It’s no secret that China is the biggest e-commerce market in the world. And with the rise of the digital shopping phenomenon, cross-border online shoppers in the country enjoy access to a vast array of foreign goods from international companies.
Beyond the allure of affordability, the convenience of online shopping further lured Chinese consumers into patronizing imported goods. Because of this, the cross-border e-commerce market shows no signs of slowing down.
In this article, we’ll discuss several cross-border e-commerce insights and analyze the key trends and challenges foreign brands may face when tapping into the Chinese market.
What is Cross Border E-Commerce in China?
True to its name, this industry mainly deals with foreign trade or any international sale between Chinese consumers and brands in an online marketplace platform. These Chinese cross-border business transactions fall into four categories, each catering to unique stakeholders and market dynamics:
- B2C (Business to Consumer)
In the B2C segment, businesses, whether retailers or brands, engage directly with individual Chinese consumers.
- B2B (Business to Business)
The B2B domain revolves around trade interactions between businesses, often involving brands or wholesalers as the key players.
- C2C (Customer to Customer)
A more informal facet of cross-border e-commerce, C2C transactions involve direct individual trade.
- D2C (Direct to Consumer)
D2C channels allow brands to forge direct connections with consumers in China on whichever platform they choose, eliminating intermediaries and traditional distribution channels.
With the creation of this landscape, cross-border logistics allow e-commerce imports into a free trade zone (typically in Shanghai). After that, these goods are shipped to mainland China. The delivery procedures can be done through direct shipping or the warehouses in the free trade zones. The required fees, like VAT and delivery, go to the consumers. Meanwhile, Chinese sellers are solely responsible for costs relating to retail pricing, marketing and general administration expenses, and profit margins.
How big is the cross-border e-commerce market in China?
Foreign brands interested in tapping into the China market don’t need an official business license in the country or a physical store on Chinese soil to take part in the cross-border e-commerce trade.
Thanks to this, most cross-border purchases from local consumers are easily carried out by companies from other Asian nations, like Japan and South Korea. With the ease of cross-border trade, the world’s fastest-growing retailers from the United States can also sell products to Chinese customers.
Source: Trading Economics (China Imports By Country)
After the Chinese government (Chinese Ministry of Finance) released new and improved regulations about customs clearance and other trade specifications, the average single transactions increased from 2,000 RMB (291 USD) to 5,000 RMB (727 USD). According to recent reports earlier this year, the country’s e-commerce imports and exports grew to 16.77 trillion yuan ($2.36 trillion).
As cross-border purchases increased gradually over the years, the streamlined customs procedures and tax rebates expanded from 15 to 37 cities. If you’ll notice, it now includes major metropolitan centers like Beijing and Shanghai. The variation in imported goods coming in and out of the market also saw the addition of new product categories, from fashion and beauty industries to health and fitness equipment.
How to do Cross-Border E-commerce in China? + Other Options
As previously stated, the China cross-border e-commerce model involves selling foreign goods within the local market through digital channels. This business model gives businesses two options for reaching more Chinese consumers online.
● Leverage Existing Cross-Border E-Commerce Platforms
You may not know, but many successful online businesses use cross-border e-commerce platforms to enter the market without needing a Chinese license. While most of these channels have free mobile platform options, it’s worth noting that they come with relatively high fees and intense competition. You need a robust digital marketing strategy (such as niche targeting and SEO optimization) to distinguish your brand and stand out in the crowded marketplace.
On the brighter side, these platforms are overflowing with Chinese customers eager to find the best products for their needs. As long as you lay the groundwork early and properly play the brand awareness tactics, your entry into the China market should be seamless.
● Create Your Own WebShop
Establishing your stand-alone virtual shop for cross-border trades grants unparalleled flexibility and independence in the market. This process includes website localization, integration into Chinese social media platforms, and link removal for blocked sites,
With this strategy, you’re taking the entire marketing plan into your hands, from social media and SEO to PR. It’ll give international companies autonomy on cost control and helps in avoiding high third-party platform expenses (e.g., deposits and commissions).
