If you want to understand everything about CBEC in China (Cross-Border E-Commerce), this article will explain to you everything + report available. 2020
Cross-border E-commerce, importing goods from sellers from foreign countries. We’ll explain you here how to do and what is the best strategy to implement to succeed in your business.
Highlights about CBEC in China.
In China, it exists many online platform operating in cross-border e-commerce but the main Chinese key players are as followed:
- Alibaba, owning different platforms such as TaoBao and Tmall: 28% market share
- Net Ease Kaola: 20.5% market share (purchase by Alibaba)
- JD: 13.5% market share
- VipShop Global: 9.8% market share
- PInduoduo, new player
In China, you can almost sell everything through cross-border e-commerce. And some sectors are particularly booming:
- Cosmetic & care products
- Baby products
- Food & beverage
- Fashion (including luxury goods)
(trend mainly led my Chinese Millenials always looking for a good quality product)
What about the export process?
To export your products in China, you’ll get 3 different choices.
- Universal Postal Union (UPU): An informal technique that allows you to send small parcels in China. It doesn’t require an import permit, but products may be subject to tax up to 15/30/60% according to your product. The total product value must not exceed 1000 RMB for 6 products, but need to check on the restrictions and prohibitions terms of import in China (cf. FedEx website).
- Import through B2C: a formal export model in which the package is declared via a platform to alert customs of its shipment. A good way to ship products such as food, cosmetics, and high-end consumer products.
- In-bond import model: a bit more complicated, it requires the storage of exported products in a location such as Hong Kong or special areas for CBEC. This type of shipment corresponds to products such as consumer goods, low-value goods or heavy goods vehicles.
Keep in mind: For the last two types of export, shipments are subject to import tax payments, VAT and consumption tax (product tax is about 11.2% for the largest category of products or 25.5% for high-end cosmetics, luxury care, and perfume).
Bonus for you: you can also ship your products to the Chinese border (Hong Kong for example) where it will be stored before being sent for an order. The good part is that if nobody in China buy it, you can still sell it through other channels in Asian countries.
About importing products in China, since 2016, a “positive” product list has been arranged meaning preferential import tax of 11.9% tax rate, exemption of additional time at custom clearance, and you won’t need an import license or other certificates. Products from this list are as followed:
- Spices / healthy dry food
- Cosmetics related products (brushes/cotton pad)
- Selection of dairy products (milk/cheese)
- Baby food
- Fitness related products
For all the other products not mentioned in the previous list, the following documents will be required:
- An import permit
- Registration form (such as CFDA permit for nutrition products)
For customer clearance, you can either deal with it by yourself or hire some logistic company to help you deal with the multiple steps during the procedure, which include:
- Customs registration
- Declaration and inspection of imported products
- Payment of taxes and exchange control
- Customs clearance
A certificate of quarantine from the local inspection & quarantine authority will still be required for alcoholic beverages, cosmetics, seeds, foodstuffs, and plants.
Once you know how to import your products, time to get into the payment method.
Fluctuating exchange rates can lead to a significant impact on the company. But to facilitate these transactions, you can use cross-border payment versions from WeChat or Alipay. Both methods require a business license but no need of Chinese bank account.
- “Pay account” is free
- Cost of transaction: 3% of the total amount
- Transaction agreement for a minimum of $5,000 (if less, may be additional fees)
- Transactions allowed between RMB and Euros, US Dollars, Japanese Yen, Pound Sterling, Australian Dollars, Singapore Dollars, Hong Kong Dollars, South Korean Won
- Alipay account: $1,000
- Transaction cost: 3% (reduced if transaction greater than 1 million RMB)
- Transaction agreement for a minimum of $5,000 (maybe negotiated per week/month/quarter)
- Support all WeChat pay supported the currency, plus Canadian Dollars, Swiss Francs, Swedish Kroner, Danish Kroner, and Norwegian Kroner.
What about the cost of CBEC to China?
