The secret of cross-border electronic commerce in China
China’s e-commerce industry has been booming in recent years, with companies like Alibaba group holding Ltd and JD.com Inc benefiting from a rising middle class with more disposable income. Everyone wants to share a piece of this giant cross-border e-commerce pie, so therefore more and more new Chinese companies start doing their business by different ways. Then let’s come to the analyst part of Chinese cross-border e-commerce.
Chinese cross-border shopping market overview
Chinese people made about 120 million trips abroad in 2015 and spend $104.5 billion on overseas purchases，according to a post on the website of the China national tourism administration. A McKiney&Co report in February estimated that cross-border e-commerce would amount to 432 billion yuan ($62 billion) in 2016, and the sector is growing at upward of 50 percent annually. The average age of cross-border e-commerce consumers is 25-44 years old. 74% of them are mobile shoppers.
Two ways to bring products into China market
– Bonded warehouse (beihuo): No sales order before products arrive at the portal. Ship to clients from free trade zone or tax free zone. Product ship to client faster, total shipping cost is lower.
– Direct, ship directly to customers after order: Easier to manage, but shipping times and costs will be higher.
7 modes of e-platform
There are principals 7 modes of e-platform in Chinese market.
Mode 1：M2C manufacturers to consumer
Typical example: TMALL.COM
Regarding manufacturers, they could sell products or services directly to consumers. This mode can lower the sale cost up.
Mode 2：B2C business to consumer
Typical example: JD.COM, JUMEI.COM, MIA.COM
It talks about business between supplier and consumers.
Mode 3：C2C consumer to consumer
Typical example: TAOBAO.COM, HAOJIEMI.COM
It’s the personal e-commerce. The price difference of goods is the source of profit.
Mode 4：B2B2C business to business to consumer
Typical example: HAITUNCUN.COM
Consumer order via a platform, the supplier receive the order then ship goods directly to customer
Mode 5：Buy products from overseas website
Typical example: AMAZON.COM
Chinese consumer could buy products from overseas website, goods shipped directly to customers from overseas. For example, in Black Friday, Chinese people could buy goods at the amazon.com USA, after the order, the product will be send from USA to China
Mode 6：Shopping guide
Typical example: MOMOSO.COM
This mode of cross-border e-commerce platform could grab oversea e-commerce site’s SKU(stock keeping unit) by their self-developed system, provide the massive SKU in Chinese which could help users to place the order.
Mode 7 : Information website community
Typical example: XIAOHONGSHU.COM
Chinese consumer share their own international shopping experience at this website community. People could get easily information about oversea product. It’s a good place of marketing for international brands to expand the customer base.
Range of e-commerce platform fees:
Refundable deposit: $25,000- $40,000 (USD)
Annual rental fee: $5,000- $10,000 (USD)
Sales commission: 2-10%, depends on product, cosmetics normally 5%
Logistics/warehouse charge: 5-20%, depends on product
Banking fee: 1-1.5%
If you want to do business with Chinese, compared to the traditional way to register trade in China, cross-border e-commerce is the best and most cost-effective way to enter the China market. But how to get ready for Chinese cross-border e-commerce? Step one, you should increase brand awareness in Chinese community, build up reputation, and drive traffic to online platform. Step two, build a Chinese online platforms that sell to China. Can be M2C (such as Tmall) , B2C (JD, Jumei, miya) or direct sell from brand online shop (need to have a Chinese-language, properly localised e-commerce website). Step three, prepare the online payment (better to support some major Chinese online payment methods, such as Alipay, UnionPay). Step four, organize your Chinese customer service support, product return and exchange, manage social media and online reviews.