Highlights of CBEC in China
This article will explain to you everything you need to know about Cross Border E-commerce (CBEC). There is also a report available below from 2020 with additional details. Cross-border E-commerce entails selling goods or services from one country directly to consumers in another country via the internet. We’ll explain to you here how to use cross-border e-commerce and what the best strategy to implement it is.
In China, there exists many online platforms operating in cross-border e-commerce but the key players are as followed:
- Alibaba: Owns several different platforms such as TaoBao and Tmall: 28% market share
- Net Ease Kaola: 20.5% market share (recently purchase by Alibaba)
- JD: 13.5% market share
- Vipshop Global: 9.8% market share
- Pinduoduo: Relatively new player but making waves
In China, you can sell almost anything through cross-border e-commerce. 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)
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What is the process for exporting products to China?
To export your products in China, there are 3 main methods:
- 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 of up to 15/30/60% according to your product. The total product value must not exceed 1000 RMB for 6 products and needs to be checked concerning 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.
China CBEC taxes & regulations:
Keep in mind: For the last two methods, 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: you can also ship your products to the Chinese border (Hong Kong for example) where it will be stored before being fulfilled to the customer. The good part is that if nobody in China buys it, you can still sell it through other channels in Asian countries.
Since 2016, a “positive” product list has been approved, resulting in a preferential import tax of 11.9% tax rate for certain goods. Those goods are also exempt from the additional time at custom clearance and don’t require an import license or other certificates.
“Positive” 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 includes:
- 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.
Understanding Chinese payment methods
Fluctuating exchange rates can lead to a significant impact on the company. To facilitate these transactions, you can use cross-border payment versions from WeChat or Alipay. Both methods require a business license but no need for a 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)
- Supports all WeChat payments and supports foreign currency
What is 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.
Main Fees & Cost of doing Cross-border eCommerce in China:
- 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. A poor plan may lead to failure or very few results.
What about product storage costs?
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.
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 grow big enough to have a detailed forecast of your future sales and understanding of customer needs, 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 a 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 in China?
This 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. Without a reliable logistic network, it will be hard to guarantee good delivery services to your customers, which will directly impact the trust the Chinese have in your company.
Regulatory and technical barriers 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, and can help you improve your objectives.
If you’re a multinational company with important investment capacities, having a local partner won’t be needed.
What’s the best Chinese CBEC 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.)
Step #1 to implement before launching your China CBEC business:
You’ll need to attract attention around your company to 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: Chinese Twitter, a brand mass marketing tool that 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.
- RED: Aka the Little Red Book/ Xiaohongshu is a social e-commerce app that focuses on high-end imported products (As well as more local products as time goes).
These are probably the two most important social networks you must use to increase your brand awareness. Other networks are available to develop your company’s reputation: Douyin, Toutiao, XiaoHongShu (little red book).
Does your brand require a trademark?
Product copying 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 to also protect your product/brand.
Chinese government works with the “first to file” system, meaning that the first applicant to file the trademark will be assimilated as the real business owner. We advise you here to cooperate with an agent of the 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.
How can GMA assist you with CBEC in China?
At 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
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- Talk to an e-Commerce consultant (30min for free)
- See our case studies
- Get our Report (free) about the top 20 questions & answer about CBEC in China
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