Global Sources is sending an important message to all China suppliers engaged in e-commerce: How far you can go depends on which B2B platform you choose.

"Today, those that remain in the market are kings," joked Philip Cheng, Chairman of Serico Design, at the China Sourcing Fair: Baby and Children's Products in Shanghai last December. His company focuses on exporting children's products with more than 10 factories in Dongguan.

Aiming to enter the domestic mainland China market and meet face-to-face with the quality international buyers, he chose Global Sources' trade show as a stepping stone. He said: "The global financial crisis, coupled with soaring raw material prices, has forced companies to improve their production technologies. Now they have to develop new products to meet new market demands in the short term to survive." He admitted that they were, at first, somewhat reluctant to make the transformation.

Global Sources' COO, Craig Pepples, sees signs of good news ? to come from such reluctant transformations. He said: "The worse the economy is, the more professional information is needed by both buyers and suppliers." Global Sources' mission is to help companies find better business partners, thus enabling quality buyers to help suppliers transform by offering them more business opportunities. To help its suppliers remain in the market is what Global Sources does best.

Global Sources' relatively smaller community of buyers and suppliers is considered by its major competitor as a weakness, but Pepples sees it as an opportunity to thrive. Alibaba once brushed aside Global Sources' threat in an interview with us, claiming: "They only have one-eighth the customers we do. Is it worthwhile for us to deal with them?" Research on China's B2B market in 2008 shows that, of the industry's 5.67 billion RMB in revenues, Alibaba owns 52.6% market share, while Global Sources comes in second with 12.1%.

Though unable to unseat Alibaba from the top spot, Global Sources has gained ground. The year before the company had only 10% market share. Now, Jack Ma is no longer so arrogant to say he "can't find competitors, even with a telescope!"

The opportunity that Pepples was referring to is Global Sources' community of quality buyers and the higher value products offered by quality suppliers. In the buyer-dominated international trade arena, suppliers' profit margins are usually extremely low, but working with top buyers can help them better weather the economic winter. He said: "Alibaba cannot deliver strong buyer teams, let alone the close relationships with these top buyers."

Free and value added services

Despite his fluent mandarin, Pepples is a foreigner and this is a reminder that Global Sources is a foreign company. With its 38 years history, they understand better how foreign buyers think and thus are able to design customized services. In addition, Global Sources never uses "low price" as its selling point. While Alibaba focuses on small to medium sized suppliers, Global Sources focuses on higher-end, volume suppliers that focus on product quality, not price.

This has put pressure on Global Sources competitors. With the same services, no other B2B company can set a higher price than Global Sources. Last year, the company launched its "one-star" package at a price of 38,800 Yuan, forcing its competitors to follow suit. In response, Alibaba has for the first time in nine years rolled out an entry level service at only 19,800 Yuan, while Toocle has launched "China suppliers" package at an extremely low price of 1,800 Yuan.

Global Sources decided to go one step further by launching its free service last November. It's been inviting exporters from around the world to list product information free of charge in the unverified supplier section of the company's website, Global Sources Online. Buyers can find these suppliers through the website's powerful search engine. This might be viewed as a move to snatch businesses from its competitors, or a "challenge" to Alibaba. But reducing prices is indeed a dangerous move. How can Global Sources, while providing free services to some suppliers, add value to their paid suppliers and convince them to extend their contracts? With two years' preparation, Global Sources has built a solid foundation to support this move – an upgrade to Global Sources Online 2.0.

The new platform includes a "verified suppliers" section to better serve paid members. With on-site visits by Global Sources' team members and third-party verification reports, buyers can choose suppliers faster and more confidently. The new platform also comes with an even more powerful search engine. The huge amount of unverified supplier information in this second level section provides buyers with even more choices.

Pepples said: "We definitely recommend verified suppliers to our buyers because they are more reliable. But the unverified supplier section helps us achieve the goal of building the most comprehensive B2B platform." Pepples believes that having enjoyed a "free lunch", unverified suppliers will be lured by Global Sources' professionalism and strength to become paid clients. Competitors' price cuts and this newly-launched free service have provided a very good opportunity for suppliers to experience more services with the same marketing budget and, thus, have the chance to compare each company. The B2B company that provides the best service will have the last laugh.

Thriving offline businesses

Pepples understands that, to attract the quality China suppliers, price reductions are not a wise move. Leveraging its advantages, Global Sources has come up with a host of tools intended to help suppliers move to the high end and survive the economic winter. These help suppliers enter emerging markets, find more buyers and provide them with management training.

Last year, Global Sources invited a famous scholar from MIT Sloan School of Management, Peter Senge, to speak at a forum where he shared the benefits of transformation with China suppliers and encouraged them to move upmarket.

Pepples and his team members visited more clients in 2008. They found, for example, that several Fujian gift suppliers had added green features to their products to maintain competitiveness despite thinning profit margins. Though prices have increased, consumers' rising appetite for environmentally friendly products has driven buyers to source more.

One Shanghai fashion accessories manufacturer told us: "Many companies are succeeding despite the economic crisis." He said that, when the economy is booming, people buy fashion accessories, but when it's weak, people need accessories even more to complement their old clothes. Therefore, he plans to expand his factory, employ more designers and produce more unique, high-quality products, to win orders.

To ease the pressure of rising costs, Global Sources' buyers are streamlining their sourcing operations. They are consolidating their supply bases and placing larger orders to gain pricing advantages. These buyers also make use of Global Sources' Private Sourcing Events, which provide them with opportunities to meet face-to-face with pre-screened suppliers. Chances of closing deals in these Private Sourcing Events are much higher than by sending inquiries through B2B websites. Therefore, these types of meetings have become popular among both buyers and suppliers. In fact, Global Sources doubled the number of Private Sourcing Events from 40 to over 80 last year. And, this year, more than 100 events are planned.

Offering offline services like trade magazines and trade shows, Global Sources can provide its clients with comprehensive solutions that combine online and offline marketing services. Such differentiation gives Global Sources an edge over its competitors, Alibaba and HC International. According to its third quarter financial results, Global Sources' offline business revenue accounted for 51% of its total revenue. While revenues decreased compared to the first quarter of 2008 as the economic slowdown forced the suppliers to cut more expensive offline activities, industry experts are still optimistic about Global Sources' offline business.

One analyst from Analysys International said: "A major reason suppliers choose Global Sources is their total solution." Another B2B analyst attributed Global Sources' success in increasing market share to the expansion of their offline business.

Pepples said: "The future of the B2B platforms lies in the ability to unleash real B2B power. To achieve this, suppliers should not rely solely on the Internet. A comprehensive B2B platform that combines online and offline services is more likely to lead to success."