On top of these cross-border eCommerce options in China, you have other options to sell foreign goods in the Chinese market. Here are some examples:
● Traditional Import and Distribution
This process will require your products to undergo extensive customs clearance procedures, ensuring the trade adheres to all relevant Chinese laws and regulations. However, it grants you access to a wide array of market opportunities that only traditional businesses benefit from.
● Regular E-commerce Process
In this approach, you can sell digitally with products already imported into China. Like traditional import and distribution, this method requires compliance with customs regulations and registration with the Chinese government authorities.
Products You Can Sell Through China’s Cross-Border E-Commerce Channel
In December 2022, a data report shows that the trade volume of Chinese people shopping online reached 845 million. Among these massive statistics are the country’s wealthy millennials pursuing exclusive luxury goods. As imported products hold a significant appeal of better quality, they captivate the interest of discerning consumers even further.
The preference for foreign brands through the China cross-border eCommerce channels stems from the desire for originality and safety, especially considering past incidents of counterfeit and harmful products sold by Chinese sellers in the past.
The rapid development of the cross-border business model is further fueled by the demand for key products like the following:
1. Cosmetics & Beauty Products
Chinese consumers have a strong appetite for foreign cosmetics and beauty products, especially those from well-known international brands. As the market grows, the demand for high-quality skincare, makeup, and personal care items will continue to rise.
2. Baby Products
Chinese consumers place a high value on baby products, particularly baby formula. Due to concerns over the safety and quality of domestic products in the past, many Chinese parents prefer to purchase foreign brands for their babies.
3. Food & Beverages
Imported food and beverages, such as snacks, chocolates, wine, and health supplements, are popular among Chinese consumers who seek unique and high-quality products worldwide.
4. Fashion & Jewelry from Luxury Brands
As previously stated, the Chinese market has a significant appetite for luxury fashion items and jewelry from well-known international brands. They see luxury products as a status symbol and a way to display their wealth and taste.
With the increasing number of internet users in China, adopting cross-border e-commerce platforms has been natural for Chinese consumers. Online shopping provides them access to a broader range of locally unavailable products.
On top of that, the combination of social media and digital shopping has given rise to social commerce, which has proven to be highly successful in the local market. Remember, the typical consumer heavily relies on social media platforms for product recommendations and trusts the opinions of their peers and influencers. The use of live streaming, sponsored posts, and viral content has further amplified the appeal of social commerce.
What are the cross-border e-commerce platforms in China?
Commonly referred to as RED or Little Red Book, Xiaohongshu is a popular cross-border e-commerce platform in China with 174 million monthly active users as of 2023. While it was originally launched as a social media platform for sharing product reviews and lifestyle recommendations, it has evolved into a full-fledged social commerce platform. It now combines social content with shopping within the platform.
International brands can set up official flagship stores on the platform, enabling direct sales to Chinese consumers. This direct-to-consumer approach bypasses the need for a physical presence, making it an attractive option for foreign businesses.
Xiaohongshu also has ongoing partnerships with various logistics providers to ensure smooth cross-border shipping and delivery. It helps international brands overcome the logistical challenges of selling products to Chinese customers.
Like any regular shopper, local consumers in China are always on the lookout for online discount sales. If it’s your target market, you can consider Pinduoduo as a reliable cross-border e-commerce marketplace. You may not know, but this platform primarily targets price-sensitive consumers looking for value deals.
Given that Pinduoduo’s primary selling point is its group-buying model, small to medium-sized enterprises can expect significant returns when entering this channel. In fact, its success and innovative group-buying model have already caught the attention of Amazon.
VipShop’s primary business model revolves around flash sales, offering time-limited discounts on various products. These flash sales create a sense of urgency among consumers, driving impulse purchases and fostering a sense of exclusivity.
