Today, businesses have the chance to trade inside their own countries or go international to reach a wider audience. Such an opportunity will allow your products to penetrate a brand new market where people and their needs may provide you with even more demand. In this blog post, we are looking at the benefits of cross-border eCommerce in China for fashion and luxury brands, we will then have a look at the main Chinese cross-border eCommerce platforms. (For those of you that need clarification on Chinese Cross-border eCommerce, head to part 3 of this article where we answer the question “what is cross-border e-commerce)
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1. 6 Benefits of Selling Through Cross-Border e-Commerce in China
Cross-border e-commerce has rapidly grown and is spreading like a wildfire. This means that merchants can sell their products to customers located in various countries. The internet has made it easier than before to become a global seller, so sales have only increased.
The number of online shoppers is also increasing every day as a result of international e-commerce. Here are just a few reasons why you should start reaching out to customers globally.
1. Enter the Chinese Market & Increase in Revenue
Through cross-border e-Commerce in china, sellers have the chance to get into the Chinese market. Once they’re in, their brand can get more recognition and will eventually result in higher demand from the public. This is especially great for brands that want to try out the Chinese market before making the big decision of registering the brand there.
2. Access to More End Customers
When selling through cross-border e-commerce in China, companies do not have to pay the same taxes as brands registered in the country. This, reducing the selling price, which will help sellers attract more customers, even if other resellers (such as Daigou) have already been distributing their brand in the country. You can observe this phenomenon by scrolling on Taobao for instance and comparing the price of the cross-border seller and third party seller – the difference in price is often very significant for the buyers.
3. Increased Business Sustainability
Cross-border e-Commerce is already huge and is still growing, with more and more countries recognizing its potential and it is especially true in China which has established 105 cross-border e-commerce pilot zones since 2015. As such, sellers don’t need to worry whether their brand will be sustained in the international market. Through these platforms, sellers can gain more popularity and awareness among their customers.
4. Increases Brand Awareness in China
Sellers can benefit from cross-border e-Commerce by presenting their brand to the Chinese market. Offering a unique product that isn’t widely available in China while answering the demand will help to get you recognition and awareness.
Furthermore, cross-border e-Commerce platforms in China offer partnerships and on-site marketing tools for international brands to get more visibility.
5. Maximizes Selling for Domestic Products
There are times when an item may not be popular in domestic e-Commerce but may do well in international markets such as China. Cross-border e-Commerce is an excellent option in this regard and may even be a better choice for some products. As such, the seller may be able to turn a low-selling product domestically into a huge hit in international markets.
6. Building Customer Relationships
When your customers trust your products, they will automatically have faith in your brand, which can contribute to building a great buyer/seller relationship. Offering a good-quality and genuine product at competitive and affordable prices will also help your customers shop from your brand more often. This will help to establish your name both in domestic and international markets.
2. What are the Top 5 Chinese Cross-Border e-Commerce Platforms?
Since the new e-Commerce Law went into effect in China two years ago (2019), all major cross-border e-Commerce platforms have transitioned, opening their market to international sellers. Their market now follows strict standards and is more structured and organized than ever. As a result, cross-border platforms provide a highly competitive way for foreign brands to sell in this busy country.
- Tmall Global: 37.4%
- Kaola: 26%
- JD Worldwide: 17.8%
- VIP Global: 8.8%
- Amazon Global: 3.7%
- Little Red Book: 2.6%
- Suning Global: 1.2%
- Xiaomi Youpin Global: 0.4%
- Other: 2.2%
Here are just a few of the top-ranking e-commerce platforms in China:
1. JD Global
Since it started in 2015, JD has been a tough competition to beat for Alibaba and is set up to be a leading power in the cross-border market. In the short time since its launch, the platform has amassed close to 10 million SKUs from almost 20,000 brands. Their product categories range from anywhere between healthcare and nutrition to car items and home appliances.
The platform also promises to sell 100% original and authentic products overseas while striving to provide a great customer experience. JD Global also has high standards when it comes to sellers, where non-original and fake products will immediately terminate merchants while providing buyers with compensation. Moreover, JD Global acts as a marketplace to provide more shopping choices for their customers, allowing retailers to set up cross-border shops within the platform.
2. VIP International
VIP International (also known as VIP Shop Global) is the leading flash-sale e-commerce platform in China. It boasts 4 third-party operated warehouses, 9 proprietary warehouses overseas, and 10 front-end warehouses, where the company ensures 100% authenticity for the products on its platform. The platform is self-operated by VIP Shop and uses the same business model as VIP Shop which is popular for its flash sale and discount model.
VIP Shop Global first started in 2008 and uses direct overseas procurement along with various delivery partners. As such, it’s able to provide deliveries for items within 12 hours. Cosmetics and fashion are their major business focus, and the platform directly signs contracts with international suppliers under consignment or wholesale.
3. Tmall Global
Currently known as China’s biggest cross-border e-Commerce platform, Tmall Global is owned by the Alibaba Group. It acts as a marketplace model, supplying domestic consumers with products imported from outside the country. It also helps overseas brands to get Chinese customers from their online stores.
