The global cross-border ecommerce market is booming with great opportunities for retailers’ international expansions. Since China is leading the way in digitalisation and cross-border ecommerce, knowing the Chinese market would be like knowing the future of cross-border ecommerce.
According to Forrester, 82% of global consumers have made an online purchase from a retailer outside their home country. In fact, Internet Retailer estimated cross-border ecommerce sales are set to reach USD 627 billion by 2022, with the fastest growth area falling into APAC. China, as the world cross-border ecommerce trade leader, recorded 49.3% YoY growth in 2018 (USD 19.59 billion, both import and export).
The opportunity in cross-border ecommerce is big
Cross-border ecommerce enables brands and retailers from all over the world to ship products directly to Chinese consumers. There is no need to register products or a local Chinese entity. Moreover, the cross-border ecommerce market is estimated to reach USD 200 billion by 2022.
The Chinese ecommerce market, however, is complex and there are many cross-border ecommerce platforms on which brands and retailers can sell their products to Chinese consumers, from Alibaba’s Tmall Global and NetEase Kaola, which have been the distinct leaders for several years, to JD Worldwide, who is the third largest player. Alibaba recently took over Kaola for USD 2 billion and will integrate it into Tmall, creating the largest cross-border ecommerce platform in China. The big marketplaces do take up a lot of space in cross-border ecommerce but there is room for other third-party retail platforms as well.
There is no ‘one-size-fits-all’ strategy for China
Having a clear strategy for international expansion is key to success. Nevertheless, when it comes to China, there are a few additional challenges: language, the ecommerce ecosystem, and – probably the most important – the different consumer behaviour. Many brands and retailers still believe they can take their expansion strategy for a different country and apply it for China as well – a crucial mistake. Another mistake is to believe there are similar consumer behaviour patterns between their local market consumers and Chinese consumers.
The steps depend on what products you sell. Whichever path you choose, start by taking a good look at the Chinese market and plan your strategy well.
What to consider when selling cross-border to China
Policy: China encourages and regulates cross-border ecommerce sales, which imply lower taxes than general trade does. The country also proactively builds bonded warehouses in order to improve international shipment efficiency.
Digital ecosystems: China has a unique digital ecosystem, from e-payment and ecommerce dominant players, to marketing and logistics. Comprehending this landscape equals knowing your 1.4 billion unique Chinese customers. You should really dive into getting to know China’s market.
Keep up with the latest developments: the Chinese market is represented by ‘The only constant is change’. Around every three- five months, there is a disruptive new development. Take Pinduoduo as an example – it took only three years for the startup to be listed in NASDAQ, while bringing the new Social Commerce into the spotlight. Keep an eye on these changes, as they could be relevant to your business.
4 steps to selling into a new market
After you develop a clear understanding of the market, I would recommend taking these steps when starting to sell in a new market, especially in China:
Always adopt local payment methods: firstly, adding local payment methods and the local language is the most cost-effective solution. Chinese consumers rarely have PayPal or use credit cards to pay in their home country. If you want to tap into the market, Chinese e-payment solutions such as Alipay or WeChat Pay are a must.
Navigate cross-continent shipments: you may start with individual parcel shipping, then move to a near-shore or bonded mainland warehouse when sales scale-up. This is a very common approach.
Choose a local partner: teaming up with a local player will help you obtain necessary permissions, accelerate your business growth, and – most importantly – you will be able to learn and adapt fast to the ever-changing Chinese market without making many mistakes or losing much time.
Choose the proper sales and marketing channel: there’s no ‘one-size-fits-all’ answer. There are in general three sales routes for entering the Chinese market, and choosing the right channel depends on the products you want to sell and on your target group. For example, if you are selling home appliances, JD.com and Suning may be a better fit than Tmall; if your selling strategy is highly social-oriented, try marketing in the form of opening a store on WeChat. The Chinese market is centring around marketplaces, but if you are selling goods belonging to specific categories – like mom and baby products or designer artwork – then marketplaces are a no-go area.
This editorial was first published in our Cross-Border Payments and Commerce Report 2019 – 2020, which provides a comprehensive overview of the major trends driving growth in cross-border payments, cross-border commerce, and marketplaces.
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