Why this is important to Wisconsin businesses: Foreign companies are recommended to work with a Chinese operator to assist their entry into the market.
According to China’s National Statistics Bureau, by the end of the first half of 2016, the total number of cross-border e-commerce platforms in China surpassed 5,000, and total transaction volume surpassed 24 percent of total import/export volume. Overall import transaction volume hit a historically high record of ¥512.5 billion. With rising demand for overseas products, this growth is expected to continue in the import segment of these cross-border e-commerce platforms.
The rapid development of cross-border e-commerce platforms has been greatly encouraged and supported by the Chinese government. Since the release of Decrees No. 56 and No. 57 by the General Administration of Customs in 2014 to regulate and facilitate the operation of the e-commerce sector, more and more companies have entered the sector. After only one year, the total market size grew by 112 percent.
The government has made efforts to lower the customs tariff rates on certain types of products, to increase duty-free retailers in the customs port cities and tax-exempt product varieties, to support new policies tailored to facilitate import inspection and quarantine for cross-border e-commerce businesses, to enhance tax reform and adjustment on imported consumer goods, among other measures.
In terms of the most popular consumer products on cross-border e-commerce platforms, maternity- and infant-related, cosmetics, and health care products rank as the top three product categories. Business-to-consumer platforms like Tmall Global, which allow Chinese customers to shop for international products directly shipped from overseas locations to their home, are a driving force of the e-commerce industry. Compared to the business-to-consumer segment, using e-commerce platforms for international business-to-business trade still has a long way to go.
Foreign brands need to take some time to get used to the Chinese market environment when entering China through the e-commerce channel. Foreign brands may not know about the tradition of the sales campaign, nor are they usually familiar with China’s logistics and the customs regulations. Even customer service remains a problem, and products that are popular elsewhere will not necessarily be attractive in China. Brands can operate their e-commerce channel on their own, but they have another option – to use an e-commerce operator as their assistant.
E-commerce operators are one of the most important components of China’s e-commerce ecosystem. They help brands and enterprises with the operation of Tmall’s flagship stores and other online platforms. They play a similar role to a network channel agent, providing professional services. The agent company does everything, including the application to create a store, product photography, web design, promotions, customer service, logistics and hosting. Currently, there are more than 300 registered service providers in Tmall, and the total number in China has grown to more than 1,000.
Many foreign brands choose to use these operators to aid their expansion in the Chinese market and help their brands become market-ready. Unlike the last century, when the motto was that "foreign goods must sell" in China, foreign brands today are facing many challenges from competitors and the overall business environment. Before entering the e-commerce space in China, foreign brands should seriously study and evaluate this unique market.