Shenzhen, Guangdong - The global economic downturn's latest victim was China ecommerce site "Global Sources Direct", which closed for business on December 1.
Sources close to the firm reacted with surprise at the abrupt closure, and reflected on the challenges the Global Sources Direct business model faced.
Global Sources Direct was a venture of NASDAQ-listed Global Sources, in operation since June 2005. The company was a joint venture between the business to business giant and online auction site eBay.
Offering no detailed public explanation for the closure, General Manager Jennifer Leung made the announcement with a simple website message on December 9, 2008.
Representatives of wholesale distributor Chinavasion has since reacted, giving their analysis of the critical difficulties Global Sources Direct faced.
The first issue Chinavasion representatives identified was the difficulty of managing 'virtual inventory'.
Major ecommerce sellers, like Amazon.com have pioneered the concept of "Virtual Inventory" which has the seller relying on suppliers for stock.
In such a system, the seller does not actually carry any volume of stock themselves. They instead rely on the goodwill between themselves and their suppliers.
According to Chinavasion's Rose Li, this is an impracticable approach in a developing economy like Mainland China.
"Virtual inventory means you rely totally on your suppliers. As the seller, you cannot afford inconsistency in product quality or supply," says Rose Li. "But most manufacturers in China cannot yet offer quality control or stock efficiency that is acceptable for international buyers."
In response to such challenges Chinese Wholesaler Chinavasion has reported ongoing investment in its own in-house quality control process, checking all items before they go onto warehouse shelves.
Secondly, at Chinavasion, products are only advertised for sale if they are actually ready to be shipped to customers.
"Virtual inventory can never be a substitute for real inventory," summarized Rose Li.
Chinavasion's Rose Li predicted that Global Sources would now focus on its core activities of business-to-
