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China’s booming market of Cross-border E-commerce

From 1st January 2019, China has improved its CBEC (Cross-border E-commerce) import policy, with more clear rights and responsibilities defined, with higher transaction limit and more commodities lists added, etc. Generally understanding, China is now creating and maintaining a healthier market environment, in order to encourage CBEC.

As the figures shown below, China is now the world’s largest online shopping market and the online shopping expenditure keeps growing, which achieves over US$1 trillion in 2018.

The growing of users and expenditure also brings the change of consuming behaviors. Consumers in China are actively demanding high quality and diversified commodities, forming their strong preference to have cross-border online shopping.

In the whole CBEC ecosystem, the platform is playing a key role connecting consumers and oversea suppliers, which can be mainly divided into two types.

1. Giant platform

Alibaba’s Tmall Global, Netease Kaola and JD Worldwide are currently top 3 CBEC platforms in China, accounting for 32.3%, 24.8% and 11.6% of the market. Considering that Netease Kaola is in the process of being acquired by Alibaba, here we make a comparison between Tmall Global and JD Worldwide.

Tmall Global

As the largest e-commerce platform in China, Alibaba has achieved numerous success no matter in C2C business like Taobao or B2C like Tmall. After acquiring Netease Kaola, Tmall will be the way ahead in CBEC China, accounting for 57% of the market. Benefiting from its shopping festival such as ’11.11’, ’12.12’, ‘Black Friday’, Alibaba keeps inspiring consumers to shop on its platforms and keeps breaking its record in the e-commerce industry. During ‘11.11’ Tmall shopping festival last year, 40% goods were imported from overseas, contributing nearly 80% CBEC imported orders of China. In order to further scale up its CBEC, Tmall Global has set the goal in coming 3 years:

  • Increasing to 20 domestic bonded warehouses and 10 oversea warehouses from its original 100M square meters areas.
  • Expanding to over 100M SKUs and introducing more SME suppliers and featured commodities overseas.

Without doubt, Tmall Global has already become the representatively successful CBEC platform in China.

  • JD Worldwide

Although accounting for around 12% market share, JD Worldwide is still a tough competitor in e-commerce market China. When Alibaba’s C2C business Taobao was dominating the online shopping market, JD, with its outstanding quality control, logistics and aftersales services, keeps winning customers and reputation.

JD Worldwide also introduced its upgraded strategy from 6 perspectives:

  1. Direct purchase upgrade
  2. Quality control upgrade
  3. Suppliers Enabling service upgrade
  4. Aftersales service upgrade
  5. Logistics service upgrade
  6. User experience upgrade

2. Self-operating model

Before the giant CBEC platforms entering this market, Self-operating is the main model connecting Chinese consumers to oversea products, and it also keeps bringing innovation and diversity for this industry today.

  • Example: Daigou

Traditionally, Daigou are individuals who buy products in oversea stores and then sell to consumers in China. Those who choose Daigou model are usually the first generation of consumers starting using cross-border service. The unique model should not be underestimated as they satisfy Chinese consumers’ demand for products that are not accessible, or cheaper than those sold in China.

Nowadays, there are also more and more large-scale and commercial Daigou stores, providing consumers professional service and excellent user experience.

  • Example: Live streaming

Live streaming is also a unique and huge industry in China. It has evolved from data competition in 2016, to the content competition in 2017. And till now, it has become a mature industry and has close connection with E-commerce.

The advantages of combining live streaming and E-commerce is the real time and deep interaction with potential end users in the benefit of AI and big data technology.

Here’s an example from Xiaohongshu, one of the leading self-operating platforms. A KOL in cosmetic domain is making live streaming introducing audience how to do the skin care and make up. Meanwhile, he can introduce the brand of cosmetic which has commercial cooperation with him. And surprisingly the transition rate from audience to customer could even achieve 20%.

Advice for oversea suppliers:

  1. Stand on the giant shoulder which is suitable for your company
  • Searching your product category on each platform, to see the existing competitor numbers and evaluate their sell out number.
  • Commercial models and terms evaluation: Choosing self-operating or direct purchase model, choosing the revenue share or annual service fee model, fully considering your company and product position.
  • Besides sales, comparing end-to-end service like logistics, marketing and aftersales.
  1. Do not overlook other distribution channels:

Still, the consumers who actively choosing cross-border online shopping are in small portion considering the huge population and market in China. There are also many CBEC platforms providing strong offline distribution networks between oversea suppliers and local distributors like chain supermarket and pharmacy.

CBEC China is now the blue ocean market and it will be another breakthrough of e-commerce China, bringing benefits to consumers and each players in this ecosystem.

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from our XpandAsia Blog

Stay up to date with all things China from our XpandAsia Blog

We provide market trends, industry, e-commere, marketing and logistics updates.

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