Cross-border e-commerce in China
In the past few years, China’s cross-border online retail market has grown rapidly: between 2012 and 2016, China’s cross-border online retail transaction volume surged from RMB 293.7 billion to RMB 1,280.1 billion, an average annual growth of 44%. In 2017, cross-border consumer goods e-commerce exceeded RMB 4 million, with an annual growth rate of 50%.
Import and export structure
The main categories of products purchased by Chinese consumers from international markets (such as the United States, Japan, Germany, South Korea, Australia, the Netherlands, France, the United Kingdom, Italy, New Zealand, etc.) through e-commerce platforms include cosmetics and health products, books and CDs, clothing and accessories, and computer hardware and software. At the same time, China is also exporting mobile phones and accessories, fashion, health and beauty, consumer electronics, and sports and outdoor products to the United States, the United Kingdom, Hong Kong, Brazil, Germany, France, Russia, Japan and South Korea. Among them, the increase in product variety, the optimization of terms, the increase in regional coverage, the improvement of quality, and more attractive prices are the main factors driving the development of cross-border shopping.
Case Study
Control of retail prices in channels: The emergence of new technologies has brought more transparent prices to consumers, retailers and e-commerce platforms. Considering that consumers can easily shop overseas with the help of cross-border e-commerce, some retail brands have gradually realized that the price gap between different regions of the world and between online and offline may lead to revenue imbalance between different regions and affect profits. This is particularly evident in the highly profitable luxury goods industry. Therefore, many major brands have begun to adjust prices to narrow the price gap between regions, which has reduced the attractiveness of cross-border shopping to a certain extent.
Case: Xiaohongshu uses social network groups and user-generated content to create a closed-loop business
With the help of product recommendations and selections based on user-generated content (UGC), a 9% conversion rate (from entering the shopping page to purchasing) was achieved
Social network elements and offline activities, such as young male model delivery, are used to cater to young and female customers (more than 80% of customers are born after 1985)
In addition to user-generated content, cooperation with various brands is established
Strategically dominant express delivery companies and third-party logistics in the region are also gearing up and accelerating their pace:
1. Alibaba has established the first Electronic World Trade Platform (eWTP) center in Malaysia’s Digital Free Trade Zone
The model investigated by Alibaba is a future regional e-commerce logistics center, which will be jointly developed by Malaysia Airports Holdings and Cainiao
The eWTP center provides infrastructure for Malaysian SMEs to conduct e-commerce, providing services such as e-commerce, logistics, cloud computing, mobile payment and talent training
The center was initially launched by Alibaba, Cainiao, Lazada and Pos Malaysia in 2017 and is expected to be operational in 2019
SANT, Sinotrans, Kerry Logistics and local express delivery companies such as Shengbang and Vientiane have also joined the opening
2. Introducing preferential policies in Xinjiang and Yunnan to attract logistics companies
According to the Xinjiang Commercial Logistics Industry Development Plan (2015-2020), there are 12 logistics parks in Xinjiang and several international logistics parks to be developed in the Central Asian Belt and Road countries. The location of the logistics park is well chosen to connect with the planned railway station, airport and highway hub. The government strongly supports it and has issued some preferential policies to attract logistics companies to set up business in the logistics park, including offering low land prices. Express companies and third-party logistics companies that occupy a strategic position in the region have also begun to gear up and accelerate their pace to try to benefit from the growing trade activities along the “Belt and Road” market. SF Express has launched a bonded import business and built an e-commerce platform for the Russian market; Best Inc. has established a cross-border e-commerce customs clearance and distribution center in Xinjiang, which specializes in connecting the Central Asian and European markets. In addition, the newly launched “Best Cloud Warehouse” can help local Chinese retailers to carry out digital Silk Road trade; Li & Fung Logistics has built a 1 million square foot logistics center in Singapore to meet the growing demand for ASEAN e-commerce shipments.
Many companies took advantage of the new policy to plan and establish business footprints in the Shanghai Free Trade Zone
Free Trade Zone + Pilot Cities: Companies set up bonded warehouses in pilot cities’ free trade zones to develop cross-border e-commerce business
KJT.com Cross-border: “Cross-border” is one of the first projects in the free trade zone and the only national pilot for cross-border trade e-commerce transactions in Shanghai. It operates in the mode of “direct purchase and import” and “purchase and bonded import”. Currently, fast-moving consumer goods (maternal and child care, nutritional products, luggage, clothing and cosmetics) account for the largest proportion of sales in Cross-border. TBP is the main reason behind the price advantage.
Amazon.com: Amazon announced in August 2014 that it would set up an international trade headquarters in the Shanghai Free Trade Zone and provide cross-border e-commerce business through Cross-border. Once Amazon has established a logistics and warehousing platform and adopted the “bonded import” model, delivery will be faster.
Tmall.com is a cross-border e-commerce platform located in the Songjiang Export and Import Zone (Songjiang is one of the demonstration zones that replicate the customs policies of the Shanghai Free Trade Zone), covering direct mail and bonded
SF Express: SF Express has established bonded import business in the Shanghai Free Trade Zone and the Qianhai Free Trade Zone in Shenzhen. SF Airlines plans to expand its capacity and purchase 757 and 767 passenger aircraft from American Airlines for conversion.
No.1 Store: No.1 Store entered the Shanghai Free Trade Zone in December 2013 to prepare for cross-border e-commerce business. No.1 Store officially launched the “No.1 Overseas Shopping” project on September 1, 2014. Through the bonded import model, No.1 Store can directly deliver goods from overseas to the Shanghai Free Trade Zone in batches by sea or air, thereby realizing pre-centralized procurement and inventory. Consumers can receive the goods as soon as two days after placing an order.