WHAT EXACTLY IS CROSS BORDER E-COMMERCE?
Cross border e-commerce is defined as import and export activities of cross-border trade conducted through e-commerce methods by transaction subjects from different customs borders. It is mainly classified into B2B and B2C.
E-commerce in China has become part of Chinese consumers daily life. The demands for better, safer and cheaper products grow at the same time as the purchasing power of the Chinese population. Possessing foreign items is not anymore just a symbol of wealth but is part of many peoples life style.
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FIRST STEP: KNOW JURISDICTION OF CROSS BORDER E-COMMERCE IN CHINA
« Bonded warehouse »: These warehouses are warehousing facilities dedicated to storing overseas goods. It allows sellers to send their products to China without being subjected to commercial import duties or quality control measures.
The consequence of this type of warehouses was the rapid growth of cross-border. Following this growth, government announced it’s will want to close them, which had retailers were very worried.
In the end, on January 1st, 2017, the government announced that they wouldn’t close the warehouses. Retailers would be allowed to continue their activities but a new tax on imported products was created.
The government allowed the creation of 5 new zones for these « bonded warehouses » in Dalian, Hefei, Chengdu, Qingdao, and Suzhou.
A BEAUTIFUL FUTURE FOR CHINA CROSS BORDER E-COMMERCE
Chinese consumers are more and more informed. They want quality and foreign products as a synonym of quality. The China cross border e-commerce market is expected to grow significantly.
The Chinese ministry of commerce announced that cross-border e-commerce reached 6.5 trillion yuan in 2016. They also said that they plan an annual growth of 30 percent in the next few years with more than 58 million consumers buying via cross-border e-commerce.
This market will more than double by 2020. It’s a very good perspective for cross-border e-commerce and many platforms are gaining in popularity.
FOCUS ON THE CHINESE CROSS BORDER SHOPPER
The Chinese cross-border shoppers are mostly coming from the middle class. They are young, around 30 years old. A thing very astonishing: the largest portion of these shoppers are males. According to the report of the China E-commerce Research center, males represent 62.6% of cross-border e-commerce shoppers. Your target lives mostly in big cities such as; Shanghai, Beijing, Hangzhou, Guangzhou, and Shenzhen. Growth is also present in smaller cities.
These shoppers spend an average of $473 each on cross-border purchases. This figure will considerably improve in the next 5 years. You have clearly a significant opportunity to do cross-border e-commerce in China.
CROSS BORDER E-COMMERCE: WHAT ARE CONSUMERS BUYING?
Chinese consumers purchase a lot of goods on cross-border e-commerce but, several categories are clearly more popular the others.
The two most popular overseas goods are cosmetics and baby products (Baby formula for instance).
Why? Because many scandals have occurred in China. (counterfeiting, dangerous goods, food scandals…). Domestic products are often considered to be inferior to foreign products.
Besides, the regulation of the cross-border goods is stricter and retailers have to inform the consumer about all the characteristics of the products they sell.
Today, Chinese consumers want to know what they purchase. They have more money and are more picky with what they buy. They want better goods for their children and for them.
WHICH CROSS BORDER E-COMMERCE PLATFORMS SHOULD YOU CHOOSE?
There are different platforms popular among Chinese consumers with different challenges and benefits. Kaola.com. Tmall, the giant of e-commerce, JD, Little Red Book, Yangmatou, Wechat store …
Kaola.com, a website, launched in 2015, is today the most important cross-border e-commerce platform in China. At the beginning the platform was open only to Australian retailers, so they could sell their products in China. Now, all foreign retailers are allowed to sell on that platform. There are currently sellers from more than 40 nationalities selling their products through the Kaola platform. Kaola is work as a more traditional distribution network; The platform buy your product and sell them.
T-mall Cross Border
Tmall is the most important platform in China, but it’s also reserved for the most successful players. In most case, brands are rejected by Tmall (85%).
However, this in changing. Tmall has recently launched its Tmall Oversea fulfillment specially targeting small and mi-size brand with low awareness in China and small budget.
What is Tmall Oversea Fulfillment? Basically, a way for any brands to try out the chinese market. To make it simple, it works a little like kaola. If you register to this service, you send your product to Alibaba oversea warehouse and tmall will take care of the rest.
XiaoHongShu (Little Red Book)
XiaoHongShu aka RED is a little different from the other platforms. The site is a mix between a social media app and an e-commerce platform. The platform is relatively new, it was launch in 2014, but, has already a user base of over 25 million people.
This app is a bit similar to Instagram with Chinese characteristic. It is more commercial. If you open the app, you have access to a store as well as visual, influencers, reviews etc
80% of users on XiaoHongShu are women. Cosmetics and beauty products are very popular on this app.
This site is also quite accessible to smaller brands hoping to expand to China and is growing quite fast.
Launched in 2009, Yangmatou is The first mover in China cross-border e-commerce.
Yangmatou offers a big range of goods on its site but it is focused primarily on the most popular categories: baby products, beauty products, nutrition products, clothes, shoes, and handbags.
The products available on the website have very detailed descriptions to inform the consumer and build trust.
Yangmatou registered over 10.000 daily orders and more than 1 million users.
Another effective alternative to these platforms is WeChat Stores. WeChat store is the best and most effective tool. These are stores hosted within this app that is linked to an official account. Besides, payment is made extremely convenient and fast to encourage impulse purchase. The percent of WeChat users that have made purchases from WeChat stores has more than doubled from 15% in 2015 to 31% in 2016.
Cross Border E-commerce Case Study
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ISANA: German affordable and vegan cosmetics and skincare products
Do you want to know more about the technicalities of operating on cross border e-commerce in China? Here are the 14 most commonly asked questions (and answers) about cross border e-commerce!
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