China to spend US$285 billion on cross-border goods
Cross-border e-commerce (CBEC) is set to skyrocket in China according to a new report from international think tank Fung Global Retail & Technology.
To capitalise on this, international retailers need to complement their existing expansion strategy with online sales platforms, says Fung Global MD Deborah Weinswig.
Cross-border e-commerce is the most efficient platform to reach increasingly affluent and sophisticated Chinese shoppers seeking products from overseas, according to the report, The International Retailers’ Guide to Cross-Border E-Commerce in China.
With Chinese authorities relaxing the rules, online purchases of overseas products are expected to increase to US$285 billion in value in 2018, up from US$136 billion last year.
As well as authenticity being less of a concern, e-commerce purchases attract less taxes so are cheaper for consumers, writes Weinswig. As a result, it is projected that a quarter of the population will shop on foreign sites or through third parties in 2020, up from 15 per cent this year.
“We expect CBEC will drive the next leg of e-commerce growth as Chinese e-commerce companies and international retailers launch globalised versions of their portals. By selling through CBEC, international retailers can reach Chinese shoppers regardless of whether or not they have a physical presence in China.”
China is already the largest e-commerce market in the world, with the use of CBEC via such marketplaces as JD Worldwide and Tmall Global being attributed to the continuing rise of the upper middle class with its growing use of the internet and belief that international brands are of higher quality.
Most shoppers seek items related to well-being such as cosmetics and organic foods, expensive or hard to find domestically, says the report. Many foreign e-commerce companies have launched Chinese websites, and since late 2014 authorities have been formalising regulations including tax reforms and expediting customs clearances.
Japanese companies in particular are targeting Chinese CBEC shoppers, using mobile apps such as Rakuten and China’s Wandou.
Choosing the right platform is crucial, writes Weinswig. Options include:
- Online marketplaces such as Alibaba’s Tmall Global, a third-party e-commerce platform that lets brands open a storefront. International distributors using this platform include Macy’s, Metro, Shiseido and Uniqlo.
- Online direct sales such as Amazon.cn, Jumei Global Store, Kaola.com (for smaller brands) and Vipshop. Distributors buy from the retailers to resell to consumers.
- Hybrid e-commerce platforms such as JD Worldwide that combine elements of an online marketplace and online direct sales. JD Worldwide partners include eBay, Lotte, Rakuten and Unilever.
- Overseas shopping platforms.
“To succeed in the Chinese market, international retailers are advised to have a strategic plan for CBEC that complements their China strategy,” writes Weinswig. “International retailers will need to decide which cross-border channels to sell on, driven by considerations of each platform’s targeted clientele and product category, costs, track record and suite of value-added services.”
Fung Global Retail & Technology is based in Hong Kong, London and New York.
This article first appeared on our sister site, Inside Retail Asia.