In recent years, cross-border e-commerce has seen rapid development in China. This type of e-commerce allows Chinese consumers to purchase foreign products from international companies online, often at lower prices than they would find in domestic stores. The popularity of cross-border e-commerce is due in part to the wide selection of imported goods available, as well as the ease and convenience of online shopping.
In this article, we take a closer look at China’s cross-border e-commerce and discuss some key trends and challenges for enterprises in the United States and Europe facing this growing sector. After reading this post you’ll have a better idea of what is cross-border e-commerce, if it is a good fit for your goals, and what are the best strategies to implement in your China strategy.
What is cross-border e-commerce?
Cross-border e-commerce is a type of online shopping that allows customers to buy foreign products from sellers in other areas of the world. Unlike traditional e-commerce, which is limited to domestic transactions, cross-border e-commerce takes advantage of global marketplace integration by connecting buyers and sellers from all over the world.
Cross-border e-commerce in China is an industry with rapid growth, and cross-border trade is worth billions of dollars annually. With the rise of the Chinese middle class and the growth of internet access, cross-border e-commerce has become an increasingly popular way for Chinese consumers to purchase goods and services from international companies.
There are a number of reasons why cross-border e-commerce is booming in China.
First, many Chinese consumers search for better quality products than they can find on domestic e-commerce platforms.
Second, big international brands are becoming increasingly popular with young, affluent urbanites in China. Finally, for sellers, cross-border e-commerce offers much greater access to new markets and potential customers to which they can sell products without leaving their countries.
What is a cross-border e-commerce platform?
A cross-border e-commerce platform is a platform that enables businesses to sell their products and services to customers in other countries. The platform typically provides the means for businesses to set up an online store, process payments, and ship orders to customers in other countries.
Cross-border e-commerce platforms are often used by businesses that want to expand their reach beyond their home country, or by businesses that only sell products or services that are available in other countries.
Highlights of China Cross-Border E-Commerce Market
In China, there are many online platforms operating in cross-border e-commerce but according to data, the key players in the China market are as followed:
- Alibaba: Owns several different platforms such as Taobao and Tmall Global: 37.4% market share
- Net Ease Kaola: 26% market share (recently purchased by Alibaba Group)
- JD Worldwide: 17.8% market share
- Vipshop Global: 8.8% market share
- Amazon Global: 3.7%
- Pinduoduo: Relatively new player but making waves
The biggest player in the market, Alibaba Group recorded sales revenue of RMB 205,555 million (US$30,689 million) and remained stable year-over-year as of 30 June 2022. A big part of these sales is of course cross-border e-commerce purchases.
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)
What is the process for product exports to China?
There are a few different ways to export products to China, depending on the type of product and the intended market.
There are 3 main methods to export your goods in China:
- Universal Postal Union (UPU): It’s an informal technique that allows you to send small parcels in China, which is a good method for small and medium-sized enterprises. It doesn’t require an import permit from general administration, but products may be subject to a customs 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 by customs clearance concerning the restrictions and prohibitions on terms of import in China (cf. FedEx website).
- Import through B2C: It’s a formal export model in which the package is declared via a platform to alert customs clearance of its shipment. This is a good way to ship products such as food, cosmetics, and high-end consumer products.
- In-bond import model: This one is a bit more complicated, as it requires the storage of exported products in a location such as Hong Kong or special areas for cross-border eCommerce. This type of shipment corresponds to products such as consumer goods, low-value goods, or heavy goods vehicles.
China Cross-Border E-Commerce taxes & customs regulations:
Keep in mind that for the last two methods mentioned above, cross-border logistics are subject to import taxes 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).
You can also ship your products to the Chinese border (Hong Kong for example) where they 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 cross-border e-commerce platforms in Asian countries.
Since 2016, a “positive” product list has been approved, resulting in a preferential import customs tax of 11.9% tax rate for certain goods. Those goods are also exempt from the additional time at customs clearance and don’t require an import license or other certificates and regulations.
