Cross-Border E-Commerce in China: A Key Driver for International Brands

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The Cross-Border E-commerce in China

The change in Chinese consumer needs and Chinese governmental support propel the popularity of cross-border e-commerce in China. International brands that wish to gain a piece of this pie must act quick before the market gets too concentrated.

With the ever increasing technology advance, the world is much more connected than ever before. Communication and business are no longer limited by proximity or space because internet and technology simply eliminate those gaps. China, along with many other countries, is heavily influenced by the development of technology. Particularly, technology has altered the way Chinese market operates.

E-learning in ChinaFirms are turning to technology to expand their customer reach as well as to provide a larger variety of products with online stores. This phenomenon is not only involving domestic platforms as e-commerce has breach country’s borders and extends its supply overseas. Therefore, it is no surprise that cross-border e-commerce is the new trend in China, which in 2015 is at 259 billion RMB, a 6% of China’s total e-commerce consumption. The market has seen remarkable growth at 50% yearly and is projected to continue growing at such a high number. Tmall (in Chinese: 天猫), owned by the technology leader Alibaba, has a global site aimed to served other countries around the world. It is seeing international success similar to the one it enjoys domestically with Costco from U.S. and Lotte Mart from South Korea as their clients. However, China is not the only country who is breaching country’s borders in terms of e-commerce, other countries are using this opportunity to do business in China from elsewhere as well. Amazon, the U.S. e-commerce giant, recently started the Amazon.cn specifically caters to the Chinese market with shipping option to China and descriptions in Chinese. As cross-border popularity rises in China with the help of the change in consumer needs and governmental support, more and more firms are joining in the race of e-commerce.

Change in Consumer Needs

With more middle and upper-middle class emerging in China, more disposable income is available in the Chinese market. Many said customers are looking for foreign products that are either not available in China or merely not yet. Purchasing goods from the online store in its origin country allows consumers to purchase goods that are otherwise not available in China. Furthermore, buying directly from the online store itself guarantees the authenticity of the products, which cannot always be assured in China. Counterfeits are rampant in China, with mostly concentrated in rural areas. As such, both the need to purchase non-available goods and guarantee authenticity drive Chinese customers to indulge more in cross-border e-commerce.

A Governmental Support

Countless imported personal goods are enjoying a favorable tax rate of 10% to 50% in at least 8 cities, with more cities predicted to follow. This is the government’s effort in combating counterfeit market, which is rampant in the country. It believes that by cutting the tax on imported authentic goods, people are less inclined to indulge in the illegal gray market purchases. With authentic goods still affordable, there will be less demand for the counterfeit market, which in turn will eventually decrease its supply.

E-commerce firms, realizing this business opportunity, help speed up and facilitate passing the customs process to further incentivize consumers to purchase. This coupled with the change in consumer needs and tax cut, cross-border e-commerce has been enjoying immense popularity in China. Brands hoping to join the bandwagon are not too late since the market is projected to continue growing at 50% for the next few years. This represents an excellent opportunity to expand customer base into a new market, therefore generating higher revenues. With the trend unlikely to stop anytime soon, cross-border e-commerce is the key driver for international brands success.

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