While it’s not a well-known cross-border e-commerce channel worldwide, it has become a popular destination for local consumers seeking value deals and access to global brands.
JD Worldwide is a significant cross-border e-commerce platform in China operated by JD.com, one of the country’s largest and most reputable online retailers. It focuses on facilitating international trade, enabling consumers to purchase products from overseas merchants and brands.
While JD.com originally specialized in electronics, the expansion to JD Worldwide opened a diverse selection of products from various categories, including fashion, beauty, health supplements, electronics, and more. It also operates on a B2B (Worldwide to China) and B2C (China to China) model. The B2B section allows overseas merchants to sell directly to local consumers through the platform, while the B2C section focuses on domestic sales within China.
And since JD Worldwide strongly emphasizes product quality and authenticity, it implements measures to combat counterfeit products, ensuring that customers receive genuine items from trusted overseas merchants.
As of today, the JD marketplace has ongoing collaborations with international brands and merchants. These partnerships help JD.com maintain a robust product catalog, catering to consumer preferences and demands.
Tmall Global Platform (Alibaba)
Alibaba is one of the top wholesale websites worldwide, and Tmall Global is its prominent cross-border e-commerce platform in China. These channels open trading opportunities in the Middle Kingdom, but they can be more expensive than the offers on JD.com.
Although Tmall Global is known for its stringent product vetting process to ensure quality and authenticity, it implemented a consignment solution called TOF (Tmall Overseas Fulfillment). Through this, brands can sell a small number of cross-border e-commerce products to test the local market and determine the right entry point for their businesses.
It’s also worth noting that Tmall and Tmall Global operate under different regulations. While Tmall primarily focuses on domestic trade within China, Tmall Global specifically caters to international brands and merchants seeking to enter the Chinese market.
Nevertheless, Tmall Global has certain entry requirements, and brands must meet specific criteria to be accepted. Initial costs and risks may be associated with joining the platform, including product rejection or the potential loss of a deposit.
Kaola primarily offers high-quality “Western” products to middle-class Chinese consumers. It caters to consumers with a higher disposable income and willing to spend on premium products.
Non-exclusive brands looking to establish themselves on Kaola should allocate a budget for marketing and advertisement. Promoting the brand effectively on the platform can drive visibility and attract potential customers.
Creating a Native WeChat Shop
With a massive user base of 1.671 billion in 2023, the reason why many businesses create WeChat stores is a no-brainer. This super app allows you to have your own free mobile platform that connects to the menu of your official WeChat account.
As a brand, you can custom-design your content, layout, and prices to create a unique shopping experience. Whether you already have a webshop or want to use the native WeChat shop, this store seamlessly integrates with your account.
In your WeChat account’s menu, you can easily add links to your shops through various options:
- H5 App: Link to a mobile web app that offers an interactive and engaging shopping experience.
- Mini-Program: Direct users to a lightweight app within WeChat that provides immersive content and games.
- External Website: Connect users to your existing website to seamlessly transition to your WeChat Store.
Millennials and Gen Z shoppers, who are highly active on social media, show loyalty to brands that align with their image and aspirations. The WeChat advertising environment provides many options to boost your brand and products, allowing your campaign to reach a wider audience.
To capitalize on these opportunities, it’s no surprise that many businesses create WeChat e-commerce stores to leverage interactive mini-programs and drive leads from popular social media platforms. By employing smart brand-building strategies, you can focus on creating demand for your products and fostering long-term loyalty among your customers.
Brand Protection and Trademarks in China
If you plan to do cross-border e-commerce business in China, we highly recommend having a trademark specifically for the local market. Although copying and intellectual property infringement are past issues that are also present in the international market, protecting your brand through trademark registration is a crucial step in establishing and differentiating your brand from others.
The “first to file” system in China means that the first entity or individual to file a trademark application will be recognized as the legitimate owner of that trademark. Therefore, registering it with the central government as early as possible is essential to prevent others from using or copying your brand identity.