“Positive” Products from this list are as followed:
- Spices / healthy dry food
- Cosmetics-related products (brushes/cotton pads and other things)
- Selection of dairy products (milk/cheese)
- Baby food
- Fitness related products
For all the other things not mentioned in the previous list, the following documents will be required:
- An import permit for any cross-border eCommerce actions
- Registration form (such as CFDA permit for nutrition products)
For customs regulations, you can either deal with it by yourself or hire some logistics company to help you deal with the multiple steps during the logistics and customs procedure which include:
- Customs registration
- Declaration and inspection of products to import
- Payment of taxes and exchange control
- Customs clearance and regulations fulfillment
A certificate of quarantine from the local inspection & quarantine authority in the country will still be required for alcoholic beverages, cosmetics, seeds, foodstuffs, and plants.
Understanding Chinese transactions methods for eCommerce
Fluctuating exchange rates can lead to a significant impact on the company during all China cross-border e-commerce-related activities. To facilitate these transactions, you can use cross-border eCommerce payment options from WeChat or Alipay that are available in China. Both methods require a business license, but there is no need for a Chinese bank account.
WeChat Pay is a mobile payment service developed and released by Tencent in China market. It uses WeChat, a messaging app with over 1 billion active users, to allow users and companies to pay for goods and services with a WeChat Pay QR code.
WeChat Pay is popular in China because it’s convenient and easy to use with a lot of available tools. All you need to do is scan the QR code at the checkout counter with your phone, and the payment will be processed instantly. There are no additional fees or charges for cross-border e-commerce transactions associated with using WeChat Pay.
Key information to take into account when planning a sales strategy:
- “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 is an online payment platform that was launched in China in 2004. It is operated by Alibaba Group, Chinese multinational e-commerce, retail, Internet, AI, and technology conglomerate. Alipay currently has over 600 million active users in China market and is used by merchants on AliExpress, Taobao, Tmall Global, and other Alibaba e-commerce platforms.
Alipay provides a number of different payment options available for all cross-border eCommerce trade including credit card payments, bank transfer payments, and cash-on-delivery payments.
Alipay also offers a number of security tools such as buyer Protections which guarantees refunds for buyers if they do not receive products and so on.
Key information to take into account when planning a sales strategy:
- Alipay account: $1,000
- Transaction cost: 3% (reduced if the transaction is bigger 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 making it easier for foreigners to sell goods
What is the cost of cross-border e-commerce – CBEC in China?
The cost of cross-border eCommerce – CBEC in China is relatively low compared to other countries. This is because of the many policies and regulations that the Chinese government has put in place to encourage trade and commerce development.
For example, the Chinese government has eliminated sales tariffs on numerous products, established special economic zones for cross-border eCommerce, and developed a national platform for online payment and logistics for easier integration of foreign and domestic segments.
Main Fees & Costs of Foreign Trade in China:
- Creation and maintenance of Internet cross-border eCommerce platforms (fee-related to the platform: Tmall Global / Taobao / Kaola, etc.),
- Design, updates, websites integration and optimizations (designer fees),
- Generating traffic to boost sales (the more competitors, the more expensive it is),
- Warehouse management system and data management,
- Enterprise Resource Planning,
- Transportation management system,
- Shipping, logistics, and customs trade costs,
- Advertising and marketing campaigns (WeChat, Weibo, XiaoHongShu, etc.),
Budgeting your project will be very important to import products into China. A poor plan may lead to failure or very few results for any industry. If you want to start cross-border eCommerce in China, you need to consider all related costs to successfully import your goods to this market.
What about product storage costs?
If you involve yourself in China’s cross-border e-commerce, the question of storage will soon be very important. You’ll have to consider investing in a storage area in a cross-border eCommerce zone.
You first have to be sure that you’ll make product sales, otherwise, you’ll end up losing a lot of money on this trade. But as soon as you grow big enough to have a detailed forecast of your future sales and an understanding of consumers’ needs in China, having a warehouse to store your products will be a wise idea.