Even if lower than establishing an offline business in China, the budget for CBEC still needs to be considered. Here’s what you need to keep in mind:
- Creation and maintenance of internet platforms (fee-related to the platform: Tmall / Taobao / Kaola, etc.),
- Design, update, and optimization (designer fees),
- Generating traffic (the more competitors, the more expensive it is),
- Warehouse management system,
- Enterprise Resource Planning,
- Transportation management system,
- Shipping costs,
- Advertising and marketing campaign (WeChat, Weibo, XiaoHongShu, etc.),
Budgeting your project will be very important to import products in China. No serious plan may lead to failure or very few results, in the best case.
What about product storage?
If you involve yourself in CBEC, the question of storage will soon be very important. You’ll have to consider investing in a storage area in a CBEC zone.
Of course, if you’re just starting it may not be necessary immediately. You first have to be sure that you’ll make product sales, otherwise, you’ll end up losing a lot of money. But as soon as you’ll grow big enough to have detailed forecast of your future sales, and in concern of customer experience improvement, having a warehouse to store your products will be a wise idea.
For logistic, be careful of “hidden costs”, such as packing costs:
- Blister wrap
- Box at the right size
Concerning delivery, you can operate with platforms such as JD offering storage services or you can also store in bonded warehouse in a free trade zone (in Mainland China or Hong Kong) which can also serve as an order management platform.
Do you need a local partner?
Yes/no, it depends on your business size and your goals.
China is a huge country and setting up a logistic system covering up large territory will require significant investment. And without a reliable logistic network, it will be hard to guarantee good delivery services to your customers, which will directly impact the trust Chinese have in your company.
Plus consider linguistic, regulatory and technical barriers that may increase your need for resources.
An on-site partner can help you here to implement your strategy. They have deep knowledge of the Chinese market, engines to optimize, can help you to improve your objectives and they know changes in terms of business law.
But if you’re a multinational company with important investment capacities, having a local partner won’t be needed.
What’s the best platform for your shop?
When developing a website for your business, there are different options available for you:
- Create your own website (need to be in Chinese, on a Chinese domain)
- Use large E-commerce platform. Ex: Tmall (good visibility, reliable and good environment for your business but high competition and important financial investment)
- WeChat shop with mini-programs (integrated in WeChat APP and offering you freedom of content/ design/ prices/ etc. But it’s hard to generate traffic and impossible to engage customers with push notification)
The 1st step to implement before launching your business:
You’ll need to attract attention around your company, make your company trustable by Chinese netizens in order to make any business in China.
Social media marketing is VERY important in China to get the most visibility possible. Here are some tools you can use:
- Weibo: the Chinese twitter, a brand mass marketing tool which will help you to increase traffic on your page.
- WeChat: the Chinese Facebook, allowing close relations with users. You can also implement an interactive campaign with your followers.
These are probably the two most important social network you must use to increase your brand awareness. But other networks are available to develop your company’s reputation: Douyin, Toutiao, XiaoHongShu (little red book).
Does your brand require a trademark?
Product copy is unfortunately still present in China… Innovating is a good way to differentiate your brand from competitors but as you’ll need to promote your product on social media, yes, protecting your product/brand will be a must-do.
Chinese government work with the “first to file” system, meaning that the first applicant to file the trademark will be assimilated as the real business owner. So we advise you here to cooperate with an agent of trademark office at the state administration for industry and commerce of the People’s Republic of China. Once the trademark is done, don’t forget to register your patent/ designs as well.
What can we do for you?
At the GMA, we can offer you different services to optimize the launch of your brand on the biggest market in the world. We can help you to:
- Choose the right platform for your brand,
- Launch your e-commerce platform.
- Build the best customer experience
- Make the delivery process as smooth as possible.
- Improve customer service
- Develop a strong digital marketing strategy on Chinese social media
- Organize monthly reports to analyze your results and performances, following what we’ll plan a new strategy for months coming
The Gentlemen Marketing Agency: Drive for success.
Strong of 7 years experience in the Chinese market with our team of 80 peoples, we help brands building trust and brand awareness on the Chinese market.
200 case studies in Crossborder. contact us for further information.
- Talk to our e-Commerce consultant (30min for free)
- See our case studies
- Get our Report (free) about top 20 questions & answer about CBEC in China
And we believe in hard word to success in China