerce express delivery: only more than 50 orders can choose this method. The price is at the same level as that in Yiwu (another commodity distribution center in China). The lifting price is 4 yuan per order, and the continued weight is 1 yuan.
3. Logistics express delivery: directly rent the freight truck.

“I am in charge of one of the malls in Huaqiangbei. Although the business of this building is good only on the 1st or 2nd floor, I still receive more than 1000 express orders every day. I feel so tired that my legs seems to be broken”

“My colleague in the next building is even more harassed. He has little time to rest. Business in that building is even more booming, with at least 2000 orders a day on the first floor and more than 1000 on the remaining three floors.”

“At present, “agent delivery” is very popular in Huaqiangbei. After finish shopping, many buying agents place orders directly with us, and then send them out from Shenzhen, saying that the goods are shipped in Shenzhen warehouse (the invoice only shows the name and address of the purchasing agent, and no specific information about the store).”

The “price war” appears not only among the sellers of Huaqiangbei, but also among the express companies.

“The price of cartons rose during the epidemic, from a few yuan to dozens of yuan per 30. But none of our express companies dare to raise prices. As soon as the price goes up, the customer will find someone else to place an order.”

“So although business is good since the begining of the epidemic, the profit has not increased.”

Do not hesitate to lease a store. If you don’t pay in the morning, it will be taken away in the afternoon.

Tang, Sales of Huaqiang North Building

“After the outbreak of the epidemic, the travel company I used to work for closed down, so I changed my career from a tour guide to seller in Huaqiangbei. My colleagues in the sales department all said that I was lucky.”

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Two years ago, Huaqiangbei’s main business was still selling mobile phones. At that time, the market was not good, and the whole building was empty. After the recent transformation of selling cosmetics, it is very difficult to find an empty storefront.

Now the situation in Huaqiangbei is that as long as you work hard, there is no money you can’t earn.

“You can’t feel the impact of the epidemic here, business here is even better. Even if the building was closed for a period of time during the outbreak, everyone traded online, and companies said their business was not affected.”

Most of the merchants who can rent shops here have the strong ecnomic strength, because the rent is very expensive. Even the worst area costs 700 yuan per square meter, and you may not be able to get it.

“There are no unleased store on the 1st-4th floor of the first building of our company. The most expensive area is the first floor. The rent has risen to more than 1000 yuan per square meter.”

“We opened another building recently. The business is too hot, so much so that we have to sell different floors separately – each floor is divided into dozens of stalls according to the specification of 10 square meters.

The first or second floors of the second building have been rented, and even the third floor that opened at the end of July have been nearly booked up. Even the worst area still cost more than 700 yuan.

Don’t think that you can open a shop by only paying the rent. If you want to be in, you still need to pay 50,000-100,000 ‘promoting fees.’ In other words, if you want to open a store, you need to prepare at least 200000 yuan. If calculating the cost of stocking and deposit, it requires least 1 million yuan.

As soon as many customers heard this, they exclaimed: “too expensive!”

At this time, I usually close the construction drawing and let them take a look around. Anyway, I have no shortage of tenants. I bring more than a dozen of potential clients to see stores every day, and it doesn’t matter to lose just one.

A few days ago, a boss chose a store, but felt the price was too high and hesitated for a while. As a result, it was rented out by someone else just in the afternoon, and in the end, the boss had to rent a worse one at about the same price.

To be honest, if I had enough starting capital, I would have rented a store here to sell cosmetics.”

With the passage of time, Huaqiangbei, once the first electronic city, ushered in its own transformation, but also faced a lot of problems.

Just as the merchants said above, the current situation of fake products and fake express shipments is not uncommon in Huaqiangbei today. Whether this will become a major obstacle to the transformation of Huaqiangbei can only be tested with time.

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