For logistics, be careful of “hidden costs”, such as packing costs:
- Blister wrap
- Box at the right size
When it comes to delivery, you can operate with China cross-border eCommerce platforms such as JD Worldwide which offers 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 data management platform.
Companies wanting to trade in China market need to be aware of all those solutions, that are not present anywhere else in the world. Successful cross-border eCommerce requires proper research of China market, and the collection of all the data and statistics, that you won’t need to worry about if you contact us.
Do you need a local partner to do cross-border e-Commerce in China?
This depends on your business size and your cross-border e-commerce goals. China is a huge place, and setting up a logistics system covering up large territory will require a significant investment.
Without a reliable logistics network, it will be hard to guarantee good delivery services to your customers in China, which will directly impact the trust the Chinese have in your company.
If you want to sell your products to the Chinese people, you need to gain their trust first, and work on your e-reputation and public relations, so that when they search the web for any information about your brand, all they find are positive comments.
Regulatory and technical barriers in China’s cross-border eCommerce may increase your need for resources. An on-site partner can help you implement your selling and marketing strategy in China. They have deep knowledge of the Chinese market, and engines to optimize, and can help you improve your objectives.
Although, if you’re a multinational company with important investment capacities for all cross-border e-commerce actions, having a local partner won’t be needed, it’s advisable to hire a marketing and PR China agency.
What’s the best Chinese Cross-Border E-Commerce platform for your shop?
When developing a website for your cross-border e-commerce business, there are different options available for you:
- Creating your own website (if you want to sell to Chinese netizens, the website needs to be in Chinese, on a Chinese domain)
- Using a large E-commerce platform like Tmall or JD (good visibility, reliable and good environment for your business but high competition and important financial investment)
- Creating a WeChat shop with mini-programs (integrated into the WeChat APP and offering you freedom of content/ design/ prices/ etc.)
The first step to implement before launching your China Cross-Border E-commerce business:
Making a start in the Chinese market is not an easy task. You have to do your research and find out what people want and what they search for before you can even think about selling them anything!
The first step would be attracting attention around your company so that netizens trust you as a business owner, which will make it easier for any future China cross-border e-commerce actions you take on together with our clients or partners who are also looking forward to success.
Social media marketing is VERY important in China to get the most visibility possible. In recent years, social media marketing in China has become an increasingly important way to get your message out there.
The immense population and fast-paced culture of this Asian country mean that it will be difficult for any company or individual without a strong presence on these platforms – even those with no plans whatsoever! Here are the most used social media platforms you should try:
- Weibo: it’s a Chinese Twitter, a brand mass marketing tool that will help you to increase traffic on your page.
- WeChat: Chinese Facebook, allowing close integration 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). Nowadays, it’s becoming the best China cross-border e-commerce platform, as it relies on users’ recommendations and opinions, that Chinese people value when shopping online.
These are probably the three most important social networks you must use to increase your brand awareness. Other networks are available to develop your company’s reputation: Douyin, Toutiao, or Zhihu.
Does your brand require a trademark specifically for China?
Copying is unfortunately still present in China, but innovating can help you differentiate your brand from competitors. Promoting on social media will also protect the success of any products or brands that are promoted through these channels- making them essential for marketing strategies for your cross-border e-commerce to succeed.
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 to cooperate with an agent of the trademark office at the state administration for the 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 Cross-Border E-commerce in China?
At GMA, we can offer you different cross-border e-commerce services to optimize the launch of your brand in the biggest market in the world. We can help you to:
- Choose the right cross-border e-commerce platform for your brand,
- Launch your cross-border e-commerce platform.
- Build the best customer experience
- Make the delivery and customs clearance 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 cross-border e-commerce strategy for the months coming
Drop us your request, and let’s have a chat about your cross-border e-commerce goals in China. We have over 10 years of experience in the Chinese market with a team of 60+ professional marketers. We help brands build trust and brand awareness in the Chinese market.
Check more than 200 case studies in China’s cross-border e-commerce. And contact us for further information. We believe hard work is the key to success in China!
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