To ensure a smooth and effective trademark registration process in China, working with an experienced agent from the trademark office at the State Administration for Industry and Commerce of the People’s Republic of China (SAIC) is advisable. They can guide you through registration and help you navigate potential challenges or legal requirements.
Taxes & Customs Regulations in China
Cross-border logistics for the B2C model and goods from a bonded warehouse must complete import tax payments, VAT, and consumption tax. Typically, the percentage of these import tariffs depends on the product categories.
However, if the goods you’re trading belong to the “positive products list,” you’ll be subjected to a special customs tax rate of 11.9%. It’ll also exempt you from clearance and import license requirements.
Here are some of the products from the list provided by CIRS:
- Beauty & Cosmetics
- Fashion Clothing
- Furniture Pieces
- Selected Dairy Products
- Registered Health Supplements & Vitamins
- Food for babies
- Fitness/Wellness products
- Food Spices
While cross-border e-commerce in China eliminates the lengthy business registration process, you must submit an import permit for goods outside the categories we mentioned. You’ll also need a registration form for nutritional goods.
How much does Chinese foreign trade cost?
The cost of cross-border e-commerce (CBEC) in China is relatively low due to the government’s policies and regulations that promote trade development. Since the government has eliminated sales tariffs on various products, it established different online payment and logistics platforms to facilitate the integration of foreign and domestic segments.
The main fees and costs associated with foreign trade in China include creating and maintaining internet cross-border e-commerce platforms (such as Tmall Global, Taobao, etc.). On top of that, brands must also consider costs relating to website design and optimization, advertising, and marketing campaigns. Besides the customs trade costs, additional fees on warehouse management, enterprise resource planning, transportation management, shipping, and logistics should also be part of your budget.
If you intend to do this business in the long run, storage costs become crucial when engaging in China’s cross-border e-commerce. Investing in a storage area in a cross-border e-commerce zone requires careful consideration and accurate sales forecasts.
What Payment Methods Can Foreign Companies Use for E-commerce in China?
Navigating the China cross-border e-commerce market demands savvy handling of fluctuating exchange rates. But fear not, for there are seamless solutions at your disposal. You can opt for WeChat and Alipay as payment options for hassle-free transactions in China. You won’t need a Chinese bank account, but this process requires a valid business license.
One of the reasons why WeChat stores are preferred as a cross-border e-commerce channel is its quick and easy “one-click-payment” checkout process. Once the shop owner implements the WeChat payment gateway, customers can complete their purchases with a single click.
They can also scan the QR code at the checkout counter with their phones for instant payment processing. When it comes to cross-border e-commerce transactions, WeChat Pay won’t come with any additional fees or charges.
With an impressive user base exceeding 600 million active individuals in the Chinese market, Alipay seamlessly facilitates transactions for merchants across prominent Alibaba e-commerce platforms, such as AliExpress, Taobao, and Tmall Global.
In cross-border e-commerce transactions, Alipay caters to diverse payment preferences with many options, including credit card payments, bank transfers, and even cash-on-delivery.
Furthermore, Alipay extends its commitment to security by offering robust tools like Buyer Protections, reassuring customers with the promise of refunds in cases where products are undelivered or other such concerns arise.
Your Trusted Cross-Border E-Commerce Partner in the Chinese Market!
Understanding the Chinese landscape is the key to unlocking success in the cross-border e-commerce market. To ensure a successful entry and consistent profits, you must plan an effective strategy according to the trends and tools available in today’s digital space.
Don’t let the complexities of the Chinese market hold you back! Our team is here to guide you through every twist and turn, transforming your brand’s potential into a resounding success.
Whether it’s for setting up an e-commerce channel, crafting compelling paid advertising campaigns, harnessing the power of SEO and social media, or making waves with PR, we have the digital solutions you need. Contact us today, and let the world witness your brand’s remarkable growth in China’s thriving business landscape. The possibilities are endless – let’s make them a reality!