Since it officially launched in 2014, merchants in Tmall Global have been corporate entities just outside of mainland China, all of which have overseas retail qualifications. Tmall Global has been the platform of choice for retailers who wish to build brand awareness and gather consumer insights. When it comes to logistics, the platform requires every merchant to complete delivery in no more than 120 hours and to arrive within 14 working days so that the whole process can be tracked.
Kaola is known as the 2nd biggest cross-border e-Commerce platform in the country and was acquired by Alibaba in 2019. Products on Kaola targets women aged between 20-40, as well as urban mothers, and white-collar workers. As a result, it is highly competitive in categories such as:
- Personal care
- Babies and mothers
The platform uses a self-sourcing and self-operating method to sell products on the platform as their main business model. This means that their products are under Kaola’s operation for the most part — brands don’t take part in the specific operations. However, to meet the requirements of business owners to have a store within the platform, Koala extended its model to the marketplace.
After it was founded in 2013, Xiaohongshu has become one the most prominent platforms in the country, boasting over 300 million users of which 70% were born on or after the 1990s. When it first started, this platform wasn’t made for selling products but was meant for reviewing products. As a result, it quickly became a place to find insightful customer-written impressions and product reviews.
Eventually, the platform was able to leverage its strong user base and reputation and was able to transform into a highly trusted selling platform. Moreover, its reputation associated with its expertise in foreign products helped to solidify trust in cross-border e-Commerce. Learn more on Xiaohonghu as an eCommerce platform here.
3. What is Cross-Border e-Commerce?
According to the Cambridge dictionary, cross-border is defined as something that happens between different countries. With the added factor of e-Commerce, the term cross-border e-commerce transforms into transactions that involve businesses or people from different countries. Furthermore, this term generally defines international trade through online platforms.
It covers the purchase or sale of products through online shops across national borders. It usually means that the seller and buyer aren’t located in the same country and as a result, they are often:
- Not within the same jurisdiction
- Don’t use the same currencies
- Using different languages
In terms of retail, cross-border refers to the sale of goods from the website of a national store to another country and another party. It can take place between a brand or retailer, and a consumer (referred to as B2C), or between one business and another (referred to as B2B), or between two people (referred to as C2C).
Why is e-Commerce & Cross-Border eCommerce So Successful in China?
Cross-border e-Commerce in China has recorded an incredible growth of over 46% in the first quarter of 2021. Over a decade ago, China had accounted for less than 1% of the e-commerce market globally. Today, it has become the center of the world’s e-commerce market, where it has increased in shares by over 40%. Because of its dominance in e-commerce, it now handles more transactions yearly compared to the United States, Germany, France, United Kingdom, and Japan combined.
In this country, you can sell just about anything from cross-border e-commerce. Some items that are doing well in particular include:
- Care products and cosmetics
- Food and beverage
- Baby products
- Fashion and luxury goods
Why has China quickly become successful with e-commerce? Here are just a few reasons.
Significant Increase in Internet Usage
In 2005, China had surpassed 100 million internet users, and currently has more people using the net than the United States, Brazil, and Indonesia combined. Now, with over 800 million internet users, China is a dominating country when it comes to making online purchases. Moreover, the year 2018 saw 30 million residents surf the web for the first time, marking a truly promising era for e-commerce for the country.
Supported by a Large Logistics Ecosystem
E-commerce giants JD.com and Alibaba found their success through the development of highly efficient systems and networks in dealing with order delivery. Managing a cross-country network of delivery firms, Alibaba can process as many as 30 million items a day through Cainiao. If you’re looking for same-day delivery in China, JD.com utilizes its 211 programs to provide customers with same-day delivery.
It works by delivering items on the day an order was made, provided that it was received before 11 am. In addition, next-day deliveries are done for orders received before 11 pm. The explosion of China’s e-commerce industry has given rise to various domestic delivery services, such as SF Express, which is now moving to penetrate international markets.
Residents are Big Fans of Online Shopping
In June 2018, over 70% of China’s internet users made online purchases. The Alibaba Singles Day shopping festival — China’s biggest e-commerce event — had exceeded sales of US$25 billion in just a matter of 24 hours, creating a new record. To put this into perspective, the total sales in the United States during 2017’s Thanksgiving, Black Friday, and Cyber Monday amounted to US$14.5 billion.7
Unprecedented Rise in Mobile Payments
Around 788 million users in China go online daily through mobile phones, representing a whopping 98% of China’s total internet users. This is more than twice the United State’s population. Out of these individuals, 72% used mobile payment platforms, which grew from only 25% in 2013. Furthermore, 2017 saw 90% of the Alibaba Singles Day transactions (which amounted to 1.5 billion) having been done using a mobile device.
Consider e-Commerce Opportunities with China Today
If you’re looking to conduct your business in the biggest e-commerce market in the world today, you need a competitive edge. At GMA, we can provide you with all the cutting-edge solutions to help you stand out from the rest. No matter which e-commerce platform in China you choose to work with, you can be sure that you’ll capture your audience’s attention.
From product selection to providing them with names and descriptions, GMA is an expert in what consumers want and need. Give us a call today to get started.